HomeMy WebLinkAbout12-07-15 FA&C Committee Packet 1
OTAY WATER DISTRICT
FINANCE, ADMINISTRATION AND COMMUNICATIONS
COMMITTEE MEETING
and
SPECIAL MEETING OF THE BOARD OF DIRECTORS
2554 SWEETWATER SPRINGS BOULEVARD
SPRING VALLEY, CALIFORNIA
BOARDROOM
MONDAY
December 7, 2015
12:00 P.M.
This is a District Committee meeting. This meeting is being posted as a special meeting
in order to comply with the Brown Act (Government Code Section §54954.2) in the event that
a quorum of the Board is present. Items will be deliberated, however, no formal board actions
will be taken at this meeting. The committee makes recommendations
to the full board for its consideration and formal action.
AGENDA
1. ROLL CALL
2. PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO
SPEAK TO THE BOARD ON ANY SUBJECT MATTER WITHIN THE BOARD'S JU-
RISDICTION BUT NOT AN ITEM ON TODAY'S AGENDA
DISCUSSION ITEMS
3. APPROVE A FINE OF $1,000 FOR METER TAMPERING AT 617 DIAMOND DRIVE
IN CHULA VISTA (CAREY) [5 minutes]
4. APPROVE A PURCHASE ORDER TO ROCKWELL ENGINEERING AND
EQUIPMENT IN AN AMOUNT NOT-TO-EXCEED $326,160 FOR THE PURCHASE
OF TWO (2) REPLACEMENT PORTABLE WATER PUMPS AND DECLARE THE
TWO (2) OLDER PUMPS SURPLUS (MARTINEZ) [5 minutes]
5. REVIEW THE LATEST ACTUARIAL REPORT AND THE ACTUARIAL EVALUATION
DETERMINING THE NET COST OR SAVINGS OF THE OTHER POST
EMPLOYMENT BENEFIT PLAN ENHANCEMENT VERSUS THE INCREASED
EMPLOYEE CONTRIBUTIONS TO PERS (KOEPPEN) [10 minutes]
6. ADJOURNMENT
2
BOARD MEMBERS ATTENDING:
Mitch Thompson, Chair
Jose Lopez
All items appearing on this agenda, whether or not expressly listed for action, may be delib-
erated and may be subject to action by the Board.
The Agenda, and any attachments containing written information, are available at the Dis-
trict’s website at www.otaywater.gov. Written changes to any items to be considered at the
open meeting, or to any attachments, will be posted on the District’s website. Copies of the
Agenda and all attachments are also available through the District Secretary by contacting
her at (619) 670-2280.
If you have any disability which would require accommodation in order to enable you to par-
ticipate in this meeting, please call the District Secretary at 670-2280 at least 24 hours prior
to the meeting.
Certification of Posting
I certify that on December 4, 2015 I posted a copy of the foregoing agenda near the
regular meeting place of the Board of Directors of Otay Water District, said time being at least
24 hours in advance of the meeting of the Board of Directors (Government Code Section
§54954.2).
Executed at Spring Valley, California on December 4, 2015.
______/s/_ Susan Cruz, District Secretary _____
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: January 6, 2016
SUBMITTED BY:
Andrea Carey,
Customer Service Manager
PROJECT: DIV. NO. All
APPROVED BY:
Joseph R. Beachem, Chief Financial Officer
German Alvarez, Assistant General Manager
Mark Watton, General Manager
SUBJECT: Impose a $1,000 Fine for Meter Tampering
GENERAL MANAGER’S RECOMMENDATION:
That the Board uphold staff’s recommendation to impose a $1,000 fine
for meter tampering at 617 Diamond Drive in Chula Vista.
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
To ensure the District continues to protect the water supply and
applies violations consistent with the Code of Ordinances.
ANALYSIS:
The District began installing AMR Master Meters in 2004. In early
2013 there was an upgrade to the reading software, Masterlinx, which
added the ability to detect tamper alerts. By Master Meter’s
definition a tamper alert “will appear on your screen when meter is
tampered with a magnet.”
On September 18, 2015, a staff member responded to a tamper alert at
617 Diamond Drive in Chula Vista. During the course of the
2
investigation, the meter box was opened and revealed a magnet
attached directly to the water meter. This action can cause the
meter to fail and inaccurately measure the volume of water going
through, thus causing the customer to be under billed. The magnet
also disables the meter to the point that it cannot be repaired or
reused.
Meter tampering is a violation of our Code of Ordinances as outlined
in section 72.03C which reads “In addition to other remedies,
tampering is subject to a Type II fine pursuant to Section 72.06.
Additionally, tampering may be prosecuted as a crime under Section
498 of the California Penal Code, as set forth in Section 73.01 of
this Code.”
The District has had two other incidents within the past year where a
magnet was discovered inside a meter box in close proximity to the
water meter. In all cases the customers were fined $1,000.
Staff is recommending that the owner of the property, Mr. Juan
Calderon, be fined $1,000 and this charge is to be put on his next
water bill which then becomes an inseparable part of that bill. If
the charges remain unpaid, the District may disconnect water service,
lien the delinquent real property, and may access damages and
penalties established by the District or otherwise authorized by law.
Applying the fine to the property owner is consistent with the Code
of Ordinances, Section 72.01 which states “Each person receiving
service, or that owns a property that receives service, agrees to pay
the District any applicable fees and charges. Such persons are also
responsible for all costs and damages in connection with any
violation of this Code relating to their service.”
The District’s costs to investigate and document this incident and
determine an appropriate course of action was $267.00 and the cost of
replacing the meter was $156.85. Per Section 72.01 of the District’s
Code of Ordinances, customers are “responsible for all costs and
damages in connection with any violation of this Code relating to
their service.” Costs incurred to investigate and remedy a violation
are not appealable to the Board and are treated as inseparable from
all other fees and charges on the customer’s account, per subsection
(D) of Section 72.01. These charges have thus been added to the
customer’s water account.
Mr. Calderon’s appeal letter is attached to this Staff Report. He is
not disputing that he committed the violation but is asking for a
reduction of the fine. Mr. Calderon has been with the District since
1995 and has an excellent payment history. This is his first
3
violation. Usage at the home has been historically low with the
average monthly usage under 10 HCF.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
None.
STRATEGIC GOAL:
Enforce the District’s Code of Ordinances and protect the public
water supply.
LEGAL IMPACT:
None.
Attachments:
Attachment A – Committee Action
Attachment B – Otay’s Letter with Pictures
Attachment C – Code of Ordinances Sections 71, 72, and 73
Attachment D – Calderon Appeal Letter with Translation
ATTACHMENT A
SUBJECT/PROJECT:
Impose a $1,000 Fine for Meter Tampering
COMMITTEE ACTION:
The Finance, Administration and Communications Committee recommend
that the Board uphold staff’s recommendation to impose a $1,000 fine
for meter tampering at 617 Diamond Drive in Chula Vista.
NOTE:
The “Committee Action” is written in anticipation of the Committee
moving the item forward for board approval. This report will be sent
to the Board as a committee approved item, or modified to reflect any
discussion or changes as directed from the committee prior to
presentation to the full board.
October 19, 2015
Mr. Juan Calderon
617 Diamond Drive
Chula Vista, CA 91911-6862
Re: Real Property Located at 617 Diamond Drive, Chula Vista, California - Notice of
Meter Tampering, Water Theft, and assessment of fine. Account 209-0742-28
Dear Mr. Calderon:
It has come to the attention of the Otay Water District (District) that (1) the meter
servicing the property at 617 Diamond Drive, Chula Vista, California, was tampered with
by attaching a magnet to the meter so it would not measure the true water use, and (2) the
customer may have benefited from reduced billings and did not pay the true cost of water
service. Each of these actions constitutes a separate violation of the District’s Code of
Ordinances that must be corrected as further described below. If you are not the owner
or account holder for 617 Diamond Drive, Chula Vista, California, please contact the
District immediately.
Our investigation on September 18th indicated that a magnet was deliberately attached to
the water meter with the purpose of receiving water service that was not registered.
Meter tampering may be prosecuted as a crime under Section 497 the California Penal
Code, as defined and set forth in Sections 71 D, 72.06 and 73.01 of Otay Water District’s
Code of Ordinances.
You are hereby notified that the District is assessing the damages listed below on your
account and that failure to pay such damages, at the District offices, by the due date on
your water bill will result in suspension of water service to your property. If these
fines and charges remain unpaid, the District will place a lien on the property to
recoup these and any other costs and damages.
Summary of Damages Amount
Costs incurred by District in connection with the investigation of
the meter tampering, water theft, and related matters (including
staff time, attorney’s fees and other related administrative costs)
$ 267.00
Fine as per Section 72 of District’s Code of Ordinances $1,000.00
Meter Replacement Fee $ 156.85
Total Due $1,423.85
Attachment B
You have the right to appeal the fine of $1,000.00 to the Board of Directors. If you
would like to take advantage of this, please call Susan Cruz at 619-670-2280 within ten
(10) days to notify the District in writing of your intent to appeal this charge. Your
appeal would then be placed on the next available board agenda.
You may contact me at 619-670-2712 with any questions concerning this notice.
Sincerely,
Andrea Carey
Customer Service Manager
Attachments: Photos (2)
Code of Ordinances Section 71, 72 and 73
'de' clS
Juan M. Calderon
617 Diamond Dr.
Chula Vista, Ca 91911
619‐799‐0055
October 21, 2015
Otay Water District
I, Juan Calderon, am writing this letter to ask for forgiveness for placing a magnet on the water meter
that is located at 617 Diamond Dr., Chula Vista, Ca 91911.
I know I must pay for this offense but I am asking for your consideration since my disabled condition and
dependent (?) does not allow me to pay this amount of money without neglecting my health.
That is why I ask that you lower the amount of the fine. I am very sorry and ashamed for what
happened and I have learned my lesson and promise never to do it again.
Thank you in advance.
Sincerely,
Juan M. Calderon
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: January 6, 2016
SUBMITTED BY:
Jose Martinez,
Assistant Chief of Water
Operations
PROJECT: DIV. NO. All
APPROVED BY:
Pedro Porras, Chief Water Operations
German Alvarez, Assistant General Manager
Mark Watton, General Manager
SUBJECT: Approval to Purchase two (2) Replacement Portable Water Pumps
GENERAL MANAGER’S RECOMMENDATION:
That the Board authorize the General Manager to issue a purchase
order to Rockwell Engineering and Equipment in the amount not to
exceed $326,160 for the purchase of two (2) replacement portable
water pumps and declare the two (2) older pumps surplus.
COMMITTEE ACTION:
See Attachment “A.”
PURPOSE:
To obtain Board authorization to purchase two (2) replacement
portable water pumps.
ANALYSIS:
Included in the approved FY 2016 budget, as Item 17 under Capital
Purchases, are two (2) replacement portable water pumps. The two
portable water engine driven pumps are a replacement for existing
portable pump numbers 740 and 2589.
The existing portable pumps were manufactured in 1992. They will
be 24 years old at the time of replacement and are TIER 0 engine
emissions level, which are before the state mandated emission
limits on portable engines. In order to comply with state
regulatory mandates, neither pump will be allowed to operate after
December 31, 2016 and must be removed from service and replaced
with engines that are certified to the latest emissions levels of
the State of California.
The specified replacement portable water pumps are designed to
operate at a maximum flow rate of 2,500 gallons per minute (GPM)
and up to 400 feet of head. The portable pumps purchased will
include 350 horsepower TIER 4 final diesel engines, mounted on
trailers with enclosures similar to the existing pumps. The pumps
will continue to provide the District the ability to supply water
in the event of emergency disruption and can be used at multiple
locations throughout the District to provide an alternate means of
water delivery.
Funding for this purchase has been included in CIP P2366 APCD
Engine Retrofits and Replacements Capital Purchase Program.
Based on system operation evaluations of workflow by the water
systems supervision and management, it is recommended that two (2)
new portable water pumps be purchased and the two (2) older pumps
be declared surplus and disposed of per District policy.
In accordance with District policy, bids were solicited for the
portable water pumps. Four (4) bids were received. Prices received
include all applicable fees, taxes, delivery, testing and
training.
Dealer Bid Price
Xylem/Godwin/Goulds/Volvo $520,841
Hawthorne/Barrett/Aurora/Caterpillar $510,097
Cortech/Flow Serve/John Deere $430,006
Rockwell/Pioneer/John Deere $326,160
FISCAL IMPACT:
Projected purchase budget for the two (2) portable pumps is
$520,000 based on preliminary research. The purchase of the pumps
will cost $326,160 which will be charged against the APCD Retrofits
and Replacements CIP P2366. The total cost in this account will
not exceed budgeted funding.
The total FY16 project budget for the CIP P2366 APCD Retrofits and
Replacements is $535,000. Existing expenditures and current
encumbrances for the CIP, including the two (2) portable pumps
purchased under this request if approved, are $326,160.
Based on the evaluation, the CIP P2366 budget is sufficient to
complete the budgeted purchase.
The Finance Department has determined that 100% of the funds are
available in the replacement fund.
Expenditure Summary:
Total CIP 2366 APCD Retrofits and
Replacements FY16 Budget: $535,000.00
Proposed Equipment Purchase: Two (2)
portable pumps
($326,160.00)
Proposed Replacement Stationary Emissions
Analyzer
($14,500.00)
Projected CIP P2366 FY16 Under Budget: $194,340.00
STRATEGIC GOAL:
Operate the system to meet demand twenty-four hours a day, seven
days a week.
LEGAL IMPACT:
None.
General Manager
Attachment “A,” Committee Action
ATTACHMENT A
SUBJECT/PROJECT:
Approval to Purchase two (2) Replacement Portable Water
Pumps
COMMITTEE ACTION:
The Finance, Administration, and Communications Committee reviewed
this item at a meeting held on December 7, 2015 and the following
comments were made:
Note:
The ‘‘Committee Action’’ is written in anticipation of the Committee
moving the item forward for Board approval. This report will be sent to
the Board as a committee approved item, or modified to reflect any
discussion or changes as directed from the committee prior to
presentation to the full board.
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: January 6, 2016
SUBMITTED BY:
Kevin Koeppen, Finance Manager
PROJECT: DIV. NO. All
APPROVED BY:
Joseph R. Beachem, Chief Financial Officer
German Alvarez, Assistant General Manager
Mark Watton, General Manager
SUBJECT: Retiree Healthcare Benefits - Review of the Actuarial Report
and Net Cost of the Enhancement of the Retiree Healthcare
Benefits
GENERAL MANAGER’S RECOMMENDATION:
This staff report is an informational item that provides findings to
the Board of Directors regarding:
1. The latest actuarial valuation performed as of June 30, 2015.
2. The actuarial evaluation determining the net cost or savings of
the Other Post Employment Benefit (OPEB) Plan enhancement versus
the increased employee contributions to PERS.
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
Every two years the District is required to hire an Actuary to
perform a study that determines the cost of the District’s OPEB Plan.
The District has received the 2015 Actuarial Report prepared by
Bartel Associates, LLC. This study is what determines the District’s
Annual Required Contribution (ARC) which is reported in the
District’s financial statements. In addition to the typical
information found in an actuarial study, Bartel Associates was asked
to evaluate the status of the cost and benefit of the increased
employee contributions to PERS and the enhancement of the OPEB
benefits.
ANALYSIS:
Every two years the District hires an actuarial firm to prepare the
OPEB evaluation which is used to determine the Annual Required
Contribution. This evaluation has been completed and the findings
are presented in this Staff Report.
Annual Required Contribution (ARC)
The Actuary has made a number of assumption changes that have
decreased the Actuarial Accrued Liability (AAL) and the Annual
Required Contribution. The most significant change is a result of
reductions in the estimated medical costs. Actual inflation of
medical costs have been lower than what was projected in the previous
actuarial study. When compared to the previous actuarial study,
these along with other changes have decreased the ARC by $140,000 in
FY 2016, $136,000 in FY 2017, and reduced the AAL by $1.8 million.
These changes also have a positive effect on the current funding
level of the OPEB Trust (Trust).
Cost/Savings of Plan and Contribution Changes
Since the 2011 OPEB change, staff has reported to the Board on two
occasions regarding the net savings status. In the 2013 actuarial
study the net costs were anticipated to exceed the projected benefit
by $43,000 and the cost was expected to increase slightly over time.
In the 2015 actuarial study the net costs of the additional benefit
is expected to exceed the projected benefit by $30,000 for FY 2016.
The net cost is expected to decrease over time and provide a net
benefit beginning in FY 2017 and remain a benefit in all future
years.
In FY 2016, the cost of the benefit enhancement is projected to be
$1,007,000 while the savings from the increased employee PERS
contribution is projected to be $978,000. These net costs to the
District, projected by the Actuary, will decrease in FY 2017 and all
subsequent years. Beginning in FY 2017 the projected benefit is
expected to exceed the projected cost. Beginning in FY 2017 the
benefit is estimated to result in a net savings to the District of
$22,000 followed by savings of $79,000, $142,000, and $214,000 in the
following three years.
Using the new assumptions, the unrepresented employees continue to
have a positive net savings to the District of $12,000 a year. This
savings is expected to grow slightly over time. The net savings of
the plan change and contributions for the represented employees
remains slightly negative at -$41,000. However, this impact is
expected to become positive in FY 2017 and remain positive in all
future years.
Funding Status
In addition to the District funding the ARC for the plan, it has also
paid the retiree medical premiums. As a result of these payments of
retiree medical premiums not being paid from the Trust, the funding
level is accelerated. The District has continued to budget for these
costs and this actuarial study reflects this funding level. With all
the assumption changes, the actuarial study shows the Trust funding
level increasing from the current 71% to 97% over the six-year budget
plan, FY 2016 to FY 2021. The prior actuarial study anticipated the
funding level to be 93% by FY 2021.
Budget Impact
Staff did not account for a decreasing ARC in the budgeting process
as the study occurred after the budget. As a result of this, the
District’s rate modeling for OPEB funding is greater than the
actuarially projected costs in all fiscal years. In the current
year, with the assumption changes the budgeted funding is
approximately $140,000 greater than the actuarial projected cost. In
the next fiscal year, FY 2017, the projected budget will be greater
than the projected cost by $136,000. Staff will adjust down the
future funding projections in the next budget process to match the
newest actuarial projected costs. After all assumption and
projection changes are factored into the actuarial calculations, the
funding level of the Trust is expected to reach 100% by fiscal year
2022.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
For FY 2016 the updated OPEB costs are below the budgeted OPEB
funding by $140,000.
STRATEGIC GOAL:
The District ensures its continued financial health through long-term
financial planning.
LEGAL IMPACT:
N/A
Attachments:
A – Committee Action
B – Actuarial Valuation Report
C – OPEB Contribution Study
ATTACHMENT A
SUBJECT/PROJECT:
Retiree Health Care Benefits - Review of the Actuarial
Report and Net Cost of the Enhancement of the Retiree
Healthcare Benefits
COMMITTEE ACTION:
This is an informational item.
NOTE:
The “Committee Action” is written in anticipation of the Committee
moving the item forward for board approval. This report will be sent
to the Board as a committee approved item, or modified to reflect any
discussion or changes as directed from the committee prior to
presentation to the full board.
OTAY WATER DISTRICT
RETIREE HEALTHCARE PLAN
June 30, 2015 GASB 45 Actuarial Valuation
Preliminary Results
Bartel Associates, LLC
Joseph R. D’Onofrio, Assistant Vice President
Adam Zimmerer, Actuarial Analyst
Tak Frazita, Associate Actuary
September 10, 2015
O:\Clients\Otay Water District\Projects\OPEB\2015\Reports\BA OtayWD 15-09-10 OPEB 15-06-30 preliminary valuation results.docx
AGENDA
Topic Page
Benefit Summary 1
Funding Policy 5
Participant Summary 7
Assets 11
Assumptions Highlights 15
Valuation Results 21
Bartel Associates OPEB Database 34
Issues 37
Next Steps 47
Exhibits 48
September 10, 2015 1
BENEFIT SUMMARY
Eligibility
Service
Retirement
Full-time employees who retire directly from District under
CalPERS (service or disability)
Unrepresented retired ≤ 7/15/11; Represented retired ≤ 8/10/11:
Hired < 1/1/81 - Age 55 and 5 years of District service
Hired ≥ 1/1/81 - Age 55 and age plus District service ≥ 70
Unrepresented1 retired > 7/15/11; Represented retired > 8/10/11:
Hired < 1/1/13 - Age 55 and 20 years of District service
(15 years for Unrepresented)
Hired ≥ 1/1/13 - Age 55 & 20 years of District service
Directors:
Elected < 1/1/95 - Age 60 and 12 years of District service2
Elected ≥ 1/1/95 - Not eligible
District service for eligibility is continuous service from last hire
date
Medicare eligible retirees and spouses must enroll in Medicare
Retirees who waive coverage cannot rejoin plan
1 Includes General Manager. 2 All current Directors were elected after 1/1/95. There are 2 retired Directors.
September 10, 2015 2
BENEFIT SUMMARY
Medical & Dental 100% of retiree premium for life
Retired < 12/29/03 - 100% spouse premium for life and 100%
eligible dependent premium to age 19
Retired ≥ 12/29/03 - 88% of spouse premium for life and 88%
eligible dependent premium to age 19
Retiree can pay eligible dependent premium after age 19 as
required by law
Medical Plans SDRMA EPO, Gold PPO, HMO 15 available before Medicare
eligibility
Gold PPO available after Medicare eligibility
Life Insurance Retired < 12/29/03 - $3,000 for retiree to age 65 and $1,950
from age 65 to age 70
Retired < 12/29/03 and hired < 1/1/81 - $1,000 for spouse to
retiree age 65 and $650 from retiree age 65 to retiree age 70
Directors not eligible
September 10, 2015 3
BENEFIT SUMMARY
Survivors
Unrepresented
Retired < 7/15/11
Represented
Retired < 8/10/11
Directors
Elected < 1/1/95
Retired < 12/29/03 and Directors elected < 1/1/95 - 100% spouse
premium and 100% eligible dependent premium to
age 19
Retired ≥ 12/29/03 - 88% of spouse premium and eligible
dependent premium to age 19
Spouse coverage after retiree death but not past spouse age 65
Eligible dependent can pay full premium after age 19 as required
by law
Survivor benefit available to actives eligible to retire
Survivors
Unrepresented
Retired ≥ 7/15/11
Represented
Retired ≥ 8/10/11
88% of spouse premium for life and eligible dependent premium
to age 19
Spouse coverage after retiree death but not past spouse age 65
Eligible dependent can pay full premium after age 19 as required
by law
Survivor benefit available to actives eligible to retire
September 10, 2015 4
BENEFIT SUMMARY
Disability &
Hardship
Full-time employees who retire directly from District under
CalPERS
Disability - Age 50 to 54 and10 years of District service
Hardship:
Hired < 1/1/13 - Hardship as determined by the District with
20 years of District service (15 years for Unrepresented)
Hired ≥ 1/1/13 - Hardship as determined by the District and
20 years of District service
Early retirement adjustment to benefit:
Age Percent
50 70%
51 76%
52 82%
53 88%
54 94%
September 10, 2015 5
FUNDING POLICY
Funding Policy Contribute full ARC with CERBT Investment Strategy #1
In addition, District pays benefits (cash subsidy and implied
subsidy) directly from District assets
For 2013/14, District prefunded $69,000 less than full ARC
Unfunded Liability amortized over 22 years for 2015/16
Employee CalPERS contributions:
Employee Hired < 1/1/13 Hired ≥ 1/1/13
Contribution CalPERS Classic Not CalPERS Classic
Rep Unrep Rep Unrep
CalPERS 8.00% 8.00% 6.25% 6.25%
OPEB 0.75% 0.00% 2.50% 1.75%
Total 8.75% 8.00% 8.75% 8.00%
Employee contributions not reflected in valuation as portion of
CalPERS contribution designated by District for OPEB offsets
District OPEB contribution
September 10, 2015 6
FUNDING POLICY
District Pay-As-
You-Go Cost
(‘000s)
Fiscal
Year
Cash
Subsidy
PayGo
Implied
Subsidy
PayGo
CERBT
PayGo
District
PayGo
CAFR
PayGo
2014/15 $929 $118 $0 $1,047 n/a
2013/14 940 116 0 1,056 940
2012/13 809 86 0 895 877
District
Contributions
(‘000s)
Fiscal
Year
Cash
Subsidy
PayGo
Implied
Subsidy
PayGo
CERBT
Funding
District
Contrib ARC
2014/15 $929 $118 $1,413 $2,460 $1,413
2013/14 940 116 1,370 2,426 1,439
2012/13 809 86 1,287 2,182 1,287
September 10, 2015 7
PARTICIPANT SUMMARY
Historical Participants
Participants 6/30/09 6/30/11 6/30/13 6/30/15
Actives
Count 160 150 137 1363
Average Age 44.8 46.5 46.5 47.1
Average Hire Age 36.4 36.3 37.0 37.4
Ave District Service 8.4 10.2 9.5 9.7
Average Pay4 $76,634 $80,784 $87,366 $93,146
Total Payroll (000’s) 11,878 12,118 11,969 12,668
Retirees
Count 69 69 80 79
Average Age 67.7 68.7 68.5 69.2
Ave Svc Ret Age 59.0 58.5 58.3 58.4
Ave Dis Ret Age n/a n/a n/a 52.5
Retirees/Actives 43% 46% 58% 58%
3 119 hired before 1/1/13 and 17 hired after 1/1/13. 4Excludes 5 Directors with no reported pay for 6/30/09.
September 10, 2015 8
PARTICIPANT SUMMARY
Active Participants
Valuation Date June 30, 2013 June 30, 2015
Employee Group Unrep Rep Total Unrep Rep Total
Count 36 101 137 35 101 136
Average Age 48.0 45.9 46.5 48.8 46.5 47.1
Average Hire Age 36.4 37.2 37.0 37.5 37.3 37.4
Average Service 11.6 8.7 9.5 11.3 9.2 9.7
Average Pay $123,826 $74,371 $87,366 $132,726 $79,430 $93,146
Total Payroll (000’s) 4,458 7,511 11,969 4,645 8,022 12,668
September 10, 2015 9
PARTICIPANT SUMMARY
Active Participants
Active Participants 6/30/13 6/30/15
Unrepresented
Executive 7 6
Confidential 8 8
Confidential Management 3 3
Manager 9 9
Supervisor 9 9
Total Unrepresented 36 35
Represented
Administrative 50 51
Field 51 50
Total Represented 101 101
Total Actives 137 136
September 10, 2015 10
PARTICIPANT SUMMARY
Participant Reconciliation
Retirees
Participants Actives Service5 Disabled Survivors Total
June 30, 2013 137 80 0 0 80
Terminations6 (11) - - - -
New Retirees & Survivors (5) 4 1 - 5
Retiree Deaths without Survivor7 - (5) (0) (0) (5)
Retiree Waived Coverage - (1) (0) (0) (1)
New Hires 15 - - - -
Data Corrections 0 (1) 1 0 0
June 30, 2015 136 77 2 0 79
5 Includes 5 hardship retirements. 6 Active employees reported for the 6/30/13 valuation and not reported for the 6/30/15 valuation were assumed to be
terminations and deaths before retirement. 7 Retirees reported for the 6/30/13 valuation and not reported for the 6/30/15 valuation were assumed to be deaths without
covered survivors.
September 10, 2015 11
ASSETS
Market Value of Plan Assets
(Amounts in 000’s)
Market Value of Assets 2010/11 2011/12 2012/13 2013/14 2014/15
Market Value Beginning of Year $6,372 $8,258 $9,595 $12,001 $15,644
CERBT Contributions 289 1,304 1,287 1,370 1,413
District PayGo Contributions8
Cash Subsidy 654 750 809 940 929
Implied Subsidy 99 91 86 116 118
Total 753 841 895 1,056 1,047
Investment Earnings 1,606 43 1,135 2,292 (22)
District Benefit Payments (753) (841) (895) (1,056) (1,047)
Administrative Expenses (9) (10) (16) (19) (16)
Market Value End of Year 8,258 9,595 12,001 15,644 17,018
Estimated Annual Return9 24.5% 0.38% 11.2% 18.3% (0.24%)
CERBT #1 Annual Return10 25.0% 0.15% 11.8% 18.5% (0.11%)
8 Benefit payments made directly from District. 9 Includes the impact of cash flow timing. 10 Before offset for expenses, currently estimated as 10 bp by CalPERS.
September 10, 2015 12
ASSETS
Actuarial Value of Plan Assets
(Amounts in 000’s)
Actuarial Value of Assets 2010/11 2011/12 2012/13 2013/14 2014/15
Actuarial Value Beginning of Year $6,962 $7,893 $9,762 $11,831 $14,399
Contributions 1,042 2,145 2,182 2,426 2,460
Expected Net Earnings 550 608 739 887 1,083
Benefit Payments (753) (841) (895) (1,056) (1,047)
Expected AVA at End of Year 7,801 9,804 11,788 14,088 16,896
Market Value at End of Year 8,258 9,595 12,001 15,644 17,018
MVA - Expected AVA 456 (209) 212 1,556 122
1/5 of (MVA - Expected AVA) 91 (42) 42 311 24
Preliminary AVA 7,893 9,762 11,831 14,399 16,920
Minimum AVA (80% of MVA) 6,606 7,676 9,601 12,515 13,614
Maximum AVA (120% of MVA) 9,909 11,514 14,401 18,772 20,422
Actuarial Value End of Year 7,893 9,762 11,831 14,399 16,920
Actuarial Value Est Net Return 9.0% 7.0% 7.7% 9.8% 7.4%
AVA/MVA 96% 102% 99% 92% 99%
September 10, 2015 13
ASSETS
6/30/08 6/30/09 6/30/10 6/30/11 6/30/12 6/30/13 6/30/14 6/30/15
MVA 5.6 5.2 6.3 8.3 9.6 12.0 15.6 17.0
80% MVA 4.5 4.2 5.0 6.6 7.7 9.6 12.5 13.6
120% MVA 6.7 6.3 7.5 9.9 11.5 14.4 18.8 20.4
AVA 5.9 6.4 7.0 7.9 9.8 11.8 14.4 16.9
0
5
10
15
20
25
Actuarial Value of Assets
(Millions of Dollars)
September 10, 2015 14
ASSETS
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
MVA Return 15.1% 24.5% 0.4% 11.2% 18.3% -0.2%
AVA Return 5.4% 9.0% 7.0% 7.7% 9.8% 7.4%
Assumed Return 7.75% 7.75% 7.25% 7.25% 7.25% 7.25%
-5%
0%
5%
10%
15%
20%
25%
30%
Approximate Return on Assets
September 10, 2015 15
ASSUMPTIONS HIGHLIGHTS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
Valuation Date June 30, 2013
2013/14 & 2014/15 ARCs
June 30, 2015
2015/16 & 2016/17 ARCs
Funding Policy Prefund full ARC with CERBT
Fund #1
Additionally, benefit payments
from District assets until 100%
funded
Same
Discount Rate 7.25% - Full ARC funding with
CERBT #1
Same
Merit Payroll
Increases
CalPERS 1997-2007
Experience Study
Added to aggregate payroll
increase assumption for
Normal Cost calculation
CalPERS 1997-2011
Experience Study
Added to aggregate payroll
increase assumption for
Normal Cost calculation
September 10, 2015 16
ASSUMPTIONS HIGHLIGHTS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
Medical Trend
Calendar
Year
Increase from Prior Year
Non-Medicare Medicare
All Plans
2013 Premiums 2014 Premiums2015 8.0% 8.3%
2016 7.5% 7.8%2017 7.0% 7.2%2018 6.5% 6.7%
2019 6.0% 6.1%2020 5.5% 5.6%2021+ 5.0% 5.0%
Calendar
Year
Increase from Prior Year
Non-Medicare Medicare
All Plans
2013 n/a2014 n/a 2015 Premiums
2016 Premiums 2017 7.0% 7.2% 2018 6.5% 6.7%
2019 6.0% 6.1% 2020 5.5% 5.6% 2021+ 5.0% 5.0%
Dental Trend 4.0% annually Same
Dental Claims
Cost
Premium x loss ratio
Employee - 90%
Spouse - 71%
Child - 71%
Use 100% premium as estimate
of future claims cost
September 10, 2015 17
ASSUMPTIONS HIGHLIGHTS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
Mortality,
Termination,
Disability,
Merit Pay
CalPERS 1997-2007
Experience Study
Mortality improvement
projection Scale AA
CalPERS 1997-2011
Experience Study
Mortality Improvement Scale
MP-2014 modified to converge
to ultimate mortality
improvement rates in 2022
Claims Costs
Demographics
District age and gender
demographics
Pool employee age and gender
demographics for each
healthcare plan provided by
SDRMA
Assumed spouse coverage:
Actives - 80%
Retirees < 65 - 80%
Retirees ≥ 65 - 65%
Hardship
Retirements
n/a 1% liability load for active
obligation
September 10, 2015 18
ASSUMPTIONS HIGHLIGHTS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
PPACA
High Cost Plan
Excise Tax
n/a Excise tax threshold is
calculated separately for self
and non-self coverage
Non-Medicare eligible and
Medicare eligible retirees can
be combined
Assume insurer has 35%
marginal income tax rate
Valuation uses estimated
1.25% AAL load
September 10, 2015 19
ASSUMPTIONS HIGHLIGHTS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
District Service
for Retirement
Hired < 1/1/81 - 5 years of
District service
Hired ≥ 1/1/81 & < 7/1/93 and
General Manager - Age plus
District service ≥ 70
Hired ≥ 7/1/93:
Unrepresented employees:
- Hired < 1/1/13 - 15 years
of District service
- Hired ≥ 1/1/13 - 20 years
of District service
Represented employees:
- 20 years of District service
- 5 years of District service
if employee does not have
15 or 20 years of service at
age 65
Unrepresented employees:
Hired < 1/1/13 - 15 years of
District service
Hired ≥ 1/1/13 - 20 years of
District service
Represented employees:
20 years of District service
5 years of District service if
employee does not have 15 or
20 years of service at age 65
September 10, 2015 20
ASSUMPTIONS HIGHLIGHTS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
Participation at
Retirement
Currently covered and waived
Medical - 100%
Dental - 80%
Same
Medical Plan at
Retirement
Currently covered:
Current plan election until
Medicare eligible
PPO after Medicare eligible
Waived actives - PPO
Waived retirees - n/a
Same
September 10, 2015 21
VALUATION RESULTS
Actuarial Obligations
6/30/13 Valuation 6/30/15 Valuation
Actuarial Obligations
(Amounts in 000’s)
Actual
6/30/13
Projected
6/30/15
Actual
6/30/15
Projected
6/30/16
Discount Rate 7.25% 7.25% 7.25% 7.25%
Present Value of Benefits
Actives $16,603 $ n/a $18,001 $ n/a
Retirees 13,059 n/a 12,805 n/a
Total 29,662 31,844 30,806 31,969
Actuarial Accrued Liability
Actives 9,832 n/a 10,884 n/a
Retirees 13,059 n/a 12,805 n/a
Total 22,891 25,527 23,689 25,097
Actuarial Value of Assets 11,831 16,559 16,920 19,407
Unfunded Actuarial Accrued Liability 11,060 8,968 6,769 5,690
Funded Percent 52% 65% 71% 77%
Normal Cost 699 745 761 786
Pay-As-You-Go Cost 1,045 1,129 1,034 1,081
September 10, 2015 22
VALUATION RESULTS
Estimated Actuarial Gains & Losses
(Amounts in 000’s)
Actuarial Gains & Losses NC% AAL (AVA) UAAL
6/30/13 Actual 5.8% $22,891 $(11,831) $11,060
6/30/15 Expected 5.8% 25,527 (16,559) 8,968
Experience Losses (Gains)
Actual versus expected premiums (0.7%) (2,692) - (2,692)
Asset Loss (Gain) 0.0% - (361) (361)
Demographic & other 0.1% (899) - (899)
Assumption Changes
CalPERS demographic assumptions 0.1% 532 - 532
Projected mortality improvement 0.2% 824 - 824
Hardship retirement assumption 0.1% 105 - 105
PPACA excise tax 0.2% 292 - 292
Total Changes 0.0% (1,838) (361) (2,199)
6/30/15 Actual 5.8% 23,689 (16,920) 6,769
September 10, 2015 23
VALUATION RESULTS
Annual Required Contribution (ARC)
(Amounts in 000’s)
Annual Required
Contribution
6/30/13 Valuation 6/30/15 Valuation
2013/14 2014/15 2015/16 2016/17
Discount Rate 7.25% 7.25% 7.25% 7.25%
ARC - $
Normal Cost $ 699 $ 722 $ 761 $ 786
UAAL Amortization 739 691 478 414
Total ARC 1,439 1,413 1,239 1,200
Estimated Payroll11 11,969 12,358 13,080 13,505
ARC - %
Normal Cost 5.8% 5.8% 5.8% 5.8%
UAAL Amortization 6.2% 5.6% 3.7% 3.1%
Total ARC % 12.0% 11.4% 9.5% 8.9%
UAAL Amortization Years 24 23 22 21
11 2015/16 estimated payroll is 2014/15 reported payroll increased at the aggregate payroll assumption of 3.25% for one year.
September 10, 2015 24
VALUATION RESULTS
Benefit Payment Projection
(Amounts in 000’s)
Cash Subsidy
Fiscal
Year
Current
Actives
Current
Retirees
Total
Cash
Implied
Subsidy
Total
Payment
2015/16 $ 4 $914 $ 918 $116 $1,034
2016/17 17 944 961 120 1,081
2017/18 38 960 998 114 1,112
2018/19 74 977 1,051 121 1,172
2019/20 122 976 1,098 117 1,215
2020/21 176 980 1,156 114 1,270
2021/22 246 965 1,211 120 1,331
2022/23 326 963 1,289 126 1,415
2023/24 417 951 1,368 135 1,503
2024/25 506 961 1,467 148 1,615
September 10, 2015 25
VALUATION RESULTS
Actuarial Obligations
June 30, 2015 - 7.25% Discount Rate
(Amounts in 000’s)
Actuarial Obligations
Cash
Subsidy
Implied
Subsidy
Total
Subsidy
Present Value of Benefits
Actives $16,516 $1,486 $18,001
Retirees 12,188 618 12,805
Total 28,704 2,104 30,806
Actuarial Accrued Liability
Actives 9,953 930 10,884
Retirees 12,188 618 12,805
Total 22,141 1,548 23,689
Actuarial Value of Assets12 15,814 1,106 16,920
Unfunded Actuarial Accrued Liability 6,327 442 6,769
Normal Cost for 2015/16 701 59 761
Pay-As-You-Go Cost for 2015/16 918 116 1,034
12 Allocated in proportion to the Actuarial Accrued Liability for this illustration.
September 10, 2015 26
VALUATION RESULTS
Annual Required Contribution (ARC)
2015/16 Fiscal Year - 7.25% Discount Rate
(Amounts in 000’s)
Annual Required
Contribution
Cash
Subsidy
Implied
Subsidy
Total
Subsidy
ARC - $
Normal Cost $ 701 $59 $ 761
UAAL Amortization 447 31 478
Total ARC 1,148 90 1,239
Estimated Payroll 13,080 13,080 13,080
ARC - %
Normal Cost 5.4% 0.5% 5.8%
UAAL Amortization 3.4% 0.2% 3.7%
Total ARC 8.8% 0.7% 9.5%
September 10, 2015 27
VALUATION RESULTS
Actuarial Obligations
June 30, 2015 - 7.25% Discount Rate
(Amounts in 000’s)
Actuarial Obligations Unrepresented Represented Total
Present Value of Benefits
Actives $5,715 $12,287 $18,001
Retirees n/a n/a 12,805
Total n/a n/a 30,806
Actuarial Accrued Liability
Actives 3,912 6,971 10,884
Retirees n/a n/a 12,805
Total n/a n/a 23,689
Actuarial Value of Assets n/a n/a 16,920
Unfunded AAL n/a n/a 6,769
Normal Cost for 2015/16 227 533 761
PayGo for 2015/16 n/a n/a 1,034
September 10, 2015 28
VALUATION RESULTS
Annual Required Contribution (ARC)
2015/16 Fiscal Year - 7.25% Discount Rate
(Amounts in 000’s)
Annual Required Contribution Unrepresented Represented Total
ARC - $
Normal Cost $227 $533 $ 761
UAAL Amortization n/a n/a 478
Total ARC n/a n/a 1,239
Estimated Payroll 4,796 8,283 13,080
ARC - %
Normal Cost 4.7% 6.4% 5.8%
UAAL Amortization n/a n/a 3.7%
Total ARC n/a n/a 9.5%
September 10, 2015 29
VALUATION RESULTS
Estimated Net Obligation (NOO)
Estimated Net OPEB Obligation (Asset)
(Amounts in 000’s)
CAFR
2013/14
CAFR
2014/15
Estimate
2015/16
Estimate
2016/17
Discount Rate 7.25% 7.25% 7.25% 7.25%
NOO (Asset) at Beginning of Year $(9,345) $(10,385) $(11,472) $(12,528)
Annual OPEB Cost
Annual Required Contribution 1,439 1,413 1,239 1,200
Interest on NOO (678) (753) (832) (908)
NOO Adjustment 625 713 810 911
Annual OPEB Cost 1,386 1,373 1,217 1,203
Contributions13
Benefit Payments Outside Trust (940) (929) (918) (961)
Implied Subsidy Payments Outside Trust (116) (118) (116) (120)
Trust Funding (1,370) (1,413) (1,239) (1,200)
Total Contributions (2,426) (2,460) (2,273) (2,281)
NOO (Asset) at End of Year (10,385) (11,472) (12,528) (13,606)
NOO Amortization Years 24 23 22 21
NOO Amortization Factor 14.96 14.57 14.17 13.75
13 Estimated contributions for years after 2014/15. Estimated items other than the ARC must be revised when actual
contributions are known.
September 10, 2015 30
VALUATION RESULTS
CERBT Investment Strategy Sensitivity
June 30, 2015
(Amounts in 000’s)
CERBT Investment Strategy CERBT #1 CERBT #2 CERBT #3
Discount Rate 7.25% 6.75% 6.00%
Present Value of Benefits $30,806 $33,769 $39,082
Funded Status
Actuarial Accrued Liability 23,689 25,401 28,350
Actuarial Value of Assets 16,920 16,920 16,920
Unfunded AAL 6,769 8,481 11,430
ARC 2015/16
Normal Cost 761 861 1,043
UAAL Amortization 478 571 716
Total ARC 1,239 1,433 1,759
ARC % of Payroll 9.5% 11.0% 13.4%
September 10, 2015 31
VALUATION RESULTS
Full ARC Funding Projection - CERBT #1 - 7.25% Discount Rate
(Amounts in 000’s)
Fiscal
Year
End
Begin
Year
NOO ARC AOC
District Contribution14
BOY
UAAL
BOY
AVA
Fund%
Cash
Pmts
IS
Pmts
Trust
Funding
Trust
Reimb
Total
Contr
2016 $(11,472) $1,239 $1,217 $918 $116 $1,239 $ 0 $2,273 $6,769 71%
2017 (12,528) 1,200 1,203 961 120 1,200 0 2,281 5,690 77%
2018 n/a 1,154 n/a 998 114 1,154 0 2,266 4,551 83%
2019 n/a 1,100 n/a 1,051 121 1,100 0 2,272 3,372 88%
2020 n/a 1,037 n/a 1,098 117 1,037 0 2,252 2,127 93%
2021 n/a 964 n/a 1,156 114 964 (477) 1,757 840 97%
2022 n/a 923 n/a 1,211 120 923 (1,331) 923 0 100%
2023 n/a 952 n/a 1,289 126 952 (1,415) 952 0 100%
2024 n/a 982 n/a 1,368 135 982 (1,503) 982 0 100%
2025 n/a 1,014 n/a 1,467 148 1,014 (1,615) 1,014 0 100%
14 Assumes District contributes full ARC to trust and additionally pays cash and implied subsidy benefit payments from District
assets until AAL is fully funded, at which point District will contribute full ARC to trust and request reimbursement of cash and
implied subsidy benefit payments from trust.
September 10, 2015 32
VALUATION RESULTS
Funding Projection - CERBT #2 - 6.75% Discount Rate
(Amounts in 000’s)
Fiscal
Year
End
Begin
Year
NOO ARC AOC
District Contribution15
BOY
UAAL
BOY
AVA
Fund%
Cash
Pmts
IS
Pmts
Trust
Funding
Trust
Reimb
Total
Contr
2016 $(11,472) $1,433 $1,431 $918 $116 $1,433 $0 $2,467 $8,481 67%
2017 (12,508) 1,403 1,429 961 120 1,403 0 2,484 7,393 73%
2018 n/a 1,367 n/a 998 114 1,367 0 2,479 6,243 78%
2019 n/a 1,325 n/a 1,051 121 1,325 0 2,497 5,052 83%
2020 n/a 1,273 n/a 1,098 117 1,273 0 2,488 3,792 88%
2021 n/a 1,212 n/a 1,156 114 1,212 0 2,482 2,487 93%
2022 n/a 1,140 n/a 1,211 120 1,140 (262) 2,209 1,132 97%
2023 n/a 1,078 n/a 1,289 126 1,078 (1,415) 1,078 0 100%
2024 n/a 1,112 n/a 1,368 135 1,112 (1,503) 1,112 0 100%
2025 n/a 1,148 n/a 1,467 148 1,148 (1,615) 1,148 0 100%
15 Assumes District contributes full ARC to trust and additionally pays cash and implied subsidy benefit payments from District
assets until AAL is fully funded, at which point District will contribute full ARC to trust and request reimbursement of cash and
implied subsidy benefit payments from trust.
September 10, 2015 33
VALUATION RESULTS
Funding Projection - CERBT #3 - 6.00% Discount Rate
(Amounts in 000’s)
Fiscal
Year
End
Begin
Year
NOO ARC AOC
District Contribution16
BOY
UAAL
BOY
AVA
Fund%
Cash
Pmts
IS
Pmts
Trust
Funding
Trust
Reimb
Total
Contr
2016 $(11,474) $1,759 $1,789 $918 $116 $1,759 $0 $2,793 $11,430 60%
2017 (12,476) 1,746 1,806 961 120 1,746 0 2,827 10,315 66%
2018 n/a 1,726 n/a 998 114 1,726 0 2,838 9,134 71%
2019 n/a 1,701 n/a 1,051 121 1,701 0 2,873 7,908 77%
2020 n/a 1,668 n/a 1,098 117 1,668 0 2,883 6,610 81%
2021 n/a 1,626 n/a 1,156 114 1,626 0 2,896 5,263 86%
2022 n/a 1,573 n/a 1,211 120 1,573 0 2,904 3,860 90%
2023 n/a 1,508 n/a 1,289 126 1,508 0 2,923 2,405 94%
2024 n/a 1,426 n/a 1,368 135 1,426 (676) 2,253 883 98%
2025 n/a 1,391 n/a 1,467 148 1,391 (1,615) 1,391 0 100%
16 Assumes District contributes full ARC to trust and additionally pays cash and implied subsidy benefit payments from District
assets until AAL is fully funded, at which point District will contribute full ARC to trust and request reimbursement of cash and
implied subsidy benefit payments from trust.
September 10, 2015 34
BARTEL ASSOCIATES OPEB DATABASE
September 10, 2015 35
BARTEL ASSOCIATES OPEB DATABASE
NC ARC
95th Percentile 10.1% 32.0%
75th Percentile 6.2% 17.7%
50th Percentile 2.8% 8.1%
25th Percentile 1.2% 3.5%
5th Percentile 0.5% 1.3%
Percent of Pay 5.8% 9.5%
Percentile 72% 56%
Miscellaneous
Discount Rate = 7.25%, Average Amortization Period = 22.0 Years
0%
5%
10%
15%
20%
25%
30%
35%
Pe
r
c
e
n
t
o
f
P
a
y
Bartel Associates GASB 45 OPEB Database
Normal Cost & Annual Required Contribution
September 10, 2015 36
BARTEL ASSOCIATES OPEB DATABASE
Miscellaneous
95th Percentile 291%
75th Percentile 164%
50th Percentile 80%
25th Percentile 28%
5th Percentile 8%
Percent of Pay 181%
Percentile 81%
Discount Rate = 7.25%
0%
50%
100%
150%
200%
250%
300%
350%
Pe
r
c
e
n
t
o
f
P
a
y
Bartel Associates GASB 45 OPEB Database
Actuarial Accrued Liability
September 10, 2015 37
ISSUES
High Cost Health Coverage Excise Tax 17
Patient Protection and Affordable Care Act (PPACA) enacted in March 2010 imposed
a tax on high cost medical coverage (“Cadillac Tax”)
Non-deductible excise tax of 40% beginning in 2018 applied to healthcare costs
exceeding annual dollar thresholds18
$10,200 for self-only coverage and $11,850 for individuals aged 55 to 64
$27,500 for non-self-only coverage and $30,950 for individuals aged 55 to 6419
2018 limits subject to increase if benchmark plan’s 2018 premiums are more than
55% higher than 2010 premiums20
Thresholds will increase for 2019 with CPI + 1%
Thresholds will increase for 2020 and later years with CPI
Age/gender adjustment if employer’s demographics are substantially different from
national workforce
17 Employers should consult with their healthcare provides, tax advisors, and legal counsel regarding the applicability of
PPACA enacted taxes. 18 Effective starting with taxable year beginning on or after 1/1/18 of entity liable for tax. Healthcare costs are premiums for
fully-insured plans. 19 Higher thresholds for self and non-self coverage apply if majority of employees are engaged in high risk professions,
including law enforcement officers and employees in fire protection activities. 20 Benchmark plan is Federal Employees Health Benefits Plan (FEHBP) Blue Cross and Blue Shield Standard Option.
September 10, 2015 38
ISSUES
High Cost Health Coverage Excise Tax
Plans not currently subject to tax may become subject in future as medical CPI is
expected to outpace general CPI
Paid by insurers for fully insured plans and by employer or TPA for self-insured plans
GASB 75 and Actuarial Standards of Practice require taxes and assessments expected
to be imposed on benefit payments be included in valuations21
Excise tax included in valuation
21GASB Statement No. 75, “Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions,” adopted
in June 2015 and revised Actuarial Standard of Practice No. 6, “Measuring Retiree Group Benefits Obligations and Determining
Retiree Group Benefits Program Periodic Costs or Actuarially Determined Contributions” adopted in May 2014.
September 10, 2015 39
ISSUES
OPEB Accounting Changes
OPEB Accounting:
GASB Statement No. 75 “Accounting and Financial Reporting for Postemployment
Benefits Other Than Pensions,” approved by GASB Board on June 2, 2015
Replaces GASB 45
Effective for fiscal years beginning after 6/15/17 (2017/18 for City)
Major Issues:
Net OPEB Liability (UAAL) on balance sheet
Expense calculation disconnected from contribution calculation
Discount rate is expected trust rate of return when assets sufficient to pay benefits
Discount rate is 20-year high-quality municipal bond rate when assets not sufficient
Immediate recognition of Total OPEB Liability (AAL) for plan changes
Deferred recognition of changes in Total OPEB Liability for gains and losses and
assumption changes over average active and inactive average future working lifetime
Recognition of investment gains and losses over 5 years
Disclosure of asset allocation and expected real rates of return for each asset class
Entry age normal cost method
Biennial valuations
September 10, 2015 40
ISSUES
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September 10, 2015 41
ISSUES
CalPERS CERBT Fund Changes
2010 target asset allocations and 2014 capital market assumptions:
Increased volatility
Higher expected real returns than 2010 levels
CERBT 1 = +15 bp CERBT 2 = +21 bp CERBT 3 = +27 bp
More conservative 2014 target asset allocations:
Reduced volatility to approximately 2010 or lower levels
Lower expected real returns than 2010 levels
CERBT 1 = -10 bp CERBT 2 = -12 bp CERBT 3 = -6 bp
Lower CalPERS assumed inflation and expenses:
Assumed inflation reduced from 3.00% to 2.75%
Expected administrative expenses lowered from 15 bp to 13 bp
Lower expected returns than 2010 levels
CERBT 1 = -33 bp CERBT 2 = -35 bp CERBT 3 = -29 bp
No change in recommended funding discount rates:
Valuation inflation assumption of 3.00%
Margins of adverse deviation relative to CalPERS expected return lower than 2010 levels
CERBT 1 = -8 bp CERBT 2 = -10 bp CERBT 3 = -4 bp
September 10, 2015 42
ISSUES
CalPERS CERBT #1 Fund Changes
Target Asset Allocation 2010 2010 Change 2014 Change Change
Capital Market Assumptions 2010 2014 CMA 2014 Mix Total
CERBT Target Allocation
Public Equity 66% 66% 0% 57% (9%) (9%)
Fixed Income 18% 18% 0% 27% 9% 9%
TIPS 5% 5% 0% 5% 0% 0%
REITs 8% 8% 0% 8% 0% 0%
Commodities 3% 3% 0% 3% 0% 0%
Standard Deviation (Volatility) 11.73% 13.07% 1.34% 11.74% (1.33%) 0.01%
Expected Long-Term Return
Expected Real Return 4.76% 4.91% 0.15% 4.66% (0.25%) (0.10%)
Inflation Assumption 3.00% 2.75% (0.25%) 2.75% (0.00%) (0.25%)
Administrative Expenses (0.15%) (0.13%)0.02%(0.13%) 0.00% 0.02%
Expected Nominal Net Return 7.61% 7.53% (0.08%)7.28% (0.25%) (0.33%)
September 10, 2015 43
ISSUES
CalPERS CERBT #2 Fund Changes
Target Asset Allocation 2010 2010 Change 2014 Change Change
Capital Market Assumptions 2010 2014 CMA 2014 Mix Total
CERBT Target Allocation
Public Equity 50% 50% 0% 40% (10%) (10%)
Fixed Income 24% 24% 0% 39% 15% 15%
TIPS 15% 15% 0% 10% (5%) (5%)
REITs 8% 8% 0% 8% 0% 0%
Commodities 3% 3% 0% 3% 0% 0%
Standard Deviation (Volatility) 9.46%10.58% 1.12% 9.24% (1.34%) (0.22%)
Expected Long-Term Return
Expected Real Return 4.21% 4.42% 0.21% 4.09% (0.33%) (0.12%)
Inflation Assumption 3.00% 2.75% (0.25%) 2.75% (0.00%) (0.25%)
Administrative Expenses (0.15%)(0.13%) 0.02%(0.13%)0.00% 0.02%
Expected Nominal Net Return 7.06%7.04% (0.02%)6.71%(0.33%) (0.35%)
September 10, 2015 44
ISSUES
CalPERS CERBT #3 Fund Changes
Target Asset Allocation 2010 2010 Change 2014 Change Change
Capital Market Assumptions 2010 2014 CMA 2014 Mix Total
CERBT Target Allocation
Public Equity 32% 32% 0% 24% (8%) (8%)
Fixed Income 42% 42% 0% 39% (3%) (3%)
TIPS 15% 15% 0% 26% 11% 11%
REITs 8% 8% 0% 8% 0% 0%
Commodities 3% 3% 0% 3% 0% 0%
Standard Deviation (Volatility) 7.27% 8.19% 0.92% 7.10% (1.09%) (0.17%)*
Expected Long-Term Return
Expected Real Return 3.54% 3.81% 0.27% 3.48% (0.33%) (0.06%)
Inflation Assumption 3.00% 2.75% (0.25%) 2.75% (0.00%) (0.25%)
Administrative Expenses (0.15%) (0.13%)0.02%(0.13%) 0.00% 0.02%
Expected Nominal Net Return 6.39% 6.43% 0.04%6.10% (0.33%) (0.29%)
September 10, 2015 45
ISSUES
Preliminary Recommended Discount Rates
Bartel Associates currently reviewing recommended CERBT discount rates
Preliminary recommended discount rates based on CalPERS expected nominal returns
Funding discount rate can include, but need not include, a margin for adverse deviation
Current funding discount rate of 7.25% includes a 36 bp margin at the 55th percentile
GASB 75 accounting discount rates should be expected return at the 50th percentile
September 10, 2015 46
ISSUES
Preliminary Recommended Discount Rates
CERBT Investment Strategy CERBT #1 CERBT #2 CERBT #3
Target Asset Allocation 2010 2014 2010 2014 2010 2014
Capital Market Assumptions 2010 2014 2010 2014 2010 2014
Expected Long-Term Return
CalPERS Expected Real Return 4.76% 4.66% 4.21% 4.09% 3.54% 3.48%
BA Inflation Assumption 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
CalPERS Admin Expenses (0.15%) (0.13%)(0.15%) (0.13%)(0.15%) (0.13%)
Expected Nominal Net Return 7.61% 7.53% 7.06% 6.96% 6.39% 6.35%
GASB 75 Discount Rate22 n/a 7.50%n/a 7.00%n/a 6.25%
Funding Discount Rate23 7.25% 7.25% 6.75% 6.75% 6.00% 6.00%
Margin for Adverse Deviation24 0.36% 0.28% 0.31% 0.21% 0.39% 0.35%
22 GASB 75, effective for 2017/18, requires a discount rate equal to the expected return net of investment expenses.
Preliminary recommended GASB 75 discount rates shown are rounded to the nearest 0.25%. 23 Assumes funding discount rate includes a margin for adverse deviation. Funding and reporting will show the same
obligations if funding and GASB 75 discount rate are the same. 24 Relative to CalPERS expected nominal net return.
September 10, 2015 47
NEXT STEPS
Current Valuation
Final valuation report
CERBT actuarial forms
Next Valuation
6/30/17 if no significant changes
2017/18 GASB 75 accounting information must use:
Measurement date no earlier than 6/30/17
- Prior fiscal year-end
Valuation date no earlier than 12/31/15
- 30 months prior to fiscal year-end
Timing:
- Cannot use City’s 6/30/15 valuation for 2017/18
o Use 6/30/17 valuation for 2017/18 accounting?
o Valuation timing?
- Do 6/30/16 valuation for 2017/18 accounting?
- Measurement date should be consistently applied from period to period
September 10, 2015 48
EXHIBITS
Topic Page
Premiums E-1
Participant Statistics E-5
Actuarial Assumptions E-15
Actuarial Methods E-26
Definitions E-28
September 10, 2015 E-1
PREMIUMS
2014 Healthcare Monthly Premiums
Non-Medicare Eligible Medicare Eligible
Healthcare Plan Single 2-Party Family Single 2-Party Family
EPO $702.78 $1,404.54 $1,826.82 n/a n/a n/a
EPO (OOS) 805.80 1,609.56 2,093.04 n/a n/a n/a
Gold PPO 600.78 1,201.56 1,562.64 $483.48 $965.94 $1,512.66
Gold PPO (OOS) 688.50 1,375.98 1,789.08 483.48 965.94 1,512.66
HMO 15 721.14 1,444.32 1,876.80 n/a n/a n/a
Dental (self-insured) 41.11 98.65 151.10 41.11 98.65 151.10
2014 Life Insurance Monthly Premiums
Participant Premium
Employee 19¢ per $1,000
Spouse 60¢ per $1,000
September 10, 2015 E-2
PREMIUMS
2015 Healthcare Monthly Premiums
Non-Medicare Eligible Medicare Eligible
Healthcare Plan Single 2-Party Family Single 2-Party Family
EPO $750.72 $1,500.42 $1,951.26 n/a n/a n/a
EPO (OOS) 860.88 1,718.70 2,235.84 n/a n/a n/a
Gold PPO 641.58 1,283.16 1,668.72 $441.66 $883.32 $1,591.20
Gold PPO (OOS) 735.42 1,469.82 1,911.48 441.66 883.32 1,591.20
HMO 15 795.60 1,593.24 2,069.58 n/a n/a n/a
Dental (self-insured) 41.11 98.65 151.10 41.11 98.65 151.10
2015 Life Insurance Monthly Premiums
Participant Premium25
Employee $1.31 per $1,000
Spouse $1.31 per $1,000
25 This is the premium for voluntary life insurance for employees age 65-69. Two retirees age 68 on the valuation date and one
spouse are eligible for retire life insurance.
September 10, 2015 E-3
PREMIUMS
2016 Healthcare Monthly Premiums
Non-Medicare Eligible Medicare Eligible
Healthcare Plan Single 2-Party Family Single 2-Party Family
EPO $797.64 $1,595.28 $2,074.68 n/a n/a n/a
EPO (OOS) 941.46 1,880.88 2,445.96 n/a n/a n/a
Gold PPO 681.36 1,363.74 1,772.76 $483.48 $966.96 $1,742.16
Gold PPO (OOS) 804.78 1,608.54 2,092.02 483.48 966.96 1,742.16
HMO 15 855.78 1,714.62 2,226.66 n/a n/a n/a
Dental (self-insured) 41.11 98.65 151.10 41.11 98.65 151.10
2016 Life Insurance Monthly Premiums
Participant Premium26
Employee $1.31 per $1,000
Spouse $1.31 per $1,000
26 This is the premium for voluntary life insurance for employees age 65-69. Two retirees age 68 on the valuation date and one
spouse are eligible for retire life insurance.
September 10, 2015 E-4
PREMIUMS
Monthly Premium Increases
2014 to 2016
Actual Increases
Non-Medicare Eligible Medicare Eligible
Healthcare Plan Single 2-Party Family Single 2-Party Family
EPO 13.5% 13.6% 13.6% n/a n/a n/a
EPO (OOS) 16.8% 16.9% 16.9% n/a n/a n/a
Gold PPO 13.4% 13.5% 13.4% 0.0% 0.1% 15.2%
Gold PPO (OOS) 16.9% 16.9% 16.9% 0.0% 0.1% 15.2%
HMO 15 18.7% 18.7% 18.6% n/a n/a n/a
Dental (self-insured) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Expected Increases
Non-Medicare Eligible Medicare Eligible
Healthcare Plan Single 2-Party Family Single 2-Party Family
Medical/Rx 16.1% 16.1% 16.1% 16.7% 16.7% 16.7%
Dental 8.2% 8.2% 8.2% 8.2% 8.2% 8.2%
September 10, 2015 E-5
PARTICIPANT STATISTICS
Medical Plan Participation
Non-Waived Participants
June 30, 2015
Retirees
Medical Plan Actives < 65 ≥ 65
EPO 51% 55% n/a
Gold PPO 9% 41% 100%
HMO 15 40% 4% n/a
Total 100% 100% 100%
June 30, 2013
Retirees
Medical Plan Actives < 65 ≥ 65
EPO 50% 44% n/a
Gold PPO 12% 53% 100%
HMO 15 38% 3% n/a
Total 100% 100% 100%
September 10, 2015 E-6
PARTICIPANT STATISTICS
Active Medical Coverage
Medical Plan Single 2-Party Family Waived Total
EPO 12 12 41 65
Gold PPO 3 3 6 12
HMO 15 13 9 30 52
Waived 7 7
Total 28 24 77 7 136
Election % 22% 19% 60%
Waived % 5%
September 10, 2015 E-7
PARTICIPANT STATISTICS
Retiree Medical Coverage
Under Age 65
Medical Plan Single 2-Party Family Waived Total
EPO 4 10 1 15
Gold PPO 1 10 11
HMO 15 1 1
Waived 0
Total 6 20 1 0 27
Election % 22% 74% 4%
Waived % 0%
September 10, 2015 E-8
PARTICIPANT STATISTICS
Retiree Medical Coverage
Over Age 65
Medical Plan Single 2-Party Family Waived27 Total
EPO n/a n/a n/a n/a
Gold PPO 17 31 48
HMO 15 n/a n/a n/a n/a
Waived 4 4
Total 17 31 0 4 52
Election % 35% 65% 0%
Waived % 8%
27 Waived medical coverage but have dental coverage.
September 10, 2015 E-9
PARTICIPANT STATISTICS
Dental Coverage
Participant Group Single 2-Party Family Waived Total
Actives 28 28 80 136
Retirees < 65 4 17 6 27
Retirees > 65 16 28 8 52
September 10, 2015 E-10
PARTICIPANT STATISTICS
Actives by Age and Service
District Service
Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total
< 25 0
25-29 1 1 2 4
30-34 1 2 2 1 6
35-39 3 7 6 2 18
40-44 3 5 12 9 3 1 33
45-49 4 6 5 5 20
50-54 4 10 7 3 2 5 31
55-59 3 5 6 1 1 16
60-64 2 3 5
≥ 65 2 1 3
Total 8 26 47 33 13 4 5 136
September 10, 2015 E-11
PARTICIPANT STATISTICS
0
10
20
30
40
<25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 ≥65
Nu
m
b
e
r
Age
Active Age Distribution
6/30/13 Valuation
6/30/15 Valuation
September 10, 2015 E-12
PARTICIPANT STATISTICS
0
10
20
30
40
50
60
0-4 5-9 10-14 15-19 20-24 >25
Nu
m
b
e
r
Years of Service
Active Service Distribution
6/30/13 Valuation
6/30/15 Valuation
September 10, 2015 E-13
PARTICIPANT STATISTICS
Retiree Healthcare Coverage by Age Group
Age Single 2-Party Family Waived Total
Under 50 0
50-54 1 1
55-59 3 6 1 10
60-64 3 13 16
65-69 7 16 1 24
70-74 4 7 11
75-79 3 1 4
80-84 1 4 5
Over 85 5 1 2 8
Total 23 51 1 4 79
Average Age 71.2 67.7 58.8 79.6 69.2
Election % 31% 68% 1%
Waived % 5%
September 10, 2015 E-14
PARTICIPANT STATISTICS
0
5
10
15
20
25
30
<50 50-54 55-59 60-64 65-69 70-74 75-79 80-84 ≥85
Nu
m
b
e
r
Age
Retiree Age Distribution
6/30/13 Valuation
6/30/15 Valuation
September 10, 2015 E-15
ACTUARIAL ASSUMPTIONS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
Valuation Date June 30, 2013
2013/14 & 2014/15 ARCs
ARC calculated as of
beginning of the year with
interest to end of year
June 30, 2015
2015/16 & 2016/17 ARCs
ARC calculated as of
beginning of the year with
interest to end of year
Funding Policy Prefund full ARC with CERBT
Fund #1
Additionally, benefit payments
from District assets until 100%
funded
Same
Discount Rate 7.25% - Full ARC funding with
CERBT #1
Same
General
Inflation
3% annually
Basis for aggregate payroll and
discount rate assumptions
Same
September 10, 2015 E-16
ACTUARIAL ASSUMPTIONS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
Aggregate
Payroll
Increases
3.25% annually
Inflation plus 0.25%
For Normal Cost calculation
and UAAL amortization
Same
Merit Payroll
Increases
CalPERS 1997-2007
Experience Study
Added to aggregate payroll
increase assumption for
Normal Cost calculation
CalPERS 1997-2011
Experience Study
Added to aggregate payroll
increase assumption for
Normal Cost calculation
CalPERS
Service
CalPERS service provided by
District
Same
September 10, 2015 E-17
ACTUARIAL ASSUMPTIONS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
Medical Trend
Calendar
Year
Increase from Prior Year
Non-Medicare Medicare
All Plans
2013 Premiums2014 Premiums2015 8.0% 8.3%2016 7.5% 7.8%2017 7.0% 7.2%2018 6.5% 6.7%2019 6.0% 6.1%2020 5.5% 5.6%2021+ 5.0% 5.0%
Calendar
Year
Increase from Prior Year
Non-Medicare Medicare
All Plans
2013 n/a 2014 n/a2015 Premiums2016 Premiums2017 7.0% 7.2% 2018 6.5% 6.7% 2019 6.0% 6.1% 2020 5.5% 5.6%2021+ 5.0% 5.0%
Dental Trend 4.0% annually Same
Dental Claims
Cost
Premium x loss ratio
Employee - 90%
Spouse - 71%
Child - 71%
Use 100% premium as estimate
of future claims cost
September 10, 2015 E-18
ACTUARIAL ASSUMPTIONS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
PPACA
High Cost Plan
Excise Tax
n/a Excise tax threshold is
calculated separately for self
and non-self coverage
Non-Medicare eligible and
Medicare eligible retirees can
be combined
Assume insurer has 35%
marginal income tax rate
Valuation uses estimated
1.25% AAL load
Life Insurance
Premium Trend
0% Same
September 10, 2015 E-19
ACTUARIAL ASSUMPTIONS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
Claims Costs
2016
Sample estimated monthly claims costs
EPO HMO PPO
Age M F M F M F
25 $266 $558 $292 $613 $223 $468
30 313 590 345 648 263 495
35 393 627 432 689 330 526
40 441 685 485 753 370 575
45 515 797 567 876 433 669
50 654 850 718 935 549 714
55 845 866 929 952 709 727
60 1,073 924 1,180 1,016 901 776
September 10, 2015 E-20
ACTUARIAL ASSUMPTIONS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
Claims Cost
Aging Factors
Relative relationship between
actual claims costs by age
Used for implied subsidy
estimate
Age M F
<30 0.50 1.05
30-34 0.65 1.15
35-39 0.80 1.20
40-44 0.85 1.35
45-49 1.05 1.60
50-54 1.35 1.60
55-59 1.75 1.65
60-64 2.20 1.80
65-69 2.65 2.25
70-74 3.45 2.75
75-79 4.00 3.25
80-84 4.25 3.60
85+ 4.45 3.90
Same
September 10, 2015 E-21
ACTUARIAL ASSUMPTIONS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
Claims Costs
Demographics
District age and gender
demographics
Pool employee age and gender
demographics for each
healthcare plan provided by
SDRMA
Assumed spouse coverage:
Actives - 80%
Retirees < 65 - 80%
Retirees ≥ 65 - 65%
Mortality,
Termination,
Disability
CalPERS 1997-2007
Experience Study
Mortality improvement
projection Scale AA
CalPERS 1997-2011
Experience Study
Mortality Improvement Scale
MP-2014 modified to converge
to ultimate mortality
improvement rates in 2022
September 10, 2015 E-22
ACTUARIAL ASSUMPTIONS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
District Service
for Retirement
Hired < 1/1/81 - 5 years of
District service
Hired ≥ 1/1/81 & < 7/1/93 and
General Manager - Age plus
District service ≥ 70
Hired ≥ 7/1/93:
Unrepresented employees:
- Hired < 1/1/13 - 15 years
of District service
- Hired ≥ 1/1/13 - 20 years
of District service
Represented employees:
- 20 years of District service
- 5 years of District service
if employee does not have
15 or 20 years of service at
age 65
Unrepresented employees:
Hired < 1/1/13 - 15 years of
District service
Hired ≥ 1/1/13 - 20 years of
District service
Represented employees:
20 years of District service
5 years of District service if
employee does not have 15 or
20 years of service at age 65
September 10, 2015 E-23
ACTUARIAL ASSUMPTIONS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
Service
Retirement
CalPERS 1997-2007
Experience Study
CalPERS Misc ERA
CalPERS Hire Age 35
Hire < 1/1/13 2.7%@55 58.1
Hire ≥ 1/1/13
Classic Member 2.7%@55 58.1
New Member 2.0%@62 60.9
CalPERS 1997-2011
Experience Study
CalPERS Misc ERA
CalPERS Hire Age 35
Hire < 1/1/13 2.7%@55 58.6
Hire ≥ 1/1/13
Classic Member 2.7%@55 58.1
New Member 2.0%@62 60.9
Hardship
Retirements
n/a 1% liability load for active
obligation
Participation at
Retirement
Currently covered and waived
Medical - 100%
Dental - 80%
Same
September 10, 2015 E-24
ACTUARIAL ASSUMPTIONS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
Medical Plan at
Retirement
Currently covered:
Current plan election until
Medicare eligible
PPO after Medicare eligible
Waived actives - PPO
Waived retirees - n/a
Same
Medicare
Eligibility
100% eligible for Medicare at
age 65
All Medicare eligibles will
elect Part B coverage
Same
Marital Status
at Retirement
Actives
Married if currently elect
2-party or family coverage
Waived - 80% married
Retirees - based on spouse
information if provided
Same
September 10, 2015 E-25
ACTUARIAL ASSUMPTIONS
Assumption June 30, 2013 Valuation June 30, 2015 Valuation
Spouse &
Dependent
Coverage at
Retirement
Spouse coverage:
100% elect CalPERS joint
and survivor annuity
Coverage assumption same
as retiree assumption
Family coverage:
Current actives -10% until
age 65 if assumed married
Current retirees - current
coverage until age 65
Same
Spouse Age Actives - males 3 years older
than females
Retirees - males 3 years older
than females if spouse birth
date not provided
Same
September 10, 2015 E-26
ACTUARIAL METHODS
Method June 30, 2015 Valuation
Cost Method Entry Age Normal
Normal Cost is a level percentage of payroll
District date of hire used for entry age
Actuarial Value of
Assets
Investment gains/losses spread over 5-year rolling period
Not less than 80% nor more than 120% of market value
Amortization Method Level percent of payroll
Amortization Period 30-year fixed (closed) period for initial UAAL as of
6/30/07 for 2007/08 ARC
22-year fixed (closed) period for UAAL as of 6/30/15 for
2015/16 ARC
Amortization period decreases by one year each fiscal
year
When amortization period reaches 15 years, new gains and
losses will be amortized over a rolling (open) 15-year
period and plan and assumption changes will be amortized
over fixed (closed) 20-year period
September 10, 2015 E-27
ACTUARIAL METHODS
Method June 30, 2015 Valuation
Implied Subsidy Employer cost for allowing non-Medicare eligible retirees
to participate at active rates
Valuation includes an implied subsidy for medical but not
dental or life insurance
Future New Entrants Valuation Results – Closed group, no new hires
Projections – Simplified open group projection:
Actives - Total pay increased in accordance with
aggregate payroll assumption
Normal Cost - New hires assume to have same the same
Normal Cost percentage as current actives
Retirees - no additional retirees from new hires over 10-
year projection period
September 10, 2015 E-28
DEFINITIONS
GASB 45
Accrual
Accounting
Project future employer-provided benefit cash flow for current active
employees and current retirees
Discount projected cash flow to valuation date using discount rate and
actuarial assumptions to determine present value of benefits (PVB)
Discount rate is expected long-term return on plan assets
Allocate PVB to past, current, and future periods
Normal Cost (NC) is portion of PVB allocated to current fiscal year
Actuarial cost method used for valuation is Entry Age Normal (EAN)
Cost method which determines Normal Cost as a level percent of
payroll
Actuarial Accrued Liability (AAL) is portion of PVB allocated to
prior service with the employer
Unfunded AAL (UAAL) is AAL less Plan Assets
Assets must be in segregated and restricted trust to be considered Plan
Assets for GASB 45
PayGo Cost Cash subsidy is employer pay-as-you-go benefit payments for retirees
Implied subsidy is difference between actual cost of retiree benefits
and retiree premiums subsidized by active employee premiums
September 10, 2015 E-29
DEFINITIONS
Present Value of Benefits
September 10, 2015 E-30
DEFINITIONS
Annual
Required
Contribution
(ARC)
GASB 45 contribution is Normal Cost plus amortization of:
Initial UAAL and AAL for plan, assumption, and method changes
Experience gains and losses (difference between actual experience
and that expected from assumptions)
Contribution gains and losses (difference between ARC and actual
contributions)
Net OPEB
Obligation
(NOO)
NOO is accumulated amounts expensed but not funded
Net OPEB Asset if amounts funded exceed those expensed
Annual
OPEB Cost
(AOC)
Expense for current period including:
ARC
Interest on NOO
Adjustment of NOO
Adjustment of NOO prevents double counting of expense since ARCs
include amortization of prior contribution gains and losses previously
expensed
September 10, 2015 E-31
DEFINITIONS
Terminology
Used in
Report
AAL - Actuarial Accrued Liability
AOC - Annual OPEB Cost
ARC - Annual Required Contribution
AVA - Actuarial Value of Assets
BOY - Beginning of Fiscal Year
EAN - Entry Age Normal Cost Method
GASB 45 - Governmental Accounting Standards Board Statement
No. 45
MVA - Market Value of Assets
NOO - Net OPEB Obligation
OPEB - Other (than pensions) Post Employment Benefits
NC - Normal Cost
PVB - Present Value of Projected Benefits
UAAL - Unfunded Actuarial Accrued Liability
September 10, 2015 E-32
DEFINITIONS
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OTAY WATER DISTRICT
RETIREE HEALTHCARE PLAN
June 30, 2015 GASB 45 Actuarial Valuation
OPEB Contribution Study
Preliminary Results
Bartel Associates, LLC
Joseph R. D’Onofrio, Assistant Vice President
Adam Zimmerer, Actuarial Analyst
Tak Frazita, Associate Actuary
November 19, 2015
O:\Clients\Otay Water District\Projects\OPEB\2015\Reports\BA OtayWD 15-11-19 OPEB 15-06-30 OPEB contribution study draft.docx
CONTENTS
Topic Page
Benefit Summary - Current Plan 1
Benefit Summary - Prior Plan 5
Actuarial Assumptions 7
CalPERS Member Contributions 9
Study Results 11
November 19, 2015 1
BENEFIT SUMMARY - CURRENT PLAN
Eligibility
Service
Retirement
Full-time employees who retire directly from District under
CalPERS (service or disability)
Unrepresented retired ≤ 7/15/11; Represented retired ≤ 8/10/11:
Hired < 1/1/81 - Age 55 and 5 years of District service
Hired ≥ 1/1/81 - Age 55 and age plus District service ≥ 70
Unrepresented1 retired > 7/15/11; Represented retired > 8/10/11:
Hired < 1/1/13 - Age 55 and 20 years of District service
(15 years for Unrepresented)
Hired ≥ 1/1/13 - Age 55 & 20 years of District service
Directors:
Elected < 1/1/95 - Age 60 and 12 years of District service2
Elected ≥ 1/1/95 - Not eligible
District service for eligibility is continuous service from last hire
date
Medicare eligible retirees and spouses must enroll in Medicare
Retirees who waive coverage cannot rejoin plan
1 Includes General Manager. 2 All current Directors were elected after 1/1/95. There are 2 retired Directors.
November 19, 2015 2
BENEFIT SUMMARY - CURRENT PLAN
Medical & Dental 100% of retiree premium for life
Retired < 12/29/03 - 100% spouse premium for life and 100%
eligible dependent premium to age 19
Retired ≥ 12/29/03 - 88% of spouse premium for life and 88%
eligible dependent premium to age 19
Retiree can pay eligible dependent premium after age 19 as
required by law
Medical Plans SDRMA EPO, Gold PPO, HMO 15 available before Medicare
eligibility
Gold PPO available after Medicare eligibility
Life Insurance Retired < 12/29/03 - $3,000 for retiree to age 65 and $1,950
from age 65 to age 70
Retired < 12/29/03 and hired < 1/1/81 - $1,000 for spouse to
retiree age 65 and $650 from retiree age 65 to retiree age 70
Directors not eligible
November 19, 2015 3
BENEFIT SUMMARY - CURRENT PLAN
Survivors
Unrepresented
Retired < 7/15/11
Represented
Retired < 8/10/11
Directors
Elected < 1/1/95
Retired < 12/29/03 and Directors elected < 1/1/95 - 100% spouse
premium and 100% eligible dependent premium to
age 19
Retired ≥ 12/29/03 - 88% of spouse premium and eligible
dependent premium to age 19
Spouse coverage after retiree death but not past spouse age 65
Eligible dependent can pay full premium after age 19 as required
by law
Survivor benefit available to actives eligible to retire
Survivors
Unrepresented
Retired ≥ 7/15/11
Represented
Retired ≥ 8/10/11
88% of spouse premium for life and eligible dependent premium
to age 19
Spouse coverage after retiree death but not past spouse age 65
Eligible dependent can pay full premium after age 19 as required
by law
Survivor benefit available to actives eligible to retire
November 19, 2015 4
BENEFIT SUMMARY - CURRENT PLAN
Disability &
Hardship
Full-time employees who retire directly from District under
CalPERS
Disability - Age 50 to 54 and10 years of District service
Hardship:
Hired < 1/1/13 - Hardship as determined by the District with
20 years of District service (15 years for Unrepresented)
Hired ≥ 1/1/13 - Hardship as determined by the District and
20 years of District service
Early retirement adjustment to benefit:
Age Percent
50 70%
51 76%
52 82%
53 88%
54 94%
November 19, 2015 5
BENEFIT SUMMARY - PRIOR PLAN
Benefit Same as current plan except for benefits listed below
Eligibility Actives hired ≥ 7/1/93:
Service retirement - Age 55 and 15 years of District service
Disability Retirement - Age 50 and 10 years of District service
Medical Benefit 50% of retiree premium until Medicare eligibility
Dental Benefit None
Survivor Benefit None
Hardship Benefit None
Medical Plan Gold PPO
November 19, 2015 6
BENEFIT SUMMARY - PRIOR PLAN
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November 19, 2015 7
ACTUARIAL ASSUMPTIONS
Assumption June 30, 2015 Valuation OPEB Contribution Study
Actuarial
Assumptions
Same as stated in 6/30/15
preliminary actuarial valuation
report dated 9/10/15
Same as stated in 6/30/15
preliminary actuarial valuation
report dated 9/10/15 except
those listed below for actives
hired ≥ 7/1/93
District Service
for Retirement
Unrepresented employees:
Hired < 1/1/13 - 15 years of
District service
Hired ≥ 1/1/13 - 20 years of
District service
Represented employees:
20 years of District service
5 years of District service if
employee does not have 15 or
20 years of service at age 65
Unrepresented employees:
15 years of District service
Represented employees:
15 years of District service
November 19, 2015 8
ACTUARIAL ASSUMPTIONS
Assumption June 30, 2015 Valuation OPEB Contribution Study
Medical Plan at
Retirement
Currently covered:
Current plan election until
Medicare eligible
PPO after Medicare eligible
Waived actives - PPO
PPO
November 19, 2015 9
CALPERS MEMBER CONTRIBUTIONS
CalPERS Member Contributions Unrepresented Represented
CalPERS Member Classic New Classic New
Required CalPERS Member Contributions 8.00% 6.25% 8.00% 6.25%
Additional CalPERS Member Contributions 0.00%1.75%0.75%2.50%
Total CalPERS Member Contributions 8.00% 8.00% 8.75% 8.75%
Prior CalPERS Member Contributions 1.00% 1.00% 1.00%1.00%
Member Contributions for OPEB Funding 7.00% 7.00% 7.75% 7.75%
November 19, 2015 10
CALPERS MEMBER CONTRIBUTIONS
Unrepresented Represented
Fiscal
Year
End
Estimated
Annual
CERBT
Return
Average
Contribution
Exposure
(Years)
Annual
Member
OPEB
Contrib
Accumulated
Member
OPEB
Contrib
Annual
Member
OPEB
Contrib
Accumulated
Member
OPEB
Contrib
2012 0.38% 0.37 $138,652 $138,847 $259,304 $259,669
2013 11.20% 0.33 320,012 485,819 557,397 866,021
2014 18.30% 0.30 309,934 900,684 590,760 1,645,810
2015 (0.24%) 0.39 304,850 1,203,087 603,073 2,244,639
November 19, 2015 11
STUDY RESULTS
Actuarial Obligations - Current Plan
June 30, 2015 - 7.25% Discount Rate
(Amounts in 000’s)
Actuarial Obligations Unrepresented Represented Total
Present Value of Benefits
Actives $5,715 $12,287 $18,001
Retirees3 3,295 9,510 12,805
Total 9,010 21,797 30,806
Actuarial Accrued Liability
Actives 3,912 6,972 10,884
Retirees 3,295 9,510 12,805
Total 7,207 16,482 23,689
Actuarial Value of Assets4 5,148 11,772 16,920
Unfunded AAL 2,059 4,710 6,769
Funded Percent 71% 71% 71%
Normal Cost for 2015/16 227 533 761
Normal Cost %Pay 4.7% 6.4% 5.8%
3 Employee group information was not available for retirees. Retiree liability was allocated to Unrepresented and Represented
employee groups in proportion to active counts on 6/30/15 (35 Unrepresented and 101 Represented.) 4 Actuarial Value of Assets was allocated to Unrepresented and Represented employee groups in proportion to AAL.
November 19, 2015 12
STUDY RESULTS
Actuarial Obligations - Prior Plan
June 30, 2015 - 7.25% Discount Rate
(Amounts in 000’s)
Actuarial Obligations Unrepresented Represented Total
Present Value of Benefits
Actives $1,292 $ 2,633 $ 3,924
Retirees 3,132 9,039 12,171
Total 4,424 11,671 16,095
Actuarial Accrued Liability
Actives 1,064 1,939 3,003
Retirees 3,132 9,039 12,171
Total 4,196 10,977 15,173
Estimated Plan Assets5 3,945 9,528 13,473
Unfunded AAL 251 1,450 1,701
Funded Percent 94% 87% 89%
Normal Cost for 2015/16 31 81 112
Normal Cost %Pay 0.6% 1.0% 0.9%
5 Actuarial Value of Assets less estimated accumulated member OPEB contributions.
November 19, 2015 13
STUDY RESULTS
Funding Projection - Current Plan - Unrepresented
(Amounts in 000’s)
Fiscal
Year
End
Normal
Cost
UAAL
Amort
Total
ARC
Projected
Payroll
Member
OPEB
Contrib
Net
District
ARC
BOY
UAAL
BOY
Fund%
2016 $228 $145 $373 $4,796 $336 $ 37 $2,059 71%
2017 235 129 365 4,952 347 18 1,777 77%
2018 243 111 354 5,113 358 (4) 1,473 82%
2019 251 89 340 5,279 370 (29) 1,150 87%
2020 259 64 323 5,451 382 (58) 795 91%
2021 267 34 302 5,628 394 (92) 407 96%
2022 276 1 277 5,811 407 (129) 15 100%
2023 285 0 285 6,000 420 (135) 0 100%
2024 294 0 294 6,195 434 (140) 0 100%
2025 303 0 303 6,396 448 (144) 0 100%
November 19, 2015 14
STUDY RESULTS
Funding Projection - Prior Plan - Unrepresented
(Amounts in 000’s)
Fiscal
Year
End
Normal
Cost
UAAL
Amort
Total
ARC
Projected
Payroll
Member
OPEB
Contrib
Net
District
ARC
BOY
UAAL
BOY
Fund%
2016 $31 $18 $49 $4,796 $0 $49 $251 94%
2017 32 13 46 4,952 0 46 185 96%
2018 33 8 42 5,113 0 42 112 98%
2019 34 3 37 5,279 0 37 36 99%
2020 35 0 35 5,451 0 35 0 100%
2021 37 0 37 5,628 0 37 0 100%
2022 38 0 38 5,811 0 38 0 100%
2023 39 0 39 6,000 0 39 0 100%
2024 40 0 40 6,195 0 40 0 100%
2025 42 0 42 6,396 0 42 0 100%
November 19, 2015 15
STUDY RESULTS
Funding Projection - Difference - Unrepresented
(Amounts in 000’s)
Fiscal
Year
End
Normal
Cost
UAAL
Amort
Total
ARC
Projected
Payroll
Member
OPEB
Contrib
Net
District
ARC
BOY
UAAL
BOY
Fund%
2016 $ 97 $127 $324 n/a $336 $(12) $1,807 (23%)
2017 203 116 319 n/a 347 (28) 1,592 (19%)
2018 210 103 312 n/a 358 (46) 1,361 (16%)
2019 217 86 303 n/a 370 (66) 1,114 (12%)
2020 224 64 288 n/a 382 (93) 795 (9%)
2021 230 34 265 n/a 394 (129) 407 (4%)
2022 238 1 239 n/a 407 (167) 0 0%
2023 246 0 246 n/a 420 (174) 0 0%
2024 254 0 254 n/a 434 (180) 0 0%
2025 261 0 261 n/a 448 (186) 0 0%
November 19, 2015 16
STUDY RESULTS
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November 19, 2015 17
STUDY RESULTS
Funding Projection - Current Plan - Represented
(Amounts in 000’s)
Fiscal
Year
End
Normal
Cost
UAAL
Amort
Total
ARC
Projected
Payroll
Member
OPEB
Contrib
Net
District
ARC
BOY
UAAL
BOY
Fund%
2016 $534 $333 $866 $8,283 $642 $224 $4,710 71%
2017 551 285 836 8,552 663 173 3,913 78%
2018 569 231 800 8,830 684 116 3,078 83%
2019 587 173 760 9,117 707 54 2,222 89%
2020 606 108 714 9,414 730 (16) 1,332 94%
2021 626 36 663 9,720 753 (91) 433 98%
2022 645 0 645 10,035 778 (133) 0 100%
2023 667 0 667 10,362 803 (136) 0 100%
2024 688 0 688 10,698 829 (141) 0 100%
2025 710 0 710 11,046 856 (146) 0 100%
November 19, 2015 18
STUDY RESULTS
Funding Projection - Prior Plan - Represented
(Amounts in 000’s)
Fiscal
Year
End
Normal
Cost
UAAL
Amort
Total
ARC
Projected
Payroll
Member
OPEB
Contrib
Net
District
ARC
BOY
UAAL
BOY
Fund%
2016 $81 $102 $183 $8,283 $0 $183 $1,450 87%
2017 84 83 167 8,552 0 167 1,144 90%
2018 86 62 148 8,830 0 148 824 93%
2019 89 39 129 9,117 0 129 504 96%
2020 92 13 105 9,414 0 105 161 99%
2021 95 0 95 9,720 0 95 0 100%
2022 98 0 98 10,035 0 98 0 100%
2023 101 0 101 10,362 0 101 0 100%
2024 105 0 105 10,698 0 105 0 100%
2025 108 0 108 11,046 0 108 0 100%
November 19, 2015 19
STUDY RESULTS
Funding Projection - Difference - Represented
(Amounts in 000’s)
Fiscal
Year
End
Normal
Cost
UAAL
Amort
Total
ARC
Projected
Payroll
Member
OPEB
Contrib
Net
District
ARC
BOY
UAAL
BOY
Fund%
2016 $453 $231 $683 n/a $642 $ 41 $3,261 (16%)
2017 467 202 669 n/a 663 6 2,769 (12%)
2018 483 169 652 n/a 684 (32) 2,254 (10%)
2019 498 134 631 n/a 707 (75) 1,718 (7%)
2020 514 95 609 n/a 730 (121) 1,171 (5%)
2021 531 36 568 n/a 753 (186) 433 (2%)
2022 547 0 547 n/a 778 (231) 0 0%
2023 566 0 566 n/a 803 (237) 0 0%
2024 583 0 583 n/a 829 (246) 0 0%
2025 602 0 602 n/a 856 (254) 0 0%
November 19, 2015 20
STUDY RESULTS
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November 19, 2015 21
STUDY RESULTS
Funding Projection - Current Plan - Total
(Amounts in 000’s)
Fiscal
Year
End
Normal
Cost
UAAL
Amort
Total
ARC
Projected
Payroll
Member
OPEB
Contrib
Net
District
ARC
BOY
UAAL
BOY
Fund%
2016 $761 $478 $1,239 $13,080 $978 $262 $6,769 71%
2017 786 414 1,200 13,505 1,009 191 5,690 77%
2018 812 342 1,154 13,944 1,042 111 4,551 83%
2019 838 262 1,100 14,397 1,076 24 3,372 88%
2020 865 172 1,037 14,865 1,111 (74) 2,127 93%
2021 894 71 964 15,348 1,147 (183) 840 97%
2022 921 1 923 15,846 1,185 (262) 0 100%
2023 952 0 952 16,361 1,223 (271) 0 100%
2024 982 0 982 16,893 1,263 (281) 0 100%
2025 1,013 0 1,014 17,442 1,304 (290) 0 100%
November 19, 2015 22
STUDY RESULTS
Funding Projection - Prior Plan - Total
(Amounts in 000’s)
Fiscal
Year
End
Normal
Cost
UAAL
Amort
Total
ARC
Projected
Payroll
Member
OPEB
Contrib
Net
District
ARC
BOY
UAAL
BOY
Fund%
2016 $112 $120 $232 $13,079 $0 $232 $1,701 89%
2017 116 96 213 13,504 0 213 1,329 92%
2018 119 70 190 13,943 0 190 936 94%
2019 123 42 166 14,396 0 166 540 97%
2020 127 13 140 14,865 0 140 161 99%
2021 132 0 132 15,348 0 132 0 100%
2022 136 0 136 15,846 0 136 0 100%
2023 140 0 140 16,362 0 140 0 100%
2024 145 0 145 16,893 0 145 0 100%
2025 150 0 150 17,442 0 150 0 100%
November 19, 2015 23
STUDY RESULTS
Funding Projection - Difference - Total
(Amounts in 000’s)
Fiscal
Year
End
Normal
Cost
UAAL
Amort
Total
ARC
Projected
Payroll
Member
OPEB
Contrib
Net
District
ARC
BOY
UAAL
BOY
Fund%
2016 $649 $358 $1,007 n/a $ 978 $ 30 $5,068 (18%)
2017 670 318 987 n/a 1,010 (22) 4,361 (15%)
2018 693 272 964 n/a 1,042 (79) 3,615 (11%)
2019 715 220 934 n/a 1,077 (142) 2,832 (9%)
2020 738 159 897 n/a 1,112 (214) 1,966 (6%)
2021 762 71 832 n/a 1,147 (315) 840 (3%)
2022 785 1 787 n/a 1,185 (398) 0 0%
2023 812 0 812 n/a 1,223 (411) 0 0%
2024 837 0 837 n/a 1,263 (426) 0 0%
2025 863 0 864 n/a 1,304 (440) 0 0%
November 19, 2015 24
STUDY RESULTS
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