HomeMy WebLinkAbout25G - ACTUARIAL SVCSREQUEST FOR
COUNCIL ACTION
CITY COUNCIL MEETING DATE:
MARCH 3, 2008
TITLE:
AWARD CONTRACT WITH
ASSOCIATES, LLC, FOR
SERVICES
CLERK OF COUNCIL USE ONLY:
APPROVED
^ As Recommended
BARTEL ^ As Amended
ACTUARIAL ^ Ordinance on 151 Reading
^ Ordinance on 2"d Reading
^ Implementing Resolution
^ Set Public Hearing For_
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CITY MANAGER
RECOMMENDED ACTION
CONTINUED TO
FILE NUMBER
Authorize the City Manager and Clerk of the Council to execute an
agreement with Bartel Associates, LLC, for a total agreement amount not
to exceed $32,000, subject to non-substantive changes approved by the
City Manager and City Attorney.
DISCUSSION
Governmental Standards Board pronouncement 45 (GASB 45) was issued to
provide more complete and reliable financial reporting regarding the
costs that governments incur for post retirement benefits such as health
insurance. The City is required to implement GASB 45 by the end of
fiscal year June 30, 2008. In order to understand the true liability as
defined under GASB 45 an actuarial study needs to be conducted.
Bartel Associates, LLC is recognized as one of the leading actuarial
firms in interpreting GASB 45. They have assisted many regional certified
accounting firms with training municipalities about GASB 45. As such,
staff recommends hiring Bartel Associates, LLC to conduct the actuarial
study.
FISCAL IMPACT
Funds for these services are available in the Finance & Management
Services (account no. 011-170-6291).
APPROVED AS TO FUNDS AND ACCOUNTS:
/~rancisco Gutierrez
~j Executive Director
Finance & Management Services Agency
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CONSULTANT AGREEMENT
THIS AGREEMENT, made and entered into this 4`" day of February, 2008 by and
between Bartel Associates, LLC, a California limited liability company (hereinafter
"Consultant"), and the City of Santa Ana, a charter city and municipal corporation organized and
existing under the Constitution and laws of the State of California (hereinafter "City").
RECITALS
A. The City desires to retain a consultant having special skill and knowledge in the field of
actuarial consulting, to perform an actuarial study of the City's retiree healthcare
obligation.
B. Consultant represents that Consultant is able and willing to provide such services to the
City.
C. In undertaking the performance of this Agreement, Consultant represents that it is
knowledgeable in its field and that any services performed by Consultant under this
Agreement will be performed in compliance with such standards as may reasonably be
expected from a professional consulting firm in the field.
NOW THEREFORE, in consideration of the mutual and respective promises, and subject to the
terms and conditions hereinafter set forth, the parties agree as follows:
1. SCOPE OF SERVICES
Consultant shall perform those services required to complete an actuarial study, as set
forth in Exhibit A to this Agreement.
2. COMPENSATION
a. City agrees to pay, and Consultant agrees to accept as total payment for its services,
the rates and charges identified in Exhibit A. The total sum to be expended under this
Agreement shall not exceed $32,000.00 during the term of this Agreement.
b. Payment by City shall be made within thirty (30) days following receipt of proper
invoice evidencing work performed, subject to City accounting procedures. Payment need not
be made for work which fails to meet the standards of performance set forth in the Recitals
which may reasonably be expected by City.
3. TERM
This Agreement shall commence on the date first written above and terminate on June 30,
2008, unless terminated earlier in accordance with Section 12, below. The term of this
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Agreement may be extended upon a writing executed by the Executive Director of the Finance
and Management Services Agency and the City Attorney.
4. INDEPENDENT CONTRACTOR
Consultant shall, during the entire term of this Agreement, be construed to be an
independent contractor and not an employee of the City. This Agreement is not intended nor
shall it be construed to create an employer-employee relationship, a joint venture relationship, or
to allow the City to exercise discretion or control over the professional manner in which
Consultant performs the services which are the subject matter of this Agreement; however, the
services to be provided by Consultant shall be provided in a manner consistent with all
applicable standards and regulations governing such services. Consultant shall pay all salaries and
wages, employer's social security taxes, unemployment insurance and similar taxes relating to
employees and shall be responsible for all applicable withholding taxes.
5. INSURANCE
Prior to undertaking performance of work under this Agreement, Consultant shall
maintain and shall require its subcontractors, if any, to obtain and maintain insurance as
described below:
a. Worker's Compensation Insurance. In accordance with the provisions of Section 3300
of the Labor Code, Consultant, if Consultant has any employees, is required to be insured against
liability for worker's compensation or to undertake self-insurance. Prior to commencing the
performance of the work under this Agreement, Consultant agrees to obtain and maintain any
employer's liability insurance with limits not less than $1,000,000 per accident.
b. Professional liability (errors and omissions) insurance, with a combined single limit
of not less than $1,000,000 per claim.
c. The following requirements apply to the insurance to be provided by Consultant
pursuant to this section:
(i) Consultant shall maintain all insurance required above in full force and
effect for the entire period covered by this Agreement.
(ii) Certificates of insurance shall be furnished to the City upon execution of
this Agreement and shall be approved in form by the City Attorney.
(iii) Certificates and policies shall state that the policies shall not be canceled
or reduced in coverage or changed in any other material aspect without
thirty (30) days prior written notice to the City.
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d. If Consultant fails or refuses to produce or maintain the insurance required by this
section or fails or refuses to furnish the City with required proof that insurance has been procured
and is in force and paid for, the City shall have the right, at the City's election, to forthwith
terminate this Agreement. Such termination shall not effect Consultant's right to be paid for its
time and materials expended prior to notification of termination. Consultant waives the right to
receive compensation and agrees to indemnify the City for any work performed prior to approval
of insurance by the City.
6. INDEMNIFICATION
Consultant agrees to and shall indemnify and hold harmless the City, its officers, agents,
employees, consultants, special counsel, and representatives from liability for personal injury,
damages, just compensation, restitution, judicial or equitable relief arising out of claims for
personal injury, including health, and claims for property damage, which may arise from the
direct or indirect operations of the Consultant or its contractors, subcontractors, agents,
employees, or other persons acting on their behalf which relates to the services described in
section 1 of this Agreement. The Consultant further agrees to indemnify, hold harmless, and pay
all costs for the defense of the City, including fees and costs for special counsel to be selected by
the City, regarding any action by a third party asserting that personal injury, damages, just
compensation, restitution, judicial or equitable relief due to personal or property rights arises by
reason of the terms of, or effects arising from this Agreement. City may make all reasonable
decisions with respect to its representation in any legal proceeding.
7. CONFIDENTIALITY
If Consultant receives from the City information which due to the nature of such
information is reasonably understood to be confidential and/or proprietary, Consultant agrees
that it shall not use or disclose such information except in the performance of this Agreement,
and further agrees to exercise the same degree of care it uses to protect its own information of
like importance, but in no event less than reasonable care. "Confidential Information" shall
include all nonpublic information. Confidential information includes not only written
information, but also information transferred orally, visually, electronically, or by other means.
Confidential information disclosed to either party by any subsidiary and/or agent of the other
party is covered by this Agreement. The foregoing obligations of non-use and nondisclosure
shall not apply to any information that (a) has been disclosed in publicly available sources; (b) is,
through no fault of the Consultant disclosed in a publicly available source; (c) is in rightful
possession of the Consultant without an obligation of confidentiality; (d) is required to be
disclosed by operation of law; or (e) is independently developed by the Consultant without
reference to information disclosed by the City.
8. CONFLICT OF INTEREST CLAUSE
Consultant covenants that it presently has no interests and shall not have interests, direct
or indirect, which would conflict in any manner with performance of services specified under
this Agreement.
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9. NOTICE
Any notice, tender, demand, delivery, or other communication pursuant to this
Agreement shall be in writing and shall be deemed to be properly given if delivered in person or
mailed by first class or certified mail, postage prepaid, or sent by telefacsimile or other
telegraphic communication in the manner provided in this Section, to the following persons:
To City: Clerk of the City Council
City of Santa Ana
20 Civic Center Plaza (M-30)
P.O. Box 1988
Santa Ana, CA 92702-1988
telefacsimile (714) 647-6956
With courtesy copies to:
Executive Director of the Finance and Management Services Agency
City of Santa Ana
20 Civic Center Plaza (M-17)
P.O. Box 1988
Santa Ana, California 92702
telefacsimile (714) 647-5414
and,
City Attorney
City of Santa Ana
20 Civic Center Plaza (M-29)
P.O. Box 1988
Santa Ana, California 92702
telefacsimile (714) 647-6515
To Consultant: Bartel Associates, LLC
411 Borel Avenue, Ste 445
San Mateo, California 94402
Telefacsimile (650) 345-8057
Attn: John E. Bartel
A party may change its address by giving notice in writing to the other party. If sent by
mail, communication shall be effective or deemed to have been given three (3) days after it has
been deposited in the United States mail, duly registered or certified, with postage prepaid, and
addressed as set forth above. If sent by telefacsimile, communication shall be effective or
deemed to have been given twenty-four (24) hours after the time set forth on the transmission
report issued by the transmitting facsimile machine, addressed as set forth above. For purposes
of calculating these time frames, weekends, federal, state, County or City holidays shall be
excluded.
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10. EXCLUSIVITY AND AMENDMENT
This Agreement represents the complete and exclusive statement between the City and
Consultant, and supersedes any and all other agreements, oral or written, between the parties. In
the event of a conflict between the terms of this Agreement and any attachments hereto, the
terms of this Agreement shall prevail. This Agreement may not be modified except by written
instrument signed by the City and by an authorized representative of Consultant. The parties
agree that any terms or conditions of any purchase order or other instrument that are inconsistent
with, or in addition to, the terms and conditions hereof, shall not bind or obligate Consultant nor
the City. Each party to this Agreement acknowledges that no representations, inducements,
promises or agreements, orally or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not embodied herein.
11. ASSIGNMENT
Inasmuch as this Agreement is intended to secure the specialized services of Consultant,
Consultant may not assign, transfer, delegate, or subcontract any interest herein without the prior
written consent of the City and any such assignment, transfer, delegation or subcontract without
the City's prior written consent shall be considered null and void. Nothing in this Agreement
shall be construed to limit the City's ability to have any of the services which are the subject to
this Agreement performed by City personnel or by other consultants retained by City.
12. TERMINATION
This Agreement may be terminated by the City upon thirty (30) days written notice of
termination. In such event, Consultant shall be entitled to receive and the City shall pay Consultant
compensation for all services performed by Consultant prior to receipt of such notice of termination,
subject to the following conditions:
a. As a condition of such payment, the Executive Director may require Consultant to deliver
to the City all work product completed as of such date, and in such case such work product shall be
the property of the City unless prohibited by law, and Consultant consents to the City's use thereof
for such purposes as the City deems appropriate.
b. Payment need not be made for work which fails to meet the standard of performance
specified in the Recitals of this Agreement.
13. DISCRIMINATION
Consultant shall not discriminate because of race, color, creed, religion, sex, marital
status, sexual orientation, age, national origin, ancestry, or disability, as defined and prohibited
by applicable law, in the recruitment, selection, training, utilization, promotion, termination or
other employment related activities. Consultant affirms that it is an equal opportunity employer
and shall comply with all applicable federal, state and local laws and regulations.
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14. JURISDICTION -VENUE
This Agreement and all questions relating to its validity, interpretation, performance, and
enforcement shall be governed and construed in accordance with the laws of the State of
California. This Agreement has been executed and delivered in the State of California and the
validity, interpretation, performance, and enforcement of any of the clauses of this Agreement
shall be determined and governed by the laws of the State of California. Both parties further
agree that Orange County, California, shall be the venue for any action or proceeding that may
be brought or arise out of, in connection with or by reason of this Agreement.
15. PROFESSIONAL LICENSES
Consultant shall, throughout the term of this Agreement, maintain all necessary licenses,
permits, approvals, waivers, and exemptions necessary for the provision of the services
hereunder and required by the laws and regulations of the United States, the State of California,
the City of Santa Ana and all other governmental agencies. Consultant shall notify the City
immediately and in writing of her inability to obtain or maintain such permits, licenses,
approvals, waivers, and exemptions. Said inability shall be cause for termination of this
Agreement.
16. MISCELLANEOUS PROVISIONS
a. Each undersigned represents and warrants that its signature hereinbelow has the power,
authority and right to bind their respective parties to each of the terms of this Agreement, and shall
indemnify City fully, including reasonable costs and attorney's fees, for any injuries or damages to
City in the event that such authority or power is not, in fact, held by the signatory or is withdrawn.
b. All Exhibits referenced herein and attached hereto shall be incorporated as if fully set
forth in the body of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the date and year
first above written.
ATTEST:
PATRICIA E. HEALY
Clerk of the Council
CITY OF SANTA ANA
DAVID N. REAM
City Manager
APPROVED AS TO FORM:
JOSEPH W.FLETCHER
City Attorney
By:
Laura Sheedy
Assistant City Attorney
RECOMMENDED FOR APPROVAL:
~~~ ~~ -~
~~RANCISCO GUTIERREZ
Executive Director of the
Finance & Management Services Agency
CONSULTANT
JOHN E. BARTEL
President
Tax ID#
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October 23, 2407
Pamela Arends-King
Assistant Director of Finance & Management Services
City of Santa Ana
24 Civic Center Plaza
Santa Ana, CA 92701
Re: GASB 45 -Other Post Employment Benefits (OPEB) Actuarial Study Fee Estimate
Dear Ms. Arends-King:
Bartel Associates would be pleased to provide the City of Santa Ana actuarial consulting services. This
letter summarizes the project scope and our fee estimate associated with the City's retiree healthcare
obligation.
Background
The City participates in the Ca1PERS retirement program providing Miscellaneous employees the
2.7%@55 beneft and Safety employees the 3%@54 benefit. The City also participates in the Ca1PERS
healthcare program (PEMHCA) providing eligible retirees the PEMHCA minimum contribution using
the "5% unequal methad: ' Some employee groups can elect to use accumulated sick leave to pay for
retiree healthcare premiums until. these amounts are exhausted. The City does not provide contributions
for retiree dental, vision, or life benefits. The City has approximately 942 full-time active employees
anal 276 retirees currently receiving healthcare benefits.
AB 2544 approved by the Governor an September 30, 2006 changes the way the 5% "unequal method"
works. The amount provided to retirees must be a percentage of the amount provided. to active
employees where the percentage is 5% multiplied by the number of years that the agency has
participated in PEMHCA.
In addition, the City contributes a retiree medical subsidy (a percentage of active employees' pay that
varies by bargaining group) to a fund to be used to help pay for retiree healthcare coverage. This fee
letter assumes these pragrams captain individual accounts and GASB 45 does no apply. However, if
these programs do not contain individual accounts then the City should discuss them with its' outside
auditor because GASB 45 may apply.
The Governmental Accounting Standards Board (GASB) issued Statement No. 45, "Accounting and.
Financial Reporting by Employers for Postemploymcnt Benefit Plans Other Than Pensions," called
"OPEB" by GASB, in June 2004. I was a member of GASB's task force providing background
n.fornaation to the Board on this issue.
The City currently pays for OPEB on apay-as-you-go basis. GASB has made it clear the City will need.
to reco~ize its retiree healthcare promise as employees render service. It is important to note the new
GASB OPEB standards will likely result in net obligations significantly different fmm the City's current
lay-as-you-go method.
We believe the "5% unequal method" cash subsidy falls under GASB 45 while any sick leave usage is
covered by GASB 16, "Accounting far Compensated Absences."
25G-9
I'art~cla flreruls-(Zing
October 23, 2007
Page ? /.
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Valuation Process
Our valuation is a four step process consisting of
^ Gathering participant data
^ Meeting with the City to discuss valuation methods and assumptions
^ Valuation processing
^ Meeting with the City to discuss valuation results, including:
• Annual Required Contribution
• Annual OPEB Cost
• Expected Net OPEB Obligation
• I 0 years of projected benefit payments and Annual OPEB Cost
We will provide the City a discussion outline and formal. report including the above information. When
the City adopts GASB 45, the City may need us to prepare a draft GASB 4S footnote. Some agencies
also request an Executive Summary, which provides a summary of the study results in an easily
understandable format. If the City pre-funds using Ca1PERS Employers' Retiree Benefit Trust
{CERBT}, the City will need additional information required by CaIPERS.
Our Approach.
We believe that there are two levels to a GASB 45 actuarial valuation. Tl~e first level is technical
compliance with GASB 45. Same public employers may hire an actuary to assist only with technical
compliance with the standard, limiting the scope of services to preparing the required financial
reporting and disclosure.
The second level goes beyond reporting and disclosure issues, and includes assisting management with
an understanding of GASB 45, the actuarial assumptions and methods, the valuation results, the
financial statement impact including a review of the plan design and cast.
Our recommended approach to GASB 4S studies includes both consulting levels, meeting with
managementtn person at least twice during tine valuation process. We would first meet with the City to
review employee data, plan provisions, and actuarial methods and assumptions. This will assure that
we have the proper information. to begin the valuation. We would meet a second time to review the
valuation results and their financial impact.
Eshma#ed Fees
Our fees to prepare a GASB 45 and GASB I6 valuation will be approximately $23,500. The
approximate cost of each project step is as follows:
Pro~ec# Sten Es#imated Fees
Actuarial Valuation (GASB 45 -Cash subsidy) $ l 1700
Actuarial Valuation (GASB I6 -Unused sick Leave) 5,000
Discount Rate Sensitivity {2 discount rates) g00
AB 2.544 tJnequaI Method Impact 500
Methods & Assumptions Meeting 1500
Preliminary Results Meeting I S00
Formal Valuation Report ~ 500
Total ~+
$23,500
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1'an~el~r ~1.reruIs-Kitrg
()ctaber 23, 2007 !~
Page 3 ,~
Please note:
^ We will bill the City at the following hourly rates:
President & Senior Actuary $300 Actuary $225
Consultant $Z00 Actuarial Analyst $17S
Actuarial Trainee $1 SO Administrative Support $7S
^ Provision for miscellaneous expenses (for travel, computer, outline production, etc.) are included in
the above hourly rates.
^ Qur study wilt include retiree medical benefits, but no dental, vision, or life insurance benefts.
^ Results will be shown separately for Miscellaneous and Safety employee groups.
^ Costs and Iiabiiities will be provided using one funding method and one set of assumptions
including 2 investment return scenarios {not funded and funded with Ca1PERS).
^ We will have 2 meetings with the City: one to review the data, plan provisions, methods, and
assumptions and a second to review preliminary valuation results
^ We will provide a forma] valuation report.
^ If the City's outside auditor determines the City does not need an actuarial analysis of the usage of
unused sick leave for retiree medical benefts, the above estimate will be reduced by $5,000.
^ The above fees assume the retiree medical subsidy programs contain individual accounts and
GASB 45 does not apply. However, if these programs do not contain individual accounts and the
City's outside auditor determines GASB 45 does apply, then our fees will be higher. Without
additional information we can't estimate what our additional fees will be.
^ The above fees are estimates and may be higher if.
• participant data is not relatively clean and free from internal inconsistencies or is not provided in
electronic format (Excel workbook);
• the City's retiree healthcare promise is more complicated than we summarized above;
• results are needed separately for additional employee or bargaining groups;
• results are needed for additional assumptions, funding methods, or alternative plan designs;
• the City requests more than 2 meetings to discuss actuarial methods and assumptions and to
present. the study results, a presentation to the City Council, a meeting with outside auditors, or
meetings with bargaining groups. An additional meeting may cast, far example, $S00 fora 2-
hour presentation or $1,500 fora 2-hour meeting that requires 3 hours of preparation or
additional work.
^ Our results outline and valuation report will include all the information needed for the City's
financial statement. if the City would like us to prepare an executive summary or draft footnote,
our estimated fees would be $1,750 for an executive summary and $1,250 for a draft financial
statement footnote.
^ We agree to bill not more than $32,000 in fees based on the above project scope and including a
City Council meeting and an Executive Summary.
^ if the City pre-funds using the CERB'1', the City will need an actuarial certification and an Excel
spreadsheet completed. fur fees to complete this information will be approximately $1.,500,
Data Requirements
To complete the GASB 45 and GASB 16 study, please provide:
^ Summary of plan provisions and copies of the most recent MQUs far bargained employee groups
and agreements for unrepresented groups or documentation of plan changes since the June 30, 2006
actuarial valuation.
^ Total pay-as-you-go costs .for the last 3 complete fiscal years (2004/05, 2005/OG, 2006/07} and ail
esti~natc for the fiscal year ending June 30, 2008.
^ The City's CatPEa~S (PT:MiICA} healthcare program contract or resolution joining Pt;MHCA.
^ City investment fund annual returns for the last ] 0 years or as many years as are available, if less.
25G-~ 1
l'~tntclir ,rends-King
CctobUr 23, 2007
^ Active and retired participant data in electronic format {.Excel workbook):
• Active Data: name, employee number, sex, birth date, hire date, medical plan, single/2-
party/family coverage, Ca1PERS medical plan code, CaIPERS pension plan
(Miscellaneous, Safety), bargaining ar empiayee group, spouse`s birth date (if
available), sick leave hours balance, and annual base (vr PERSable) compensation.
Include any active employees who have waived coverage.
• Retiree Data; name, employee number, sex, birth date, retirement date (if available),
medical glan, singlel2-party/family coverage, CaIPERS medical plan code, spouse's
birth date {if available), Ca1PERS pension. plan (Miscellaneous, Safety), bargaining or
employee group, remaining sick leave balance, portion of premium paid by the City,
and portion ofpremium paid by the retiree. Include retirees (including surviving
spouses) who have retired under Ca1PERS and participate in PEMHCA even if they are
not eligible for a City contribution.
~ The City may request a data extract of its CaIPERS PEMHCA database by calling the
CaIPERS Employer Contact Center at 888-225-7377. This data extract may be helpful
to the City in assembling the requested. employee census information.
Note that the GaIPER.S data extract will not include some of the requested data, such as
compensation and bargaining group. (We are available to assist if the City needs our
frelp to merge and reconcile various data sources, but this will. result in additional fees,)
In lieu of providing individual pay records, the City can provide the average pay for
Miscellaneous acrd Safety employees from the last Ca1PERS contribution report,
indicating if the reported amount is semi-monthly pay (reported 24 times per year) or
bi-weekly pay (reported 26 times per year).
• In order to maintain confidentiality, please do not provide Social Security Numbers for
the employee number.
^ We may need additional data, depending an our review of the City's benefit promise,
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,/ ~,,
We are prepared to begin this project immediately and can set meeting dates to discuss methods and
assumptions and present valuation results as soon as we receive the above information. Normally the
valuation results meeting is set approximately 4-6 weeks after the later of receipt of the above
information or the methods and assumptions meeting.
We look forward to working with you and the City.
Sincerely,
~~ ~
John E. Bartel
President
c: lloug Pryor, Bartel Associates
Jae D'Onofxio, Bartel Associates
oaprosp~ts~.city aPcan4a analba letter 07-IO-t9 nim6 foes em::il.Joc
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