HomeMy WebLinkAbout25C - RENEWAL TO ACTUALRIAL VALUATION SRVCS FOR OPEB AGMT WITH BICKMOREREQUEST FOR
COUNCIL ACTION
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JUNE 20, 2017
TITLE:
RENEWAL TO THE ACTUARIAL
VALUATION SERVICES FOR OTHER
POST -EMPLOYMENT BENEFITS
(OPEB) AGREEMENT WITH BICKMORE
(STRATEGIC PLAN N0.4, 1)
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CITY 16AWAGER
RECOMMENDED ACTION
CLERK OF COUNCIL USE ONLY:
❑ As Recommended
❑ As Amended
❑ Ordinance on 1" Reading
❑ Ordinance on 2ntl Reading
❑ Implementing Resolution
❑ Set Public Hearing For
CONTINUED TO
FILE NUMBER
Authorize the City Manager and Clerk of the Council to execute the renewal of the existing one-
year agreement, extending the period from June 20, 2017 through June 30, 2019, and increasing
the contract amount to $15,950 with Bickmore, , for a not to exceed agreement of $29,497, subject
to nonsubstantive changes approved by the City Manager and City Attorney.
DISCUSSION
The City issued a Request for Proposal (RFP) on April 15, 2016 seeking qualified firms to provide
actuarial valuation services for other post -employment benefits ("OPEB"). As a result of the RFP
the City received three (3) proposals reviewed and approved by the Finance and Management
Services Agency — Accounting Division. After completing its analysis of the submitted proposals,
Bickmore was selected as the most qualified entity to provide the City the above -referenced
services, specifically due to its overall ability in providing the services; technical qualifications and
experience of key members of the engagement team; along with costs in providing the service.
On June 21, 2016, the City entered into a one-year contract agreement with Bickmore to provide
actuarial valuation services for OPEB for a total not to exceed amount of $13,547, with the option
to renew annually for two additional one-year periods. The actuarial valuation is required to be
performed every two years to determine the City's total retirement health benefits liability as of
each fiscal year end. Approval of the recommended action allows for the City to consolidate its
two one-year renewal options into one contract amendment allowing for an extension of the said
two years. As a result the preparation of the report and subsequent financial reporting will be
performed by one actuarial and allow for uninterrupted service during the upcoming fiscal years.
Additionally, the liability and related information are presented in the City's Comprehensive Annual
Financial Report (CAFR) for FY 2015-16.
25C-1
First Amendment to Actuarial Valuation Services for
Other Post -Employment Benefits (OPEB) Agreement
June 20, 2017
Page 2
In June 2015, the Governmental Accounting Standards Board (GASB) issued a Statement No.
75(GASB 75), Accounting and Financial Reporting for Postemployment Benefits Other Than
Pensions (OPER), which reflects an overhaul in the standards for accounting and financial
reporting for OPEB. The most significant impact of the new standard is the reporting of the OPEB
liability on the face of the financial statements rather than in the footnotes. The standard also
requires more extensive disclosure in the notes to the CAFR.
The City is required to implement GASB 75 for the fiscal year ending June 30, 2018. Bickmore's
knowledge and expertise related to the new OPEB reporting requirements will assist the City to
successfully implement the new standard and ensure true, current, and accurate reporting.
Therefore, staff recommends extending Bickmore's contract for two additional years to provide
actuarial valuation services required under the new guidance for fiscal years 2017-18 and 2018-19.
STRATEGIC PLAN ALIGNMENT
Approval of this item allows the City to meet Goal #4 City Financial Stability, Objective #1 (Maintain
a Stable, Efficient, and Transparent Financial Environment).
FISCAL IMPACT
Funds in the amount of $15,950 will be budgeted and available for FY 2017-18 and FY2018-19 as
follows:
Accounting Unit FY2017-18 FY2018-19
01110110-62300 $12,980 $2,970
APPROVED AS TO FUNDS AND ACCOUNTS:
%'N `
Francisco Gutierrez
Executive Director
Finance and Management Services Agency
Exhibits: 1. First Amendment to Professional Services Agreement with Bickmore
25C-2
EXHIBIT 1
FIRST AMENDMENT TO PROFESSIONAL SERVICES
AGREEMENT WITH BICHIVIORE
THIS FIRST AMENDMENT TO AGREEMENT is entered into this day of June 2017,
by and between Bickmore ("Consultant"), and the City of Santa Ana, a charter city and municipal
corporation duly organized and existing under the Constitution and laws of the State of California ("City").
RECITALS
A. On 21 June 2016, the City entered into Agreement # N-2016-102 with Consultant to provide
actuarial valuation services for other post -employment benefits (OPEB) and related matters for
the term of one (1) year with an expiration date of June 20, 2017.
B. hi accordance with the terns and conditions of the Agreement, the parties desire to amend the
scope of services, compensation and term of the Agreement.
THE PARTIES THEREFORE AGREE:
1. Section 1. SCOPE OF SERVICES, shall be amended to include the additional services
outlined in the Proposal from Bickmore dated May 16, 2017 and described and set forth
in Exhibit A attached hereto, and incorporated by reference to this Agreement.
2. Section 2. COMPENSATION, is amendedto include an additional $15,950 for services
to be performed by the Consultant as follows:
Fi�20i-7=j�-irramarnount-nut�e�ed-$12;g80�vhi�lriercludesOrth .
$1.1,800 and (2) a 10% contingency of up to $1,180;
b, for FY 2018-19 in an amount not to exceed $2,970 which includes (1) the sum of
$2,700 and (2) a 10% contingency of up to $270;
The total "not to exceed" amount for the Agreement, including the costs detailed in this
amendment, shall not exceed $29,497.
3. Section 3. TERM, shall be amended to extend the tern of said Agreement for an additional
two (2) year period from June 20, 2017 through June 30, 2019. This includes Fiscal Year
(FY) 2017-18 for the first year, and additional services through FY 2018-19 for the second
year.
Except as hereinabove modified, the terns and conditions of said Agreement remain unchanged
and in full force and effect.
Signature page to follow on page 2
25C-3
Signature page:
First Amendment to Bickmore Services Agreement (N-2016-102)
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to the Agreement the
date and year first above written.
ATTEST:
CITY OF SANTA ANA
MARIA D. HUIZAR CYNTHIA J. KURTZ
Clerk of the Council Interim City Manager
APPROVED AS TO FORM:
Sonia R.. Carvalho, City Attorney
By: Lisa Storck
Assistant City Attorney
RECOMMENDED FOR APPROVAL: CONSULTANT
Francisco Gutierrez
Executive Director,
Finance and Management
Services Agency
By:
Title:
Page 2 of 2
25C-4
Exhibit A: First Amendment to
ffickmore Consultant Agreement with Bickmore
May 16, 2017
Ms. Sarah Ro
Supervising Accountant
City of Santa Ana
20 Civic Center Plaza
Santa Ana, CA 92701
Re: Engagement Letter for OPEB Actuarial Valuation Services for the City of Santa Ana
Dear Sarah:
We are sending this letter at your request proposing Bickmore's engagement to complete an
updated actuarial valuation of other postemployment benefits (OPEB) liabilities under GASB 75 for
the City of Santa Ana (the City).
The valuation date will tentatively be July 1, 2017. We anticipate that this valuation will
develop OPEB disclosure Information for financial reporting purposes under GASB 75 for the
fiscal year ending June 30, 2016 and will be the basis for financial reporting under GASB 75
for the fiscal year ending June 30, 2019. if the City wishes to see illustrations of results for
one or more "prefunding" scenarios, those calculations would be separate from those
prepared for GASB 75 purposes.
• The data request will be similar to what we have requested for prior valuations, with an
employee data request, a questionnaire about benefits and copies of some documentation.
• Much of the valuation process will be similar to that followed in prior years. However, the
presentation of results will materially different than in prior valuations, reflecting the revised
information needed for GASB 75 reporting. Please also note that additional calculations will
be required one year after the valuation to provide the information for FYE 2019 reporting.
• Timing: We are prepared to begin the valuation at your convenience. We anticipate
completing the draft report within 50-60 days following receipt of complete data.
• The last page summarizes include the fees we propose for this project. Our quote reflects the
time required far the additional GASB 75 information for the interim year between valuations,
Our quote is also based on the assumptions that retiree medical benefits remain largely the
same as they were in the City's previous valuation.
If you are comfortable with the project as outlined and the fees quoted, please return a signed
dated copy back to us by email. If you have any questions, please contact me at (503) 419-0462 or
at cmacleod@bickmore.net. We appreciate the opportunity to work with you and the City on this
assignment and look forward to hearing back from you.
Cordially,
Catherine L. MacLeod. FSA, FCA, MAAA, EA
Director, Post -Employment Benefit Actuarial Services
Enclosure
5200 SW Macadam Ave, Suite 310,�Portland, OR 97239 • 860,541 4591 - f. 855.242.8919 wv .bckmore.net
25C-5
Bickmore is a leading independent risk management, insurance,
and actuarial consulting firm with clients in 33 states.
Formed in 1984, Bickmore is headquartered in California and has a
staff of more than 100. over 60% of our staff holds advanced
degrees and professional designations in risk management, law,
workers' compensation, accounting, actuarial, and loss and risk
control.
our professionals work together to provide clients with traditional
risk management services such as coverage reviews, self-insured
retention analysis, and claims consulting and non-traditional
services such as data collection, self-insured group administration,
program structure evaluation, and underwriting.
Commitment to Service
Bickmore performs more than 250 consulting assignments annually.
Our greatest mark of client satisfaction is repeat business, with 95%
of clients engaging us for additional projects after completion of
initial assignments.
Bickmore does not sell insurance, nor are we affiliated with any
such organization, This independence allows us to perform
consulting activities free from actual or perceived conflicts of
interest.
We are recognized for;
Our technical expertise
Our availability to our clients
Our assistance is identifying and resolving issues
Helping our clients understand our analysis and
presenting our results In a meaningful way
25C-6
Bckmore
City of Santa Ana OPEB Overview as of June 30, 2016
OPEB provided: The City reported the following OPER: retiree medical, dental, and vision coverage.
Access to coverage: Medical coverage is currently provided through CaIPERS as permitted under
the Public Employees' Medical and Hospital Care Act (PEMHCA). This coverage requires the
employee to satisfy the requirements for retirement under CaIPERS, which requires attainment of
age 50 (age 52, if a new to PERS on or after January 1, 2013) with 5 years of State or public agency
service or approved disability retirement.
If an eligible employee is not already enrolled in the medical plan, he or she may enroll within 60
days of retirement or during any future open enrollment period. Coverage may be continued at the
retiree's option for his or her lifetime. A surviving spouse and other eligible dependents may also
continue coverage.
The employee must begin his or her retirement warrant (CaIPERS pension benefit) within 120 days
of terminating employment with the City to be eligible to continue medical coverage through the
City and be entitled to the employer subsidy described below.
PEMHCA Benefits provided: As a PEMHCA employer, the City is obligated to contribute toward the
cost of medical coverage for a retired employee's lifetime or until coverage is discontinued. The City
maintains "unequal contribution" resolutions with CaIPERS (effective in 1998 for the Fire employees
and City Council, and in 1999 for all other employee groups).
The resolution covering retired City Council members does not provide for a City contribution, but
allows the retiree Council members to continue coverage at their own expense.
The resolutions covering City employees define the City's contribution toward the active empioyee
medical plan premiums to be the PEMHCA minimum employer contribution (MEC). The MEC is $128
per month in 2017. Under the unequal resolutions, the City's contribution toward retiree medical
benefits is determined by multiplying together the following three items:
5% times
The number of prior years the employer has been contracted with PEMHCA times
• The contribution the employer makes towards active employee health benefits (i.e., the
MEC).
PEMHCA contributions for active and retired employees will become equal in 2018 or 2019.
25C-7
r \'■ r. r.
Application of this valuation report and implications of GASB 75
It Is our understanding that the City will be required to Implement GASB Statement 75 for its fiscal
year ending June 30, 2018. Four key changes under GASB 75, among others, are:
(1) GASB 75 introduces the concept of a "Measurement Date" for each fiscal year; this date
may or may not be the same as the valuation date. In addition, the Measurement Date
should be a date consistently applied from year to year, not later than the last day of the
current fiscal year and not earlier than the last day of the prior fiscal year.
Note: It is often easier to choose the 12 month prior date because this allows the
actuary to develop the calculations in plenty of time prior to fiscal year end. As you
know, CaiPERS takes this approach for GASB 68. if using the last day of the period, there
are more agencies needing to get the work completed by in a narrower window of time.
(2) The Net OPEB Liability (a.k.a. unfunded OPEB liability) will be reported in the statement of
net position, rather than in a footnote.
(3) The period for recognizing certain deferrals (amortization items) will be considerably shorter
than the maximum 30 year period permitted under GASB 45,
(4) The discount rate used to value the OPEB liability under GASB 75 is determined differently
than under GASB 45; this rate and the resulting plan liability must be reviewed and
potentially updated every year, not every other year.
However, we anticipate that the underlying actuarial calculations from the July 2017
valuation may be used to make these updates and additional calculations, without need to
gather and analyze new employee or premium data during the interim (FYE 2019) year, just
as was allowed under GASB 45.
Please note that where GASB 45 typically served as the valuation basis for both financial reporting
and funding (contribution) development, it is expected that GASB 75 will serve only for financial
reporting purposes; separate calculations would be required to support the development of
future prefunding contributions, if any, based on the City's long term funding policy and current
funded position.
Assuming the City does select a "12 month prior" Measurement Date for GASB 75 reporting, the
July 1, 2017 valuation would likely produce the following outputs at these times:
• The July 1 (or June 30), 2017 Measurement Date information to be reported in financial
statements under GASB 75 for the fiscal year ending June 30, 2018. Estimated completlow
on or before April 30, 2018.
• The July 1, 2018 (roll forward and re -measurement from the July 2017 valuation) would
review the discount rate for continued suitability, gather updated contribution information
and develop the GASB 75 information to be reported by the City for the fiscal year ending
June 30, 2019. Estimated completion: on or before April 30, 2019.
• The process would repeat with the next valuation as of July 1, 2019.
One other option would be to choose a "January 1" Measurement Date (i.e., 1/1/2018 for FYE 2018,
1/1/2019 for FYE 2019, etc.) The 12 month prior appears to be more common, but we wanted to
mention this as another date used in some instances.
Please let us know if you have any questions about these components or the timelines.
25C-8
•
Professional Service Fees for This Project
July 2017 Actuarial Valuation Report and GASB 75 results for FYE 2018: $11,800
GASB 75 compliant results will be presented based on a Measurement Date of July 1, 2017 for the
fiscal year ending June 30, 2018. Exhibits will provide information separately and in total for the
explicit and implicit subsidy OPER liability for active and retired employees. The fee above also
includes and all telephone conferences, as needed, to review report results with the City. Results
will be presented separately for 6 groups. Results will not he provided for the POA Benefit Trust
(see Out -Of -Scope Services).
GASB 75 information for FYE 2019 (measured as of July 1, 2018): $ 2,700
The July 2017 valuation results will be applied, discount rate reviewed and/or updated as needed,
and the current value of OPEB trust assets reflected as of each Measurement Date to develop the
information required for GASB 75 financial reporting purposes for each fiscal year end. Results
will be presented separately for 6 groups.
The "not -to -exceed" fees for the services described for the two years above are summarized here:
Staff Position
2017
Hourly
Rates
Estimated
Hours
Fee for
FYE 2018
GA5875
2018
Hourly
Rates
Estimated
Hours
Fee for
FYE 2019
GASS 75
Actuarial Manager/Director
$ _310
15
$ 4,650
$ 325
4
$ 1,300
5enlorActuarialAnalyst
185
16
2,960
195.
3
585
Actuarial Analyst
140
26
3,640
145
4.5
653
Administrative Support
95
5.8
550
100
1.6
162
Total Fee for in -scope services'
62.8
$ 11,800
13.1
$ 2,700
*These not to exceed fees exclude items specifically described in Optional Services and Out -Of -Scope Services
Optional Services:
Preliminary total results at alternate discount rates
$350 each
Actuarial forms required for CENT filing (if applicable)
$ 750
Additional meetings in person (1 is included above)
$900 each
Out -of -Scope Services: We do not anticipate any out -of -scope work related to the valuation which
could result in additional charges, with the possible exception of the following:
• Data: The basic fee above includes 16 hours for analysis and organization of employee and plan
data to prepare it for our actuarial coding. If additional time is needed before we can begin our
valuation, we reserve the right to charge for this time at the hourly rates shown below,
• If benefits or eligibility are significantly different than described to us for this proposal.
• Development of prior period results under GASB 75.
• OPEB liability calculations relating to the POA Benefit Trust.
• Consulting or actuarial projections relating to possible plan redesign or "experience studies".
Should they be needed, our 2017 hourly rates are:
Consultant
2017 Hourly Rates
Senior Actuarial Staff
$285-330
Actuarial Analysts
145-185
Adminsitrative Staff
95
25C-9
25C-10