finance committee meeting - cls, inc. finance agenda packet.pdf · to the district’s budget and...

032114 Finance

FINANCE COMMITTEE MEETING

The Finance Committee is responsible for discussing and reviewing items related

to the District’s budget and short-term financial position.

A. CALL TO ORDER

B. DISCUSSION/INFORMATION ITEMS

1. Review Payment of Side Fund Obligation with California Public Employees’ Retirement

System (CalPERS)

2. Review DRAFT Agreement for Prefunding of Other Post Employment Benefits (OPEB) with the California Employers’ Retiree Benefit Trust (CERBT)

C. ADJOURNMENT

Next Meeting Scheduled: To Be Determined.

VALLEY COUNTY WATER DISTRICT 14521 RAMONA BOULEVARD

BALDWIN PARK, CA 91706 OFFICE: (626) 338-7301 / FAX (626) 814-2973

http://www.vcwd.org

DATE & LOCATION: Friday, March 21, 2014 at 12:30PM Valley County Water District 14521 Ramona Boulevard Baldwin Park, Ca 91706

COMMITTEE MEMBERS: Margarita Vargas, Chairperson Lenet Pacheco, Co-Chairperson Paul C. Hernandez, Alternate Member

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Date: March 21, 2014 To: Members of the Finance Committee From: Lynda Noriega, General Manager Subject: DISCUSSION/INFORMATION ITEM 1 – Review Payment of Side Fund Obligation with the California Public

Employees’ Retirement System REPORT TO THE FINANCE COMMITTEE: Valley County Water District (District) provides retirement benefits to eligible employees and retired employees though the California Public Employees’ Retirement System (CalPERS). Within the 2005/2006 fiscal year, CalPERS required pension benefit plans with less than 100 active members, which included the District, to participate in a risk pool. The District was placed in the Miscellaneous 2.7% at 55 Risk Pool. When the District joined the risk pool, the “funded status” of the retirement plans, or the ratio of retirement assets to the actuarial value of retirement liabilities, was lower than the funded status of the risk pool as a whole. As a result, in 2005 CalPERS established a side fund of approximately $638,812, amortized over 15 years at a rate of 7.75% per year, to reconcile the difference between the funded status of the risk pool and pension benefit plan of the District. Currently, the District side fund would be fully amortized in 2019 unless it is prepaid. As explained within the 2012/2013 audited financial report, the side fund is now required to be reported and disclosed within the financial statements of all participating agencies. As part of the audit process, the District posted a liability adjustment of $518,152, which represented the outstanding side fund balance as of June 30, 2012. Throughout the 2012/2013 fiscal year, payments to the side fund, including principle and interest at a rate of 7.75%, totaled $70,453. For the current 2013/2014 fiscal year, payments to the side fund, including principle and interest at a rate of 7.75%, are projected at $72,501, which is collected and disbursed in the required employer contributions to the retirement pension benefit. The current side fund pay-off amount, including principle and accrued interest, is approximately $425,000. As the pay-off of the side fund obligation was not budgeted for the 2013/2014 fiscal year, the amount would be satisfied with the available reserve funding of the District. If the side fund is paid off prior to being fully amortized in 2019, the District will realize savings in the required employer contributions for participating in the retirement pension benefit plan. For 2013/2014, the required employer contribution rate is 20.533% of annual gross payroll, which includes 3.826% for payment to the side fund obligation. By prepaying the side fund obligation, the required employer contribution rate would be reduced to 16.707% (20.533% - 3.826%), netting an annual cost savings of greater than $52,750 since this amount does not include the added interest factor of 7.75%. SUPPORTING DOCUMENTATION: 1. CalPERS Actuarial Valuation as of June 30, 2011 for the Miscellaneous Plan of the Valley County Water District

VALLEY COUNTY WATER DISTRICT

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ACTUARIAL VALUATION as of June 30, 2011

for the MISCELLANEOUS PLAN

of the VALLEY COUNTY WATER DISTRICT

(CalPERS ID 3442495340)

REQUIRED CONTRIBUTIONS

FOR FISCAL YEAR July 1, 2013 - June 30, 2014

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Section 1

C A L I F O R N I A P U B L I C E M P L O Y E E S ’ R E T I R E M E N T S Y S T E M

Plan Specific Information for the MISCELLANEOUS PLAN

of the VALLEY COUNTY WATER DISTRICT

(CalPERS ID 3442495340)

(Rate Plan # 1012)

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TABLE OF CONTENTS

ACTUARIAL CERTIFICATION 1

HIGHLIGHTS AND EXECUTIVE SUMMARY 3

PURPOSE OF SECTION 1 3

REQUIRED EMPLOYER CONTRIBUTIONS 4

PLAN’S FUNDED STATUS 5

SUPERFUNDED STATUS 5

PROJECTED CONTRIBUTIONS 5

RATE VOLATILITY 6

SUMMARY OF FINANCIAL AND DEMOGRAPHIC INFORMATION 7

PLAN’S SIDE FUND 7

DEVELOPMENT OF THE ACTUARIAL VALUE OF ASSETS 8

FUNDING HISTORY 8

PLAN’S TOTAL NORMAL COST RATE 8

HYPOTHETICAL TERMINATION LIABILITY 9

SUMMARY OF PARTICIPANT DATA 9

LIST OF CLASS 1 BENEFIT PROVISIONS 9

INFORMATION FOR COMPLIANCE WITH GASB STATEMENT NO. 27 10

SUMMARY OF PLAN’S MAJOR BENEFIT OPTIONS 11

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SECTION 1 – PLAN SPECIFIC INFORMATION FOR THE MISCELLANEOUS PLAN OF THE VALLEY COUNTY WATER DISTRICT

CalPERS Actuarial Valuation – June 30, 2011 Page 1 Rate Plan belonging to Miscellaneous 2.7% at 55 Risk Pool

ACTUARIAL CERTIFICATION

Section 1 of this report is based on the member and financial data contained in our records as of June 30, 2011 which was provided by your agency and the benefit provisions under your contract with CalPERS. Section 2 of this report is based on the member and financial data as of June 30, 2011 provided by employers participating in the risk pool to which your plan belongs and benefit provisions under the CalPERS contracts for those agencies. As set forth in Section 2 of this report, the Pool Actuary has certified that, in her opinion, the valuation of the Risk Pool containing your MISCELLANEOUS PLAN has been performed in accordance with generally accepted actuarial principles consistent with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for the Risk Pool, as prescribed by the CalPERS Board of Administration according to provisions set forth in the California Public Employees’ Retirement Law.

Having relied upon the information set forth in Section 2 of this report and based on the census and benefit provision information for your plan, it is my opinion as your Plan Actuary that the Side Fund as of June 30, 2011 and employer contribution rate as of July 1, 2013, have been properly and accurately determined in accordance with the principles and standards stated above.

The undersigned is an actuary for CalPERS, who is a member of both the American Academy of Actuaries and Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein.

KUNG-PEI HWANG, ASA, MAAA Senior Pension Actuary, CalPERS Plan Actuary

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INTENTIONALLY

LEFT BLANK

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CalPERS Actuarial Valuation – June 30, 2011 Page Rate Plan belonging to Miscellaneous 2.7% at 55 Risk Pool

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HIGHLIGHTS AND EXECUTIVE SUMMARY

Purpose of Section 1

This section 1 report for the MISCELLANEOUS PLAN of the VALLEY COUNTY WATER DISTRICT of the California Public Employees’ Retirement System (CalPERS) was prepared by the Plan Actuary in order to: set forth the actuarial assets and accrued liabilities of this plan as of June 30, 2011; determine the required employer contribution rate for this plan for the fiscal year July 1, 2013 through

June 30, 2014; provide actuarial information as of June 30, 2011 to the CalPERS Board of Administration and other

interested parties; and provide pension information as of June 30, 2011 to be used in financial reports subject to Governmental

Accounting Standards Board (GASB) Statement Number 27 for a Cost Sharing Multiple Employer Defined Benefit Pension Plan.

The use of this report for any other purposes may be inappropriate. In particular, this report does not contain information applicable to alternative benefit costs. The employer should contact their actuary before disseminating any portion of this report for any reason that is not explicitly described above.

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Required Employer Contributions

Fiscal Year Fiscal Year

2012/2013 2013/2014

Employer Contribution Required (in Projected Dollars)

Risk Pool’s Net Employer Normal Cost $ 181,561 $ 193,694

Risk Pool’s Payment on Amortization Bases 82,658 91,750

Surcharge for Class 1 Benefits

a) FAC 1 11,878 11,767

b) PRSA 18,373 19,366

Phase out of Normal Cost Difference 0 0

Amortization of Side Fund 70,453 72,501

Total Employer Contribution $ 364,923 $ 389,078

Employee Cost Sharing N/A 0

Net Employer Contribution N/A 389,078

Annual Lump Sum Prepayment Option* $ 351,554 $ 375,260

Projected Payroll for the Contribution Fiscal Year $ 1,819,066 $ 1,894,876 Employer Contribution Required (Percentage of Payroll)

Risk Pool’s Net Employer Normal Cost 9.981% 10.222%

Risk Pool’s Payment on Amortization Bases 4.544% 4.842%


a) FAC 1 0.653% 0.621%

b) PRSA 1.010% 1.022%

Phase out of Normal Cost Difference 0.000% 0.000%

Amortization of Side Fund 3.873% 3.826%

Total Employer Contribution 20.061% 20.533%

Employee Cost Sharing N/A (0.000%)

Net Employer Contribution N/A 20.533% Appendix C of Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges for each benefit. Risk pooling was implemented as of June 30, 2003. The normal cost difference is scheduled to be phased out over a five year period. The phase out of normal cost difference is 100% for the first year of pooling, and is incrementally reduced by 20% of the original normal cost difference for each subsequent year. *Payment must be received by CalPERS before the first payroll reported to CalPERS of the new fiscal year and after June 30.

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Plan’s Funded Status

June 30, 2010 June 30, 2011

1. Present Value of Projected Benefits (PVB) N/A $ 12,629,520

2. Entry Age Normal Accrued Liability N/A 9,871,964

3. Plan’s Actuarial Value of Assets (AVA) N/A $ 7,943,004

4. Unfunded Liability (AVA Basis) [(2) - (3)] N/A $ 1,928,960

5. Funded Ratio (AVA Basis) [(3) / (2)] N/A 80.5%

6. Plan’s Market Value of Assets (MVA) N/A $ 7,164,531

7. Unfunded Liability (MVA Basis) [(2) - (6)] N/A 2,707,433

8. Funded Ratio (MVA Basis) [(6) / (2)] N/A 72.6%

Superfunded Status

June 30, 2010 June 30, 2011

Is the plan Superfunded? No No

[Yes if AVA exceeds PVB, No otherwise]

Projected Contributions

The rate shown below is an estimate for the employer contribution for Fiscal Year 2014/2015. The estimated rate is based on a projection of the most recent information we have available, including an estimate of the investment return for fiscal year 2011/2012, namely 0%:

Projected Employer Contribution Rate: 21.4% The estimate also assumes that there are no liability gains or losses among the plans in your risk pool, that your plan has no new amendments in the next year, and that your plan’s and your risk pool’s payrolls both increase exactly 3.0% in the 2011/2012 fiscal year. Therefore, the projected employer contribution rate for 2014/2015 is just an estimate. Your actual rate for 2014/2015 will be provided in next year’s report.

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Rate Volatility

Your plan’s employer contribution rate will inevitably fluctuate, for many reasons. However, the biggest fluctuations are generally due to changes in the side fund rate resulting from unexpected changes in payroll. The following figure shows how much your 2014/2015 side fund rate would change for each 1% deviation between our 3.0% payroll growth assumption and your actual 2011/2012 payroll growth.

POTENTIAL 2014/2015 RATE IMPACT FROM 2011/2012 PAYROLL DEVIATION

% Rate Change per 1% Deviation from Assumed 3.0% Payroll Growth: (0.037%)

Examples: To see how your employer contribution rate might be affected by unexpected payroll change, suppose the following:

The % Rate Change per 1% Deviation figure given above is -0.400% Your plan’s payroll increased 10% in 2011/2012 (7.0% more than our 3.0% assumption).

Then your 2014/2015 rate would decrease -0.400% x (10 – 3.0) = -2.80% from that cause alone. Or conversely, using the same % Rate Change per 1% Deviation figure given above, suppose your plan’s payroll remained the same in 2011/2012 (3.0% less than our 3.0% assumption). Then your 2014/2015 rate would increase -0.400% x (0 – 3.0) = 1.2% from that cause alone. Note that if your plan had a negative side fund, an unexpected payroll increase would spread the payback of the negative side fund over a bigger payroll, which would decrease your plan’s side fund percentage rate and the total employer contribution rate. On the other hand, if your plan had a positive side fund, an unexpected payroll increase would spread the payback of the positive side fund over a larger payroll, which would increase your plan’s side fund percentage rate and the total employer contribution rate. In either case, the amortization of Side Fund dollar amount would not change.

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SUMMARY OF FINANCIAL AND DEMOGRAPHIC

INFORMATION

Plan’s Side Fund

At the time your plan joined the Risk Pool, a side fund was created to account for the difference between the funded status of the pool and the funded status of your plan, in addition to your existing unfunded liability. The side fund for your plan as of the June 30, 2011 valuation is shown in the following table. Your side fund will be credited, on an annual basis, with the actuarial investment return assumption. This assumption is 7.75% prior to July 1, 2012 and 7.5% after June 30, 2012. A positive side fund will cause your required employer contribution rate to be reduced by the Amortization of Side Fund shown above in Required Employer Contributions. A negative side fund will cause your required employer contribution rate

to be increased by the Amortization of Side Fund. In the absence of subsequent contract amendments or funding changes, the side fund will disappear at the end of the amortization period shown below.

Plan’s Side Fund Reconciliation

June 30, 2010 June 30, 2011

Side Fund as of valuation date* $ (570,971) $ (546,620)

Adjustments 0 0

Side Fund Payment 66,088 68,236

Side Fund one year later $ (546,620) $ (518,152)

Adjustments 0 0

Side Fund Payment 68,236 70,453

Side Fund two years later $ (518,152) $ (483,966)

Amortization Period 9 8

Side Fund Payment during last year $ 70,453 $ 72,501 * If your agency employed superfunded vouchers in fiscal year 2010/2011 to pay employee contributions, the June 30, 2011 Side Fund amount has been adjusted by a like amount without any further adjustment to the Side Fund’s amortization period. Similarly, the Side Fund has been adjusted for the increase in liability from any recently adopted Class 1 or Class 2 contract amendments. Also, the Side Fund may be adjusted or eliminated due to recent lump sum payments. Contract amendments and lump sum payments may result in an adjustment to the Side Fund amortization period.

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Development of the Actuarial Value of Assets

June 30, 2011

1. Plan’s Accrued Liability $ 9,871,964

2. Plan’s Side Fund (546,620)

3. Pool’s Accrued Liability 2,486,708,579

4. Pool’s Side Fund (160,864,546)

5. Pool’s Actuarial Value of Assets Including Receivables 1,981,073,089

6. Plan’s Actuarial Value of Assets (AVA) Including Receivables [(1 + 2) / (3 + 4) x 5] $ 7,943,004

7. Pool’s Market Value of Assets (MVA) Including Receivables 1,786,913,296

8. Plan’s Market Value of Assets (MVA) Including Receivables [(1 + 2) / (3 + 4) x 7] $ 7,164,531

Funding History

The Funding History below shows the actuarial accrued liability, the actuarial value of assets, the market value of assets, funded ratios and the annual covered payroll. The actuarial value of assets is used to establish funding requirements and the funded ratio on this basis represents the progress toward fully funding future benefits for current plan participants. The funded ratio based on the market value of assets is an indicator of the short-term solvency of the plan.

[funding_history] Valuation

Date

Accrued Liability

Actuarial Value of

Assets (AVA)

Market Value of

Assets (MVA)

Funded Ratio

AVA MVA

Annual Covered Payroll

06/30/11 $ 9,871,964 $ 7,943,004 $ 7,164,531 80.5% 72.6% $ 1,734,080

Plan’s Total Normal Cost Rate

The Public Employees’ Pension Reform Act of 2013 requires that new employees pay at least 50% of the total annual normal cost and that current employees approach the same goal through collective bargaining. Please refer to the CalPERS website for more details. Shown below is the total annual normal cost rate for your plan. Note that this rate is for current members only. Total Normal Cost Rate Fiscal Year Fiscal Year

2012/2013 2013/2014

Pool’s Net Total Normal Cost Rate N/A 18.168%


a) FAC 1 N/A 0.621%

b) PRSA N/A 1.022%

Plan’s Total Normal Cost Rate N/A 19.811%

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Hypothetical Termination Liability

In August 2011, the CalPERS Board adopted an investment policy and asset allocation strategy that more closely reflects expected benefit payments of the Terminated Agency Pool. With this change, CalPERS increased benefit security for members while limiting its funding risk. The table below shows the hypothetical termination liability, the market value of assets, the unfunded termination liability and the termination funded ratio. The assumptions used, including the discount rate, are stated in Appendix A and take into account the yields available in the US Treasury market on the valuation date and the mortality load for contingencies. The discount rate is duration weighted and is not necessarily the rate that would be used for this plan if it were to terminate. The discount rate for this plan’s termination liability would depend on the duration of the liabilities of this plan. For purposes of this estimate, the discount rate of 4.82% is based on the June 30, 2011 30-year US Treasury Stripped Coupon Rate. Please note, as of June 30, 2012 the 30-year US Treasury Stripped Coupon Rate was 2.87%.

[hypothetical_termination_liability] Valuation

Date

Hypothetical Termination

Liability

Market Value of Assets

(MVA)

Unfunded Termination

Liability

Termination Funded Ratio

Discount Rate

06/30/11 $ 13,757,997 $ 7,164,531 $ 6,593,466 52.1% 4.82%

Summary of Participant Data

The table below shows a summary of your plan’s member data upon which this valuation is based:

June 30, 2010 June 30, 2011

Projected Payroll for Contribution Purposes $ 1,819,066 $ 1,894,876

Number of Members

Active 25 25

Transferred 7 6

Separated 8 9

Retired 32 30

List of Class 1 Benefit Provisions

One Year Final Compensation Post-Retirement Survivor Allowance

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Information for Compliance with GASB Statement No. 27

for Cost-Sharing Multiple-Employer Defined Benefit Plan

Your plan is part of the Miscellaneous 2.7% at 55 Risk Pool, a cost-sharing multiple-employer defined benefit plan. Under GASB 27, an employer should recognize annual pension expenditures/expense equal to its contractually required contributions to the plan. Pension liabilities and assets result from the difference between contributions required and contributions made. The contractually required contribution for the period July 1, 2013 to June 30, 2014 has been determined by an actuarial valuation of the plan as of June 30, 2011. Your unadjusted contribution rate for the indicated period is 20.533% of payroll. In order to calculate the dollar value of the contractually required contributions for inclusion in financial statements prepared as of June 30, 2014, this contribution rate, less any employee cost sharing, and as modified by any subsequent financing changes or contract amendments for the year, would be multiplied by the payroll of covered employees that was actually paid during the period July 1, 2013 to June 30, 2014. However, if this contribution is fully prepaid in a lump sum, then the dollar value of contractually required contributions is

equal to the lump sum prepayment. The employer and the employer’s auditor are responsible for determining the contractually required contributions. Further, the required contributions in dollars and the percentage of that amount contributed for the current year and each of the two preceding years is to be disclosed under GASB 27. A summary of principal assumptions and methods used to determine the contractually required contributions is shown below for the cost-sharing multiple-employer defined benefit plan. Valuation Date June 30, 2011 Actuarial Cost Method Entry Age Normal Cost Method Amortization Method Level Percent of Payroll Average Remaining Period 20 Years as of the Valuation Date Asset Valuation Method 15 Year Smoothed Market Actuarial Assumptions Discount Rate 7.50% (net of administrative expenses) Projected Salary Increases 3.30% to 14.20% depending on Age, Service, and type of employment Inflation 2.75% Payroll Growth 3.00% Individual Salary Growth A merit scale varying by duration of employment coupled with an

assumed annual inflation growth of 2.75% and an annual production growth of 0.25%.

Complete information on assumptions and methods is provided in Appendix A of Section 2 of the report. Appendix B of Section 2 of the report contains a description of benefits included in the Risk Pool Actuarial Valuation.

A Schedule of Funding for the Risk Pool’s actuarial value of assets, accrued liability, their relationship, and the relationship of the unfunded liability (UL) to payroll for the risk pool(s) to which your plan belongs can be found in Section 2 of the report.

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Summary of Plan’s Major Benefit Options

Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in Appendix B within Section 2 of this report.

Coverage Group

{sum_of_major_ben_1} 70003 70001* 70002*

Benefit Provision

Benefit Formula 2.7% @ 55 2.0% @ 55 2.0% @ 55 Social Security Coverage yes yes no Full/Modified full full full

Final Average Compensation Period 12 mos. 12 mos. 12 mos. Sick Leave Credit yes yes yes Non-Industrial Disability standard standard standard Industrial Disability no no no Pre-Retirement Death Benefits

Optional Settlement 2W yes yes yes 1959 Survivor Benefit Level no no no Special no no no Alternate (firefighters) no no no

Post-Retirement Death Benefits

Lump Sum $500 $500 $500 Survivor Allowance (PRSA) yes yes yes

COLA 2% 2% 2%

Employee Contributions Contractual employer paid no no no

*Inactive Coverage Group


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Date: March 21, 2014 To: Members of the Finance Committee From: Lynda Noriega, General Manager Subject: DISCUSSION/INFORMATION ITEM 2 – Review Draft Agreement for Prefunding of Other Post Employment

Benefits with the California Employers’ Retiree Benefit Trust REPORT TO THE FINANCE COMMITTEE: Valley County Water District (District) provides healthcare benefits to eligible retired employees and qualified dependents including medical, dental, vision, and employee assistance program premiums. These costs are commonly referred to as other post employment benefits (OPEB), and have historically been paid on a pay-as-you-go basis. This funding plan means that the current expense for retiree medical, dental, vision, and employee assistance program premiums are budgeted and paid for within the fiscal year, however no allowance is made for estimates of the accrued liability for the current employees who may be eligible for the same benefits at a future date. Based on the August 2013 actuarial valuation, the unfunded actuarial accrued liability (UAAL) for OPEB was approximately $3.43 million. In efforts of funding the OPEB obligations and preventing the unfunded liability from continuing to increase each year, the annual required contributions (ARC) should be funded annually. The ARC includes both the current pay-as-you-go expense and an amount for prefunding OPEB obligations. Within the 2013/2014 fiscal year, the OPEB pay-as-you-go expense is budgeted at $224,480 and the OPEB prefunding obligation is budgeted at $221,781, for a total OPEB expense of $446,261. Establishing an external trust account for prefunding OPEB obligations offers advantages to the District, including the demonstration of fiscal responsibility and the realization of higher discount rate assumptions that will translate into a lower ARC and UAAL. The California Employers’ Retiree Benefit Trust (CERBT) is a multi-employer trust with over $3.30 billion in OPEB assets under management from 389 municipal agencies across the State of California. CERBT offers three investment strategies with expected long term rates of return ranging from 6.39% to 7.61%. SUPPORTING DOCUMENTATION: 1. DRAFT – CERBT Agreement and Election of Valley County Water District to Prefund Other Post Employment

Benefits Through CalPERS

2. DRAFT – Resolution 03-14-746 of the Board of Directors of Valley County Water District Delegating Authority to Request Disbursements


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CALIFORNIA EMPLOYERS’ RETIREE BENEFIT TRUST PROGRAM ("CERBT")

AGREEMENT AND ELECTION OF

(NAME OF EMPLOYER)

TO PREFUND OTHER POST EMPLOYMENT BENEFITS THROUGH CalPERS

WHEREAS (1) Government Code Section 22940 establishes in the State Treasury the Annuitants' Health Care Coverage Fund for the prefunding of health care coverage for annuitants (Prefunding Plan); and WHEREAS (2) The California Public Employees' Retirement System (CalPERS) Board of Administration (Board) has sole and exclusive control and power over the administration and investment of the Prefunding Plan (sometimes also referred to as CERBT), the purposes of which include, but are not limited to (i) receiving contributions from participating employers and establishing separate Employer Prefunding Accounts in the Prefunding Plan for the performance of an essential governmental function (ii) investing contributed amounts and income thereon, if any, in order to receive yield on the funds and (iii) disbursing contributed amounts and income thereon, if any, to pay for costs of administration of the Prefunding Plan and to pay for health care costs or other post employment benefits in accordance with the terms of participating employers' plans; and WHEREAS (3) _____________________________________________________

(NAME OF EMPLOYER)

(Employer) desires to participate in the Prefunding Plan upon the terms and conditions set by the Board and as set forth herein; and WHEREAS (4) Employer may participate in the Prefunding Plan upon (i) approval by the Board and (ii) filing a duly adopted and executed Agreement and Election to Prefund Other Post Employment Benefits (Agreement) as provided in the terms and conditions of the Agreement; and WHEREAS (5) The Prefunding Plan is a trust fund that is intended to perform an essential governmental function within the meaning of Section 115 of the Internal Revenue Code as an agent multiple-employer plan as defined in Governmental Accounting Standards Board (GASB) Statement No. 43 consisting of an aggregation of single-employer plans, with pooled administrative and investment functions;

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NOW, THEREFORE, BE IT RESOLVED THAT EMPLOYER HEREBY MAKES THE FOLLOWING REPRESENTATION AND WARRANTY AND THAT THE BOARD AND EMPLOYER AGREE TO THE FOLLOWING TERMS AND CONDITIONS:

A. Representation and Warranty Employer represents and warrants that it is a political subdivision of the State of California or an entity whose income is excluded from gross income under Section 115 (1) of the Internal Revenue Code.

B. Adoption and Approval of the Agreement; Effective Date; Amendment (1) Employer's governing body shall elect to participate in the Prefunding Plan by adopting this Agreement and filing with the CalPERS Board a true and correct original or certified copy of this Agreement as follows: Filing by mail, send to: CalPERS Affiliate Program Services Division CERBT (OPEB) P.O. Box 1494 Sacramento, CA 95812-1494 Filing in person, deliver to: CalPERS Mailroom Affiliate Program Services Division CERBT (OPEB) 400 Q Street Sacramento, CA 95811 (2) Upon receipt of the executed Agreement, and after approval by the Board, the Board shall fix an effective date and shall promptly notify Employer of the effective date of the Agreement. (3) The terms of this Agreement may be amended only in writing upon the agreement of both CalPERS and Employer, except as otherwise provided herein. Any such amendment or modification to this Agreement shall be adopted and executed in the same manner as required for the Agreement. Upon receipt of the executed amendment or modification, the Board shall fix the effective date of the amendment or modification. (4) The Board shall institute such procedures and processes as it deems necessary to administer the Prefunding Plan, to carry out the purposes of this Agreement, and to maintain the tax exempt status of the Prefunding Plan. Employer agrees to follow such procedures and processes.

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C. Other Post Employment Benefits (OPEB) Cost Reports and Employer Contributions (1) Employer shall provide to the Board an OPEB cost report on the basis of the actuarial assumptions and methods prescribed by the Board. Such report shall be for the Board’s use in financial reporting, and shall be prepared at least as often as the minimum frequency required by GASB 43. This OPEB cost report may be prepared as an actuarial valuation report or, if the employer is qualified under GASB 45 and 57, may be prepared as an Alternative Measurement Method (AMM) report.

(a) Unless qualified under GASB 45 and 57 to provide an AMM report, Employer shall provide to the Board an actuarial valuation report. Such report shall be for the Board's use in financial reporting, and shall be prepared at least as often as the minimum frequency required by GASB 43 and 57, and shall be:

1) prepared and signed by a Fellow or Associate of the Society of

Actuaries who is also a Member of the American Academy of Actuaries or a person with equivalent qualifications acceptable to the Board;

2) prepared in accordance with generally accepted actuarial practice and

GASB 43, 45 and 57; and,

3) provided to the Board prior to the Board's acceptance of contributions for the valuation period or as otherwise required by the Board.

(b) If qualified under GASB 45 and 57, Employer may provide to the Board an

AMM report. Such report shall be for the Board’s use in financial reporting, shall be prepared at least as often as the minimum frequency required by GASB 43 and 57, and shall be:

1) affirmed by Employer’s external auditor, or by a Fellow or Associate

of the Society of Actuaries who is also a Member of the American Academy of Actuaries or a person with equivalent qualifications acceptable to the Board, to be consistent with the AMM process described in GASB 45;

2) prepared in accordance with GASB 43, 45, and 57; and,

3) provided to the Board prior to the Board's acceptance of

contributions for the valuation period or as otherwise required by the Board.

(2) The Board may reject any OPEB cost report submitted to it, but shall not unreasonably do so. In the event that the Board determines, in its sole discretion, that the OPEB cost report is not suitable for use in the Board's financial statements or if Employer fails to provide a required OPEB cost report, the Board may obtain, at

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Employer's expense, an OPEB cost report that meets the Board’s financial reporting needs. The Board may recover from Employer the cost of obtaining such OPEB cost report by billing and collecting from Employer or by deducting the amount from Employer's account in the Prefunding Plan. (3) Employer shall notify the Board of the amount and time of contributions which contributions shall be made in the manner established by the Board. (4) Employer contributions to the Prefunding Plan may be limited to the amount necessary to fully fund Employer's actuarial present value of total projected benefits, as supported by the OPEB cost report acceptable to the Board. As used throughout this document, the meaning of the term "actuarial present value of total projected benefits" is as defined in GASB Statement No. 45. If Employer’s contribution causes its assets in the Prefunding Plan to exceed the amount required to fully fund the actuarial present value of total projected benefits, the Board may refuse to accept the contribution. (5) No contributions are required. If an employer elects to contribute then the contribution amount should not be less than $5000 or the employer’s annual required contribution (ARC), whichever amount is lower. Contributions can be made at any time following the seventh day after the effective date of the Agreement provided that Employer has first complied with the requirements of Paragraph C. D. Administration of Accounts, Investments, Allocation of Income (1) The Board has established the Prefunding Plan as an agent plan consisting of an aggregation of single-employer plans, with pooled administrative and investment functions, under the terms of which separate accounts will be maintained for each employer so that Employer's assets will provide benefits only under employer's plan. (2) All Employer contributions and assets attributable to Employer contributions shall be separately accounted for in the Prefunding Plan (Employer’s Prefunding Account). (3) Employer’s Prefunding Account assets may be aggregated with prefunding account assets of other employers and may be co-invested by the Board in any asset classes appropriate for a Section 115 Trust. (4) The Board may deduct the costs of administration of the Prefunding Plan from the investment income or Employer’s Prefunding Account in a manner determined by the Board. (5) Investment income shall be allocated among employers and posted to Employer’s Prefunding Account as determined by the Board but no less frequently than annually. (6) If Employer's assets in the Prefunding Plan exceed the amount required to fully fund the actuarial present value of total projected benefits, the Board, in compliance with applicable accounting and legal requirements, may return such excess to Employer.

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E. Reports and Statements (1) Employer shall submit with each contribution a contribution report in the form and containing the information prescribed by the Board. (2) The Board shall prepare and provide a statement of Employer’s Prefunding Account at least annually reflecting the balance in Employer's Prefunding Account, contributions made during the period and income allocated during the period, and such other information as the Board determines.

F. Disbursements (1) Employer may receive disbursements not to exceed the annual premium and other costs of post employment healthcare benefits and other post employment benefits as defined in GASB 43. (2) Employer shall notify CalPERS in writing in the manner specified by CalPERS of the persons authorized to request disbursements from the Prefunding Plan on behalf of Employer. (3) Employer's request for disbursement shall be in writing signed by Employer's authorized representative, in accordance with procedures established by the Board. The Board may require that Employer certify or otherwise establish that the monies will be used for the purposes of the Prefunding Plan. (4) Requests for disbursements that satisfy the requirements of paragraphs (2) and (3) will be processed monthly. (5) CalPERS shall not be liable for amounts disbursed in error if it has acted upon the written instruction of an individual authorized by Employer to request disbursements. In the event of any other erroneous disbursement, the extent of CalPERS' liability shall be the actual dollar amount of the disbursement, plus interest at the actual earnings rate but not less than zero. (6) No disbursement shall be made from the Prefunding Plan which exceeds the balance in Employer’s Prefunding Account.

G. Costs of Administration Employer shall pay its share of the costs of administration of the Prefunding Plan, as determined by the Board.

H. Termination of Employer Participation in Prefunding Plan (1) The Board may terminate Employer’s participation in the Prefunding Plan if:

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(a) Employer gives written notice to the Board of its election to terminate; (b) The Board finds that Employer fails to satisfy the terms and conditions of

this Agreement or of the Board's rules or regulations. (2) If Employer’s participation in the Prefunding Plan terminates for any of the foregoing reasons, all assets in Employer’s Prefunding Account shall remain in the Prefunding Plan, except as otherwise provided below, and shall continue to be invested and accrue income as provided in Paragraph D. (3) After Employer’s participation in the Prefunding Plan terminates, Employer may not make contributions to the Prefunding Plan. (4) After Employer’s participation in the Prefunding Plan terminates, disbursements from Employer’s Prefunding Account may continue upon Employer’s instruction or otherwise in accordance with the terms of this Agreement. (5) After the Employer’s participation in the Prefunding Plan terminates, the governing body of the Employer may request either:

(a) A trustee to trustee transfer of the assets in Employer’s Prefunding Account; provided that the Board shall have no obligation to make such transfer unless the Board determines that the transfer will satisfy applicable requirements of the Internal Revenue Code, other law and accounting standards, and the Board’s fiduciary duties. If the Board determines that the transfer will satisfy these requirements, the Board shall then have one hundred fifty (150) days from the date of such determination to effect the transfer. The amount to be transferred shall be the amount in the Employer's Prefunding Account as of the date of the transfer (the “transfer date”) and shall include investment earnings up to an investment earnings allocation date preceding the transfer date. In no event shall the investment earnings allocation date precede the transfer date by more than 150 days.

(b) A disbursement of the assets in Employer’s Prefunding Account; provided

that the Board shall have no obligation to make such disbursement unless the Board determines that, in compliance with the Internal Revenue Code, other law and accounting standards, and the Board’s fiduciary duties, all of Employer's obligations for payment of post-employment health care benefits and other post-employment benefits and reasonable administrative costs of the Board have been satisfied. If the Board determines that the disbursement will satisfy these requirements, the Board shall then have one hundred fifty (150) days from the date of such determination to effect the disbursement. The amount to be disbursed shall be the amount in the Employer’s Prefunding Account as of the date of the disbursement (the “disbursement date”) and shall include investment earnings up to an investment earnings allocation date

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preceding the disbursement date. In no event shall the investment earnings allocation date precede the disbursement date by more than 150 days.

(6) After Employer’s participation in the Prefunding Plan terminates and at such time that no assets remain in Employer’s Prefunding Account, this Agreement shall terminate. (7) If, for any reason, the Board terminates the Prefunding Plan, the assets in Employer’s Prefunding Account shall be paid to Employer after retention of (i) amounts sufficient to pay post employment health care benefits and other post employment benefits to annuitants for current and future annuitants described by the employer’s current substantive plan (as defined in GASB 43), and (ii) amounts sufficient to pay reasonable administrative costs of the Board. (8) If Employer ceases to exist but Employer’s Prefunding Plan continues to exist and if no provision has been made by Employer for ongoing payments to pay post employment health care benefits and other post employment benefits to annuitants for current and future annuitants, the Board is authorized to and shall appoint a third party administrator to carry out Employer's Prefunding Plan. Any and all costs associated with such appointment shall be paid from the assets attributable to contributions by Employer. (9) If Employer should breach the representation and warranty set forth in Paragraph A., the Board shall take whatever action it deems necessary to preserve the tax-exempt status of the Prefunding Plan. I. General Provisions (1) Books and Records. Employer shall keep accurate books and records connected with the performance of this Agreement. Employer shall ensure that books and records of subcontractors, suppliers, and other providers shall also be accurately maintained. Such books and records shall be kept in a secure location at the Employer's office(s) and shall be available for inspection and copying by CalPERS and its representatives. (2) Audit.

(a) During and for three years after the term of this Agreement, Employer shall permit the Bureau of State Audits, CalPERS, and its authorized representatives, and such consultants and specialists as needed, at all reasonable times during normal business hours to inspect and copy, at the expense of CalPERS, books and records of Employer relating to its performance of this Agreement.

(b) Employer shall be subject to examination and audit by the Bureau of State

Audits, CalPERS, and its authorized representatives, and such

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consultants and specialists as needed, during the term of this Agreement and for three years after final payment under this Agreement. Any examination or audit shall be confined to those matters connected with the performance of this Agreement, including, but not limited to, the costs of administering this Agreement. Employer shall cooperate fully with the Bureau of State Audits, CalPERS, and its authorized representatives, and such consultants and specialists as needed, in connection with any examination or audit. All adjustments, payments, and/or reimbursements determined to be necessary by any examination or audit shall be made promptly by the appropriate party.

(3) Notice.

(a) Any notice, approval, or other communication required or permitted under this Agreement will be given in the English language and will be deemed received as follows:

1. Personal delivery. When personally delivered to the recipient.

Notice is effective on delivery. 2. First Class Mail. When mailed first class to the last address of the

recipient known to the party giving notice. Notice is effective three delivery days after deposit in a United States Postal Service office or mailbox.

3. Certified mail. When mailed certified mail, return receipt requested.

Notice is effective on receipt, if delivery is confirmed by a return receipt.

4. Overnight Delivery. When delivered by an overnight delivery

service, charges prepaid or charged to the sender's account, Notice is effective on delivery, if delivery is confirmed by the delivery service.

5. Telex or Facsimile Transmission. When sent by telex or fax to the

last telex or fax number of the recipient known to the party giving notice. Notice is effective on receipt, provided that (i) a duplicate copy of the notice is promptly given by first-class or certified mail or by overnight delivery, or (ii) the receiving party delivers a written confirmation of receipt. Any notice given by telex or fax shall be deemed received on the next business day if it is received after 5:00 p.m. (recipient's time) or on a nonbusiness day.

6. E-mail transmission. When sent by e-mail using software that provides unmodifiable proof (i) that the message was sent, (ii) that the message was delivered to the recipient's information processing system, and (iii) of the time and date the message was delivered to

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the recipient along with a verifiable electronic record of the exact content of the message sent.

Addresses for the purpose of giving notice are as shown in Paragraph B.(1) of this Agreement.

(b) Any correctly addressed notice that is refused, unclaimed, or

undeliverable because of an act or omission of the party to be notified shall be deemed effective as of the first date that said notice was refused, unclaimed, or deemed undeliverable by the postal authorities, messenger or overnight delivery service.

(c) Any party may change its address, telex, fax number, or e-mail address by

giving the other party notice of the change in any manner permitted by this Agreement.

(d) All notices, requests, demands, amendments, modifications or other

communications under this Agreement shall be in writing. Notice shall be sufficient for all such purposes if personally delivered, sent by first class, registered or certified mail, return receipt requested, delivery by courier with receipt of delivery, facsimile transmission with written confirmation of receipt by recipient, or e-mail delivery with verifiable and unmodifiable proof of content and time and date of sending by sender and delivery to recipient. Notice is effective on confirmed receipt by recipient or 3 business days after sending, whichever is sooner.

(4) Modification This Agreement may be supplemented, amended, or modified only by the mutual agreement of the parties. No supplement, amendment, or modification of this Agreement shall be binding unless it is in writing and signed by the party to be charged. (5) Survival All representations, warranties, and covenants contained in this Agreement, or in any instrument, certificate, exhibit, or other writing intended by the parties to be a part of their Agreement shall survive the termination of this Agreement until such time as all amounts in Employer's Prefunding Account have been disbursed. (6) Waiver No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this Agreement shall be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy shall be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, nor shall any waiver constitute a continuing waiver unless the writing so specifies.

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(7) Necessary Acts, Further Assurances The parties shall at their own cost and expense execute and deliver such further documents and instruments and shall take such other actions as may be reasonably required or appropriate to evidence or carry out the intent and purposes of this Agreement. A majority vote of Employer’s Governing Body at a public meeting held on the ______

day of the month of __________________ in the year _________, authorized entering

into this Agreement.

Signature of the Presiding Officer: ________________________________________

Printed Name of the Presiding Officer: _____________________________________

Name of Governing Body: ______________________________________________

Name of Employer: ___________________________________________________ Date: _______________________________ BOARD OF ADMINISTRATION CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM BY_____________________________________ RAND ANDERSON AFFILIATE PROGRAM SERVICES DIVISION CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM

To be completed by CalPERS The effective date of this Agreement is: _________________________

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APRIL

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2014

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PRESIDENT LENET PACHECO

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BOARD OF DIRECTORS

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RESOLUTION NO. 03-14-746

A RESOLUTION OF THE BOARD OF DIRECTORS OF VALLEY COUNTY WATER DISTRICT DELEGATING AUTHORITY TO REQUEST DISBURSEMENTS

FROM THE OTHER POST EMPLOYEMENT BENEFIT PREFUNDING PLAN BE IT RESOLVED BY THE BOARD OF DIRECTORS OF VALLEY COUNTY WATER DISTRICT, as follows:

The Board of Directors of Valley County Water District delegates to the incumbents in the positions of General Manager and Finance & Administrative Manager authority to request on behalf of Valley County Water District disbursements from the Other Post Employment Benefit Prefunding Plan and to certify as to the purpose for which the disbursed funds will be used.

PASSED, APPROVED, AND ADOPTED this 14th day of April 2014. SIGNED: ______________________________________________ President of the Board of Directors ATTEST: ______________________________________________ Secretary of the Board of Directors (OFFICIAL VCWD SEAL)

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finance committee meeting - cls, inc. finance agenda packet.pdf · to the district’s budget and...

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