Title
Recommendation to Receive an Informational Report on Other Post-Employment Benefits. (Finance 10024051) [Continued from June 4, 2024]
Body
To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
In February 2024, City Council received a presentation on the funded status of the CalPERS Pension liability and the Pension Rate Stabilization Policy. At that time, staff stated their intentions to bring to City Council an update on the Other Post-Employment Benefits (OPEB) status of the City.
The City of Alameda offers OPEB to retired staff via two OPEB Plans - OPEB (Pre-2019) and OPEB (Post-2019). At this time, staff is bringing an update of the financial position and funded status of these OPEB plans.
BACKGROUND
The purpose of this informational staff report is to provide a comprehensive analysis of the current funding status of the City OPEB plans. The underfunded OPEB plans pose a financial challenge that continues to require attention and strategic planning.
The City has partnered with GovInvest, a leading consultant in pension and OPEB planning, in order to help the City clarify its current position and options for the future. They have prepared a short presentation including OPEB basics, current funding status, and funding projections.
DISCUSSION
The City provides medical and dental employer defined benefit health benefits to retirees through CalPERS as specified below under the City of Alameda Miscellaneous and Pre-1/1/2019 Safety OPEB Plan and the City of Alameda Post-1/1/2019 Safety OPEB Plan, agent multiple- care plans. The City is responsible for establishing and amending the funding policy of the Plans.
Prior to July 1, 2018, the City had one OPEB Plan, but active Safety employees as of January 1, 2019 transferred to the new Post-1/1/2019 Safety OPEB Plan.
Unfunded Liability:
The Unfunded Liability refers to the shortfall the City has between the amounts actuarily assumed owed to retirees and the current assets within the pension trust funds. These unfunded amounts are as follows (as of June 30, 2023):
|
Miscellaneous and Pre-1/1/2019 Safety Plan*: |
$43,988,923.00 |
|
Post-1/1/2019 Safety Plan*: |
$21,484,930.00 |
*Please note this combines both the OPEB liability and the Public Agency Retirement Services (PARS) irrevocable trust assets discussed in the next section.
PARS Irrevocable Trust:
The City established an irrevocable trust for each Plan with PARS to fund its retiree health benefits. On March 1, 2014, the City adopted the Public Agencies Post-Employment Benefits Trust to prefund OPEB. The Trust is an irrevocable trust and qualifies as an Internal Revenue Section 115 trust. Investments of funds held in Trust are governed by the Investment Guideline Document for the investment account and by the agreement for administrative services with PARS, rather than the general provisions of the California Government Code or the City’s investment policy. As of June 30, 2023, the amounts of the PARS Trust accounts are as follows:
|
Miscellaneous and Pre-1/1/2019 Safety Plan: |
$4,915,850.74 |
|
Post-1/1/2019 Safety Plan: |
$16,311,991.40 |
Membership:
Membership in the Plans consisted of the following at the actuarial valuation date of June 30, 2022 (the most recent actuarial evaluation date presented on our financial statements):
Miscellaneous and Pre-1/1/2019 Safety Plan Membership:
|
FY 2023 Active Employees: |
336 |
|
Inactive employees or beneficiaries currently receiving benefit payments: |
372 |
|
Inactive employees entitled to but not yet receiving benefit payments: |
200 |
|
Total: |
908 |
Post-1/1/2019 Safety Plan Membership:
|
FY 2023 Active Employees:180 |
|
|
Inactive employees or beneficiaries currently receiving benefit payments: |
43 |
|
Inactive employees entitled to but not yet receiving benefit payments: |
5 |
|
Total: |
228 |
As the accrued liability is larger than the PARS Irrevocable Trust Assets, the City has net unfunded actuarial liability between the two plans (Pre-2019 and Post-2019).
ALTERNATIVES
• City Council can ask questions and provide feedback on this informational report on the City’s OPEB plans.
FINANCIAL IMPACT
This report is for informational purposes only. There is no fiscal impact from hearing this item.
MUNICIPAL CODE/POLICY DOCUMENT CROSS-REFERENCE
This action is in conformance with the Alameda Municipal Code and all policy documents; and the City’s Strategic Priority of Practice Fiscally Responsible, Equitable and Inclusive Governance.
ENVIRONMENTAL REVIEW
This activity is not a project and is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15378 (b) (4) of the CEQA Guidelines because it involves governmental fiscal activities which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
CLIMATE IMPACTS
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Receive the informational report on the City’s current OPEB status.
Respectfully submitted,
Margaret L. O’Brien, Director of Finance
By:
Ross McCarthy, Controller