Nerds Talking OPEB & Pensions State Association of County Auditors April 2017

Other Postemployment Benefits Napa County The Basics Began Trust Contributions in Fiscal Year 2007-08 Elected a 14 year closed amortization period Elected a 20 Year Fresh Start in Fiscal Year 2009-10 California Employees Retirement Benefit Trust Managed by CalPERS

Other postemployment benefits Actuarial Determined Contributions Funded Each Year Contribution to CERBT Made Quarterly- True-up at Year End Pay-As-You-Go Paid Outside of the CERBT CERBT Invested in CalPERS Strategy 1, Most Aggressive

Other postemployment Benefits Fiscal Year Contribution Disbursements 2007-08 $4,320,628 $-- 2008-09 $4,352,252 2009-10 $2,858,074 2010-11 $2,783,630 2011-12 $4,211,368 2012-13 $4,243,097 2013-14 $4,230,867 2014-15 $4,305,498 2015-16 $6,066,750 2016-17 $4,888,000 The reduction in 2016-17 reflects the increase in pay-as-you-go amounts now that the implied subsidy is in full force.

Other postemployment benefits Funded Status As you can see, the large jump in the Accrued Liability between 2011 and 2013 reflects the County’s early adoption of ASOP 6, and the inclusion of the implicit subsidy. Just when you think you are making real progress, the actuaries change the rules.

Other postemployment benefits Moving Forward No Change in Benefits Anticipated – Recently reduced benefits for elected officials Funded Status Continues to Rise Investment Risk Continues to Increase Shift from Asset Growth to Asset Preservation Outlook Change in Investment Strategy Change in Funding Strategy – Lump Sum in July Consider Opening a Second Trust Develop a Plan to Begin Drawing from CERBT

Pension

pension Napa County Two Plans – Miscellaneous and Safety Cost Sharing Built into Both MOUs Reduced Benefit Tiers Added to Both Plans in 2011

PEnsion Competitive Disadvantage New Tiers – Classic Members now earn decreased benefits Cost Sharing, a blessing and a curse Miscellaneous, manageable Safety, problematic

pension Napa County Section 115 Trusts Discussed with Grand Jury Proposed to County Executive Office Recommended by the Grand Jury Rejected by the County Executive Office

Pension Section 115 Trust Napa Challenges Funding - Don’t have the money! Claimability Education Benefits Demonstrate sound financial accountability Irrevocable flexibility – two year reimbursement Rate stabilization Custom investment strategy Credit rating The biggest challenge we faced was the one caused by the idea being summarily dismissed because it didn’t originate with the CEO. We sometimes become single minded and can’t address multiple challenges at once. We get paralyzed when choices aren’t obvious

Pension Acceptance PERS decision to lower the discount rate Estimated increase in ER contribution Review of impact on cost sharing Visually being able to show the pending impact of the discount rate change Actuary recommendation

Pension Funding Goal Internal demand on one time money Build in a funding discipline Unused budgeted retirement Estimated savings from prefunding ER contribution Direct cost sharing savings into the plan or a trust First, no that is not a self portrait

Amortization Periods & methods Analyzing the Cost/Benefit Ratio of Amortization Changes Analyze the inventory of unfunded liabilities Impact of smoothing ramps Understanding the cost of long amortization lives Dealing with plans with no active employees PEPRA & other immature tiers

Future Hard decisions – Prioritizing our largest liabilities Pray for investment returns!!!!!!!!