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HomeMy WebLinkAboutC-4684 - Agreement 13-035-01 and Agreement No. 11-002-01 for Actuarial Valuation Study ProjectAGREEMENT NO. 13-035-01 BETWEEN SOUTHERN CALIFORNIA ASSOCATION OF GOVERNMENTS AND ` CITY OF NEWPORT BEACH THIS AGREEMENT, is made and entered into, by and between the Southern California Association of Governments ("SCAG") and City of Newport Beach ( "City ") regarding an \ Actuarial Valuation Study project ( "Study ") as further detailed below. �J RECITALS WHEREAS, SCAG is a Joint Powers Agency and a federally designated Metropolitan Planning Organization for Southern California. SCAG is primarily responsible for developing the regional transportation plan and transportation improvement program for the counties of Los Angeles, Orange, San Bernardino, Riverside, Ventura, and Imperial; WHEREAS, SCAG requires certain technical, professional, or support services from time to time to support various mandated activities and requirements of the agency; WHEREAS, SCAG seeks to engage in the Actuarial Valuation Study project in order to comply with the requirements of the California Employers' Retiree Benefit Trust (CERBT) to provide California Public Employees' Retirement System (CalPERS) trust administrators with an updated actuarial report every two (2) years to satisfy the requirements of the Governmental Accounting Standards Board Statement 45 (GASB 45); WHEREAS, City is a member of SCAG and has elected to participate in a joint procurement with SCAG for purposes of pursuing the Study; WHEREAS, SCAG has retained the services of Nyhart Epler, ( "Consultant ") to perform the actuarial valuation studies for SCAG and City; and, WHEREAS, City agrees to the performance of the services on the terms and conditions set forth below. NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the City hereby agree as follows: 1. Agreement. This "Agreement' is comprised of these terms and conditions and any attached exhibits. 2. Term. The services provided pursuant to this Agreement shall commence upon execution of this Agreement and continue until June 30, 2016. 3. Scope of Work. a. SCAG agrees to engage Consultant to perform the Scope of Work on behalf of the City, as set forth in the "Scope of Work," Exhibit A, attached hereto and incorporated by this reference. Consultant shall furnish all technical and professional services necessary to perform the tasks set forth in the Scope of Work. Performance of work is contingent upon issuance of a Purchase Order by SCAG to Consultant to conduct the work. b. The Project Manager assigned by the City, Susan Giangrande, shall coordinate work related to this Project through the Consultant, Nyhart Epler. The City's Project Manager shall supply resources for this Project as described in the SCAG Scope of Work, and coordinate and oversee the Consultant throughout the duration of the Study. C. The City maintains final approval of final work products provided under the Agreement for work explicitly performed for the City. 4. Compensation The maximum amount payable under this Agreement, including all expenses, shall not exceed $25,000 per annual valuation report, not to exceed a total amount of $75,000. 5. Invoicine a. Invoices for payment to Consultant shall be administered and paid by SCAG; provided, however, that no payment shall be made by SCAG until said Consultant invoices have been reviewed and approved. b. SCAG shall provide a copy of a Consultant invoice to the City's Project Manager within five (5) business days of receipt of invoice. The City's Project Manager shall review and approve the Consultant invoice within five (5) business days of receipt of the copy of the invoice from SCAG. If there is any dispute related to the invoice, City shall make a good faith effort to resolve the dispute with Consultant prior to SCAG's payment of Consultant invoice. C. SCAG shall issue City an invoice for reimbursement for Consultant services. The City shall reimburse SCAG within ten (10) business days of receipt of SCAG invoice. 6. Ownership of Materials. Work products, documents, analysis, and materials provided pursuant to the Scope of Work explicitly for the City, shall become the property of the City. 7. Independent Contractor. SLAG, their members, officers, employees, consultants and agents shall be independent contractors in the performance of this Agreement, and not officers, employees, consultants or agents of the City. Disputes. The parties agree to submit any disputes arising under this Agreement to neutral mediation before resorting to litigation. 9. Limitation of Liability. In no event shall either party be liable to the other Party in connection with the provision or use of the services for claims, demands, costs or damages arising from or connected with this Agreement. 10. Termination of Agreement. Any Party may terminate this Agreement for convenience or for cause by giving written notice to the other parties of such termination at least thirty (30) calendar days before the effective date of such termination. In the event a party terminates for cause, it shall provide a reasonable opportunity for the other Party to cure prior to termination. 11. Entire Agreement. This writing contains the entire agreement relating to the subject matter hereof, and the parties have made no agreements, representations or warranties relating to the subject matter hereof which are not set forth herein. This Agreement may not be modified or altered without formal written amendment thereto. IN WITNESS WHEREOF, The Southern California Association of Governments and City of Newport Beach hay ca sed this Agreement to be executed by their duly authorized representatives. For SLAG Basil Panas Chief Financial Officer Date: 6 f � 06 � Approved as to Legal Form: S�'� Joao Arica Chief Counsel/Director of Legal Services r City of NewportBeach Dan Matusiewicz Finance Director Date: 7 " t 3 Approved as to Legal Form: A/ C�d�) Aaron C. Hale City Attorney Attest: City Clerk EXHIBIT A SCOPE OF WORK Consultant shall provide services for the following Actuarial Valuation Components and based upon the specific Plan Description for the City of Newport Beach as further detailed below. Actuarial Valuation Components: 1. Analyze the data to assess any inconsistencies and make recommendations for enhancing data quality 2. Prepare an actuarial valuation following GASB 43 and GASB 45 standards 3. Prepare a report which includes: • The actuarial present value of total projected benefits • Actuarial accrued liability • Actuarial value of assets • The unfunded actuarial accrued liability • Normal cost 4. Annual required contribution of the employer(s) as a level dollar amount and as a level percentage of covered payroll 5. Net OPEB obligation (for employer disclosure under GASB statement 45) 6. Prepare the necessary material for the Comprehensive Annual Financial Report to comply with GASB OPEB reporting and disclosure requirements 7. Prepare the annual gain/loss analysis to determine reasons for changes in the unfunded actuarial accrued liability, whenever a prior actuarial valuation is available to support this 8. Determine the implicit rate subsidy, if any, and the impact it would have on the OPEB liability 9. Prepare a cash flow analysis (the "pay -as- you -go cost ") 10. Prepare a sensitivity analysis showing the impact of alternative assumptions on the employer's contributions (healthcare trend rates and investment rate assumptions) 11. As appropriate, provide recommendations on managing the OPEB liability. This may include changes in plan design 12. As appropriate, review and update plan documents and design. Make recommendations as to formalizing informal plans Plan Description The City of Newport Beach implemented a defined contribution plan for retiree medical benefits, effective January 1, 2006. The defined contribution plan, called the Retiree Health Savings program (RHS), is a Health Reimbursement Arrangement (HRA) sponsored by the City, held in trust and managed by ICMA -RC (Trustee), under IRS Revenue Ruling 2002 -41 (June 26, 2002) and IRS Notice 2002 -45 (June 26, 2002). It provides reimbursement for post - employment medical (PEMHCA plan) dental, vision, long -term care, miscellaneous medical expenses, and the PEMHCA minimum. The plan is only provided to full -time employees. Part -time employees can participate in PEMHCA, but the only City contribution is the PEMHCA minimum if they are participating in PEMHCA. There are five funding components for the RHS: • Part A — Mandatory contribution of 1% of base pay, immediate upon enrollment. • Part B — City contributes $2.50 per month for each year of age and service during employment. Part B contributions are effective upon vesting at 5 years of service and are retroactively deposited. • Part C — Mandatory transfer of a portion of accumulated leave during any leave buyout. The amount of leave conversion varies by bargaining unit. • Part D — for active employees as of January 1, 2006, the City will make a one -time contribution upon retirement from the City of $100 per month times the months the employee contributed to the prior defined contribution plan with a cap of $18,000. • Part E — Post retirement contribution, the City will provide the PEMHCA minimum contribution when a retiree's RHS account value has been exhausted. Prior to the implementation of a defined contribution plan for retiree medical benefits, the City provided a defined benefit plan. The defined benefit plan required seven years of service and retirement, either service retirement or disability retirement, from the City. The benefit was $400 per month for the retiree and surviving spouse. Funding of the defined contribution plan was divided between the City which paid 50% of costs, active employees paid 25% of costs, and retirees contributed 25% of cost. Police employees retired prior to January 1, 2006, receive $425 per month for the retiree and surviving spouse with the additional $50 paid half by the City and half by the current active Police employees. There are currently 170 active employees who will be eligible for the defined contribution plan if they retire from the City_ As of June 30, 2012, there were approximately 670 retirees, terminated employees and/or eligible beneficiaries. Participation in the RHS is required for new employees, however at implementation, only certain employees were required to convert to the RHS: sworn/safety employees whose age plus service years was less than or equal to 45 and miscellaneous employees whose age plus service years was less than or equal to 49. For retirees as of January 1, 2006, and active employees whose age plus years of service was greater than mentioned above, a conversion plan was established. The funding components of the conversion plan are: • Part A — For active employees, a mandatory contribution of I% of base pay. • Part B — No part B contribution. • Part C —Mandatory transfer of a portion of accumulated leave during any leave buyout. The amount of leave conversion varies by bargaining unit. Part D — for active employee as of January 1, 2006, the City will make a one -time contribution upon retirement from the City of $75 per month times the months the employee contributed to the prior defined contribution plan with a cap of $13,500. Part E - Post retirement contribution, the City will provide $400 per month to the retiree's or to the surviving spouses' RHS account. Police retirees and their surviving spouses who retired prior to January 1, 2006, receive a $450 per month. Part F — Active employees participating in the conversion plan are required to make a contribution of $100 per month to the City as long as they are employed by the City in a full -time position. The plan's assets are invested with the California Employers' Retirement Benefit Trust (CERBT) which is offered through CalPERS. Copies of the trust document, employee union contracts /memorandums of understanding, employee manuals and communications related to post - employment benefits will be provided to the actuarial firm selected. In addition, a complete census of members including, but not limited to: employee /retiree age, Medicare status, marital status, dependent data, insurance participation, premium amounts, and RHS contributions will be provided. Deliverables I. The consultant shall deliver three (3) bound copies of the actuarial valuation and all supporting calculations and exhibits. Consultant shall also deliver an unbound copy of the valuation suitable for reproduction of the report for internal use. 2. Consultant may be required to make an oral presentation to the applicable agency's executive management, governing board or a committee, if it is recommended and requested by agency's management. 3. The final actuarial valuation report shall contain a glossary of terms and sufficient explanatory text to permit a reasonable understanding of the actuarial assumptions, and cost methods used for actuarial valuations to support the conclusions. 4. The explanatory text shall include, but not be limited to, a summary of the plan, description of actuarial assumptions, and cost methods used. A display of age groups, service matrices for active and retired employees and mortality assumptions, as well as other relevant data should also be included with final actuarial report. �� q AGRFFMFNT NO. 11-002-01 BETWEEN SOUTHERN CALIFORNIA ASSOCATION OF GOVERNMENTS AND CITY OF NEWPORT BEACH THIS AGREEMENT, is made and entered into, by and between the Southern California Association of Governments ( "SCAG ") and City of Newport Beach ( "City ") regarding an Actuarial Valuation Study project (`Study") as further detailed below. RECITALS WHEREAS, SCAG is a Joint Powers Agency and a federally designated Metropolitan. Planning Organization for Southern California. SCAG is primarily responsible for developing the regional transportation plan and transportation improvement program for the counties of Los Angeles, Orange, San Bernardino, Riverside, Ventura, and Imperial; WHEREAS, SCAG requires certain technical, professional, or support services from time to time to support various mandated activities and requirements of the agency; WHEREAS, SCAG seeks to engage in the Actuarial Valuation Study project in order to comply with the requirements of the California Employers' Retiree Benefit Trust (CERBT) to provide California Public Employees' Retirement System (CalPERS) trust administrators with an updated actuarial report every two (2) years to satisfy the requirements of the Governmental Accounting Standards Board Statement 45 (GASB 45); WHEREAS, City is a member of SCAG and has elected to participate in a joint procurement with SCAG for purposes of pursuing the Study; WHEREAS, SCAG has retained the services of Bartel Associates, LLC, (`Consultant") to perform the actuarial valuation studies for SCAG and City; and, WHEREAS, City agrees to the performance of the services on the terms and conditions set forth below. NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the City hereby agree as follows: Agreement. This "Agreement" is comprised of these terms and conditions and any attached exhibits. 2. Term. The services provided pursuant to this Agreement shall commence upon execution of this Agreement and continue until June 30, 2013. Scope of Work. a. SCAG agrees to engage Consultant to perform the Scope of Work on behalf of the City, as set forth in the "Scope of Work," Exhibit A, attached hereto and incorporated by this reference. Consultant shall furnish all technical and professional services necessary to perform the tasks set forth in the Scope of Work. Performance of work is contingent upon issuance of a Purchase Order by SCAG to Consultant to conduct the work. b. The Project Manager assigned by the City, Susan Giangrande, shall coordinate work related to this Project through the Consultant, Bartel Associates, LLC, The City's Project Manager shall supply resources for this Project as described in the SCAG Scope of Work, and coordinate and oversee the Consultant throughout the duration of the Study. c. The City maintains final approval of final work products provided under the Agreement for work explicitly performed for the City. 4. Compensation The maximum amount payable under this Agreement, including all expenses, shall not exceed $25,000 per annual valuation report, not to exceed a total amount of $75,000. 5. Invoicine a. Invoices for payment to Consultant shall be administered and paid by SCAG; provided, however, that no payment shall be made by SCAG until said Consultant invoices have been reviewed and approved. b. SCAG shall provide a copy of a Consultant invoice to the City's Project Manager within five (5) business days of receipt of invoice, The City's Project Manager shall review and approve the Consultant invoice within five (5) business days of receipt of the copy of the invoice from SCAG. If there is any dispute related to the invoice, City shall make a good faith effort to resolve the dispute with Consultant prior to SCAG's payment of Consultant invoice. C. SCAG shall issue City an invoice for reimbursement for Consultant services. The City shall reimburse SCAG within ten (10) business days of receipt of SCAG invoice. 6. Ownership of Materials. Work products, documents, analysis, and materials provided pursuant to the Scope of Work explicitly for the City, shall become the property of the City. 7. Independent Contractor. SCAG, their members, officers, employees, consultants and agents shall be independent contractors in the performance of this Agreement, and not officers, employees, consultants or agents of the City. 8. Disputes. The parties agree to submit any disputes arising under this Agreement to neutral mediation before resorting to litigation. 9. Limitation of Liability. In no event shall either party be liable to the other Party in connection with the provision or use of the services for claims, demands, costs or damages arising from or connected with this Agreement. 10. Termination of Agreement. Any Party may terminate this Agreement for convenience or for cause by giving written notice to the other parties of such termination at least thirty (30) calendar days before the effective date of such termination. In the event a party terminates for cause, it shall provide a reasonable opportunity for the other Party to cure prior to termination. 11. Entire Agreement. This writing contains the entire agreement relating to the subject matter hereof, and the parties have made no agreements, representations or warranties relating to the subject matter hereof which are not set forth herein. This Agreement may not be modified or altered without formal written amendment thereto. IN WITNESS WHEREOF, The Southern California Association of Governments and City of Newport Beach have caused this Agreement to be executed by their duly authorized representatives. For SC or City of ewport Beach Wayne Moore Tracy Mc aner Chief Financial Officer Administrative Services Director Date: l0' l l- ID Approved as to Legal Form: JoA Africa Chief Counsel/Director of Legal Services Date: I b I 6 I I b Approved as to Legal Form: Leonie Mulvihill Assistant City Attorney c Attest: CRY Clerk NA'FAZI EXHIBIT A SCOPE OF WORK Consultant shall provide services for the following Actuarial Valuation Components and based upon the specific Plan Description for the City of Newport Beach as further detailed below. Actuarial Valuation Components: 1. Analyze the data to assess any inconsistencies and make recommendations for enhancing data quality 2. Prepare an actuarial valuation following GASB 43 and GASB 45 standards 3. Prepare a report which includes: • The actuarial present value of total projected benefits • Actuarial accrued liability • Actuarial value of assets • The unfunded actuarial accrued liability • Normal cost 4. Annual required contribution of the employer(s) as a level dollar amount and as a level percentage of covered payroll 5. Net OPEB obligation (for employer disclosure under GASB statement 45) 6. Prepare the necessary material for the Comprehensive Annual Financial Report to comply with GASB OPEB reporting and disclosure requirements 7. Prepare the annual gain/loss analysis to determine reasons for changes in the unfunded actuarial accrued liability, whenever a prior actuarial valuation is available to support this 8. Determine the implicit rate subsidy, if any, and the impact it would have on the OPEB liability 9. Prepare a cash flow analysis (the "pay -as- you -go cost ") 10. Prepare a sensitivity analysis showing the impact of alternative assumptions on the employer's contributions (healthcare trend rates and investment rate assumptions) 11. As appropriate, provide recommendations on managing the OPEB liability. This may include changes in plan design 12. As appropriate, review and update plan documents and design. Make recommendations as to formalizing informal plans Page i of 3 Plan Description: The City of Newport Beach implemented a defined contribution plan for retiree medical benefits effective January 1, 2006. The defined contribution plan, called the Medical Expense Reimbursement Program (MERP), is a Health Reimbursement Arrangement (HRA) sponsored by the City, held in trust and managed by ING (Trustee), under IRS Revenue Ruling 2002 -41 (June 26, 2002) and IRS Notice 2002 -45 (June 26, 2002), It provides reimbursement for post - employment medical (PEMHCA plan and City sponsored Blue Cross plan), dental, vision, long- term care, miscellaneous medical expenses, and the PEMHCA minimum. The plan is only provided to full -time employees. Part -time employees can participate in the City's medical plans or in PEMHCA, but the only City contribution is the PEMHCA minimum if they are participating in PEMHCA. There are five funding components for the MERP: • Part A — Mandatory contribution of l % of base pay, immediate upon enrollment. • Part B — City contributes $2.50 per month for each year of age and service during employment. Part B contributions are effective upon vesting at 5 years of service and are retroactively deposited to January 1, 2006. • Part C — Mandatory transfer of a portion of accumulated leave during any leave buyout. The amount of leave conversion varies by bargaining unit. • Part D — for active employee as of January 1, 2006, the City will make a one -time contribution upon retirement from the City of $100 per month times the months the employee contributed to the prior defined contribution plan. • Part E — Post retirement contribution, the City will provide the PEMHCA minimum contribution when a retiree's MERP account value has been exhausted. Prior to the implementation of a defined contribution plan for retiree medical benefits, the City provided a defined benefit plan. The defined benefit plan required seven years of service and retirement, either service retirement or disability retirement, from the City. The benefit was $400 per month for the retiree and surviving spouse. Funding of the defined contribution plan was divided between the City which paid 50% of costs, active employees paid 25% of costs, and retirees contributed 25% of cost. Conversion to the MERP is required for new employees, however at implementation, only certain employees were required to convert to the MERP: sworn/safety employees whose age plus service years was less than or equal to 45 and miscellaneous employees whose age plus service years was less than or equal to 49. For retirees as of January 1, 2006, and active employees whose age plus years of service was greater than mentioned above, a conversion plan was established. The funding components of the conversion plan are: • Part A — For active employees, a mandatory contribution of I% of base pay. • Part B — No part B contribution. • Part C — Mandatory transfer of a portion of accumulated leave during any leave buyout. The amount of leave conversion varies by bargaining unit. * Part D — for active employee as of January 1, 2006, the City will make a one -time contribution upon retirement from the City of $75 per month times the months the employee contributed to the prior defined contribution plan. Page 2 of 3 Part E - Post retirement contribution, the City will provide $400 per month to the retiree's or to the surviving spouses' MERP account. Police retirees and their surviving spouses who retired prior to January 1, 2006, receive a $450 per month. Part F — Active employees participating in the conversion plan are required to make a. contribution of $100 per month to the City as long as they are employed by the Clay in a full -time position. One of the two health plans offered by the City is a non- community -rated plan and retirees are offered the same premium rates as active employees. This requires than an implied subsidy (the difference between expected claims and premiums paid for retirees) be valued for the life of the retiree and accrued as a cost of the MERP plan. The City has elected to fund the implied subsidy on a pay -as- you -go basis since employer contributions to active and retiree medical plans are fixed, and significant uncertainty exits whether additional cash flows will occur in the future as a. result of the implied subsidy. The plan's assets are invested with the California Employers' Retirement Benefit Trust (CERBT) which is offered through CAPERS. Copies of the trust document, employee union contracts /memorandums of understanding, employee manuals and communications related to post employment benefits will be provided to the actuarial firm selected.. In addition, a complete census of members including, but not limited to: employee /retiree age, Medicare status, marital status, dependent data, insurance participation, premium amounts, and MERP contributions will be provided. Deliverables: The consultant shall deliver three (3) bound copies of the actuarial valuation and all supporting calculations and exhibits. Consultant shall also deliver an unbound copy of the valuation suitable for reproduction of the report for internal use. 1 Consultant may be required to make an oral presentation to the applicable agency's executive management, governing board or a committee, if it is recommended and requested by agency's management. 3. The final actuarial valuation report shall contain a glossary of terms and sufficient explanatory text to permit a reasonable understanding of the actuarial assumptions, and cost methods used for actuarial valuations to support the conclusions. 4. The explanatory text shall include, but not be limited to, a summary of the plan, description of actuarial assumptions, and cost methods used. A display of age groups, service matrices for active and retired employees and mortality assumptions, as well as other relevant data should also be included with final actuarial report. Page 3 of 3