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FCERA Benefits and Reserves

P. FCERA Benefits and Reserves. January 11, 2006. Syllabus. FCERA Benefits Valuation Non-valuation FCERA Reserves. Valuation Benefits. Guaranteed by County Included in contribution rates Two Classifications General Safety Two Tiers. Valuation Benefits. Regular Benefits Basic COL

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FCERA Benefits and Reserves

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  1. P FCERA Benefits and Reserves January 11, 2006

  2. Syllabus • FCERA Benefits • Valuation • Non-valuation • FCERA Reserves

  3. Valuation Benefits • Guaranteed by County • Included in contribution rates • Two Classifications • General • Safety • Two Tiers

  4. Valuation Benefits • Regular Benefits • Basic • COL • Settlement Benefits • Supplemental (Section 6) • $15 Retiree (Section 8) • Retiree Health (Section 9)

  5. Non-Valuation Benefits • No guarantee • Not vested • Retirement Board discretion • Paid from “Excess Earnings” • Earnings not credited to other reserves

  6. Reserves • What they are • How they work

  7. FCERA Reserves • Valuation Reserves • Contingency Reserve • Non-Valuation Reserves

  8. Valuation Reserves • Member Accumulated Contributions • Basic, COL, and Settlement • Employer Contributions • Basic, COL and Settlement

  9. Non-Valuation Reserves • Nonvested Retiree Health • Purchasing Power COLA • Undistributed Earnings

  10. Rough Balances(in Millions) – 6/30/2005 • Valuation $ 2,314 • Contingency ($ 49) • Non-Valuation $ 72 • Total $ 2,337

  11. Cash Flow Member Contributions Employer Contributions Earnings 1937 Act Pension Fund Supplemental Benefits COLA Benefits Basic Benefits Settlement Benefits

  12. Reserves Member Contributions Employer Contributions VALUATION CONTINGENCY N O N V A L U N D I S T R I B U T E D Supplemental Benefits COLA Benefits Basic Benefits Settlement Benefits

  13. Allocating Earnings • 31591 (a) Regular interest shall be credited semiannually on June 30th and December 31st to all contributions in the retirement fund which have been on deposit for six months immediately prior to that date. …

  14. Credit Regular Interest VALUATION CONTINGENCY N O N V A L U N D I S T R I B U T E D Investment Return Assumption

  15. Fill Contingency Reserve VALUATION CONTINGENCY N O N V A L U N D I S T R I B U T E D COLA Up to 3%

  16. Undistributed Earnings VALUATION CONTINGENCY N O N V A L U N D I S T R I B U T E D COLA Up to 3%

  17. Undistributed Earnings • AKA Excess Earnings • Earnings available after: • Crediting regular interest • Filling Contingency Reserve • Calculated on smoothed basis • Limited expectations for near future

  18. Undistributed Earnings • Acceptable Uses under 37 Act • Save it (Bigger Contingency Reserve) • Pay for current benefits • Regular benefits • Settlement benefits • Pay for COL contributions • Create Additional Benefits

  19. Additional Benefits • Generally temporary (as long as money lasts) • Reconfirmed by Retirement Board each year • Examples • Purchasing Power COLA • Dollars for Retiree Health

  20. Purchasing Power COLA • Originally paid to retirees and beneficiaries who had lost 25% or more of purchasing power since beginning benefit payments

  21. Purchasing Power COLA • Retired on or before April 1, 1981 • Approximately 575 retirees and beneficiaries • FCERA Board decided to freeze benefits at current level • Expected Assets needed: $12 million

  22. Current Retiree Health Benefits • Two Pieces • Settlement Section 9 • Non-guaranteed benefits

  23. Settlement Section 9 • $3 per year of service • Maximum: $90 • Guaranteed • Additional amounts when additional undistributed earnings are available

  24. Non-Guaranteed Benefits • If member prior to 1990: • $45 plus • $3.50 per year of service • If member after 1989: • $5 per year of service • Maximum: $150

  25. Current Features • Paid to all annuitants • Paid from the date of retirement • Paid for life of member • Same amount continues to beneficiary upon member’s death

  26. Estimated Funded Percentage as of 6/30/2005 – Current Retiree Health Benefits

  27. Questions

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