COUNTY CLERK/AUDITOR/RECORDER/ELECTIONS - J. P. GONZALEZ

Reduction of CalPERS Employer Unfunded Accrued Liability (UAL) Contribution Expenditure with Annual Lump Sum Prepayment Option.

SBC FILE NUMBER: 608

Revenue enhancements and expenditure reductions is key to balancing the County’s Budget. One expenditure reduction opportunity is available for consideration by the Board of Supervisors through the County’s pension plans with CalPERS for the Fiscal Year 2019-20.

The annual CalPERS Actuarial Valuation reports for the County's Classic Miscellaneous, Classic Safety and PEPRA Safety plans require Employer Contributions for the Employer Normal Cost Rate plus fixed Monthly Employer Dollar Unfunded Accrued Liability (UAL) payments. These monthly UAL payments summed, total $4,361,236 on an annual basis. CalPERS offer to its member agencies the option of prefunding the UAL payments. This Annual Lump Sum amount is $4,208,820 for the three affected County pension plans. The difference between the annual monthly total and the prefunded UAL amount is $152,416. Not all of this difference is savings since the County would be forfeiting interest earnings when paying the Annual Lump Sum amount less one-month of monthly UAL payments or $3,845,384 in late July. If using an assumed annualized Treasury net interest earning rate of 2.00%, the amount of forfeited interest earning to the General Fund is $38,561. The net savings to the General Fund is calculated to be $113,855 if utilizing this payment option. The total Annual Lump Sum payment may be made from the $16,534.377 cash assets of the Unassigned Fund Balance of the General Fund.  The Annual Lump Sum Payment Option must be made prior to July 31, 2019 in order to realize the net savings from this prefunding option. 

The County Auditor recommends that the Board of Supervisors direct the CalPERS prefunding payment in the amount of $4,208,820 be made by the County Auditor prior to July 31, 2019.