Clouds above Contra Costa County

 

CONTRA COSTA COUNTY
EMPLOYEES' RETIREMENT ASSOCIATION

  

 

IMPORTANT INFORMATION ABOUT PRE-TAX SERVICE CREDIT PURCHASES

CCCERA offers its active members the option of purchasing eligible service credit under specific circumstances. Some examples of purchasable service credit are: previous public service employment, redeposits, medical leaves of absence, conversions or time prior to membership.

Payment for purchases can be made in a variety of ways: direct trustee-to-trustee transfers from 457 accounts (Hartford Deferred Compensation), after-tax monthly payment contracts, one lump sum payment for the full amount due, or a combination of the two methods.

Due to a change in the Internal Revenue Service’s (IRS) rules, pre-tax payments for service credit purchases are no longer allowed. As a result, CCCERA will no longer enter into any new pre-tax installment contracts after October 31, 2010.

Members who are currently purchasing service with pre-tax contracts will be permitted to complete that purchase under its existing terms.

Retirement Board Votes to Change Compensation for Retirement Purposes Policy for New Hires Only

At the March 10, 2010 meeting, after discussion and Public Comment on the issue, the CCCERA Board voted to keep existing policy for current active and retired members. This means there will be no changes to the Board's policy on terminal pay items, which has been in place since 1998, for all current members of the system. (Click this link to view the policy "Determining Which Pay Items are "Compensation" for Retirement Purposes.")

However, the Board voted to make changes for new members who join the system on or after January 1, 2011. Compensation items for these new employees going forward will be covered under a revised retirement board policy addendum which reflects recent case law, defining "cash out" items as "The value of accrued time . . . that is both earned and sold back to the employer during the final compensation period . . ." Lump sums at termination will also be defined as ". . . only the time . . . both earned and cashable during the final compensation period. . ." This revised addendum will be posted on this website after the Board adopts a final version.

Attention Active Members: The County service conversion "Buyback Program" ended on July 31, 2009 for the following groups:
  • Local 1
  • AFSCME 2700
  • SEIU 1021
  • Western Council of Engineers
  • Local 512
  • Management and Unrepresented employees

This program was ONLY for converting Tier 2 to Tier 3 service. Please be aware that all trustee-to-trustee transfer forms and payroll deduction contracts must have been signed and received no later than July 31, 2009. Lump sum payments must be received or postmarked no later than July 31, 2009. If you need clarification, please contact us immediately.

Stock Market Changes No Threat to Pension Benefits

In recent weeks, media headlines have been dominated by turmoil in the financial markets. Examples of this include the well publicized problems with AIG, Fannie Mae, Freddie Mac, the failure of Washington Mutual and the recent bankruptcy of Lehman Brothers. This has spurred an increase in the number of phone calls from CCCERA members concerned about their retirement benefits.

A defined benefit pension plan is designed to provide employees with a safe, secure retirement benefit which is immune from fluctuations in the capital markets. As a defined benefit plan, the benefits of CCCERA’s members are guaranteed by the employer and are not impacted by the erratic movements in the financial markets.

While the benefits of CCCERA’s members are secure and stable, CCCERA’s assets are not immune from volatility in the financial markets. Like all institutional investors with large global portfolios, we are impacted by downturns in the stock market. One way in which we deal with this is through a well planned, diversified investment program. We have investments across the stock and bond markets, both within the US and international markets. We have investments globally in real estate and private equity, and investments in energy partnerships. This diversification is key to moderate the volatility experienced in markets day-to-day, month-to-month and year-to-year. We remain focused on implementing a well structured, diversified investment program designed to provide solid long term returns with an appropriate level of risk. The Fall 2008 CCCERA Viewpoint provides an excellent overview of CCCERA’s investment program.

For more information, click here to read FAQs about your benefits and the safety of CCCERA

 New Actuarial Assumptions Cause RateChanges Based on Service Years

CCCERA’s retirement benefits are determined by a formula:
Years of Service X Final Average Salary X Retirement Age Factor = Retirement Benefit.

You can see that the larger the formula numbers are, i.e., more years of service, higher final average salary, the better your benefit.
However, we won’t receive benefits unless we contribute enough money during our careers to help pay for benefits after we retire.

By performing an Experience Study, CCCERA’s actuary determines how much money, at what rates (percentage of salary), must be contributed during each member’s career to fund a portion of the pension benefits for the lifetime of each member. One important aspect that the actuary reviews while conducting an Experience Study (which happens every three years), is salary increases. The actuary must estimate (assume) the total amount of salary increases each of us will receive by the time we complete our careers, in order that contributions collected (together with interest and investment returns) will fund our pensions.
By analyzing the data collected in the most recent Experience Study, our actuary observed that for the average employee, salary increases correspond more closely with years of service than with age. Regardless of what age you begin employment, CCCERA members have higher promotional and merit increases in the early stages of their careers. For example:
If you begin working for a CCCERA employer at age 26, on average:

  1. You experience higher salary percentage increases early in your career, at relatively young ages.
  2. You contribute for more years than an individual who enters the system at a later age.
  3. Since the years when you get higher salary increases occur at younger ages, your rate may be lower than with the old assumption.

By the same token:
If you begin working for a CCCERA employer at age 40, on average:

  1. You still experience higher salary percentage increases early in your career, but at relatively older ages.
  2. You do not contribute for as many years as an individual who enters the system at an earlier age.
  3. Since the years when you get higher salary increases occur at older ages, your rate may be higher than with the old assumption.

Prior to this observation, the actuary assumed (estimated) the average CCCERA member did not necessarily receive higher percentage salary increases at the beginning of his/her career. The salary assumptions were based on age only, without including early career salary increase information. Contribution rates were based on this assumption, which, after careful study, does not reflect CCCERA’s member experience as reflected in the new assumption.
The newest experience study verifies that, on average, employees hired at a later age are equally likely to receive higher percentage increases in the first years of employment as are younger members entering the system. This causes a slight contribution cost shift at certain ages, with some younger members receiving lower contribution rates over more years, and some older members receiving higher contribution rates over fewer years, to arrive at funding for retirement benefits.

For more information:
To see the exact ages at which these contribution rates change under the new assumption, please see the 2008 Spring edition of FYI.
The Experience Study performed by CCCERA’s actuary is posted on the Publications page of this web site.
The new rates for 2008/2009 are also on the Publications Page of the website.
A glossary of terms is located on this web site in the General Member Handbook.


 
Why Your Contribution Rates Rise (and fall, sometimes)