Welcome to our “one-stop-shop” for community members interested in information on post-employment benefits. Below are links to literally hundreds of pages of financial data and information regarding our financial assets and liabilities, pension reform actions, and retiree health reform actions. Please see the box “By the Numbers” for a brief summary of current assets and liabilities.
In short, we offer our employees two post-employment benefits: a pension and a contribution towards retiree health care costs (also referred to as other post-employment benefits, or “OPEB”). Both of these benefits have been significantly reduced over the past few years.
We are committed to financial transparency and have provided this information to make available financial details and answer questions.
New Financial Reporting for Pensions
Beginning with the our financial statements as of June 30, 2015, we implemented Governmental Accounting Standards Board Statement No. 68 (GASB 68), Accounting and Financial Reporting for Pensions. The purpose of this reporting requirement is to improve the decision-making usefulness of information in financial reports and enhance its value for assessing accountability and inter-period equity by requiring recognition of the entire net pension liability and a more comprehensive measure of pension expense.
The implementation of GASB 68 required a prior period adjustment and reduced our net position as of July 1, 2014, by $103 million. As of June 30, 2015, we reported a net pension liability of $74.3 million. This calculation was prepared using the MCERA GASB 67/68 Report as of June 30, 2014, issued in April 2015. This report contained the most current Marin County Employees’ Retirement Association (MCERA) GASB 67/68 information as of the audit opinion date of September 30, 2015. As our CAFR was being published, MCERA issued its GASB 67/68 Report as of June 30, 2015. That report presents our net pension liability at $142.3 million as of the report date. Read the City’s financial reports as of June 30, 2015.
The most recent actuarial valuation was prepared as of June 30, 2016. This valuation governs the employer and employee contribution rates for the fiscal year beginning July 1, 2017. This valuation (produced in March 2017) reports our pension funded ratio to be 70.6%. The funding ratio is expected to improve over time, as the unfunded liability is paid down; however varying investment returns will result in fluctuations to the ratio. We, via MCERA, have a funding strategy in place based on sound actuarial practices that will ensure the long term viability of the retirement plan.
Recently, the pension funding plan absorbed two significant changes: Demographics show people living longer, which when plugged into a long-term funding plan, increases costs. Also, the plan assumptions for investment returns were reduced from 7.5% to 7.25%, and inflation from 3.0% to 2.75%. The impact of these cost increases is fully incorporated in our annual budget.
The Great Recession had a very significant impact on the pension system due to severe investment losses. At the same time, there was a large negative impact on City revenues as people bought fewer things and home values fell. The first relates to the sales tax we received (1.5 cents for every dollar spent on taxable purchases) and the second to the property tax we received (11 cents for every dollar collected). We responded to the Great Recession with significant cuts, totaling a 15% reduction in staff, in addition to many other measures such as:
- significant pension and retiree health reforms;
- regionalizing services such as Fire dispatch;
- sharing services with nearby communities including Larkspur, Novato, San Anselmo, and the County of Marin;
- implementing economic development strategies such as business retention and attraction;
- setting user fees at cost recovery levels; and
- pursuing state and federal grants and private investment.
Changes to OPEB (Retiree Medical) valuation methodology
As part of the most recent actuarial valuation, prepared as of June 30, 2015, a required change was made to the methodology used to measure the liability. This change effectively accelerates the funding time frame for retiree medical benefits. This report calculates the unfunded liability at $32.7 million at June 30, 2015.
The below information is intended to demystify the impact of pension and retiree health benefits in San Rafael.
Just the Basics
We negotiate employee compensation agreements with multiple unions under a number of state and federal laws. We strive to provide a competitive salary/benefit package to attract and retain a highly qualified workforce while maintaining a balanced city budget.
Over the past few years, benefits offered to new employees for pension and retiree health care have already been reduced. In fact, the actuarial firm of Bartel Associates completed a March 24, 2013 analysis of our pension and retiree health reforms to date and found that our actions will result in a savings of $65 million over the next 30 years. This number increases to a savings of approximately $132 million when recent State reforms that will impact San Rafael are included as well. Our reforms were largely negotiated at a time that employees were also experiencing salary reductions to assist in closing the budget gap.
More Information About San Rafael Pensions and Retiree Health Benefits
The City Council has taken a number of decisive steps towards reducing post employment benefit costs including significantly reducing employee pension and retiree healthcare benefits. Here are some facts in the form of frequently asked questions:
By the Numbers
A full discussion of retiree obligations must include both pension and retiree health and consider assets as well as liabilities. Below are the current approximate numbers for San Rafael as of the most recent actuarial valuations:
San Rafael Pension Assets: $370.7 million
Pension Fund Set-Aside Assets: $2.1 million
Total Pension Assets: $372.8 million
San Rafael Pension Liabilities: $511.5 million
Pension Bond Debt: $4.5 million
Total Pension Debt: $516.0 million
72.5% funded ratio
Retiree Health Assets:
San Rafael Retiree Health Total Assets: $15.5 million
Retiree Health Liabilities:
San Rafael Retiree Health Total Liabilities: $48.2 million
32% funded ratio
The above means that, like most plans in California, current obligations exceed current assets, creating an “unfunded liability.” This liability is paid off over time between contributions and investment returns.
- San Rafael Labor Negotiations
- MCERA Actuarial Valuations: Annual valuation reports as of June 30 for all years 2002-2016
- MCERA Governmental Accounting Standards Board (GASB) Statement 67/68 Reports as of June 30 for all years 2014-2016
- MCERA Audited Financial Statements of June 30 for all years 2008-2016
- Citizens' Group on Pension Reform Report (March 2014)
- MCERA’s annual actuarial valuations (including the City of San Rafael) for 2015
- MCERA’s Audit and Financial Report
- Marin County Civil Grand Jury Final Reports 2000-2014
- League of California Cities Pension Information Center
- Marin Voice: San Rafael Pension Reform Underway – With More to Do (July 15, 2012)
- The California Public Employee' Pension Reform Act of 2013