Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Rocio Kiryczun, Human Resources Director
Kim Pearson, Benefits Manager
Subject: Agreement with Milliman to Serve as the Actuary for the County’s OPEB Plan
RECOMMENDATION:
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Adopt a resolution authorizing a three-year agreement with Milliman to serve as the actuary for the County’s Other Post-Employment Benefits (OPEB) plan for the period from April 1, 2025, to March 31, 2028, with one two-year option to extend through March 31, 2030, in an amount not to exceed an aggregate total of $750,000.
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BACKGROUND:
The County maintains a trust fund with CalPERS’s California Employers’ Retiree Benefit Trust (CERBT) that pre-funds the County’s negotiated obligations toward retiree health plan premiums, which are otherwise known as Other Post-Employment Benefits (OPEB). As of September 2024, total assets in the CERBT account were approximately $448 million.
The CERBT program, as would other trust administrators, requires account holders to conduct annual actuarial valuations to assess the funding level for each plan. The funding level is the amount of assets held in trust compared to the total liability based on plan design and demographics. As of the June 30, 2024, actuarial valuation, the County’s OPEB plan was 82% funded.
Milliman has conducted the most recent five years of actuarial valuations for the OPEB plan. In addition, Milliman has conducted related ad hoc studies and analyses on the hypothetical impact that potential new retiree benefits would have on the actuarial valuation. Most of the ad hoc work corresponded to labor contract negotiations.
DISCUSSION:
A request for proposals (RFP) for CERBT actuarial services was conducted in December 2024. The Human Resources Department used the same recruitment list of seven companies used by SamCERA in its most recent RFP for actuarial services. Despite the targeted recruitment list and a three-week application period, including a window for questions and answers, only Milliman submitted a proposal. HR staff reached out to all non-respondents to better understand the lack of responses. The deterrents apparently included the complexity of the County’s various retiree health plan designs compared to the likely contract amount (based on Milliman’s most recent contract, which was included in the RFP), lack of staff bandwidth to respond to the RFP, and business decisions to focus on accounting work and move away from actuarial work.
Nevertheless, County staff evaluated Milliman’s proposal and believe that Milliman submitted a strong proposal to the RFP and is highly qualified to provide the requested services.
• Milliman is the incumbent actuary and is familiar with the County’s complex OPEB plan designs. Milliman is also SamCERA’s actuary, which is helpful to provide a comprehensive understanding of County retiree plans and needs.
• Milliman’s fee for annual actuarial valuations remains the same from 2024 to 2025. It increases by a modest 3% in Years 2 and 3 of the new agreement.
• Milliman’s billing rate for ad hoc work remains virtually the same from the previous agreement to the new agreement.
• The Milliman team’s principal actuary, Dan Wade, remains the same. Some of his team members will change due to promotions. However, the County will continue to benefit from his familiarity with our plans, our financials, and our retiree demographics.
The Agreement includes a provision for the County to exercise its sole option to extend the term of the Agreement by two years.
This resolution also contains the County’s standard provision authorizing the Director of Human Resources or designee to execute contract amendments that modify the County’s maximum fiscal obligation under the proposed agreement by no more than $25,000 and/or modify the term and/or services as long as the modified term or services is/are within the current or revised fiscal provisions.
County Attorney has reviewed and approved the Resolution and Agreement as to form.
PERFORMANCE MEASURES:
|
Measure |
2025 Estimate |
2026 Estimate |
|
Provide annual actuarial valuation by September 15 of each year or as mutually agreed with the Controller’s Office for the purpose of the Annual Comprehensive Financial Report. |
100% |
100% |
EQUITY IMPACT:
This agreement will positively impact all County employees and retirees by ensuring that retiree health benefits are reliably funded, which in the short-term benefits retirees and older County employees who may be nearing retirement age and in the long-term benefits all County retirees. Staff does not anticipate negative equity impacts from this study.
FISCAL IMPACT:
There is no net County cost associated with this agreement, as the cost is fully covered by the Benefits Trust Fund. The cost will be approximately $150,000 per year, up to $750,000 over five years if the County exercises its two-year extension option.