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SAN DIEGO CITY EMPLOYEES' RETIREMENT SYSTEM
REQUEST FOR PROPOSAL (RFP) FOR
ACTUARIAL AUDIT SERVICES
MAY 24, 2010
San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
TABLE OF CONTENTS
SECTION ONE - GENERAL INFORMATION Page
1.1 INTRODUCTION 4
1.2 CALENDAR OF EVENTS 4
1.3 PROPOSAL SUBMISSION 4
1.4 CONTRACT PRICING 5
1.5 MODIFICATION OR WITHDRAWAL OF OFFERS/ERRORS 5
1.6 CONFIDENTIALITY 5
1.7 RFP RESPONSE COSTS 6
1.8 TAXES 6
1.9 DISCUSSION FORMAT 6
1.10 DISCLOSURE 7
SECTION TWO - PROPOSAL PROCEDURES
2.1 CONTACTS AND RFP INQUIRIES 7
2.2 AWARDING OF CONTRACT 7
SECTION THREE – ENTITY DESCRIPTION
3.1 BACKGROUND INFORMATION 8
3.2 VALUATION AND MEMBERSHIP INFORMATION 9
3.3 ACTUARIAL INFORMATION 9
SECTION FOUR - LENGTH OF CONTRACT 11
SECTION FIVE - MINIMUM REQUIREMENTS 11
SECTION SIX- PROPOSAL PREPARATION INSTRUCTIONS
6.1 GENERAL 11
6.2 PROPOSAL COVER LETTER 12
6.3 PROPOSAL 13
SECTION SEVEN- EVALUATION PROCEDURES 14
SECTION EIGHT – SCOPE OF SERVICES 16
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San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
TABLE OF CONTENTS (Continued)
ATTACHMENTS:
ATTACHMENT 1: PLAN INFORMATION AND BENEFIT PROVISIONS
ATTACHMENT 2: REPORTS
ATTACHMENT 3: RESPONDENT GUARANTEES
ATTACHMENT 4: RESPONDENT WARRANTIES
ATTACHMENT 5: FEE PROPOSAL
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San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
SECTION ONE - GENERAL INFORMATION
1.1 INTRODUCTION
This Request for Proposal (RFP) is issued by the San Diego City Employees’
Retirement System (SDCERS) for the purpose of soliciting proposals from
qualified actuarial firms with substantial public defined benefit pension system
experience to perform actuarial audits of the SDCEDRS’ Annual Valuations
as of June 30, 2009 for each of the three SDCERS Plan Sponsors, the City
of San Diego (“City”), the San Diego Unified Port District (“Port”) and the San
Diego County Regional Airport Authority (“Airport”). SDCERS primary actuary
to perform its annual valuations and periodic experience study is Cheiron.
Cheiron remains under contract with SDCERS to perform its annual valuations
through the fiscal year ending June 30, 2013. However, SDCERS’ Board Policy
states that should its same actuary be retained for more than five years, an audit
of the actuary’s services shall be conducted at least every five years. The June
30, 2009 actuarial valuations were the fifth that Cheiron has performed for
SDCERS.
Additional information about SDCERS can be found in Section 3 of this RFP.
1.2 CALENDAR OF EVENTS
Request for Proposal (RFP) issued May 24, 2010
Submission of Questions on the RFP June 2, 2010
Proposal Submission Due Date June 11, 2010
Proposal Evaluation June 18, 2010
Contract Award June 21, 2010
Estimated Contract Negotiation Commencement June 28, 2010
1.3 PROPOSAL SUBMISSION
Respondents must submit five (5) copies of their proposal, no later than 5:00
PM PDT June 11, 2010, to:
Bob Wilson
Internal Auditor and Chief Compliance Officer
San Diego City Employees’ Retirement System
401 West A Street, Suite 400
San Diego, CA 92101
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San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
No telegraphic, fax, email or telephone responses will be accepted. Any
proposal received after the due date will not be considered. Any late
proposals will be returned, unopened, to the Respondent, upon request,
within thirty (30) days of filing.
1.4 CONTRACT PRICING
The respondent shall provide a “not to exceed” price for the actuarial audit in
Attachment 4. If incidental costs are included in the “not to exceed” bid,
such costs shall be clearly identified and segregated from actual
engagement related costs.
1.5 MODIFICATIONS OR WITHDRAWALS OF OFFERS/ ERRORS
Responses to this RFP may be modified or withdrawn in writing or by fax
notice if received prior to the date specified for submission of proposals.
Modifications to or withdrawal of a proposal received after the date specified
for submission of proposals will not be considered except as provided in 6.1.
If a Respondent discovers any ambiguity, conflict, discrepancy, omission or
other error in this RFP, please immediately notify SDCERS of such
error by e-mail at RLWilson@sdcers.org to request clarification or
modification of the document. If it becomes necessary to revise any part of
this RFP or if a more exact interpretation of provisions of this RFP are
required prior to the due date for proposals, a supplement will be posted by
SDCERS on its website. If such addenda issuance is necessary, SDCERS
reserves the right to extend the due date of proposals to
accommodate such interpretations or additional data requirements.
If the Respondent fails to notify SDCERS of a known error, or an error that
reasonably should have been known prior to the final filing date for
submission, the Respondent shall assume the risk. If awarded the contract,
the Respondent shall not be entitled to additional compensation.
1.6 CONFIDENTIALITY
All responses to this RFP become the property of SDCERS and will be kept
confidential until such time as recommendation for award of a contract
has been announced. Thereafter, submittals are subject to public inspection
and disclosure under the California Public Records Act. If a Respondent
believes that any portion of its submittal is exempt from public disclosure, such
portion may be marked “confidential.” SDCERS will use reasonable means to
ensure that such confidential information is safeguarded but will not be held
liable for inadvertent disclosure of such materials, data and information.
Submissions marked “confidential” in their entirety will not be honored as
such and SDCERS will not deny public disclosure of all or any portion of
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San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
submittals so marked. By submitting information with portions marked
“confidential,” the Respondent represents it has a good faith belief that such
material is exempt from disclosure under the California Public Records Act and
agrees to reimburse SDCERS for, and to indemnify, defend and hold
harmless SDCERS, its officers, fiduciaries, employees and agents from and
against: (a) any and all claims, damages, losses, liabilities, suits, judgments,
fines, penalties, costs and expenses including, without limitation, attorneys’
fees, expenses and court costs of any nature whatsoever (collectively,
“Claims”) arising from or relating to SDCERS’ non-disclosure of any such
designated portions of a proposal if disclosure is deemed required by law or
court order.
1.7 RFP RESPONSE COSTS
SDCERS accepts no obligations for costs incurred by Respondents in preparing
responses to this request.
1.8 TAXES
SDCERS is exempt from federal, state and local taxes. SDCERS will not be
responsible for any taxes levied on the Respondent as a result of any
contract resulting from this RFP.
1.9 DISCUSSION FORMAT
SDCERS reserves the right to conduct discussions or obtain clarifications,
either oral or written, with those Respondents determined by SDCERS to be
potential finalists. Such communications may be permitted after submission
of proposals and prior to award for the purpose of obtaining best and final
offers. In such communications, there shall be no disclosure of any information
derived from proposals submitted by competing Bidders to anyone outside the
Evaluation Committee. The purpose of such discussions shall be to examine
Bidders’:
- Qualifications.
- Proposed method of performance.
- Proposed personnel
- Compensation.
All Bidders submitting a proposal for consideration agree that their company
will be willing to enter into a negotiated, final Contract if awarded this proposal.
Such negotiated changes will not change the “Scope of Work”.
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Request For Proposal
Actuarial Audit Services
1.10 DISCLOSURE
Submission of information indicates acceptance by the submitting firm of the
terms and conditions contained in this request for proposal, unless
exceptions are clearly and specifically noted in the submittal.
If the Respondent objects to any term(s) in the RFP, or wishes to modify or
add terms to a subsequent contract, the submittal must identify each
objection, propose language for each modification and include the reasons
for the modification. SDCERS reserves the right to modify the contract prior
to execution.
SECTION TWO - PROPOSAL PROCEDURES
2.1 CONTACTS AND RFP INQUIRIES
All inquiries concerning this Request For Proposal must be submitted via
email to Bob Wilson, Internal Auditor, at RLWilson@sdcers.org. All
questions must identify the RFP section and page number to which the
question refers. Questions and responses thereto will be posted on the
SDCERS web site. Written questions to the above e-mail address will be
accepted until 5:00 p.m. on June 2, 2010. Responses to questions will be
posted to the SDCERS web site at www.sdcers.org on or before June 7,
2010. Any contact relating to the RFP or its response with any SDCERS
board member, other staff or consultants may be grounds for disqualification.
Waiver/Cure of Minor Informalities, Errors and Omissions: SDCERS
reserves the right to waive or permit cure for minor informalities, errors or
omissions prior to the selection of a proposal, and to conduct discussion with
any qualified proposers and to take any other measures with respect to this
RFP in any manner necessary to serve the best interests of SDCERS and its
beneficiaries.
2.3 AWARDING OF CONTRACT
The qualifying proposal determined to be the most advantageous to SDCERS,
taking into account all of the selection criteria (as outlined in Section Seven),
may be selected by SDCERS for further action, such as a contract award. If,
however, SDCERS decides that no proposal is sufficiently advantageous to
SDCERS, SDCERS may take whatever further action is deemed in its best
interest, including making no contract award.
If, for any reason, a proposal is selected and it is not possible to
consummate a contract with the Respondent, SDCERS may begin contract
discussions with the next qualified Respondent or decide that it does not wish
to award a contract pursuant to this RFP, at its sole discretion.
SDCERS reserves the right to reject any or all proposals received or to award,
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Request For Proposal
Actuarial Audit Services
without discussions or clarifications, a contract on the basis of the
proposals received. At the point of contract, a final detailed agreement
concerning services and performance expectations will be agreed upon
between SDCERS and the successful firm. The terms of the final contract
between SDCERS and the successful firm will be binding and supersede this
RFP. However, this RFP and its Scope of Work, together with the successful
firm’s proposal, will be incorporated into the contract. In addition, the contract
will require the successful firm to acknowledge, in writing, that it is a fiduciary
with respect to SDCERS.
SECTION THREE - ENTITY DESCRIPTION
3.1 BACKGROUND INFORMATION
The San Diego City Employees’ Retirement System (“SDCERS”) is a Retirement
System Trust Fund for the employees of the City of San Diego (“City”), the San
Diego Unified Port District (“Port”) and the San Diego County Regional Airport
Authority (“Airport”). SDCERS is a Group Trust under IRC Section 401(a) and
each employer has adopted participation and administration agreements to
participate in the trust. Assets of the trust are pooled for investment purposes
only.
The Board of Administration (“Board”) establishes policies and objectives for
SDCERS. SDCERS’ staff is responsible for the daily operations involving the
administration of benefits, accounting functions and management of the
investments for the fund.
SDCERS was established in 1927 by the City of San Diego. In accordance with
the California State Constitution Article XVI, Section 17, the San Diego City
Charter Article IX Sections 141-148.1 and Article X Section 1 and the San Diego
Municipal Code Sections 24.0100 et seq.. SDCERS administers retirement
benefits, health insurance, disability, and death benefits to its members and their
beneficiaries.
SDCERS administers retirement benefits for approximately 9,175 active,
3,176 terminated vested, and 7,782 retired members and beneficiaries.
The active membership is composed of general classifications for all three
employers and safety classifications for the City (3) and the Port (1). Each
member classification/tier has a different benefit formula.
SDCERS also administers a Deferred Retirement Option Plan (DROP) for all
three plan sponsors as part of the benefits offered. Active members who
enter DROP may participate for up to five years, accumulating a retirement
benefit, member contributions, and interest thereon in an account that can be
annuitized or rolled over upon retiring and leaving DROP. DROP assets are
included in the actuarial value of assets, and DROP liabilities are included in
the actuarial liabilities as well.
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San Diego City Employees’ Retirement System
Request For Proposal
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Member contribution rates are established based on the member’s age at
the time of employment. Plan Sponsor contribution rates are established
based on the Plan Actuary’s recommendation. SDCERS market value of
assets for all employers totaled $3.715 billion at June 30, 2009.
Attachment 1 provides detail about SDCERS’ plan information and benefit
provisions.
3.2 FUNDING STATUS AND PROGRESS
The following information is provided from the June 30, 2009 Actuarial
Valuation Reports for the three SDCERS plan sponsors.
Valuation information (Dollar amounts in Millions):
Description City of San Diego Port Airport
Actuarial Value of Assets $4,175.2 $223.9 $59.0
Actuarial Liability - EAN $6,281.6 $288.7 $67.9
Unfunded Actuarial Liability $2,106.4 $64.8 $8.9
Funded ratio 66.5% 77.5% 86.9%
Employer Contribution Rate 42.26% 27.61% 16.60%
Annual Required Contribution $231.7 $11.5 $4.3
(paid at beginning of year)
Membership information:
Description City of San Diego Port Airport
Active Members 8,273 564 338
Retired Members and 7,369 391 22
Beneficiaries
Terminated Vested Members 2,827 281 68
TOTAL 18,469 1,236 428
3.3 ACTUARIAL INFORMATION
SDCERS engages an independent actuarial firm, Cheiron, to conduct an
annual valuation to monitor funding status and compute annual required
contributions of SDCERS’ plan sponsors. Cheiron completed annual
valuations as of June 30, 2009. Summary information and assumptions are
outlined below. Assumptions adopted by SDCERS Board of Administration
are common to all three plans sponsors, except for the remaining amortization
life of the UAL that was in effect at June 30, 2007.
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San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
Actuarial Cost Method Entry Age Normal
Amortization Method 15 years *
Asset Valuation Method Expected Value of Assets Method,
approximately four year smoothing
Assumed Investment Rate of Return 7.75%
Projected Salary Increase 4.00%
Inflation 4.00%
Cost of Living Increase in Benefits 2.00%
* The full range of assumptions with additional detail about amortization
policy layers can be found in the SDCERS AVR reports.
Actuarial valuations are performed annually to monitor funded status.
Historically SDERS conducts an investigation of the appropriateness of
all economic and noneconomic assumptions, an Actuarial Experience Study.
Recommendations are then presented to the Board of Retirement for
consideration. SDCERS most recent Experience Study, also performed by
Cheiron, covering the period July 1, 2004 to June 30, 2007, was completed in
July 2008. Recommendations adopted by the Board from that study were
implemented by Cheiron beginning with the valuations dated June 30, 2008
and are disclosed in the 2008 reports. This experience study along with the
2008 valuation reports can also be found on SDCERS website.
SDCERS provides its actuarial firm with data files for the purpose of
performing actuarial valuations. These data files are produced from
SDCERS’ pension administration system, PensionGold, a product of the
firm Levi, Ray, & Shoup. PensionGold has been used by SDCERS for
approximately eight years. The system’s functionality includes active
member tracking of retirement-eligible salary, member contributions and
accrued service, retirement benefit calculations, and retired member benefit
payroll processing. Other features include disability benefits processing,
health benefits administration, and DROP program account maintenance.
SDCERS receives bi-weekly data feeds from each plan sponsor for active
member salary and contribution data. This data includes new members,
demographic data, member status changes, salaries, contributions, etc.
SECTION FOUR - LENGTH OF CONTRACT
The contract term for the actuarial audit shall be for the period of the
engagement project only, beginning on the date of final contract execution
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San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
through presentation of the final reports to SDCERS’ Board of
Administration.
SECTION FIVE - MINIMUM REQUIREMENTS
To be considered for the actuarial auditor described in the RFP the firm must
meet the following minimum requirements:
1. The firm must be a professional actuarial services firm engaged in the
business of providing actuarial valuation, experience investigations, actuarial
audits, and pension consulting services.
2. The actuarial firm must acknowledge in writing that it will serve as a
“fiduciary” with respect to SDCERS as defined in Section 3(2 1) (A) of the
Employee Retirement Income Security Act of 1974 (“ERISA”) and California
Government Code section 31595;
3. The Actuary performing the work must be a Fellow of the Society of
Actuaries and an enrolled actuary. Any Supporting Actuary must be either a
Fellow, enrolled, or have ten years of pension consulting experience.
4. The Actuary performing the services under the Contract must have a
minimum of ten years of experience as an actuary providing pension
consulting services, experience analysis, valuation assignments, and
actuarial audit assignments for multi-employer public retirement systems.
5. The actuarial firm must agree to disclose all potential conflicts of interest.
SECTION SIX - PROPOSAL PREPARATION INSTRUCTIONS
6.1 GENERAL
A standard format for proposal submission is provided herein.
All Respondents are required to format their proposals in a manner
consistent with this format as follows:
1. Each item must be addressed in the Respondent’s proposal or the
proposal may be rejected.
2. The Proposal cover letter should be in the form of a letter, as described in
Section 6.2.
3. The proposal must be organized under the specific section titles as listed
in section 6.3.
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San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
4. SDCERS may, at its discretion, allow all Respondents five (5) business
days, from date of submission, to correct errors or omissions to their
proposals. Should this necessity arise, SDCERS will contact each
Respondent affected. Each Respondent must submit written corrections to
the proposal within five (5) business days of such notification. The intent of
this option is to allow proposals with only minor errors or omissions to be
corrected. Major errors or omissions, such as the failure to include prices, will
not be considered by SDCERS and will result in disqualification of the
proposal from further evaluation.
A complete proposal will include the following:
1. Hard copy submission of a Proposal cover letter (with the information in
Section 6.2)
2. Hard copy submission of a Proposal (with the information and
attachments described in Section 6.3)
3. Signed Respondent Guarantees Form (Attachment 2)
4. Signed Respondent Warranties Form (Attachment 3)
5. Dollar Cost Bid (Attachment 4)
6. Original, two (2) copies, and CD ROM of all submitted materials
6.2 PROPOSAL COVER LETTER
The Proposal Cover Letter must address the following topics:
1.Identification of the RFP
2.Respondent’s ability to supply the requested services
3. Respondent’s willingness to provide the requested services
subject to the terms and conditions set forth in the RFP
The Proposal cover letter must be signed by a person authorized to legally
bind the company, and proof of such authority must also be provided. A
copy of firm’s bylaws or a resolution adopted by the board of directors
indicating this authority will fulfill this requirement. Any other information the
Respondent may wish to briefly summarize will be accepted.
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San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
6.3 PROPOSAL
The Proposal must contain the following items:
1. Ability to Perform Scope of Services
The Respondent should demonstrate in this section an ability to meet the
requirements set forth in Exhibit A, Scope of Services, and should address
in detail how it intends to complete each task. The detailed description
should be organized to reflect the sequence in which the work will be
performed and address the strategies that the Respondent will use to
achieve the proper level of detail. The Respondent should also specify the extent
of involvement required of SDCERS staff, outlining the amount of time,
skills and knowledge needed in order or the Respondent to meet the
deliverables.
2. Timeline.
The respondent should submit a proposed timeline to complete the Scope
of Services.
3. Fee Proposal
The Respondent is to submit its fixed fee proposal as outlined in the Scope
of Services and Attachment 4.
4. Assumptions
The Respondent must identify and discuss all assumptions it has made in
preparing its cost proposals. Further, the Respondent must state that there
are no other assumptions related to meeting the requirements of the RFP
other than those enumerated in this section of the proposal. Any other
assumptions elsewhere in the Respondent’s proposal will not be recognized
by SDCERS.
5. Exceptions
The Respondent must affirm that it has read and understands the RFP and the
terms and conditions included in the RFP. The Respondent must state any
and all exceptions it takes with the requirements set forth in the RFP and/or
with any terms and conditions contained in the RFP relating to the ensuing
contract. Only the exceptions identified in this section of the proposal will
be considered by SDCERS; any other exceptions embedded elsewhere in
the proposal will not be recognized by SDCERS.
6. References
The Respondent should include a list of at least three (3) clients for whom
the Respondent has performed actuarial audit services that are the same or
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San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
similar to those services requested in this RFP. Information provided should
include the name, address, and telephone number of the client and the
name, title, e-mail address, and phone/fax numbers of a person who may be
contacted for further information.
7. Staffing
The Respondent must identify the Primary Actuary and other key personnel
who will be assigned to the engagement. Please provide the following
information for each team member:
Name
Title
Job responsibilities. If a person has multiple responsibilities, indicate
the percentage of time spent on each function.
Representative clients or projects demonstrating skill sets
applicable to this engagement
Years with the Actuary firm
Years in the industry.
Degrees and/or professional designations, including Institution
awarding the degree or designation
8. Prior Litigation
Disclose any litigation involving actuarial audit services involving your firm
or principal officers over the last five years. If any, provide a brief
explanation.
9. Insurance
Describe the levels of coverage for errors and omissions insurance and any
fiduciary or professional liability insurance your firm carries and any
limitations.
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San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
SECTION SEVEN - EVALUATION PROCEDURES
SDCERS reserves the right to award this contract to the firm which, in its sole
judgment, will provide the best match with the requirements outlined in the
RFP.
SDCERS is not required, and will not be obligated, to award this contract to
the firm with the lowest cost proposal.
SDCERS reserves the right to reject Respondents due to their noncompliance
with the requirements of this RFP. Additionally, SDCERS reserves the right to
not hire or defer the hiring of any firm for actuarial audit services.
Submittals will be evaluated by a committee of SDCERS staff. The
Committee’s recommendation will be presented to the Board of
Administration if needed in accordance with SDCERS’ Board Rules. One or
more of the respondents may be requested to make an oral presentation to the
Committee which may be conducted by telephone.
The weighted factors listed below will be considered by SDCERS when
evaluating the firms’ submittals.
Evaluation Criteria Weight
Firm’s Experience and Capabilities 30%
Quality of Assigned Professional staff 25%
PersonnelAbility to Perform
Quality of 25%
Fees Proposed 20%
Form of Agreement for Actuarial Audit Services
No agreement with SDCERS is in effect until a contract has been signed by
both parties.
Attached to this RFP as Attachment 5 is a sample agreement which is in
substantially the form the successful proposer will be expected to sign.
The final agreement may include the contents of this RFP, any addenda to the
RFP, the successful proposer’s proposal and any other modifications
determined by SDCERS to be necessary prior to its execution by the parties.
If any provisions of the agreement would not be acceptable, those provisions
and the objections thereto must be noted by the proposer and alternative
contract language proposed.
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San Diego City Employees’ Retirement System
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SECTION EIGHT - SCOPE OF SERVICES
SDCERS seeks one qualified actuarial firm to perform an actuarial audit
of assumptions, methods, calculations and experience used in SDCERS’
report on the Actuarial Valuation as of June 30, 2009 to verify that the results
presented are actuarially sound, reasonable and consistent with industry
standards.
A. A separate report must be prepared for each of the three SDCERS plan
sponsors.
B. Audit subject matter for each report will include:
Discussion of the appropriateness of the actuarial assumptions
Review the actuarial assumptions and methodology for
compliance with SDCERS’ regulations and policies; and for
compliance with generally recognized and accepted actuarial
principles and practices which are consistent with Actuarial Standards
of Practice and Code of Professional Conduct.
Standards for Public Statements of Actuarial Opinion of the
American Academy of Actuaries, and GASB Statement 25.
Accuracy of funding computations.
Appropriateness of established reserve accounts.
Appropriateness of recommended employer and employee
contribution rates.
Evaluation of actuarial asset methods.
Assess the validity of the 2009 valuations using a mathematical
model of plan activity or sampling based on the same data,
methods, and assumptions used by Cheiron.
Evaluate the test results and reconcile any significant
discrepancies between the findings, assumptions,
methodology, rates, and adjustments of the auditing firm and
Cheiron.
Assess whether the valuation appropriately reflects information
required to be disclosed under required reporting standards
(GASB, etc.)
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C. The completed audit report will include (at minimum):
An evaluation and an opinion on the reasonableness and
accuracy of the valuation results (including a determination of
actuarial accrued liability, normal cost, and actuarial required
contributions), experience study findings, actuarial assumptions,
and appropriateness and application of the actuarial cost method.
Recommendations (if any) for reasonable alternatives to the
actuarial assumptions used in the 2009 valuation or
recommended as a result of the 2004-2007 experience study.
SDCERS next scheduled experience study will be following the
Fiscal Year 2010 valuations.
Recommendations to improve the quality and understanding
of the annual valuation reports.
Such other information or analysis that, in the opinion of the
actuarial audit firm, will be useful to the Board along with
recommendations in accordance with accepted standards of
actuarial practice that SDCERS may consider adopting in the
performance of its future annual valuations.
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San Diego City Employees’ Retirement System
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ATTACHMENT 1 – PLAN INFORMATION AND BENEFIT PROVISIONS
The following pages are excerpts from SDCERS’ Comprehensive Annual
Financial Report (CAFR) for the fiscal year ended June 30, 2009, and illustrate the
various benefit provisions for the City’s, Port’s and Airport’s SDCERS participants
that were in effect for the actuarial valuation year ended June 30, 2009:
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Attachment I - PLAN INFORMATION AND BENEFIT PROVISIONS
City of San Diego
1. Membership Requirements Membership is mandatory upon employment with
the City, for all full, three-quarter and half-time
classified employees and any unclassified
employees hired on or after 8/11/93. (§ 24.0104)
2. Monthly Base Salary for Benefits Highest consecutive 12 month average in any
qualified employment with a California government
jurisdiction (§24.0103) subject to a 10% increase
for those hired before July 1, 2002, if the General or
Safety Member elects such an increase in lieu of an
increased benefit formula.
3. Service Retirement
Eligibility
General Members Age 62 with 10 years of service credit, or age 55
with 20 years of service credit. (§ 141 of City
Charter)
Safety Members Age 55 with 10 years of service credit, or age 50
(includes Fire, Lifeguard & Police) with 20 years of service credit. (§ 141 of City
Charter)
Elected Officers Age 55 with 4 years of service. Eligible to retire at
any age with 8 years of service, however, benefit is
reduced by 2% per year for each year under age 55.
(§24.1705)
Benefit Formula Per Year of Service
General Members Choice of: (1) 2.0% per year of service at age 55,
increasing to 2.55% at age 65, with an additional
10% added to Final Compensation; (2) 2.25% per
year of service at age 55, and increasing to 2.55% at
age 65; or, (3) 2.5% per year of service at age 55,
and increasing to 2.8% at age 65, not to exceed 90%
of Final Compensation. (§24.0402)
General Members (Andrecht-Covered) N/A
Port & Airport only
Executive General Members – N/A
Port & Airport only (where not
specifically identified, treated
as part of General Members)
Safety Members Choice of: (1) 2.5% per year of service at age 50,
(City - Fire & Police, Port – Harbor increasing to 2.9999% at age 55, with an additional
Police) 10% added to Final Compensation, not to exceed
90% of Final Compensation; or, (2) 3.0% per year
of service at age 50 and above, not to exceed 90%
of Final Compensation. (§24.0402)
Safety Members Choice of: (1) 2.2% at age 50, increasing to 2.77%
(City - Lifeguard) at age 55, with an additional 10% added to Final
Compensation, not to exceed 90% of Final
Compensation; or, (2) 3.0% at age 50 and above,
not to exceed 90% of Final Compensation.
(§24.0402)
Elected Officers 3.5% per year of service. A 2% annual reduction
factor applies to benefits for Elected Officers
retiring prior to age 55. (§24.1705)
Attachment 1 – 1A
PLAN INFORMATION AND BENEFIT PROVISIONS
Unified Port of San Diego San Diego County
Regional Airport Authority
Membership is mandatory upon employment for all full- Membership is mandatory upon employment for all full-
time Port employees. (§0101) time Airport employees. (§0101)
Highest one-year average for general members hired Highest contiguous 26 bi-weekly pay periods (§0102),
before October 1, 2006, and all safety members. For subject to a 10% increase if the Member elects such
General members hired on or after October 1, 2006, increase in lieu of an increased benefit formula
highest 3-year average (§0102). Subject to a 10%
increase, if the General or Safety Member elects such
increase in lieu of an increased benefit formula.
Age 62 with 5 years of service credit, or age 55 with 20 Age 62 with 5 years of service, or age 55 with 20 years
years of service credit. (§0300) of service (Excludes 5 year permissible purchased
service) (§0300).
Age 55 with 5 years of service credit, or age 50 with 20 N/A
years of service credit. (§0301)
N/A N/A
N/A N/A
Choice of: (1) 2.0% per year of service at age 55, Choice of: (1) 2.0% per year of service at age 55,
increasing to 2.55% at age 65, with an additional 10% increasing to 2.55% at age 65, with an additional 10%
added to Final Compensation; (2) 2.25% per year of added to Final Compensation; (2) 2.25% per year of
service at age 55, and increasing to 2.55% at age 65; or, service at age 55, and increasing to 2.55% at age 65; or
(3) 2.5% per year of service at age 55, and increasing to (3) 2.5% per year of service at age 55, and increasing to
3.0% at age 65, not to exceed 90% of Final 3.0% at age 65, not to exceed 90% of Final
Compensation. Compensation.
Effective as of 12/21/2002, Service Retirement Effective as of 12/21/2002, Service Retirement
calculated at 3.0% at age 55 or older. calculated at 3.0% at age 55 or older.
Choice of: (1) 2.5 % at age 50, increasing to 2.77% at N/A
age 55, with an additional 10% added to Final
Compensation; or, (2) 3.0% at age 50 and above, not to
exceed 90% of Final Compensation.
N/A N/A
N/A N/A
Attachment 1 - 1B
PLAN INFORMATION AND BENEFIT PROVISIONS
City of San Diego
Retirement Payment Options Choice of:
Maximum Benefit - provides the highest possible
monthly allowance to the member for their lifetime and
guarantees their spouse a 50% automatic continuance
after the member dies for the rest of his or her life. If
unmarried, the member may choose to receive a lump
sum refund of surviving spouse contributions and
interest or treat them as voluntary additional
contributions to provide a larger annuity benefit for the
member.
Option 1 - receive a reduced monthly retirement
allowance until the member's death. If the member dies
before they receive the total amount of their
accumulated contributions, SDCERS will pay the
balance to their beneficiary or estate. If the member dies
after their annuity payments exceed their accumulated
contributions, no payments will be made to the
member's beneficiary or estate.
Option 2 - receive a reduced monthly retirement
allowance until the member's death. When the member
dies, their spouse or beneficiary will receive a
continuance equal to 100% of the member's reduced
monthly retirement allowance for the rest of his or her
life. The amount of the reduction depends upon the age
difference between the member and their beneficiary.
Option 3 - receive a reduced monthly retirement
allowance until the member's death. When the member
dies, their beneficiary will receive a retirement
allowance equal to 50% of the member's reduced
monthly benefit for the rest of his or her life. The
amount of the reduction depends upon the age difference
between the member and their beneficiary.
Option 4 - receive a reduced monthly retirement
allowance until the member's death. When the member
dies, their beneficiary will receive a percentage of the
member's reduced monthly benefit in an amount selected
by the member, for the rest of his or her life. The higher
the percentage to the beneficiary and the greater the age
difference between the member and their beneficiary,
the greater the reduction in the member's monthly
retirement allowance.
Social Security Integrated Option - The member may
select this option in addition to one of the other five
payment choices only if the member was enrolled as a
General Member in SDCERS before January 1, 1982,
and are eligible to receive a Social Security benefit.
The member would receive an increased monthly
allowance from SDCERS based on their estimated
Social Security benefit. When the member turns 65,
SDCERS will then actuarially reduce their monthly
retirement allowance for the remainder of their life.
This reduction will be greater than the adjusted amount
the member received from the time the member retired
to the time the member turned 65. After the member's
death, their surviving spouse or beneficiary will receive
a continuance based on the non-adjusted benefit amount
from the payment option the member selected at
retirement. (§24.1102, 24.0210, 24.0310)
Attachment 1 – 2A
PLAN INFORMATION AND BENEFIT PROVISIONS
Unified Port of San Diego San Diego County
Regional Airport Authority
Choice of: Choice of:
Maximum Benefit - provides the highest possible Maximum Benefit - provides the highest possible monthly
monthly allowance to the member for their lifetime allowance to the member for their lifetime and guarantees
and guarantees their spouse a 50% automatic their spouse a 50% automatic continuance after the member
continuance after the member dies for the rest of his or dies for the rest of his or her life. If unmarried, the member
her life. If unmarried, the member may choose to may choose to receive a lump sum refund of surviving spouse
receive a lump sum refund of surviving spouse contributions and interest or treat them as voluntary additional
contributions and interest or treat them as voluntary contributions to provide a larger annuity benefit for the
additional contributions to provide a larger annuity member.
benefit for the member.
Option 1 - receive a reduced monthly retirement Option 1 - receive a reduced monthly retirement allowance
allowance until the member's death. If the member until the member's death. If the member dies before they
dies before they receive the total amount of their receive the total amount of their accumulated contributions,
accumulated contributions, SDCERS will pay the SDCERS will pay the balance to their beneficiary or estate. If
balance to their beneficiary or estate. If the member the member dies after their annuity payments exceed their
dies after their annuity payments exceed their accumulated contributions, no payments will be made to the
accumulated contributions, no payments will be made member's beneficiary or estate.
to the member's beneficiary or estate.
Option 2 - receive a reduced monthly retirement Option 2 - receive a reduced monthly retirement allowance
allowance until the member's death. When the until the member's death. When the member dies, their
member dies, their spouse or beneficiary will receive a spouse or beneficiary will receive a continuance equal to
continuance equal to 100% of the member's reduced 100% of the member's reduced monthly retirement allowance
monthly retirement allowance for the rest of his or her for the rest of his or her life. The amount of the reduction
life. The amount of the reduction depends upon the depends upon the age difference between the member and
age difference between the member and their their beneficiary.
beneficiary.
Option 3 - receive a reduced monthly retirement Option 3 - receive a reduced monthly retirement allowance
allowance until the member's death. When the until the member's death. When the member dies, their
member dies, their beneficiary will receive a beneficiary will receive a retirement allowance equal to 50%
retirement allowance equal to 50% of the member's of the member's reduced monthly benefit for the rest of his or
reduced monthly benefit for the rest of his or her life. her life. The amount of the reduction depends upon the age
The amount of the reduction depends upon the age difference between the member and their beneficiary.
difference between the member and their beneficiary.
Option 4 - receive a reduced monthly retirement Option 4 - receive a reduced monthly retirement allowance
allowance until the member's death. When the until the member's death. When the member dies, their
member dies, their beneficiary will receive a beneficiary will receive a percentage of the member's reduced
percentage of the member's reduced monthly benefit monthly benefit in an amount selected by the member, for the
in an amount selected by the member, for the rest of rest of his or her life. The higher the percentage to the
his or her life. The higher the percentage to the beneficiary and the greater the age difference between the
beneficiary and the greater the age difference between member and their beneficiary, the greater the reduction in the
the member and their beneficiary, the greater the member's monthly retirement allowance.
reduction in the member's monthly retirement
allowance.
Social Security Integrated Option – Unified Port Social Security Integrated Option – Airport Authority
District employees participate in Social Security. employees participate in Social Security
Attachment 1 – 2B
PLAN INFORMATION AND BENEFIT PROVISIONS
City of San Diego
4. Non-Industrial Disability
Eligibility
All Members Ten years of service credit. (Charter §141)
Benefit Formula Per Year of Service
General Members Choice of: (1) 1.5% per year of service multiplied by final
compensation*; (2) one-third of final compensation; or, (3)
the earned service retirement benefit, if eligible.( §24.0502,
24.0505)
Safety Members Choice of: (1) 1.8% per year of service; (2) one-third of final
compensation*; or, (3) the earned service retirement benefit,
if eligible. (§24.0502, 24.0504)
Elected Officers Earned service retirement benefit. (§24.1707)
5. Industrial Disability
Eligibility
All Members No age or service requirement. (§24.0501)
Benefit Formula Per Year of Service
General Members Choice of: (1) 50% of final compensation* or (2) the earned
service retirement benefit, if eligible. (§24.0502, 24.0505)
Safety Members Choice of: (1) 50% of final compensation* or (2) the earned
service retirement benefit, if eligible. (§24.0502, 24.0503)
Elected Officers Earned service retirement benefit. (§24.1707)
6. Non-Industrial Death Before Eligible to Retire Refund of employee contributions with interest plus one
month’s salary for each completed year of service, to a
maximum of six months salary. (§24.0702)
7. Non-Industrial Death After Eligible to Retire 50% of earned benefit payable to eligible surviving spouse.
for Service (§24.0704)
8. Industrial Death
General Members 50% of the final average compensation (subject to 10%
increase) preceding death, payable to eligible spouse,
domestic partner, or eligible child. (§24.0705)
Safety Members 50% of the final average compensation (subject to 10%
increase) preceding death, payable to eligible spouse,
domestic partner, or eligible child. (§24.0705)
9. Death After Retirement 50% of member’s unmodified allowance continued to eligible
spouse. (§24.0601)
$2,000 payable in lump sum to the beneficiary or the estate of
the retiree. (§24.0710)
10. Withdrawal Provisions Pre-12/8/76 hires – if contributions left on deposit, entitled to
earned benefits commencing anytime after eligible to
retire.
Post-12/7/76 hires –
1. Less than ten years of service - Refund of accumulated
member contributions with interest, or may keep
contributions on deposit with SDCERS and earn additional
interest, and use service with a reciprocal system to
establish eligibility for earned benefits upon concurrent
retirement from reciprocal system. (§24.0206, 24.0306,
24.1005)
2. Ten or more years of service - If contributions left on
deposit, entitled to earned benefits commencing anytime
after eligible to retire. (§24.0206, 24.0306)
*Per Board decision, the 10% increase on final average compensation has been removed
Attachment 2 – 3A
PLAN INFORMATION AND BENEFIT PROVISIONS
Unified Port of San Diego San Diego County
Regional Airport Authority
Ten years of service credit. (§0503) Ten years of service credit. (§0502)
Choice of: (1) 1.5% per year of service multiplied by final Choice of: (1) 1.5% per year of service multiplied by final
compensation; (2) one-third of final compensation; or, (3) the compensation; (2) one-third of final compensation; or, (3)
earned service retirement benefit, if eligible. (§0505) the earned service retirement benefit, if eligible. (§0503)
Choice of: (1) 1.8% per year of service; (2) one-third of final N/A
compensation; or, (3) the earned service retirement benefit, if
eligible. (§0504)
N/A N/A
No age or service requirement. (§0500) No age or service requirement. (§0500)
Greater of: (1) one-third of final compensation or (2) the earned Choice of: (1) 50% of final compensation or (2) the earned
service retirement benefit. (§0502) service retirement benefit, if eligible. (§0501)
Choice of: (1) one-half of final compensation or (2) the earned N/A
service retirement benefit. (§0501)
N/A N/A
Refund of employee contributions with interest plus one month’s Refund of employee contributions with interest plus plus
salary for each completed year of service to a maximum of six one month’s salary for each completed year of service to a
months salary. maximum of six months salary.
50% of earned benefit payable to eligible surviving spouse, 50% of earned benefit payable to eligible surviving spouse,
domestic partner, or child under 21 years of age. domestic partner, or dependent child under 21 years of age.
50% of the final average compensation preceding death, payable 50% of the final average compensation preceding death,
to eligible surviving spouse, domestic partner, or child under 21 payable to eligible surviving spouse, domestic partner, or
years of age. child under 21 years of age.
50% of the final average compensation preceding death, payable N/A
to eligible surviving spouse, domestic partner, or child under 21
years of age.
50% of member’s unmodified allowance continued to eligible 50% of member’s unmodified allowance continued to
surviving spouse, domestic partner, or child under 21 years of age. eligible surviving spouse, domestic partner, or child under
$2,000 payable in lump sum to the beneficiary or the estate of the 21 years of age. $2,000 payable in lump sum to the
retiree. beneficiary or the estate of the retiree.
Pre 12/8/76 hires – if contributions are left on deposit, entitled to 1. Less than five years of service credit - Refund of
earned benefits commencing anytime after eligible to retire. accumulated member (employee) contributions with
Post 12/8/76 hires – interest, or may keep deposits with SDCERS and earn
1. Less than five years of service credit (ten years of service if additional interest, and use service with a reciprocal
employee terminated before December 31, 2002) - Refund of system to establish eligibility for earned benefits upon
accumulated member (employee) contributions with interest, concurrent retirement from reciprocal system.
or may keep deposits with SDCERS and earn additional 2. Five or more years of service credit - If contributions are
interest, and use service with a reciprocal system to establish left on deposit, entitled to earned benefits, commencing
eligibility for earned benefits upon concurrent retirement from anytime after eligible to retire.
reciprocal system.
2. Five or more years of service credit (ten or more years of
service if employee terminated before December 31, 2002) -
If contributions are left on deposit, entitled to earned benefits,
commencing anytime after eligible to retire.
Attachment 1 – 3B
PLAN INFORMATION AND BENEFIT PROVISIONS
City of San Diego
11. Post-Retirement Cost-of-Living Benefits
General Members Based on changes in Consumer Price Index, to a maximum
of 2% per year. (§24.1505)
Safety Members Based on changes in Consumer Price Index, to a maximum
of 2% per year. (§24.1505)
12. Cola Annuity Actuarial equivalent of accumulated contributions in cost of
living annuity account at time of retirement. (§24.0103)
13. Member Contributions Vary by age at time of entrance into SDCERS (§24.0201,
24.0301). Any portion of these contributions paid by the
plan sponsor (employer), are not directly reflected in either
the member (employee) contributions or related refund
calculations.
14. Internal Revenue Code Compliance Benefits provided by SDCERS' Plans are subject to the
limitations set forth in Section 415 in accordance with the
"grandfather" election in Section 415(b)(10) of the Internal
Revenue Code. (§24.1004)
15. Blended Benefit with Participating Agencies Members may retire and receive benefits from multiple
Plan IDs (e.g. – a City police officer could have also
worked for the Airport Authority).
Attachment 1 – 4A
PLAN INFORMATION AND BENEFIT PROVISIONS
Unified Port of San Diego San Diego County
Regional Airport Authority
Based on changes in Consumer Price Index, to a Based on changes in Consumer Price Index, to a
maximum of 2% per year. maximum of 2% per year.
Based on changes in Consumer Price Index, to a N/A
maximum of 2% per year.
Actuarial equivalent of accumulated contributions in Actuarial equivalent of accumulated contributions in
cost of living annuity account at time of retirement. cost of living annuity account at time of retirement.
Vary by age at time of entrance into SDCERS (§0200). Vary by age at time of entrance into SDCERS (§0200).
Any portion of these contributions paid by the plan Any portion of these contributions paid by the plan
sponsor (employer), are not directly reflected in either sponsor (employer), are not directly reflected in either
the member (employee) contributions or related refund the member (employee) contributions or related refund
calculations. calculations.
Benefits provided by SDCERS' Plans are subject to the Benefits provided by SDCERS' Plans are subject to the
limitations set forth in Section 415 in accordance with limitations set forth in Section 415 in accordance with
the "grandfather" election in Section 415(b)(10) of the the "grandfather" election in Section 415(b)(10) of the
Internal Revenue Code. Internal Revenue Code.
Members may retire and receive benefits from multiple Members may retire and receive benefits from multiple
Plan IDs (e.g. – a Unified Port District Employee could Plan IDs (e.g. – an Airport Authority member could
have also worked for the Airport Authority). have also worked for the Unified Port District).
Attachment 1 – 4B
PLAN INFORMATION AND BENEFIT PROVISIONS
Deferred Retirement Option Plan (DROP)
The Deferred Retirement Option Plan (DROP) is a voluntary program created by SDCERS’ plan sponsors (employers) to provide
SDCERS’ members (employees) with an alternative method to accrue benefits in SDCERS. For actuarial valuation purposes,
SDCERS’ members entering DROP are considered “retired” the date they enter DROP.
A SDCERS’ member’s decision to enter DROP is irrevocable. If a SDCERS member participates in DROP, they will have access to a
lump sum benefit in addition to their normal monthly retirement allowance when they retires. DROP was initially offered by
SDCERS’ sponsors on a trial basis for a three-year period ending March 31, 2000. It has since become a permanent retirement option.
SDCERS’ members are eligible to participate in DROP when they are eligible for a service retirement. A DROP participant continues
to work for his/her respective employer (plan sponsor) and receives a regular paycheck. Both the plan sponsor (employer) and the
DROP Participant no longer make retirement contributions to SDCERS, and the DROP participant stops earning creditable service. A
DROP participant continues to receive most of the employer-offered benefits available to regular employees.
A SDCERS’ member must select a retirement option when they enters DROP. If the DROP participant elects to leave a continuance
to a beneficiary, the DROP participant must name a beneficiary at that time as well. The selection of a retirement option and the
designation of a beneficiary for a continuance are irrevocable and cannot be changed once the first payment is made into a DROP
account.
SDCERS’ members electing to enter DROP must agree to participate in the program for a specific period of time, up to a maximum of
5 years; this specific time period cannot be modified once agreed to. A DROP participant must end employment with their employer
(plan sponsor) on or before the end of the selected DROP participation period.
When a SDCERS member participates in DROP, a DROP account is set up for that individual. The money credited to a DROP
account comes from six sources:
1. A DROP participant’s contributions – 3.05% of salary each pay period of participation in DROP (no employee contributions
are made to SDCERS during this time);
2. The plan sponsor’s contributions – 3.05% of salary each pay period of participation in DROP (no employee contributions are
made to SDCERS during this time);
3. The DROP participant’s monthly retirement allowance, as determined when entering DROP;
4. The COLA (cost of living adjustment) increases to a monthly retirement allowance that occur while participating in DROP;
5. SDCERS’ Supplemental Benefit (13th Check) payments made while participating in DROP; and
6. Interest credited to the DROP account each quarter, at the rate determined by SDCERS’ Board.
The DROP benefit is the value of a DROP participant’s account at the end of the DROP participation period. It is available either in a
lump sum or periodic distribution. Once a participant leaves DROP, they begin receiving their monthly retirement allowance directly.
SDCERS will distribute the funds in a participant’s DROP account when they leave employment and begins retirement. The
distribution is made as a single lump sum, periodic payments, in 240 equal monthly payments, or as otherwise allowed by SDCERS’
Board, subject to the applicable provisions of the Internal Revenue Code.
For further information on the DROP program, please contact SDCERS’ office at (800) 774-4977 or (619) 525-3600, or visit
SDCERS’ Web site at www.sdcers.org.
Attachment 1 - 5
San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
ATTACHMENT 2 - REPORTS
The following reports are available on SDCERS web site at www.sdcer.org
Actuarial Valuation reports for the City of San Diego, the San Diego Unified Port
District and the San Diego County Regional Airport Authority as of June 30,
2009
Actuarial Valuation reports for all three plan sponsors for June 30, 2008, which
disclose changes implemented from the 2007 Experience Study
Comprehensive Annual Financial Report as of June 30, 2009 and earlier years
Report on the Experience Study for the Period July 1, 2004 through June 30,
2007
San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
ATTACHMENT 3 - RESPONDENT GUARANTEES
The respondent certifies it can and will provide, at a minimum, all services set forth
in Section 8, Scope of Services.
Signature of Official:
Name (typed):_________________________________
Title: _______________________________________
Firm Name: __________________________________
Date: _______________________________________
San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
ATTACHMENT 4 - RESPONDENT WARRANTIES
A. Respondent warrants that it is willing and able to comply with State of
California laws with respect to foreign (non-state of California) corporations.
B. Respondent warrants that it maintains or is willing and able to obtain an
errors and omissions insurance policy providing a prudent amount of
coverage for the willful or negligent acts, or omissions of any officers,
employees or agents thereof.
C. Respondent warrants that it will not delegate or subcontract its
responsibilities under an agreement without the prior written permission of
SDCERS.
D. Respondent warrants that all information provided by it in connection with
this proposal is true and accurate.
Signature of Official:____________________________________
Name (typed): ________________________________________
Title: _____________________________________________
Firm:
Date:_______________________________________________________
San Diego City Employees’ Retirement System
Request For Proposal
Actuarial Audit Services
ATTACHMENT 5 – FEE PROPOSAL
NOT TO EXCEED MAXIMUM PRICE
1.Actuarial Audit Services $________________________
2. Terms:
State any itemizations or detail describing the fee proposal respondent deems
necessary.
