FROM: Amy McInerny, Chief Financial Officer
SUBJECT: Review and Approve Proposed General Policy No. 020
RECOMMENDATION:
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Approve the new General Policy No. 020 - Participating Employer Termination and Terminal Funding Obligation.
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BACKGROUND:
In order to provide clarity to participating employers and other stakeholders, staff proposes to codify SBCERA's current practices as they pertain to terminating participating employers.
In summary, the proposed new General Policy No. 020 establishes the funding obligation of terminating participating employers as the present value of all future benefits expected to be paid by SBCERA to the terminating employer's employees, retirees, beneficiaries, and terminated members as of the termination date, less the value of SBCERA assets allocated to the terminating participating employer as of the termination date. The proposed policy sets forth a market-based approach for establishing the value of both assets and liabilities, assessing a benefit liability, and terminating any ongoing contribution commitment by the terminating participating employer (other than any installment payment provisions). The calculation methodology is detailed in the proposed policy.
The proposed policy also includes specific provisions including:
* The terminating participating employer is obligated to reimburse SBCERA for the actuarial consulting fees incurred to determine the terminal funding obligation.
* The terminating participating employer and SBCERA shall enter into an agreement stipulating the provisions for the settlement of the terminal funding obligation.
* Unless otherwise approved by the Board, the settlement of the terminal funding obligation will be made in a lump sum, or paid out in annual installment payments over a period of no more than five years and subject to interest at the then-current actuarial assumed discount rate less 0.50%.
Staff consulted with The Segal Company, SBCERA's consulting actuary in the...
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