City Council
Report
City Council Meeting: September 13, 2022
Agenda Item: 5.D
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To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Financial Operations Subject: Approval of Professional Services Agreement for Other Post-Employment Benefits (OPEB) valuation services to MacLeod Watts
Recommended Action
Staff recommends that the City Council:
1. Award RFP 318 to MacLeod Watts Inc, a Washington state-based corporation, to provide consulting services in connection with valuing the City’s OPEB liability for use in the City’s financial reporting and calculate the City’s Actuarially Determined Contribution;
2. Authorize the City Manager to negotiate and execute an agreement with MacLeod Watts, in an amount not to exceed $108,010 for eight years.
Summary
The City provides post-employment health care benefits in the form of both direct payments and implicit subsidies to retiree’s medical insurance premiums. These are classified as Other Post-Employment Benefits (OPEB). These benefits, subject to negotiations between the City and each bargaining unit, require the approval of the City Council. Benefits include:
• The City pays medical insurance for the Executive Pay Plan group and management employees of the Rent Control Board if their combined retirement age and years of service with public agencies equals or exceeds 70; • The City subsidizes the cost of insurance to non-sworn permanent retirees so that they can participate in a City health plan at the same rate as active employees; and
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• The City maintains minimum benefits for public safety employees provided by the City’s contract with its healthcare provider CalPERS.
Per best practice and recommendation of Government Finance Officers Association (GFOA), the City has an IRS Section 115 irrevocable trust (Trust) that manages the funds contributed by the City for these benefits. The Trust ensures that all funds contributed cannot be changed, reversed, or recovered and all assets held in the Trust are legally protected from creditors of the City. The City’s CalPERS OPEB Trust is called the California Employer’s Retirement Benefits Trust (CERBT).
The City engages an actuary to perform a valuation of the City’s OPEB plan in compliance with Governmental Accounting Standards Board Statement Number 75 (GASB 75) for inclusion in the City’s basic financial statements, as well as calculating the Actuarially Determined Contribution to be paid to the CERBT. The Actuarially Determined Contribution is the amount that the City should pay to CERBT to prefund plan benefits, broken down by Fund to be accurately recorded by staff in the financial system. Staff recommends that the City enter into an eight-year agreement with MacLeod Watts Inc. to provide actuarial valuation services to the City.
Discussion
The requirements of GASB 75 allows for a biennial valuation process. The first year includes a more costly and full actuarial valuation. The second year includes a less expensive remeasurement of the liability utilizing the previous year’s assumptions and amounts. The City will require a full actuarial valuation for inclusion in the FY 2021-22 financial statements. The actuarial report must also provide the Actuarially Determined Contribution. GASB 75 and CERBT also require detailed reporting information that must be included in the report. Lastly, the actuarial consultant must be able to communicate the results of the report to City financial staff, and if asked, to the Audit Subcommittee and Council.
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Vendor Selection
Bidder Recommendation
Best Qualified Person/Firm MacLeod Watts Inc.
Evaluation Criteria Experience and technical competence, ability to meet project work plan and timeliness, quality control, cost of services, cost control, stability/references, and value add/breadth of service.
Municipal Code SMMC 2.24.190
RFPs Received
Athena Actuarial Consulting Bartel Associates, LLC David Dougherty LLC Jefferson Solutions, Inc Lauterbach & Amen, LLP MacLeod Watts Inc.
RFP Data
Posted On Posted On
Advertised In
(City Charter & SMMC)
Vendors
Downloaded
Date Publicly
Opened
03/30/2022 City's Online
Bidding Site
Santa Monica Daily Press 8 03/30/2022
Justification to Award
Based on the evaluation criteria above and criteria in SMMC 2.24.190, staff recommends MacLeod Watts, Inc. as the best qualified firm to provide OPEB actuary valuation services for a total not-to-exceed amount of $108,010 during the eight-year term based on their technical knowledge, emphasis on time management, planning, and realizing deadlines, and ability to provide valuable insight and information related to accounting standards, industry best practices, and the analyses and outcomes that appear in the actuarial report.
Financial Impacts & Budget Actions
Staff seeks authority to approve funding from the General Fund to award an agreement with MacLeod Watts for actuarial valuation services. Future year funding is contingent on Council budget approval.
Contract Request
Request Amount FY 2022-23 Budget Dept/CIP Account # Total Contract Amount $20,500 01300003.552010 $108,010
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Prepared By: Stephanie Manglaras, Financial Operations Manager Approved Forwarded to Council
Attachments:
A. MacLeod Watts Oaks fy 22-23