Comprehensive Annual Financial Report - City of Santa Monica

CITY OF SANTA MONICA, CALIFORNIA
Notes to Basic Financial Statements, Continued
For the fiscal year ended June 30, 2009
Deferred Compensation Plans
The City offers to its employees an optional deferred compensation plan created in accordance with
Section 457 of the Internal Revenue Code. This plan is available to substantially all employees and
allows participants to defer a portion of their current income until future years to shelter such funds and
earnings from state and federal taxation until withdrawal. The deferred compensation is not available to
participants until termination, retirement, death or unforeseeable emergency.
The City offers an employer discretionary, defined contribution plan established and governed under
Internal Revenue Code Section 401(a). Employer-only contributions are calculated based upon a
percentage of employee compensation under agreements with employee bargaining groups and unions.
The City offers to its as-needed employees a separate Section 457 deferred compensation plan under the
Omnibus Budget Reconciliation Act (OBRA). This plan is available to all as-needed employees who
are not eligible to participate in CalPERS. This plan requires equal employer and employee
contributions based on a percentage of earnings.
These plans are administered through third-party administrators. The City does not perform the
investing function and has no fiduciary accountability for the plans. Thus, plan assets and any related
liabilities to plan participants have been excluded from the City’s basic financial statements.
Other Postemployment Benefits
In addition to providing pension benefits through CalPERS, the City, in accordance with agreements
with various bargaining units and groups, provides medical insurance benefits that are considered other
postemployment benefits (OPEB) to certain retired employees. Employees of the Supervisory Team
Associates bargaining unit become eligible for a medical insurance benefit if they fulfill length of
service requirements and have more than 75 unused sick leave days upon retirement. Employees of the
Executive Pay Plan group and management employees of the Rent Control Board are eligible for a city
paid medical insurance benefit if their combined retirement age and years of City service equals or
exceeds 70. Although not delineated in any written agreement, all retirees are allowed to continue
participating in one of the City’s health plans at the same rate as active employees. The City also
maintains minimum benefits for public safety employees provided by the City’s contract with its
healthcare provider.
The City pays for OPEB on a pay-as-you-go basis.
Annual OPEB Cost and Net OPEB Obligation
The City’s OPEB cost is calculated based on the annual required contribution (ARC) of the employer,
an amount actuarially determined in accordance within the parameters of GASB 45, “Accounting and
Financial Reporting for Employers for Postemployment Benefits Other than Pensions.” The ARC
represents a level of funding that if paid on an ongoing basis is projected to cover the normal cost each
year and amortize any unfunded actuarial liabilities over a period not to exceed 30 years. The following
table shows the components of the City’s annual OPEB cost for the year, the amount actually
contributed to the plan, and changes in the City’s OPEB obligation to the plan.
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