Report 2012-106 All Recommendation Responses

Report 2012-106: City of San José: Some Retirement Cost Projections Were Unsupported Although Rising Retirement Costs Have Led to Reduced City Services (Release Date: August 2012)

Recommendation #1 To: San Jose, City of

To ensure that stakeholders receive consistent and reliable information, San José should report the official retirement cost projections that were developed using the assumptions approved by the boards of the two retirement plans. If San José does not use the official retirement cost projections, it should develop projections that are supported by accepted actuarial methodologies, report this information in the correct context, and disclose significant assumptions that differ from those in the boards' retirement cost projections.

1-Year Agency Response

The City of San Jose has continued to fully implement the State Audit's recommendation to "...report the official retirement cost projections that were developed using the assumptions approved by the boards of the two retirement plans." The City believes that this recommendation has been fully implemented. The City's intent is to continue reporting the official retirement cost projections. Please note that the City has been reporting the official retirement cost projections developed by the Boards' actuary in official publications since dates earlier than those provided in the above drop-down menu.

The City released the Fiscal Year 2013-2014 five-year forecast in February 2013, which included the official retirement cost projections developed by Cheiron, the actuary for both retirement plan boards. This section can be found on pages 17 - 19 of the forecast documents. The five-year forecast has been included in the supporting documentation.

As the City has continually demonstrated its commitment to the open and transparent process of publishing the official retirement cost projections developed by Cheiron, which remains consistent with the recommendation provided in the State Audit, we hope that the State and the Joint Legislative Audit Committee will join us in considering the recommendation to be fully implemented.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

In February 2013, the City of San Jose (City) released its fiscal year 2013-14 five-year forecast, which included official retirement cost projections that were based on estimates developed by the actuary for both retirement plan boards. However, as we discussed in our report, the City has not always limited its reporting of retirement cost projections to those developed by the boards' actuary. The City's fiscal year 2013-14 five-year forecast can be found on the City's Web site at:

http://sanjoseca.gov/DocumentCenter/View/12833.

6-Month Agency Response

The City believes that this recommendation has been implemented and will continue to be implemented.

As noted in the City's response to the State Auditor dated August 8, 2012, it is the City's current and past practice to report the official retirement cost projections using the actuarial assumptions approved by the two retirement plan boards. The City anticipates releasing the fiscal year 2013-14 five-year forecast in late February 2013, which will include the official retirement cost projections developed by Cheiron, the actuary for both retirement plan boards.

By this demonstration of the City's commitment to continue its prior practice which is consistent with the recommendation provided in the State Audit, and the City's intent to continue this practice, the City hopes that the State and Joint Legislative Audit Committee will join it in considering this matter to be resolved.

California State Auditor's Assessment of 6-Month Status: Pending

At the time of this response, the City had not yet released its fiscal year 2013-14 five-year forecast, which it asserted would include the official retirement cost projections developed by the actuary for both retirement plan boards.

60-Day Agency Response

San José reported that it continues to implement our recommendation. Similar to its initial response to our report, San José reiterated that the retirement cost projections used in its most recent five-year budget forecast, released in February 2012, were developed by the actuary used by the boards of the two retirement plans, using assumptions that were also approved by both boards. However, as we discussed in our report, San José has not always done this. Therefore, we look forward to seeing that San José uses retirement cost projections developed by the actuary used by the boards of its two retirement plans based on board-approved assumptions in its next five-year budget forecast. San José expects to release its next forecast in early 2013. (See 2013-406, p. 199)

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2012-106

Agency responses received after June 2013 are posted verbatim.