JULY 1, 2008, OTHER POSTEMPLOYMENT BENEFITS PROGRAM ACTUARIAL VALUATION
The following is the opening letter to the Los Angeles County Other Postemployment Benefits Program (OPEB) Actuarial Valuation document. The major findings of the valuation are contained in this report. This report reflects the benefit provisions in effect as of July 1, 2008, and the retiree health plan premium rates in effect as of July 1, 2008, and July 1, 2009. Please note that the table of contents is linked to the various sections of the document.

Click here to access the entire Other Postemployment Benefits Program Actuarial Valuation document.

June 22, 2009

Mr. Gregg Rademacher
Chief Executive Officer
LACERA 300 North Lake Avenue
Pasadena, CA 91101-4199

Re: July 1, 2008, Other Postemployment Benefits (OPEB) Actuarial Valuation

Dear Gregg:

As requested, we have prepared an actuarial valuation of the retiree medical, dental/vision, and life insurance benefits covering the retired Los Angeles County workers who also participate in the Los Angeles County Employees Retirement Association (LACERA) retirement benefit program. These benefits are collectively referred to in this report as the Los Angeles County OPEB Benefits Program, or the “Program”. The major findings of the valuation are contained in this report. This report reflects the benefit provisions in effect as of July 1, 2008, and the retiree health plan premium rates in effect as of July 1, 2008, and July 1, 2009.

In preparing this report, we relied, without audit, on information (some oral and some in writing) supplied by Los Angeles County, LACERA and Mercer Health & Benefits. This information includes, but is not limited to: benefit descriptions, membership data, and financial information. In our examination of these data, we have found the data to be reasonably consistent and comparable with data used for other purposes. In some cases, where the data was incomplete, we made assumptions as noted in Table C-11. Since the valuation results are dependent on the integrity of the data supplied, the results can be expected to differ if the underlying data is incomplete or missing or if our assumptions regarding incomplete data are incorrect. It should be noted that if any data or other information is inaccurate or incomplete, our calculations may need to be revised.

We certify that all costs, liabilities, rates of interest, health cost trend rates, and other factors under the Program have been determined on the basis of actuarial assumptions and methods which are individually reasonable (taking into account the experience of the Program and reasonable expectations) and which, in combination, offer our best estimate of anticipated experience affecting the Program. Nevertheless, the emerging costs will vary from those presented in this report to the extent that actual experience differs from that projected by the actuarial assumptions.

The retirement benefit related demographic and economic assumptions used in this report are based on those developed for the July 1, 2008, valuation of the LACERA retirement benefit program. The OPEB demographic and economic assumptions are based on the results of our 2008 OPEB Investigation of Experience, a report that was produced by Milliman as LACERA’s actuary, with oversight and approval from Mercer as LACERA’s health benefits consultant, Buck Consultants as Los Angeles County’s actuary, and Rael & Letson, as the actuary for SEIU Local 721. Thus, the assumptions were the result of a collaborative effort by these various stakeholder groups. The assumptions are summarized in Appendix A. The County has the final decision regarding the appropriateness of the assumptions and should adopt them based on the joint consultants’ recommendations.

Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: Program experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements such as the end of an amortization period; and changes in Program provisions or applicable law. Due to the limited scope of our assignment, we did not perform an analysis of the potential range of future measurements.

Actuarial computations under GASB No. 43 and No. 45 are for purposes of fulfilling financial accounting requirements for LACERA and Los Angeles County (the employer) respectively. LACERA needs to report under GASB 43 since the benefit payments flow through LACERA’s financial accounts. The calculations in the enclosed exhibits have been made on a basis consistent with our understanding of GASB No. 43 and No. 45, as well as the County’s funding goals. Determinations for purposes other than meeting these financial accounting requirements may be significantly different from the results contained in this report. Accordingly, additional determinations may be needed for other purposes.

Any distribution of this report must be in its entirety including this cover letter, unless prior written consent from Milliman is obtained. Milliman’s work product was prepared exclusively for LACERA under our contract with LACERA for a specific and limited purpose. It is a complex technical analysis that assumes a high level of knowledge concerning LACERA’s operations, and uses LACERA’s data and other data provided Milliman, which Milliman has not audited. It is not for the use or benefit of any third party for any purpose. Any third party recipient of Milliman’s work product, including Los Angeles County or the South Coast Air Quality Management District (SCAQMD), who desires professional guidance should not rely upon Milliman’s work product, but should engage qualified professionals for advice appropriate to its own specific needs.

The consultants who worked on this assignment are employee benefit actuaries. Milliman’s advice is not intended to be a substitute for qualified legal or accounting counsel.

On the basis of the foregoing, we hereby certify that, to the best of our knowledge and belief, this information is complete and accurate and has been prepared in accordance with generally recognized and accepted actuarial principles and practices. We are members of the American Academy of Actuaries and meet the Qualification Standards to render the actuarial opinion contained herein.

We would like to express our appreciation to LACERA staff members, Los Angeles County, SEIU Local 721, Mercer, Rael & Letson, and Buck Consultants who gave substantial assistance in supplying the data on which this report is based. We respectfully submit the following report, and we look forward to discussing it with you.

Sincerely,

Robert L. Schmidt , F.S.A., EA, M.A.A.A. Consulting Actuary	Karen I. Steffen, F.S.A., EA, M.A.A.A. Consulting Actuary

RLS/pap

cc: Mr. Robert Hill, LACERA