Actuarial Consulting Services Contract

Recommendations:
  1. That the City enter into an agreement with Aon Consulting for actuarial services as per the Terms and Conditions outlined in Attachments 1 and 2 of the November 13, 2003, Corporate Services Department report.
  2. That the final agreement be approved as to form by Corporate Services Department (Law Branch) and as to content by the General Manager of Corporate Services Department.

Report Summary

  • In accordance with the City Administration Bylaw 12005, final expenditure authority shall be obtained from Executive Committee for all contracts awarded in excess of $250,000.
  • The contract will be self-funding as all costs are paid from the appropriate benefit plan (i.e. Pension Fund, Long Term Disability Plan, or Income Replacement Plan).

Report

  • Under Article 19 of Part III (Pension Plan Agreement) of the Collective Agreement between the City and the Edmonton Fire Fighters’ Union, the Pension Committee is to select the actuary to carry out actuarial valuations for the Fire Fighters’ Supplementary Pension Plan (FFSPP) and generally advise the Committee.
  • Article 19.11.012 of the Pension Plan Agreement states that the Administrator agrees to appoint the actuary selected by the Pension Committee.
  • On July 18, 2003, the Request for Proposal for Actuarial Services was sent to five actuarial firms selected by the Pension Committee.
  • The Pension Committee evaluated the proposals and is recommending the appointment of Aon Consulting.
  • Aon’s ongoing proposal was more competitive than other proponents. Also Aon Consulting has been providing actuarial services to the City for several years, and therefore no transition costs will be incurred.
  • The term of the contract is for period of three years beginning January 1, 2004, with an annual renewal option for up to a maximum of seven years.
  • Aon Consulting has significant knowledge and direct experience in providing actuarial services to meet accounting, funding and regulatory requirements for the Pension Fund (which includes the FFSPP), Long Term Disability (LTD) and Income Replacement (IR) Plans.
  • Actuarial services for the three other pension plans in the Pension Fund, LTD and IR Plans are required on an ongoing basis. Given the competitive pricing offered by Aon, the Administration would intend to negotiate with Aon Consulting to include all required actuarial services under a single contract.

Budget / Financial Implications

The actuarial services are self-funded as the costs are paid from the appropriate plan fund. For example, actuarial services for the FFSPP are paid for by the FFSPP.

Justification of Recommendations

  1. Actuarial services are required on an ongoing basis to meet collective agreement, accounting, funding and regulatory compliance for the Pension Fund, Long Term Disability Plan and Income Replacement Plans.
  2. Authorizing the Administration to execute the Agreement based on the Terms and Conditions approved by Executive Committee, will expedite this matter.

Background Information Attached

  1. Consultant Agreement Between the City of Edmonton and AON Consulting Agreement - Terms of Payment.
  2. Consultant Agreement Between the City of Edmonton and AON Consulting Agreement - Description of Work.

(Page 1 of 2)

Attachment 1

Consultant Agreement Between The City of Edmonton and AON Consulting Agreement

Terms of Payment

1.0Payment

1.1The City agrees to pay the Consultant for fees and disbursements as outlined below.

2.0Consultant Fees

2.1The maximum billable amount, including GST, is:

Pension Fund Accounting:$34,000 (with a maximum fee of $17,000 for the FFSPP)

LTD Plan Accounting:$12,000

IR Plan Accounting:$10,000

FFSPP & FCSPP Funding & Related Services:$26,000 (with a maximum fee of $18,000 for the FFSPP)

LTD Funding and Related Services:$34,000

The maximum billable amounts specified above are guaranteed until completion of the December 31, 2005 funding and accounting valuations.

2.2For work outside the scope of the projects identified in Clause 2.1 as listed below, the fees will be based on hourly rates in effect at the time the services are rendered plus GST, as applicable.

Accounting

Pension Fund

  • supplementary actuarial or consulting services related to the completion of the City's financial statements, as requested

LTD and Income Replacement Plans

  • supplementary actuarial services or consulting services related to the preparation of the City's financial statements, as requested

Funding and Related Services

FFSPP & FCSPP

  • supplementary actuarial or consulting services related to data, funding, plan design, regulatory issues, as requested

LTD and Income Replacement Plans

  • perform the actuarial calculations and provide the present value amounts required under the provisions of the collective agreements where an employee has received or will receive a lump sum payment for which the City has the right of subrogation
  • supplementary actuarial services or consulting services, as requested

Plan Administration

  • prepare actuarial calculations, commuted values, benefit payment calculations under the FFSPP and FCSPP
  • supplementary actuarial services or pension consulting services related to the day-to-day operation of the supplementary pension plans

Other

  • additional actuarial or consulting services as approved by the Branch Manager, Human Resources

3.0Disbursements

3.1The City may reimburse all reasonable disbursements incurred by the Consultant when carrying out the Services defined in the Description of Work at cost.

3.2Disbursements may include:

3.2.1printing;

3.2.2photocopying;

3.2.3courier services;

3.2.4long distance telephone and fax charges; and

3.2.5other costs (e.g. travel) approved in advance by the City’s representative.

4.0Application for Payment

4.1The Consultant will submit invoices with respect of Services rendered on a monthly basis. Each invoice shall:

4.1.1refer to the purchase order number;

4.1.2list the Services and expenses, by plan, for which payment is being claimed;

4.1.3list the number of work-hours spent and the various rates used to calculate the invoice; and

4.1.4show the GST as a separate amount.

4.22The Consultant shall submit the invoice to, Benefits and HR Support Supervisor, 10th Floor, Century Place, 9803 – 102A Avenue, Edmonton, Alberta, T5J 3A3.2

Attachment 1 - Page 1 of 2

Attachment 2

Consultant Agreement Between The City of Edmonton and AON Consulting Agreement

Description of Work

1.General Description of Project

1.1.The Project involves providing actuarial and consulting Services to meet accounting, and funding requirements for the City of Edmonton’s LTD Plan and Income Replacement Plan.

  1. Consultant Services
  2. The Consultant will provide Aactuarial and consulting Services will which include, butis are not limited to:

Accounting

Under the direction of the Director, Corporate Accounting, Budgets and Reporting:

  • provide advice in the development of best estimate actuarial assumptions for accounting purposes
  • undertake an extrapolation/valuation and provide the appropriate reports for financial statement purposes for the Long Term Disability Reserve Fund on a corporate basis which embodies the relevant assertions of paragraph 5300.17 of the CICA Handbook and Section PS 3255
  • undertake an actuarial valuation for the Income Replacement Plan pursuant to Section PS 3255 and provide the appropriate report
  • undertake an accounting valuation/extrapolation for the Income Replacement Plan using current data
  • supplementary actuarial services or consulting services related to the preparation of the City’s financial statements, as requested

Funding and Related Services

Under the direction of the Benefits Planner:

  • undertake a funding valuation for the Long Term Disability Plan for each employee group to review the financial experience, calculate reserves and premium rates
  • provide advice in the development of actuarial assumptions for funding purposes
  • assist in data preparation and review
  • provide the cost implications of various cost-of-living adjustments on the financial health of the plan by employee group
  • meet with each of the five (5) LTD Advisory Committees to review the actuarial report, recommended premium rate and cost-of-living implications
  • perform the actuarial calculations and provide the present value amounts required under the provisions of the collective agreements where an employee has received or will receive a lump sum payment for which the City has the right of subrogation1supplementary actuarial services or consulting services, as requested 1

Attachment 2 - Page 1 of 1