Administration, Audit and County Services Committee Richard McCreedy Brad Aguilu, Chairperson

R1

The Kern County Department of Airports should continue to plan improvements as needed for BFL. (Finding 3)

R2

The Kern County Department of Airports should make plans to upgrade the other six airports, with particular attention to Lost Hills, Wasco, Taft and Elk Hills/Buttonwillow. (Finding 5)

R3

The Kern County Department of Airports should have a budget line item that provides equipment to maintain the vegetation around the County airports’ runways and tarmacs. (Finding 17)

R4

The Kern County Department of Airports should ensure that their website contains current information pertaining to all County airports. (Finding 21) NOTES:  Kern County Board of Supervisors and the Kern County Department of Airports, should post a copy of this report where it will be available for public view at all seven Kern County Department of Airports locations.  Persons wishing to receive an e-mail notification of newly released reports may sign up at www.kerncounty.com/grandjury  Present and past Kern County Grand Jury Final Reports and Responses can be accessed on the Kern County Grand Jury website, www.kerncounty.com/grandjury RESPONSE REQUIRED WITHIN 90 DAYS PRESIDING JUDGE KERN COUNTY SUPERIOR COURT 1415 TRUXTUN AVENUE, SUITE 212 BAKERSFIELD, CA 93301 CC: TRUXTUN AVENUE, SUITE 600 BAKERSFIELD CA, 93301 25 KERN COUNTY EMPLOYEE RETIREMENT ASSOCIATION Working on the Future for Kern County Retirees PREFACE: Kern County Employee Retirement Association (KCERA) is the Kern County public employee retirement system. KCERA was established on January 1, 1945, by the Kern County Board of Supervisors. The purpose of KCERA is to provide benefits for retirement, disability, death, beneficiary, cost-of-living, and supplemental retirement to the employees of Kern County, and participating Kern County special districts. PURPOSE OF INQUIRY: The 2017-2018 Kern County Grand Jury (Grand Jury) Administration, Audit, and County Services Committee (Committee) inquired into the operation and management of KCERA, pursuant to California Penal Code §933.6. PROCESS: The Committee searched the internet, newspaper articles, and reviewed KCERA’s publications:  KCERA Board of Retirement By-laws and Regulations  KCERA 2015 – 2016 Financials and audit reports  New Employee Guide to Retirement Benefits  Retirement Benefits Handbook  Rules of Procedure for Disability Retirement The Committee attended a KCERA Board of Retirement Meeting, an Investment Committee Meeting, and interviewed the Executive Director and staff. All interviews and meetings were at the KCERA office, 11125 River Run Boulevard, Bakersfield, California. BACKGROUND AND FACTS: According to KCERA website: “KCERA’s mission is to prudently administer retirement benefits, invest the assets of the Association, and provide quality membership services to eligible public employees, retirees and their beneficiaries.” Using professional consultants, KCERA manages $4 billion of funded assets, with current liabilities of $5.8 billion. KCERA is a defined benefit pension plan (Plan). As a Plan, KCERA provides its vested members with a lifetime retirement benefit, i.e., pensions. Retirement benefits are formulated using the members total years of retirement service credit, age at retirement, and final average compensation. A. The Plan is administered by the KCERA Board of Retirement (Board), which consist of nine members and two alternate non-voting members. Five members constitute a quorum. Members of the Board include:  1 – Kern County Treasurer-Tax Collector (mandatory)  4 – Appointed by the Kern County Board of Supervisors  4 – Elected by the KCERA members to a three year term; 2 General o 1 Safety o 1 Retired o  2 – Alternates, also elected by the KCERA members to a three year term 1 Safety o 1 Retired o B. The Board also holds separate meetings for its Administrative, Finance and Investment Committees, each consisting of four members. KCERA’S committees were formed to assist in the efficient administration, by making recommendations to the Board for approval, and are held on an as-needed basis. C. Elections are conducted by the Kern County Auditor-Controller’s Office:  Appointments to the Board may be made “in lieu of an election” if the candidate runs unopposed  Ballots are mailed to the member’s last known address, no later than 15 days prior to the election  Each member votes for the nominee in the category in which they participate, i.e. general members can only vote for the general seat nominee, etc.  Ballots can be returned via mail or dropped off at the Kern County Elections Office  Information for elections is available via the member portal and the KCERA website D. The regular meeting of the Board is on the second Wednesday of each month. In accordance with the Brown Act, notices of meetings are published and posted through various methods:  On the KCERA website (www.kcera.org)  Outside the KCERA office entrance  In print in the KCERA meeting room 28 E. The Board is governed by the County Employees’ Retirement Law of 1937, and subject to the requirements of the Public Employees’ Pension Reform Act of 2013. KCERA is considered a “Governmental Plan,” as defined in Section 414(d) of the Internal Revenue Code. F. The day-to-day operation of KCERA is carried out by the Executive Director who, with staff, manage the following areas:  Administration  Retirement Services  Financial Services  Information Technology  Communications G. There are 15 agencies (Plan sponsors) currently enrolled in KCERA:  County of Kern  Berrenda Mesa Water District  Buttonwillow Recreation and Park District  East Kern Cemetery District  Inyokern Community Services District  Kern County Hospital Authority  Kern County Superior Court  Kern County Water Agency  Kern Mosquito and Vector Control District  North of the River Sanitation District  San Joaquin Valley Air Pollution Control District  Shafter Recreation and Park District  West Side Cemetery District  West Side Mosquito and Vector Control District  West Side Recreation and Park District H. There are three types of members in KCERA:  Active (General and Safety)  Retired  Deferred (ended employment with less than five years of retirement service credits) I. There are approximately 17,350 members of KCERA.  8,635 Active (General – 6,795, Safety – 1,840)  7,824 Retired  892 Deferred J. Contributions to KCERA come from three sources:  KCERA members (from pre-tax earnings)  The employer  Investment funds earnings 29 K. Employees of the County of Kern and Plan sponsors have mandatory participation in KCERA. Employees are enrolled into the Plan on the first day of the next pay period, following their entrance into eligible service. L. Employees are required to complete a Member Sworn Statement, to validate membership. This statement is used to calculate the contribution rate, retirement benefits, and to designate the beneficiary. M. There are exclusions from membership in KCERA:  Extra help employees  Temporary help employees  Workers who work less than 50% of full standard hours  Fixed rate compensated employees  Written contracted employees N. New employees over the age of 60 may, in writing, waive membership in KCERA. This waiver, when signed and filed, is irrevocable and the employee is not able to join the Plan at any time thereafter. O. Members are vested in the Plan after five years of retirement service credit. Vesting entitles the member to receive a pension, after all eligibility requirements have been fulfilled. P. Members, both active and deferred, receive an annual benefit statement of account for their review. This statement includes:  Date of birth  Service years  Retirement entry date  Designated beneficiary  Contribution balances  Estimated retirement benefit Q. As of May 2017, a member’s Plan information can be accessed directly through the KCERA Member’s Portal. R. Withdrawal from KCERA can be made upon termination of employment with the Plan sponsor, using the Disposition of Retirement Contribution Instructions form. The member can designate from the following dispositions:  Refund: funds dispersed directly to the member with applicable taxes withheld  Traditional IRA rollover: with tax deferred funds to a bank or qualified defined contribution plan  Roth IRA rollover: eligible funds to a bank or qualified defined contribution plan with applicable taxes withheld 30  Retirement funds to remain on deposit with KCERA, if less than five years of retirement credit  Deferred Retirement: elects to leave funds in KCERA and to defer retirement to a later date  Reciprocal Election: leaving funds with KCERA, if terminating with Plan sponsor and will become a member of a reciprocating sponsor with 180 days S. Seven qualifying benefit tiers are in place for Plan sponsor employees. T. Six retirement options are available for selection for retirees and/or beneficiaries. The final selection is irrevocable, after the first payment is issued. U. KCERA’s monthly benefit payouts total $29 million. V. Disability benefits may be applied for, if a worker becomes disabled and permanently unable to perform their usual job duties. KCERA requires proof of disability, supported with medical reports. The employee may be required to undergo an independent medical examination with a physician of KCERA’s choosing. KCERA can also require that the former employee be examined at any time until age 55, to determine eligibility of continuation of disability. W. Employer policy could require transferring, reassignment, or job modification as an option for the employee, due to a disability. Wage compensation is to be equal to the position from which the employee is transferred, reassigned, or modified. KCERA must have a completed Disability Retirement Application on file, and must have accepted the application before this can be a considered option. X. Service connected disability benefit is no less than 50% of the employee’s final average monthly compensation. There is no minimum service requirement for service connected disabilities, and in most cases, the benefits granted may not be subject to Federal and State income taxes. Y. Death benefits are assigned to the designated beneficiary of active and/or retired KCERA members. Members must have on file, a completed Beneficiary Designation form, listing the primary and any secondary beneficiaries. Provision is made for a separate one-time lump sum death benefit of $5,000, for designated primary and/or secondary beneficiary. Provisions can also be made for minors or special needs adults for primary and/or secondary beneficiary.