best can to bring up the market value of assets, but again, 84% of the funding level against and $18 billion accrued liability basically says we have 84¢ to pay every dollar promised for all active employees as well as retired employees for as long as we assume they will work and live. the goal is to get as close to 100% funding in that area as we can. but probably 70¢ to 75¢ on every dollar is generated into the investment return. our job is to make sure that we can capture that investment return. we had a return of over 20 two% netted fees -- 22% near its fees for fiscal year 2011. we lost 22% the year before that. again, we're focusing on both of these numbers, realizing we need to get both of those percentages

as close to 100% as we can. the retirement system also administers the city's deferred comp plan. i want to give a brief report on that. as of last month, we had 13,740 two actively contributing employees. that is quite remarkable given that we've had a timeframe where we had employees affected by unpaid furlough days. this is a voluntary plan. they have still persisted in saving and differing monies to the 457 plan. and 50% participation is very extraordinary in this type of voluntary plan. we have 24,173 total participants, reflecting those who still have money in the plan but not actively contributing.

and the assets topped $2.1 billion as of the end of may. that is an important piece of the voluntary plan that the city employees have access to. my final page basically focuses on the five questions that you had asked as to present. our two-year budget outlook, all of the costs of administering the trusts are born out of the investment earnings of the trust. there is no general fund impact that we would perceive going into the two years at all costs being administered to the workers' comp program are being deferred by the party administrator. we started we were going into a two-year budget cycle. the retired board adopted a strategic planning approach in october, 2011, which gives them a three to five-year outboard look -- out word look --

outward look. the four major projects identified in this plant are the enhanced customer service. we currently estimates that 95% of transactions are done face to face with staff. we're trying to figure out how to transition that a way to give more service time to employees. we're also enhancing our website. we want to provide 24/7 access sell an employee can log on and check their ballots, service credit, and look at what future benefits with the like. the third area is in reporting. and a fourth is the electronic content management of the system to replace the electronic archiving technology that we currently have. we requested a total of four new positions in the budget.

we have accepted the budget analyst office recommendation that we would proceed with three. two of those positions, one is a management level position and a benefit technician position in the deferred comp program budget. currently, there are two employees supporting the membership, other participants as well as the two billion dollars invested in the deferred comp program. these positions will be put in place to address the growing customer service needs. most of you might be similar -- familiar with the fact that we introduce target date funds in march of this year. and with a target date funds we think there is a lot of possibility, but we plan to introduce a rafa feature to the plan by the end of this year. -- a roth feature to the plan by the end of this year. under summer youth employment opportunities, we have

allocation for the mayor's summer youth work program. and for language access, we are a two-tiered department under the ordinance. we provide services upon request and we have certified staff that can council folks in mandarin, cantonese, and spanish. chairperson chu: one area where we missed information and perhaps you might have covered it, but in terms of the contribution rate that the city would have to pay into the fund, what does that look like over time? >> the employer contribution rate is set at 20.71% starting july 1st, 2012. our actuaries are estimating that the net contribution rate to the city will be close to 18.3% with the employees, based

on salary, can treating roughly two points out -- 2.5% of what the city would have contributed. we have five-year smoothing of the retirement system, so we're still smoothing out the losses of two thousand eight-09. we will have two more years -- 2008-09. we will have two more years where we will have to deal with those. but then it will be offset by higher level of employee contributions. without knowing where we will finish this year, because the snapshot is taking june 30th, it is hard to say. but there will be a trend over the next two years of an increase in the contribution rate. chairperson chu: in terms of the snapshot at this moment, the best understanding we have right now is that your expectation is that beginning july 1st, we will

have a job -- a general contribution rate of 20% going to retirement expenses, correct? and some is paid by the employee and some by the employer. and over the next two years, the expectation is that will grow to 24%? >> yes. and again, those are projections based on different scenarios. the actuarial provides the retirement board as well as the city with the requested scenarios. the most recent one we ran because we know this has been a difficult year financially over the last several months. as of today we are up 1.5%. but depending on the scenario, the range of contributions go as high as 24%, 25% over the next two years. but that would trigger a higher level of bertsch submission on the employee's side as well. >> -- a higher level of

participation on the employee's side as well. chairperson chu: and on the employer's side, that would be relative to how much money? >> from retirements perspective, we also cover the two school districts as well as the trial courts. we have roughly $1.4 billion. the city will be roughly 95% of that. 1% would be roughly $24 million. what has happened is as the employees have decreased, the covered pay levels have also decreased. we have seen decreases in pay in the last two years. the last number we were looking at was $2.4 billion in covered paid.

-- covered pay. >> madam chair, members of the committee, this estimate is what we would have assumed as well. chairperson chu: $24 million and roughly 95% as the city share. $24 million is 1% across the entire system. >> that is correct. i think the last time we looked was roughly 95% with city /employee covered pay. chairperson chu: the areas where it would change that liability would be with fewer employees or better returns, it sounds like. >> the passage of the two pension reforms assumed a very gradual replacement of existing employees with basically, the employees that have a lower

level of benefits. i think we have been surprised at what is happening with the city that the turnover as far as replacing and people retiring with a higher level of benefits and be replaced with folks at the lower level, that is more rapidly taking place than the actuary assumed. the actuary was very conservative in the cost of those programs. i think we see people -- as we see people leaving the city and been replaced, there is a chance to accelerate those savings. the savings from passing does two -- those two were crossed that the board of supervisors thought would take 20 years to see a savings that is to begin. i think we will -- that is significant. i think we will see that accelerated. it is good news as people are retiring. we just need to make sure that we continue to invest wisely and

to the best we can. chairperson chu: and a final question with regard to the administration costs, you mentioned that most of the expenses are paid out of the trust. i'm wondering, is there a rule of thumb, good metric in terms of the administrative expense to the trust? although it does not cost the general fund, it is coming out of that trust. is there a level that we would not want to exceed? what is good practice? rex it could be -- >> the actuary has assumed anywhere between 45 to 55 basis points. that is a good average of what the administrative costs should be. the only thing that complicate it on our side is that we have a number of different types of -- we now have 14 separate benefit plans covering active employees. there's a degree of competition there. but i think there rule of

thumb, at least in the actuarial industry, is anywhere between 45 to 55 basis points against the value of the trust. chairperson chu: and where are we, generally? >> i think we are 46. chairperson chu: thank you. you are never met with the budget analysts recommendations -- you are in agreement with the budget analyst recommendations? >> we are. and we thank them for their report. chairperson chu: let's go to the next report. >> it recommended reduction of 2013-14, a decrease that would still allow 5.9% in the department's 12-13 budget. we also recommend an extension of encumbrances which would allow $100,000 to the city of san francisco for plant project reserves. none of those are general fund

reductions. regarding 2013-14, recommended reductions total $313,000. of that amount, ongoing savings would still allow an increase of 1.2% of the department's budget. of those recommendations in 2013-14, $3,879 our general fund reductions. chairperson chu: given that we have agreement on operations as well as the close out, do we have a motion? we will do that without objection. thank you very much. we will not require you to come back next week. health service systems. >> good morning, supervisors.

i am pleased to present the health service board budget presentation today. i will start out by reminding you all that we have 107,000 covered lives. we do services for the city and county. our total budget in terms of the contracts we manage our over 25 complex contracts. it is over $700 million for the budget. our administrative costs represent less than 1% of what we actually manage. these are not investment. these are actual services that we are negotiating. i want to highlight three areas of change and growth. the first came about because of the passage of prop c. when we presented our budget last year, we did not know that

prop c would exist. we agreed after it passed to negotiate calendar year for health and benefits. right now, we're in the midst of a six-month benefit plan, finishing out our fiscal year negotiations. and beginning in 2013, we will benefit -- we will negotiate benefits based on the calendar year. the one planned save about service system by $16.9 million, half of which went to the city and county. this year, going to the 2013 plan, we will be going -- implementing something called the medicare employer group labor plan, which will save another $2.3 million beginning next year. it also required as to double our workload not just in terms of open royal lowlights, -- open enrollment, but in terms of the negotiations.

we are performed every organization in california in terms of negotiating benefit rates. we will outperform calpers this year. the next major area of a challenge for us is the implementation of the marriage -- implementation of e-merge. it will change the way we manage our workload because we will not have access to get two days a month. but we will work with the unified school district, the community college district, and retirees during these outages and accomplish a lot of reconciliation that usually happens simultaneously. most of the processes will lead dodt -- will require additional screen input rather than fewer, but we do expect more timely

entrance, leave of absence and retirements. that will require retroactive adjustment. chairperson chu: a quick question. why will e-merge not be available two days a month? >> because of the payroll processing that we are bringing to merge with e-merge. during the processing of paychecks will not have access to the system. chairperson chu: is that a continual issue? or just in the implementation phase? >> currently, we have as you know, one system that produces paychecks and another system that has all of the human resources information and systems, and finally the health

services system. these are all being join together in e-merge. during the pay cycle, the the parts have a number of days to input all of the information, including the hires, the transfers, and time spent. the health services division has a certain time frame where they then allocate the appropriate fringe benefits to the employees based on their status, and right before we run payroll, we have to close the system down to disable the right ability -- that is, they cannot make any changes while we are in peril. that will be a couple of days every pay cycle. currently, because we have -- while we are doing payroll. that will be a couple of days every pay cycle. graeme dekema because -- currently you can access the

system. but we will have a blackout of the department of human resources as well as the department of health services during that timeframe. they will have the ability to read, and they can look things up, but they cannot make changes. otherwise, people's paychecks will not be correct. and we will have access to serve the other employers, which includes retirees. retirees make up 30% of our membership. i do act -- do not anticipate things coming to a halt, but we will have to rearrange our work plans. i do think though improved processes of termination and retirements will decrease the complex corrections we often have to make when things are entered in accurately. -- when things are not entered

accurately. the other thing is, we will have open enrollment, which most of our employers sites have. we will look forward to that by 2014. the next area we will continue to focus on its the suggestion of the budget analyst when he suggested that all actions be centralized in health services. since 2010, we have implemented and managed without a budget remarkable well as programs. we did manage 1 fte through a trust fund. we are soon to partner with laguna honda and sfgh. we're the leader city-wide for the weight watchers program and we have lost 2,500 lbs. since august of last year.

it will save millions and millions of dollars. it is hard to translate that exactly, but it is at a substantial -- it is a ton of money, if you will. and our eap program has expanded its scope significantly since it came to hhs under the board of supervisors direction in 2008. they do koses on violence prevention and workshops, and also have implemented at workshops this year on smoking cessation. we have had two very successful workshops on smoking cessation eap in also looking -- smoking cessation. eap also responds to every instance where there is employee injury or death. we do three workshops a year on preventing violence in the workplace.

that could be physical violence or verbal violence. we have had a bonus share every year. the department and the unions have both said they read like the wellness fair to be spread out. last year, we serve over 3000 people and we did over 1600 flu vaccinations. it is obvious the more expensive and more difficult to do that on a department by department basis, but we will be working to rule out a city-wide flu vaccinations as well as a virtual wellness' fair sometime next january or february. we do yoga and other class'es. we're collaborating with the mayor's office on a health- related application that will help people that are hospitalized to be more informed patients and prevent what they

call hac's, special acquired conditions, which are expensive and debilitating. and we're a candidate for the health award. we have doubled the workload, and we are also -- i think people are waiting until the member for long awaited vacations and time off. in terms of the language access question that was put forth, we are a two-tiered apartment -- department, however, we do have employees who speak spanish and korean. our united healthcare plan, we're required to meet language access requirements.

more than one-third of our members are bilingual. the requirements as more than 10% of the county's population, if they do not have english as their first language. we will be providing a four-page summary of the benefit guiding chinese. in terms of the budget overview, -- of the benefit guyed in chinese. in terms of the budget overview, 2011-12 is $169,000. if you look at the proposed budget cuts, hhs is predominantly funded through worker recovery. 60% is general fund and 40% is non-general fund. we have since i've been in this

position been understaffed. we propose no decrease to our staff, but also because we are taking an open enrollment. in terms of the budget cuts, the increase of 136 -- the increase in our budget of 2.1% represents increases it to only existing salaries and benefits on department work orders. there is no increase in projects or funds in our budget. the second year at 2.6%, again, represent increases to all the existing salaries and work orders and rents that we are required to pay. we're not in agreement at this time with our budget analyst requests. we would like $14,500 restored, essentially.

the analyst requested -- recommended a $64,000 record -- $64,000 cut. we agree with $50,000 of that, but there is 14,500 that we hope to recover in the coming days. that is where it is. chairperson chu: on the wellness program, we had a lot of successes with that. and due in large part to the department's effort on wellness. when we try to implement some of these more city-wide programs, flu shots and other things, did we start to measure whether there were six days or other metrics that might demonstrate what the value of them would be? i know collectively, we know losing weight is a good thing, but are they translating to

fewer sick days, fewer days out of work, those kinds of things? >> not only productivity days in terms of sick leave, but also workers' comp costs. we should see a decrease. at this point, we are putting a lot of hope in this to standardize the way sick leave is recorded throughout the city. different apartments in different ways. that is all being combined into one system. we're trying to be using this first year as a baseline. if we use multiple systems as a base line, they would not be accurate measurements for the future. we will look at those over time. and hopefully, the department's we're working with will look at cost decreasing over time as people get healthier. chairperson chu: thank you. and i want to thank the department. seeing our own staff go through two open enrollment is quite a bit to go through.

i want to thank you for that. i know your folks art -- are negotiating rates twice a year versus one the year. i appreciate that work. and colleagues, we expect to come back to the budget and finance committee sometime in july to approve the next rates and benefits package for the health systems for the 2013 year. expect that to come down the pipeline. supervisor kim: i want to concur, i appreciate the work that hhs does. your department does a lot of work to take care of individual employees. it is great to hear about all of the movement we been making and how we have -- we have been making and how we are a model department for others. i know you said that on some of the insurance and policy grass, students are analyzing how that

impacts expenditures. in the future, it would be great to get a presentation on what those savings actually are. i believe the savings will be there. i'm just very curious to see what the actual outcomes may be >> thank you. -- actual outcomes may be. >> thank you. absolutely. >> maybe as a general comment for this department and other departments, the department is actually correct that there are increases in salaries and no increases in other areas. our recommendations are based on actual experiences. if you look at recommendations such as air travel, membership fees, other occurring expenses. and this is not a criticism. our recommendation is strictly based on actual experience, and then we provide a cushion so that when we make our recommendations to