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Home My WebLink About05. Summary of GASB 45 actuarial report6. Central Contra Costa Sanitary District March 23, 2015 TO: HONORABLE BOARD FINANCE COMMITTEE FROM: THEA VASSALLO, FINANCE MANAGER SUBJECT: SUMMARY OF RESULTS OF JULY 1, 2014 OTHER POST EMPLOYMENT BENEFITS (OPEB) GASB 45 ACTUARIAL VALUATION John E. Bartell of Bartell Associates, LLC prepared the GASB 45 Actuarial Valuation Results as of July 1, 2014 and reviewed the results with finance staff. Highlights of the valuation are discussed in this memo and two tables with historical and projected data are provided. A key acronyms and terms are located at the end of this memo. An actuarial study is required every two years under current GASB 45 rules. Actuarial assumptions include investment gains or losses using 5 -year smoothing, discount rate, cost of retiree benefits, mortality, and number of retirements, terminations and disabilities. These factors can impact the calculation when actual results differ from projections made in the prior actuarial calculation. GASB Statement No. 45 set rules for computing the employer's expense for retiree benefits other than pension, called Other Post - Employment Benefits (OPEB). The calculations are similar to those used for pension valuation reports. The annual required contributions (ARC) of the employer, represents a level of funding that, if paid on an ongoing basis, is projected to cover normal annual costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The District uses the Level Dollar method to calculate ARC, keeping the annual ARC amount fairly consistent from year to year. The ARC calculated as of 7/1/2014 is used for two budget years: FY 2015 -16 and FY 2016 -17. The ARC is made up of retiree medical, dental and life insurance premiums paid- as -we -go and a component for future OPEB expense. The ARC has decreased slightly from $8.103 million in the 7/1/2012 report to $7.866 million as of 7/1/2014. This is mainly due to higher earnings on PARS trust assets and savings in retiree insurance premiums compared to the 7/1/12 actuarial report projections. Table One shows actual and projected components of the District's ARC for the six years Bartell Associates, LLC have prepared our actuarial reports. It also shows the Market Value of Assets components in the PARS Trust. More detailed investment information is covered with the Finance Committee quarterly. NAAccounting \GMTEMPI \GASB 45\2014 - board comm report and review\Memo Board Finance Committee 2 -4 -15 draft.docx Table Two illustrates the four components that make up the Present Value of Benefits. The pie charts show that our PARS trust assets are increasing and the unfunded liability is decreasing. It also provides participant statistics. Other Issues Going Forward: • Similar to current pension GASB Statement No. 68 changes that will require agencies to record the total pension unfunded liability on the Statement of Net Position (formerly called the Balance Sheet) along with other valuation and calculation requirement changes, a new OPEB Accounting Standard is in process. The District will be subject to this change in FY 2017 -2018. Most likely the full OPEB liability will also be recorded on the Balance Sheet. Staff is staying abreast of these new pronouncements and will update the Board when more is known. • Blended premiums create an implied subsidy. Several employers use blended premiums and the practice is not uncommon. Active employee and early retiree premiums are blended (costs averaged into one rate for both groups). Generally, healthcare costs increase with age. Active employee premiums subsidize retiree premiums when the two premium amounts are blended. Because some active and retired employees, depending on Tier, must pay a portion of their healthcare premiums, consideration should be given to the current blended rate practice. Changing District premiums to unblended full cost rates by group is a more accurate and equitable method. Early retiree premiums will increase and active employee rates will decrease, and total premiums of both groups combined remain unchanged. Table One shows the total amount of implied subsidy that is transferred from active to retiree premium costs in the actuarial report and in our financial statements. Please contact me if you would like a copy of the full actuarial report or if you have any questions subsequent to today's meeting. OTHER POST EMPLOYMENT BENEFITS (OPEB) /GASB45 TERMS - ACRONYM KEY AAL ACTUARIAL ACCRUED LIABILITY AOC ANNUAL OPEB COST ARC ANNUAL REQUIRED CONTRIBUTION AVA ACTUARIAL VALUE OF ASSETS MVA MARKET VALUE OF ASSETS FNC FUTURE NORMAL COST NC NORMAL COST NOO NET OPEB OBLIGATION PVPB PRESENT VALUE OF PROJECTED BENEFITS UAAL UNFUNDED ACTUARIAL ACCRUED LIABILITY NAAccounting \GMTEMPI \GASB 45\2014 - board comm report and review \Memo Board Finance Committee 2 -4 -15 draft.docx July 1, 2014 OPEB Actuarial Report Highlights TABLE ONE Central Contra Costa Sanitary District Other Post Employment Benefits (OPEB) Summary of Annual Required Contribution and Annual OPEB Cost Components Actuary: Valuation Date: Fiscal Year District Books: Bartell 7/1/2010 2011 -2012 Bartell 7/1/2010 Actual 2012 -2013 Bartell 7/1/2012 I 2013 -2014 Bartell 07/01/2012 2014 -2015 Bartell 07/01/2014 Projected 2015 -2016 Bartell 07/01/2014 2016 -2017 Retiree Medical, Dental & Life Ins. Prem. $ 3,710,606 4,287,096 4,413,641 4,878,000 5,249,000 5,658,000 Implied Subsidy $ 429,000 536,000 556,000 498,000 564,000 656,000 OPEB Expense Prefunded $ 4,160,394 3,476,904 3,133,359 2,727,000 2,053,000 1,552,000 Annual Required Contribution (ARC) $ 8,300,000 $ 8,300,000 $ 8,103,000 8,103,000 7,866,000 7,866,000 Amortization Period (Years) 28 27 26 25 24 23 Other Post Employment Benefits (OPEB) - Summary of Market Value of Investments and Earnings Actual Projected Projected - CCCSD Staff Fiscal Year District Books: 2011 -2012 2012 -2013 2013 -2014 2014 -2015 2015 -2016 2016 -2017 Beg. Market Value of Investments (MVA) $ 18,077,000 22,719,000 29,353,000 36,132,000 41,314,000 46,013,281 Actual PARs Trust Contributions $ 4,132,000 4,143,000 2,828,000 2,810,000 2,053,000 1,552,000 Earnings $ 510,000 2,491,000 3,951,000 2,372,000 2,646,281 2,924,330 Ending MVA $ 22,719,000 29,353,000 36,132,000 41,314,000 46,013,281 50,489,611 Approximate Annual Return 2.50% 10.40% 13.50% 6.25% 6.25% 6.2591. CCB 3/16/2015 11:09 AM N: \Accounting \GMTEMPI \GASB 45 \2014 - board comm report and review \Tables - highlights for board fin comm 7 -1 -14 report.xlsx TABLE ONE July 1, 2014 OPEB Actuarial Report Highlights TABLE TWO ccb 3/16/2015 11:09 AM N: \Accounting \GMTEMPI \GASB 45 \2014 - board Comm report and review \Tables - highlights for board fin corrm 7 -1 -14 report.xlsx TABLE TWO Central Contra Costa Sanitary District Summary of Other Post Retirement Benefit (OP EB) Actuarial Results Current Actuarial Report dated 7/1/2014 and Two Prior Valuations Conducted Every Two Years Per Omitted GASB 45 Rules Present Value of Benefits (PVB) ,000 Present Value of Benefits (PVB) The pie charts to the right illustrate how the Present Value of Benefits (PVB) Present Value of ° 7/1/2010 7/1/2012 7/1/2014 of • .• i that the PVB has increased by ' 1150 �2% 2% 11% 2% the Actuarial Value of Assets [AVA) in the 9% PARS trust increase, the Unfunded Actuarial IlAccrued 28% Liability (UAAL) decreases. Comparing to 7/1/2010 has increased by 258.3% !�i 78% 68% 59 and the UAAL has decreased by 13.25%. Other compared decreased the UAAL are lower actual premiums ■ Future Normal Costs (FNC) ■ Future Normal Costs (FNC) ■ Future Normal Costs (FNC) • • • Normal Cost (NC) ■ Normal Cost (NC) ■ Normal Cost (NC) (living of retirements, mortality . ■ Actuarial Value of Assets (AVA) ■ Actuarial Value of Assets (AVA) i - Actuarial Value of Assets (AVA) terminations. The UAAL has decreased from Unfunded Actuarial Accrued Liability (UAAL) w Unfunded Actuarial Accrued Liability (UAAL) Unfunded Actuarial Accrued Liability (U L) $80.1 M in 2010 to $70.2 M in 2014. -- - - - -- — r -- - - - - -- — change 2014 7/1/2010 7/1/2012 7/1/2014 to 2010 Future Normal Costs (FNC) $ 11,693 $ 11,268 $ 12,619 7.92% Normal Cost (NC) $ 2,213 1 2,134 , 5.06% Actuarial Value of Assets (AVA) $ 9,404 22,481 _2,325 33,695 258.30% Unfunded Actuarial Accrued Liability (UAAL) $ 80,933 78,017 70,209 - 13.251% Present Value of Benefits (PVB) 104,243 113,900 118,848 14.01% Actuarial Accrued Liability (AAL) $ 902337 $ 10.4% 100,498 $ 22.4% 103,904 32.4% 15.02% AVA Funded Percent Participant Statistics: Active Participants: 252 242 259 2.78% Average Age: 47 46.2 46 - 2.13% Retiree Participants: 216 241 249 15.28% Average Age: 67.5 67.3 68.1 ccb 3/16/2015 11:09 AM N: \Accounting \GMTEMPI \GASB 45 \2014 - board Comm report and review \Tables - highlights for board fin corrm 7 -1 -14 report.xlsx TABLE TWO