IS YOUR SCHOOL DISTRICT PREPARED TO IMPLEMENT GASB S-75? August 2018

Transcription

1 IS YOUR SCHOOL DISTRICT PREPARED TO IMPLEMENT GASB S-75? August 2018

2 QUESTIONS WE WILL ANSWER TODAY Do you have something to report or disclose? Where do you find the necessary information? What does this mean for the future?

3 MEET YOUR PRESENTERS Fred Lantz, CPA Partner-in-Charge, Sikich LLP Government Services Chad Lucas, CPA Partner, Sikich LLP Krisztina Dommer, CPA Senior Manager, Sikich LLP

4 OTHER POST EMPLOYMENT BENEFITS (OPEB) GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions Issued in June 2015 Effective for fiscal years ending June 30, 2018 and thereafter Applies to employers that provide OPEB benefits Also applies to non-employer contributing entities Financial statement focus shifts from over/underfunding of the ARC to over/underfunding of the plan Total/net OPEB liability recorded on employers F/S (accrual basis financial statements) Replaces NOPEBO/NOPEBA

5 WHAT IS OPEB? Healthcare benefits provided after employment ends (whether or not retired) Medical, dental, vision, prescription drugs Other benefits if provided outside of a pension plan Death benefits, life insurance, disability/long-term care Short term versus long-term disability Part of overall benefit package Inducement to attract employees Exchange of benefits for services performed Recognize cost of benefit over service life of employee

6 WHAT IS OPEB? Includes both explicit benefits and implicit benefits (subsidy) Explicit subsidy the employer pays all or a portion of the benefit Specific dollar amount or percentage of age adjusted premiums Implicit subsidy generally result from retirees continuing in the employers health plan but not paying an age adjusted premium Required in Illinois per ILCS for certain retirees Community rated exemption for implicit subsidy removed by Actuarial Standards of Practice (ASOP)

7 WHAT OPEB IS NOT Does not include special termination benefits (early retirement incentives (ERI)) Offer made by employer for a period of time Inducement to leave employment Includes both voluntary and involuntary programs ERI May impact the OPEB liability Does not include sick leave conversion Follow GASB Statement No. 16 Unless restricted for OPEB benefits

8 WHAT IS OPEB? If we have an OPEB benefit is it a Defined benefit, or Defined contribution Is the OPEB benefit provided through an OPEB Plan Formal plan document Trust or no trust No formal plan document Benefits provided via other venue Benefits documented in personnel policies, union contracts, compiled statutes

9 PLAN TYPES If we have an OPEB plan what type of plan is it Single employer Most general purpose governments and certain special districts Multiple employer Cost sharing Community colleges (CIP) and school districts (THIS) in Illinois Agent Multiple plans for one employer Certain school districts Participate in the statewide cost sharing plan for teachers (THIS) Separate single employer defined benefit plan for administrators, other employees

10 TEACHERS HEALTH INSURANCE SECURITY FUND (THIS) Defined benefit OPEB plan Multiple employer cost-sharing plan Special funding situation Employee 1.12% of covered payroll Employer -.84% of covered payroll State 1.12% of covered payroll Retiree - premium Non-employer is legally responsible for making a portion of employer contributions Pay as you go financing, minimal net assets to pay benefits (deficit)

11 TEACHERS HEALTH INSURANCE SECURITY FUND (THIS) Net OPEB liability allocated to state (nonemployer) and employers (schools) Report proportionate share of THIS net (total) OPEB liability Provided by State in allocation audit report Report in accrual basis financial statements Governmental activities Enterprise funds Total OPEB liability Schools liabilities range from $40,000 $416,000,000 Report revenue/expense for state share Add note disclosures Both accrual basis and cash basis Add RSI Different than GASB S-68 on pensions (TRS)

12 TEACHERS HEALTH INSURANCE SECURITY FUND: NOTE DISCLOSURES - GENERAL OPEB Plan Description Teachers Health Insurance Security Fund administered by the State Department of Central Management Services to provide health coverage benefits for retired employees of participating employers throughout the State of Illinois, excluding the Chicago Public School System. Description of benefits provided. Description of contributions requirements On-behalf contributions (on behalf of members by the state) Employer contributions Information on how to obtain the separate annual financial report for THIS: on the website of the Illinois Auditor General: Reports/ABC-List.asp. The current reports are listed under Central Management Services. Prior reports are available under Healthcare and Family Services.

13 TEACHERS HEALTH INSURANCE SECURITY FUND: NOTE DISCLOSURES GENERAL (CONT.) Actuarial Assumptions (from Actuarial Valuation) Inflation Salary increases Investment Rate of Return Healthcare cost trend rates Discount Rate Information (from Actuarial Valuation) Other disclosures specific to the Actuarial Valuation from a combination of sources.

14 TEACHERS HEALTH INSURANCE SECURITY FUND INFORMATION What puzzle pieces will you need to gather in order to comply with the requirements of GASB Statement 75 for OPEB? 1. THIS Fund Financial Audit for the year ended June 30, Actuarial Valuation for the Teachers Retirement Insurance Program of the State of Illinois (valuation dated June 30, 2016 measured and rolled to June 30, 2017, to be utilized for employers with fiscal year ends of June 30, The Report on the Allocation of Other Postemployment Benefit Amounts for the State of Illinois Department of Health Management Services Teachers Health Insurance Security Fund Breaks down each employer s piece of the total reportable amounts for contributions, deferred outflows of resources, net OPEB liabilities, deferred outflows of resources, and OPEB expense. 4. Annual Report Remittances Teachers Retirement Insurance Program (THIS) This report is on the second page of the same report prepared for the Teacher s Retirement System of the State of Illinois Presents the amounts that need to be disclosed and reports as on behalf contributions from the state as well as the amount that was contributed by the employer for disclosure in the notes to the financial statements.

15 TEACHERS HEALTH INSURANCE SECURITY FUND LOCATION OF INFORMATION Once the information is obtained, the allocation must be computed for the note disclosure. Start with the Allocation Report Contains the allocation percentage attributed to each individual employer. Contains items allocated by percentage to each employer Employer Contribution Beginning and Ending OPEB Liability Deferred Outflows of Resources Deferred Inflows of Resources OPEB Expense

16 TEACHERS HEALTH INSURANCE SECURITY FUND LOCATION OF INFORMATION (CONT.) Continue with the Actuarial Valuation Report Apply the allocation percentage to each item contained in total in the actuarial valuation report for the entire THIS plan.

17 TEACHERS HEALTH INSURANCE SECURITY FUND APPLICATION EXAMPLE: THIS proportionate share = PROPORTIONATE SHARE OF COLLECTIVE NET OPEB LIABILITY 2.56% 3.56% 4.56% PER VALUATION 31,139,345, ,949,568, ,796,923, % 634, , , PROPORTIONATE SHARE OF HEALTH CARE COST TREND RATES 2.56% 3.56% 4.56% PER VALUATION 20,943,959, ,949,568, ,134,273, % 427, , ,607.83

18 TEACHERS HEALTH INSURANCE SECURITY FUND APPLICATION EXAMPLE: THIS proportionate share = PROPORTIONATE SHARE OF NET DEFERRED OUTFLOWS (INFLOWS) ALLOCATED PER VALUATION % 2019 (476,928,017.00) (9,725) 2020 (476,928,017.00) (9,725) 2021 (476,928,017.00) (9,725) 2022 (476,928,017.00) (9,725)

19 TEACHERS HEALTH INSURANCE SECURITY FUND APPLICATION EXAMPLE: THIS proportionate share = STATE PROPORTIONATE SHARE OF CONTRIBUTIONS 4, Current Year Contribution 109,703, Subtotal School District Contributions (page 27 of Allocation Report) % State's proportionate share of contributions 13,527,447, Total State Appropriations Ending Net OPEB Liability, (page 96 of Allocation Report) 522, State's propoportionate share of the net OPEB liability associated with the employer

20 TEACHERS HEALTH INSURANCE SECURITY FUND REQUIRED SUPPLEMENTARY INFORMATION Schedule of Employer Contributions and Notes (10 years) Supporting information obtained from Annual Remittances Report from TRS. Statutorily required contribution total contributions due for employer amount. Contributions in relation to the statutorily required contribution total contributions paid (normally agrees with the amount due). Contribution deficiency (excess) normally zero. Employer s covered payroll covered payroll disclosed in Annual Remittance Report for TRS. Contributions as a percentage of covered payroll

21 TEACHERS HEALTH INSURANCE SECURITY FUND REQUIRED SUPPLEMENTARY INFORMATION Schedule of Employer Contributions and Notes (10 years)

22 TEACHERS HEALTH INSURANCE SECURITY FUND REQUIRED SUPPLEMENTARY INFORMATION Schedule of Employer s Proportionate Share of the Collective Net OPEB Liability (10 years) Information obtained from Allocation Report Employer s proportion of the collective net OPEB liability (asset) Employer s proportionate share of the collective net OPEB liability (asset) Employer s covered payroll - covered payroll disclosed in Annual Remittance Report for TRS. Employer s proportionate share of the collective net OPEB liability (asset) as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total OPEB liability

23 TEACHERS HEALTH INSURANCE SECURITY FUND REQUIRED SUPPLEMENTARY INFORMATION Schedule of Employer s Proportionate Share of the Collective Net OPEB Liability (10 years)

24 POST IMPLEMENTATION REPORTING Shift in focus GASB 45 Reporting a liability for any funding shortfall(s) (ARC determined by actuary) Example - Unpaid monthly mortgage payment GASB 75 Reporting a liability for total actuary determined PV of all future benefits Example Unpaid mortgage balance Previously disclosed in RSI under GASB 45 Result Larger liability reported on the Statement of Net Position Assuming a pay-as-you-go methodology

25 EFFECT ON FINANCIAL POSITION Liability Proportionate share of THIS fund total liability Single employer plan (administrators and other employees - IMRF) Net Position Liability will negatively affect unrestricted net position

26 ASSESSMENT OF FINANCIAL POSITION Rating Agencies Evaluate financial status Evaluate financial policies (i.e. funding) Issues for ratings Predictability Stability Flexibility

27 POLICY ISSUES Funding (Pre-funding) Single Employer plans Cost Sharing plans Less incentive to do so, unless state addresses Set aside outside of a trust Evaluate assumptions and calculations Used by actuaries Managing risk Self insurance vs. third-party provider Stop loss (reinsurance) Take action to address the issue When the flexibility to do so exists

28 THANK YOU Contact Information: Fred Lantz Chad Lucas Krisztina Dommer

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