1.02 TRINITY COUNTY. County Contract No. Board Item Request Form Department Personnel. Contact Carol Martin

Transcription

1 County Contract No. Department Personnel TRINITY COUNTY 1.02 Board Item Request Form Contact Carol Martin Phone Requested Agenda Location Presentations Requested Board Action: Receive a presentation from Nyhart regarding the actuarial valuation report. Fiscal Impact: No fiscal impact. Motion: Second Roll Call: Ayes: Nays: Tabled To: Action: Notes:

2 July 1, 2015 Updated GASB Actuarial Valuation Retiree Health Program Prepared by The Nyhart Company September

3 Purpose of July 1, 2015 Valuation Meet Accounting Requirements (GASB 43 & 45) Biennial valuation of County s liability for retiree health benefits Accrual accounting versus cash (PAYGO) accounting Disclosure of unfunded accrued liability & funded status Determine FY2015/16 & FY2016/17 Annual Required Contribution (accrual expense) Funding Requirements: No statutory or Regulatory Requirement to Pre-fund County established PARS Post-Retirement Health Care Plan Trust in 2006 (Market value of assets at July 1, 2015 = $386,953) Implied Rate Subsidy Actuarial Standard of Practice (ASOP) No. 6 requires inclusion (rare exception with no guidance) of implicit rate subsidy GASB 45 & 75 require accounting results in accordance with ASOPs 2

4 Annual Claim Costs Implied Rate Subsidy $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $ Age Average Cost Actual Cost Exists when non- Medicare retirees & actives pooled together for Medical coverage Retiree Cost > Pooled Groups Average Cost Implied Rate Subsidy = Expected Retiree Cost less Average Cost (Premium) Required to be included as employer liability New ASOP 6 GASB defers to ASOPs Newly issued GASB 74 & 75 Past valuations may have excluded as consistent with prior ASOP 6 & GASB exemption for community rated plans 3

5 Current Retiree Health Benefits County Participates in CalPERS Health Program for Medical Benefits Community-rated plan past valuations excluded implicit rate subsidy Dental & life provided through separate plans Employees With at Least 5 Years of Service & Retiring from County & PERS May Continue Health Benefits at Retirement County Provides Contribution for Health Benefits Subject to a Monthly Maximum (Currently equal to $ per month) Life insurance coverage varies by employment type Retiree May Cover Dependents & Spouse Retiree pays any premium cost above the County s monthly maximum 4

6 Actuarial Valuation Collect Plan, Census & Rate (Premium) Information 299 active employees eligible for health benefits 367 retirees currently receiving County contribution Project Retiree Health Contributions Expected to be Paid by the County for Future Years (Projected Cash Flows) Demographic assumptions: e.g. mortality, withdrawal, retirement Financial assumptions: e.g. discount (interest rate), healthcare costs, healthcare trend Discount Projected Cash Flows to Measurement Date to Determine Present Value of County s Contributions Allocate Present Value to Past, Future & Current Period Using Actuarial Cost Method 5

7 Projected County OPEB Contributions Fiscal Year Explicit Contribution Implicit Rate Subsidy Total Projected Payments 2015/16 $2,254,315 $460,809 $2,715, /17 $2,365,832 $487,061 $2,852, /18 $2,430,620 $482,617 $2,913, /19 $2,549,358 $445,112 $2,994, /20 $2,660,813 $413,941 $3,074, /21 $2,803,342 $415,073 $3,218, /22 $2,915,308 $400,632 $3,315, /23 $3,034,439 $394,790 $3,429, /24 $3,175,541 $395,392 $3,570, /25 $3,310,506 $380,137 $3,690,643 : : : : : : : : All Years $216,028,374 $14,040,831 $230,069,205 6

8 Valuation Results July 1, 2015 Total Projected County Contributions = $230.1M Present Value of County Contributions* = $88.9M Accrued (Past Service) Liability = $63.1M $0.4M pre-funded in trust/$62.7m unfunded $22.9 $2.9 $0.4 $62.7 Accrued (Past Service) Liability - Unfunded Portion Accrued (Past Service) Liability - Funded Portion Future Service Liability Current Year's Benefit Accrual *Interest rate = 4.0% 7

9 GASB 45 Accounting Results Financial Statement Requirements Disclose Unfunded Actuarial Accrued Liability (UAAL) = $62.7M 2015/16 Fiscal Year Accrual Expense = $5.5M Expected County Contributions= $2.7M Difference Accumulates as Additional Liability on Financial Statement Significant Increase From Prior Valuation Inclusion of Liability for Implicit Rate Subsidy Sensitivity Analysis 1% Increase/Decrease in Discount Rate 1% Increase in Healthcare Trend Rates *Projected to end of fiscal period 8

10 Impact of Pre-funding: Full Funding County Funds the Annual Required Contribution (ARC) Each Year to the PARS Trust Assumed Rate of Return on Plan Assets/Discount Rate = 7.0% Impact of Change from Pay-As-You-Go Funding to Full Funding Strategy (Fiscal Year 2015/2016) Present Value of County Contributions: $88.9M to $54.2M Unfunded Past Service Liability (UAAL): $62.7M to $43.1M Annual Required Contribution: $ 5.5M to $ 4.2M Expected County Contribution: $ 2.7M to $ 4.2M 9

11 Impact of Pre-funding: Full Funding - 5 Year Phase In County Funds a Percentage of the Excess of the ARC Over the County s Direct Contribution for Benefits Funds into the PARS trust Percentage equals 20% in 2015/2016 & increases 20% per year to 100% Assumed Rate of Return on Plan Assets/Discount Rate = 6.5% Impact of Change from Pay-As-You-Go Funding to Full Funding Strategy With 5 Year Phase In (Fiscal Year 2015/2016) Present Value of County Contributions: $88.9M to $58.3M Unfunded Past Service Liability (UAAL): $62.7M to $45.6M Annual Required Contribution: $ 5.5M to $ 4.3M Expected County Contribution: $ 2.7M to $ 3.0M 10

12 Advantages to Pre-Funding Higher Rate of Return Under Long Term Investment Strategy - Lowers Liability/Expense Mitigates Impact of Liability Earlier Contributions; Less Contributions Required in Aggregate Increase Financial Stability/Benefit Security 11

13 Overview of New Accounting Requirements GASB 75 Applicable to All OPEB Plans; Replacing GASB 45 Effective for fiscal years beginning after June 15, 2017 Similar to GASB 68 All Employers Will Recognize Net OPEB Liability (NOL) Discount rate will be Aa municipal bond rate for unfunded & blended rate for poorly funded plans Total OPEB Liability (TOL) determined under Entry Age Level % of Pay Cost Method NOL = TOL minus Plan Fiduciary Net Position (Market Value of Assets) Net OPEB Obligation goes away Expense will reflect change in the NOL from year to year Annual Required Contribution (ARC) goes away Additional Note Disclosures and RSI Similar to GASB 68 More extensive sensitivity analysis (+/- 1% discount rate & +/- 1% healthcare trend combinations) 12

14 QUARTERLY MUNICIPAL RATES 13

15 Questions 14