Wayne County GASB 45 Actuarial Valuation Fiscal Year Ending September 30, 2015

Transcription

1 Wayne County GASB 45 Actuarial Valuation Fiscal Year Ending September 30, 2015 Prepared by: Nyhart Actuary & Employee Benefits 8415 Allison Pointe Blvd., Suite 300 Indianapolis, IN Ph: (317)

2 Table of Contents Page Certification 1 Actuary s Notes 3 Executive Summary 5 GASB Disclosures GASB Results 8 Schedule of Funding Progress 9 Schedule of Employer Contributions 10 Historical Annual OPEB Cost 10 Reconciliation of Actuarial Accrued Liability (AAL) 11 Employer Contribution Cash Flow Projections 12 Substantive Plan Provisions 14 Actuarial Methods and Assumptions 19 Summary of Plan Participants 24 Appendix 27 Comparison of Participant Demographic Information 28 Glossary 29 Decrements Exhibit 30 Retirement Rates Exhibit 31 Illustrations of GASB Calculations 32 Definitions 34

3 January 26, 2016 Tony Saunders Wayne County 500 Griswold, 20 th Floor Detroit, MI This report summarizes the GASB actuarial valuation for Wayne County 2014/15 fiscal year. To the best of our knowledge, the report presents a fair position of the funded status of the plan in accordance with GASB Statement No. 45 (Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions). The valuation is also based upon our understanding of the plan provisions as summarized within the report. The information presented herein is based on the actuarial assumptions and substantive plan provisions summarized in this report and participant information furnished to us by the Plan Sponsor. We have reviewed the employee census provided by the Plan Sponsor for reasonableness when compared to the prior information provided but have not audited the information at the source, and therefore do not accept responsibility for the accuracy or the completeness of the data on which the information is based. When relevant data may be missing, we may have made assumptions we feel are neutral or conservative to the purpose of the measurement. We are not aware of any significant issues with and have relied on the data provided. The discount rate and other economic assumptions have been selected by the Plan Sponsor. Demographic assumptions have been selected by the Plan Sponsor with the concurrence of Nyhart. In our opinion, the actuarial assumptions are individually reasonable and in combination represent our estimate of anticipated experience of the Plan. All calculations have been made in accordance with generally accepted actuarial principles and practice. Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period); and changes in plan provisions or applicable law. We did not perform an analysis of the potential range of future measurements due to the limited scope of our engagement. To our knowledge, there have been no significant events prior to the current year's measurement date or as of the date of this report that could materially affect the results contained herein. 1 P a g e

4 Neither Nyhart nor any of its employees has any relationship with the plan or its sponsor that could impair or appear to impair the objectivity of this report. Our professional work is in full compliance with the American Academy of Actuaries Code of Professional Conduct Precept 7 regarding conflict of interest. The undersigned meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. Should you have any questions please do not hesitate to contact us. Randy Gomez, FSA, MAAA Consulting Actuary Evi Laksana, ASA, MAAA Valuation Actuary 2 P a g e

5 Actuary s Notes For Fiscal Year Ending September 30, 2015 The prior year s GASB results shown in this report are different from the County s audited financial statement disclosure for FYE September 30, 2014 due to the October 1, 2013 Trust balance revision. There are changes to the substantive plan provisions since the last full valuation, which was for the fiscal year ending September 30, All of the changes described below decrease the County s liabilities. 1. Retirees classified as MIRROR by the County are eligible to retain their current retiree health benefits, however, they are required to enroll in the HDHP 80/20 plan. The required retiree contribution is 10% of monthly premium. When the retiree turns 60, retiree contribution will be frozen at the applicable 10% of HDHP premium in that year until all covered members in the policy turns 65, at which time retiree health benefits come non-contributory. This change is also applicable to Mental Health Authority (MHA) retirees. 2. For all other retirees classified as non-mirror by the County, the County s only obligation to these retirees is in providing stipend benefits as described in the Substantive Plan Provisions section. These retirees must obtain their health coverage elsewhere. This change is also applicable to Mental Health Authority (MHA) retirees. 3. Non-POAM non-rmsa active employees who have at least 20 years of service as of October 1, 2015 are eligible for the stipend benefits. The County s only obligation to these employees at retirement is in providing stipend benefits as described in the Substantive Plan Provisions section. These employees must obtain their health coverage elsewhere at retirement. 4. For POAM employees who are non-rmsa eligible: a. Those who retire prior to October 1, 2017 are eligible to retain their current health benefits, however, they are required to enroll in the HDHP 80/20 plan. The required contribution at retirement is 10% of monthly premium. When the retiree turns 60, retiree contribution will be frozen at the applicable 10% of HDHP premium in that year until all covered members in the policy turns 65, at which time retiree health benefits come non-contributory. b. Those who do not retire by October 1, 2017 are eligible to receive stipend benefits if they have at least 20 years of service as of October 1, The County s only obligation to these employees at retirement is in providing stipend benefits as described in the Substantive Plan Provisions section. These employees must obtain their health coverage elsewhere at retirement. 5. RMSA active employees are not eligible to enroll in the County s group health plan at retirement. 3 P a g e

6 Actuary s Notes For Fiscal Year Ending September 30, 2015 Two actuarial assumptions have been updated since the last full valuation, which was for the fiscal year ending September 30, 2014: 1. Amortization type for County s liabilities has been changed to a closed period from an open period (the remaining amortization period as of September 30, 2015 is 30 years). A closed period amortization is a more conservative and prudent approach to take for pre-funding long-term obligations, such as OPEB liabilities. This change has no impact in this year s County s liabilities or Annual Required Contribution. 2. Health care trend rates have been reset to the same initial trend used in the last valuation. Comparison of actual and expected trend rates are as shown below. This change caused an increase in the County s liabilities. FYE Prior Valuation Current Valuation FYE Prior Valuation Current Valuation % 9.0% % 6.5% % 8.5% % 6.0% % 8.0% % 5.5% % 7.5% % 5.0% % 7.0% 4 P a g e

7 Actuary s Notes For Fiscal Year Ending September 30, 2015 Summary of Results (Results are shown in thousands) Presented below is the summary of GASB 45 results for the fiscal year ending September 30, 2015 compared to the prior fiscal year as shown in GASB 45 actuarial valuation report for FYE September 30, 2014 revised in November 2015 for corrected Actuarial Value of Assets. As of October 1, As of October 1, 2014 Total MHA County Total MHA County Actuarial Accrued Liability (AAL) $ 1,333,744 $ 8,075 $ 1,325,669 $ 476,656 $ 5,432 $ 471,224 Actuarial Value of Assets (AVA) $ 9,106 $ 0 $ 9,106 $ 9,106 $ 0 $ 9,106 Unfunded AAL $ 1,324,638 $ 8,075 $ 1,316,563 $ 467,550 $ 5,432 $ 462,118 Funded Ratio 0.7% 0.0% 0.7% 1.9% 0.0% 1.9% FY 2013/14 FY 2014/15 Total MHA County Total MHA County Annual Required Contribution $ 77,623 $ 693 $ 76,930 $ 20,602 $ 489 $ 20,113 Annual OPEB Cost $ 77,613 $ 628 $ 76,985 $ 20,582 $ 403 $ 20,179 Annual Employer Contribution $ 35,901 $ 309 $ 35,592 $ 16,386 $ 201 $ 16,185 As of September 30, 2014 As of September 30, 2015 Total MHA County Total MHA County Net OPEB Obligation $ 256,887 $ 1,719 $ 255,168 $ 261,083 $ 1,921 $ 259,162 As of October 1, 2015 Total MHA County Total Active Participants 2 1, ,385 Total Retiree Participants 5, ,046 1 Based on FYE 9/30/2014 GASB Report updated in November 2015, which are different from the County s audited financial statement disclosure for FYE September 30, 2014 due to the October 1, 2013 Trust balance revision. 2 Total active participants above only includes active employees who are either eligible for subsidized retiree health benefits or stipend benefits. 5 P a g e

8 Actuary s Notes For Fiscal Year Ending September 30, 2015 Below is a breakdown of total GASB 45 liabilities allocated to past, current, and future service as of October 1, 2014 compared to the prior year. (Results are shown in thousands) As of October 1, 2013 Total MHA County Present Value of Future Benefits $ 1,604,299 $ 8,075 $ 1,596,224 Active Employees 717, ,307 Retired Employees 886,992 8, ,917 Actuarial Accrued Liability $ 1,333,744 $ 8,075 $ 1,325,669 Active Employees 446, ,752 Retired Employees 886,992 8, ,917 Normal Cost $ 23,662 $ 0 $ 23,662 Future Normal Cost $ 246,893 $ 0 $ 246,893 As of October 1, 2014 Total MHA County Present Value of Future Benefits $ 485,971 $ 5,432 $ 480,539 Active Employees 57, ,215 Retired Employees 428,756 5, ,324 Present Value of Future Benefits (PVFB) is the amount needed as of October 1, 2013 and 2014 to fully fund the County s retiree health care subsidies for existing and future retirees and their dependents assuming all actuarial assumptions are met. Actuarial Accrued Liability (AAL) is the portion of PVFB considered to be accrued or earned as of October 1, 2013 and This amount is a required disclosure in the Required Supplementary Information section. Normal Cost is the portion of the total liability amount that is attributed and accrued for current year s active employee service by the actuarial cost method. Future Normal Cost is the portion of the total liability amount that is attributed to the future employee by the actuarial cost method. Actuarial Accrued Liability $ 476,656 $ 5,432 $ 471,224 Active Employees 47, ,900 Retired Employees 428,756 5, ,324 Normal Cost $ 1,680 $ 0 $ 1,680 Future Normal Cost $ 7,635 $ 0 $ 7,635 6 P a g e

9 Actuary s Notes For Fiscal Year Ending September 30, 2015 Below is a breakdown of total GASB 45 Actuarial Accrued Liability (AAL) allocated to pre and post Medicare eligibility. The liability shown below includes explicit (if any) and implicit subsidies. Refer to the Substantive Plan Provisions section for complete information on the Plan Sponsor s GASB subsidies. (Results are shown in thousands) As of October 1, 2013 Total MHA County Active Pre-Medicare $ 93,508 $ 0 $ 93,508 Active Post-Medicare 353, ,244 Total Active AAL 446, ,752 Retirees Pre-Medicare $ 130,526 $ 396 $ 130,130 Retirees Post-Medicare 756,466 7, ,787 Total Retirees AAL 886,992 8, ,917 Total AAL $ 1,333,744 $ 8,075 $ 1,325,669 Millions $1,200 $800 $400 $0 Change in AAL - County $1,102 $224 $96 $375 Pre-Medicare Cost Post-Medicare Cost October 1, 2013 October 1, 2014 As of October 1, 2014 Total MHA County Active Pre-Medicare $ 21,719 $ 0 $ 21,719 Active Post-Medicare 26, ,181 Total Active AAL 47, ,900 Thousands $8,000 $6,000 Change in AAL - MHA Retirees Pre-Medicare $ 74,917 $ 238 $ 74,679 Retirees Post-Medicare 353,839 5, ,645 Total Retirees AAL 428,756 5, ,324 $4,000 $2,000 $7,679 $5,194 Total AAL $ 476,656 $ 5,432 $ 471,224 $0 $396 $238 Pre-Medicare Cost Post-Medicare Cost October 1, 2013 October 1, P a g e

10 GASB Disclosures For Fiscal Year Ending September 30, 2015 GASB Results (Results are shown in thousands) Required Supplementary Information FY 2013/14 3 FY 2014/15 MHA County Total MHA County Total AAL beg. of year $ 8,075 $ 1,325,669 $ 1,333,744 $ 5,432 $ 471,224 $ 476,656 AVA beg. of year 0 (9,106) (9,106) 0 (9,106) (9,106) Unfunded AAL (UAAL) $ 8,075 $ 1,316,563 $ 1,324,638 $ 5,432 $ 462,118 $ 467,550 Funded Ratio 0.0% 0.7% 0.7% 0.0% 1.9% 1.9% Covered payroll N/A $ 181,566 $ 181,566 $ N/A $ 76,105 $ 76,105 UAAL as a % of covered payroll N/A 725.1% 729.6% N/A 607.2% 614.3% ARC MHA County Total MHA County Total Normal cost beg. of year $ 0 $ 23,662 $ 23,662 $ 0 $ 1,680 $ 1,680 Amortization of the UAAL ,309 50, ,659 18,129 Total $ 666 $ 73,971 $ 74,637 $ 470 $ 19,339 $ 19,809 Interest to end of year 27 2,959 2, ARC $ 693 $ 76,930 $ 77,623 $ 489 $ 20,113 $ 20,602 Net OPEB Obligation (NOO) MHA County Total MHA County Total ARC as of end of year $ 693 $ 76,930 $ 77,623 $ 489 $ 20,113 $ 20,602 Interest on NOO to end of year 56 8,551 8, ,207 10,276 NOO amortization adjustment to the ARC (121) (8,496) (8,617) (155) (10,141) (10,296) Annual OPEB cost $ 628 $ 76,985 $ 77,613 $ 403 $ 20,179 $ 20,582 ER contribution for pay-go cost (309) (35,592) (35,901) (201) (16,185) (16,386) ER contribution for pre-funding Change in NOO $ 319 $ 41,393 $ 41,712 $ 202 $ 3,994 $ 4,196 NOO as of beginning of year 1, , ,175 1, , ,887 NOO as of end of year $ 1,719 $ 255,168 $ 256,887 $ 1,921 $ 259,162 $ 261,083 3 Based on FYE 9/30/2014 GASB Report updated in November 2015, which are different from the County s audited financial statement disclosure for FYE September 30, 2014 due to the October 1, 2013 Trust balance revision. Annual Required Contribution (ARC) is the annual expense recorded in the income statement under GASB 45 accrual accounting. It replaces the cash basis method of accounting recognition with an accrual method. The GASB 45 ARC is higher than the pay-asyou-go cost because it includes recognition of employer costs expected to be paid in future accounting periods. Pay-as-you-go Cost is the expected total employer cash cost for the coming period based on all explicit and implicit subsidies. It is also the amount recognized as expense on the Income Statement under pay-asyou-go accounting. Net OPEB Obligation is the cumulative difference between the annual OPEB cost and employer contributions. This obligation will be created if cash contributions are less than the current year expense under GASB 45 accrual rules. The net obligation is recorded as a liability on the employer s balance sheet which will reduce the net fund balance. The value of implicit subsidies is considered as part of cash contributions for the current period. Other cash expenditures that meet certain conditions are also considered as contributions for GASB 45 purposes. 8 P a g e

11 GASB Disclosures For Fiscal Year Ending September 30, 2015 Summary of GASB 45 Financial Results (Results are shown in thousands) Presented below is the summary of GASB 45 results for the fiscal year ending September 30, 2015 and prior fiscal years. FY 2012/13 information is combined for County and Mental Health Authority (MHA). Schedule of Funding Progress As of Actuarial Accrued Liability (AAL) Actuarial Value of Assets (AVA) Unfunded Actuarial Accrued Liability (UAAL) Funded Ratio Covered Payroll UAAL as % of Covered Payroll A B C = A - B D = B / A E F = C / E October 1, 2014 $ 476,656 $ 9,106 $ 467, % $ 76, % MHA $ 5,432 $ 0 $ 5, % $ N/A N/A County $ 471,224 $ 9,106 $ 462, % $ 76, % October 1, $ 1,333,744 $ 9,106 $ 1,324, % $ 181, % MHA $ 8,075 $ 0 $ 8, % $ N/A N/A County $ 1,325,669 $ 9,106 $ 1,316, % $ 181, % October 1, 2012 $ 1,568,535 $ 0 $ 1,568, % $ N/A N/A 4 Based on FYE 9/30/2014 GASB Report updated in November 2015, which are different from the County s audited financial statement disclosure for FYE September 30, 2014 due to the October 1, 2013 Trust balance revision. 9 P a g e

12 GASB Disclosures For Fiscal Year Ending September 30, 2015 Summary of GASB 45 Financial Results (Results are shown in thousands) Schedule of Employer Contributions FYE Employer Contributions Annual Required Contribution (ARC) % of ARC Contributed A B C = A / B September 30, 2015 $ 16,386 $ 20, % MHA $ 201 $ % County $ 16,185 $ 20, % September 30, $ 35,901 $ 77, % MHA $ 309 $ % County $ 35,592 $ 76, % September 30, 2013 $ 53,908 $ 89, % Historical Annual OPEB Cost As of Annual OPEB Cost % of Annual OPEB Cost Contributed Net OPEB Obligation September 30, 2015 $ 20, % $ 261,083 MHA $ % $ 1,921 County $ 20, % $ 259,162 September 30, $ 77, % $ 256,887 MHA $ % $ 1,719 County $ 76, % $ 255,168 September 30, 2013 $ 89, % $ 216, Based on FYE 9/30/2014 GASB Report updated in November 2015, which are different from the County s audited financial statement disclosure for FYE September 30, 2014 due to the October 1, 2013 Trust balance revision. 6 Original Net OPEB Obligation balance as of September 30, 2013 before the reversal due to elimination of benefit for MHA active employees. 10 P a g e

13 Reconciliation of Actuarial Accrued Liability For Fiscal Year Ending September 30, 2015 The Actuarial Accrued Liability (AAL) is expected to change on an annual basis as a result of expected and unexpected events. Under normal circumstances, it is generally expected to have a net increase each year. Below is a list of the most common events affecting the AAL and whether they increase or decrease the liability. Expected Events Increases in AAL due to additional benefit accruals as employees continue to earn service each year Increases in AAL due to interest as the employees and retirees age Decreases in AAL due to benefit payments Unexpected Events Increases in AAL when actual premium rates increase more than expected. A liability decrease occurs when premium rates increase less than expected. Increases in AAL when more new retirements occur than expected or fewer terminations occur than anticipated. Liability decreases occur when the opposite outcomes happen. Increases or decreases in AAL depending on whether benefit provisions are improved or reduced. (Results are shown in thousands) FY 2013/14 7 FY 2014/15 MHA County Total MHA County Total AAL as of beginning of year $ 8,075 $ 1,325,669 $ 1,333,744 $ 5,432 $ 471,224 $ 476,656 Normal cost as of beginning of year 0 23,662 23, ,680 1,680 Expected benefit payments during the year (303) (34,891) (35,194) (201) (16,185) (16,386) Interest adjustment to end of year ,282 53, ,596 18,809 Expected AAL as of end of year $ 8,089 $ 1,367,722 $ 1,375,811 $ 5,444 $ 475,315 $ 480,759 Actuarial (gain) / loss due to experience 6, , , Preliminary AAL as of end of year reflecting actual experience $ 14,359 $ 1,831,251 $ 1,845,610 $ 5,444 $ 475,315 $ 480,759 Actuarial (gain) / loss due to plan provisions (9,346) (1,416,179) (1,425,525) Actuarial (gain) / loss due to assumption changes Reconciliation of AAL shows what the actuary expects the actuarial accrued liability to be at the beginning of the following fiscal year based on current assumptions and plan provisions. The expected end of year AAL will change as actual plan experience varies from assumptions. Generally, the AAL is expected to have a net increase each year ,152 56, Actual AAL as of end of year $ 5,432 $ 471,224 $ 476,656 $ 5,444 $ 475,315 $ 480,759 7 Actuarial Accrued Liability (AAL) as of beginning of year was actuarially rolled-back from end of year AAL on a no gain/loss basis. 11 P a g e

14 Employer Contribution Cash Flow Projections For Fiscal Year Ending September 30, 2015 The below projections show the actuarially estimated employer-paid contributions for retiree health benefits for the next ten years. Results are shown separately for current /future retirees and gross claim costs/retiree contributions. These projections include explicit and implicit subsidies. (Results are shown in thousands) COUNTY FYE Current Retirees Future Retirees 8 Total 2015 $ 15,746 $ 439 $ 16, $ 17,163 $ 479 $ 17, $ 17,352 $ 883 $ 18, $ 17,794 $ 1,492 $ 19, $ 18,219 $ 1,824 $ 20, $ 18,641 $ 2,097 $ 20, $ 19,017 $ 2,395 $ 21, $ 19,492 $ 2,677 $ 22, $ 19,813 $ 3,085 $ 22, $ 19,913 $ 3,397 $ 23,310 FYE Estimated Claims Costs Retiree Contributions Net Employer- Paid Costs 2015 $ 16,796 $ 611 $ 16, $ 18,308 $ 666 $ 17, $ 18,918 $ 683 $ 18, $ 19,979 $ 693 $ 19, $ 20,717 $ 674 $ 20, $ 21,394 $ 656 $ 20, $ 22,044 $ 632 $ 21, $ 22,793 $ 624 $ 22, $ 23,495 $ 597 $ 22, $ 23,884 $ 574 $ 23,310 Millions Millions $25 $20 $15 $10 $5 $0 $25 $20 $15 $10 $5 $0 Projected Employer Pay-go Cost - County Current Retirees Future Retirees Claims and Cost Sharing Projections - County Retiree Contributions Net Employer Paid Costs 8 Projections for future retirees do not take into account future new hires. 12 P a g e

15 Employer Contribution Cash Flow Projections For Fiscal Year Ending September 30, 2015 The below projections show the actuarially estimated employer-paid contributions for retiree health benefits for the next ten years. Results are shown separately for current /future retirees and gross claim costs/retiree contributions. These projections include explicit and implicit subsidies. (Results are shown in thousands) MHA $300 Projected Employer Pay-go Cost - MHA FYE Current Retirees Future Retirees 9 Total 2015 $ 201 $ 0 $ $ 219 $ 0 $ $ 231 $ 0 $ 231 Thousands $240 $ $ 232 $ 0 $ $ 246 $ 0 $ 246 $ $ 251 $ 0 $ 251 $ $ 259 $ 0 $ $ 266 $ 0 $ 266 $ $ 281 $ 0 $ $ 289 $ 0 $ Current Retirees Future Retirees FYE Estimated Claims Costs Retiree Contributions Net Employer- Paid Costs $300 Claims and Cost Sharing Projections - MHA 2015 $ 206 $ 5 $ $ 224 $ 5 $ $ 236 $ 5 $ 231 Thousands $240 $ $ 235 $ 3 $ $ 249 $ 3 $ 246 $ $ 253 $ 2 $ $ 260 $ 1 $ 259 $ $ 267 $ 1 $ $ 281 $ 0 $ $ 289 $ 0 $ 289 $ Retiree Contributions Net Employer Paid Costs 9 Projections for future retirees do not take into account future new hires. 13 P a g e

16 Substantive Plan Provisions For Fiscal Year Ending September 30, 2015 Retiree Health Benefits Non-POAM employees who have at least 20 years of service as of October 1, 2015 are eligible for stipend benefits once they meet the eligibility requirements noted in the next page. POAM employees who retire prior to October 1, 2017 by meeting the eligibility requirements noted in the next page are eligible to retain their current retiree health benefits but they are required to enroll in the HDHP 80/20 plan and pay the required contributions as described on page 17. POAM employees who retire on/after October 1, 2017 are eligible for stipend benefits if they have at least 20 years of service as of October 1, Existing retirees classified as MIRROR by the County are eligible for stipend benefits. Existing retirees classified as non-mirror by the County are eligible to retain their current retiree health benefits but they are required to enroll in the HDHP 80/20 plan and pay the required contributions as describe on page 17. Stipend Benefits Employees and existing retirees eligible for stipend benefits are required to seek health coverage elsewhere and the County s only obligation to this group is in providing the stipend benefits as noted below. Prior to Medicare eligibility, the monthly stipend benefits provided by the County are as shown in the table below. Retiree only Retiree + Spouse (or 1 Dependent) Family AGI* Stipend AGI* Stipend AGI* Stipend < $30k $ 100 < $35k $ 150 < $40k $ 150 $30 to $45k $ 200 $35 to $65k $ 300 $40 to $55k $ 300 >= $45k $ 400 >= $65k $ 750 $55 to $70k $ 400 >= $70k $ 800 Upon Medicare eligibility, the monthly stipend is $130 per person, increasing annually based on percentage increase in general wage levels for non-supervisory AFSCME for the annual period being calculated, but not more than 2%. If there is negative % change from 1/1/2015 in general wage levels for non-supervisory AFSCME, stipend may decrease but not less than $0. The maximum stipend shall never exceed 12.5% of the starting stipend (or $146.25). Additionally, there is a $5 monthly stipend that will replace the existing $29.50 Medicare Part B reimbursement. The additional $5 monthly stipend is not expected to increase in the future. * AGI is short for Adjusted Gross Income. For existing retirees, their AGI is based on their pension benefit. For future retirees, they are assumed to receive the maximum stipends shown above. 14 P a g e

17 Substantive Plan Provisions For Fiscal Year Ending September 30, 2015 Eligibility Employees in retirement plans 1 through 6 are eligible for subsidized retiree health benefits if they meet the age and service requirements of the applicable retirement plan. Employees hired or rehired on/after December 1, 1990 must have 30 years of service at retirement to be eligible for retiree health benefits, unless otherwise noted in the union contracts. Based on the retirement plans normal eligibility requirements and union contract languages, the retiree health benefits eligibility requirements are as follows: Union Contract Retirement Plan* Retiree Health Eligibility AFSCME Supervisory and Non-Supervisory DOH < 12/1/1990 DB 2 or DC 4 55/25, 60/15, 65/8 12/1/1990 DOH < 11/16/2001 DB 2 or DC 4 55/30, 60/15 DOH 11/16/2001 Hybrid 5 30 YOS Building & Construction Trades DOH < 7/1/1991 DB 2 55/25, 60/15, 65/5 7/1/1991 DOH < 10/1/2001 DB 2 or DC 4 60/15, 55/30 DOH 10/1/2001 Hybrid 5 60/15, 30 YOS Dieticians & Nutritionists DOH < 12/1/1990 DC 4 55/25, 60/15, 65/8 12/1/1990 DOH < 12/23/2002 DC 4 60/15, 55/30 DOH 12/23/2002 Hybrid 5 60/15, 30 YOS Executive & Non-Executive Exempt DOH < 12/1/1990 DC 4 55/25, 60/15, 65/8 12/1/1990 DOH < 12/23/2002 DC 4 55/30 DOH 12/23/2002 Hybrid 5 55/30 Government Admin Association DOH < 12/1/1991 DB 2 or DC 4 55/25, 60/15, 65/8 12/1/1991 DOH < 10/1/2001 DB 2 or DC 4 60/15, 30 YOS DOH 10/1/2001 Hybrid 5 60/15, 30 YOS * We did not have the actual retirement plan enrollment information so we have assumed the retirement plan enrollment above based on employee s hire date. 15 P a g e

18 Substantive Plan Provisions For Fiscal Year Ending September 30, 2015 Eligibility Retiree health benefits eligibility requirements (continued): Union Contract Retirement Plan* Retiree Health Eligibility Government Bar Association DOH < 12/1/1990 DB 2 or DC 4 55/25, 60/20, 65/8 12/1/1990 DOH < 2/28/2002 DB 2 or DC 4 60/15, 55/30 DOH 2/28/2002 Hybrid 5 60/15, 30 YOS IUOE Local 324 DOH < 12/1/1990 Hybrid 5 55/25, 60/15, 65/8 12/1/1990 DOH < 8/19/2002 DC 4 60/15, 55/30 DOH 8/19/2002 DC 4 60/15, 30 YOS Judicial Attorneys Association DOH < 12/1/1991 Hybrid 5 55/25, 60/20, 65/8, 30 YOS DOH 12/1/1991 Hybrid 5 60/15, 30 YOS POAM DOH < 12/1/1990 DB 2 or DC 4 55/25, 60/20, 65/8, 30 YOS 12/1/1990 DOH < 10/1/2001 DB 2 or DC 4 55/30 DOH 10/1/2001 Hybrid 5 30 YOS AFSCME 3317 Lieutenants & Sergeants DOH < 12/1/1990 DB 2 25 YOS 12/1/1990 DOH < 10/1/2001 DB 2 or DC 4 60/15, 30 YOS DOH 10/1/2001 Hybrid 5 30 YOS Unite Here Local 24 DOH < 12/1/1990 DB 2 or DC 4 55/25, 60/20, 65/8 12/1/1990 DOH < 5/21/2002 DB 2 or DC 4 55/30, 60/15 DOH 5/21/2002 Hybrid 5 30 YOS * We did not have the actual retirement plan enrollment information so we have assumed the retirement plan enrollment above based on employee s hire date. 16 P a g e

19 Substantive Plan Provisions For Fiscal Year Ending September 30, 2015 Retiree Medical Savings Account (RMSA) Employees hired on/after the cut-off dates shown in the table below are only eligible for Retiree Medical Savings Account (RMSA) benefit. While actively working, these employees contribute 2% of bi-weekly payroll (or a fixed dollar amount as specified by the CBA) and the County will contribute 5% of bi-weekly payroll (or a fixed dollar amount as specified by the CBA). At retirement these employees may utilize the RMSA balance to purchase retiree health benefits through the County by paying the full cost of coverage. Union Contract Subsidized Retiree Health Eligibility Cut-Off Date AFSCME Supervisory Hired on/after 4/4/2008 AFSCME Non-Supervisory Hired on/after 7/31/2008 Building & Construction Trades Hired on/after 12/19/2007 Dieticians & Nutritionists Hired on/after 6/5/2009 Executive & Non-Executive Exempt Hired on/after 3/14/2008 Government Admin Association Hired on/after 10/17/2008 Government Bar Association Hired on/after 4/15/2008 IUOE Local 324 Hired on/after 12/5/2008 Judicial Attorneys Association Hired on/after 9/21/2012 Nurse Unit 1 Hired on/after 6/5/2009 POAM Hired on/after 12/12/2008 AFSCME 3317 Lieutenants & Sergeants Hired on/after 5/2/2007 Unite Here Local 24 Hired on/after 9/29/2008 Spouse Benefit Life Insurance Surviving spouse can continue coverage after the death of the retiree or active employees eligible to retire. County subsidy and/or stipend benefit continues to surviving spouse upon death of the retiree or active employee eligible to retire. The County pays for life insurance benefits at retirement. Majority of current retirees have $5,000 life insurance benefits, but there are others who have varying life insurance benefit amounts. Liability for retirees life insurance benefits paid by Prudential is not included in this report. For future retirees who are eligible for stipend benefits, there s no subsidized life insurance benefits. For those who are allowed to retain the subsidized retiree health benefits, they are eligible to receive $5,000 life insurance benefits at retirement. 17 P a g e

20 Substantive Plan Provisions For Fiscal Year Ending September 30, 2015 Retiree Cost Sharing Medical Benefit All retirees receiving subsidized retiree health benefits are required to enroll in the HDHP 80/20 plan and contribute 10% of the monthly premium. When the retiree turns 60, retiree contribution will be frozen at the applicable 10% monthly premium in that year until all covered members in the policy turn 65, at which time retiree health benefits become non-contributory. All retirees receiving subsidized retiree health benefits are required to enroll in the BCBS HDHP 80/20 plan. All BCBS benefit options are self-insured. The monthly premiums on October 1, 2015 for the BCBS HDHP 80/20 plan are as shown below. Single 2-person 1 Comp BCBS HDHP 80/20 $ $ $ P a g e

21 Actuarial Methods and Assumptions For Fiscal Year Ending September 30, 2015 The actuarial assumptions used in this report represent a reasonable long-term expectation of future OPEB outcomes. As national economic and County experience change over time, the assumptions will be tested for ongoing reasonableness and, if necessary, updated. There are changes to substantive plan provisions and actuarial methods and assumptions since the last GASB valuation, which was for the fiscal year ending September 30, Refer to the Actuary s Notes section for complete information on these changes. For the current year GASB valuation, we have updated the per capita costs. We expect to update health care trend rates and per capita costs again in the next full GASB valuation, which will be for the fiscal year ending September 30, Measurement Date Discount Rate Payroll Growth Inflation Rate Cost Method Amortization Census Data Employer Funding Policy September 30, 2015 with results actuarially rolled-back to October 1, 2014 on a no loss/no gain basis. 4.0% partially funded 3.0% per year (used for amortization purposes only) 3.0% per year Projected Unit Credit with linear proration to decrement County: Level % of pay over a 30-year closed period MHA: Level dollar over a 15-year closed period Census information was provided by the County as of September We have reviewed it for reasonableness and no material modifications were made to the census data except for the following: Employees who were noted in the prior valuation s census data as ineligible for retiree health benefits due to employment category are assumed to stay ineligible in this year s valuation. Certain funds within the County will make an additional pre-funding contribution at the County s discretion into a Section 115 Trust that is equal to the difference between the Annual Required Contribution (ARC) allocated to that fund and the pay-go costs. Allocation of the total ARC to each fund is currently done in the same proportion as their share of retiree healthcare expenses. The Section 115 Trust is currently invested in a Master Demand Account, which is a liquid account with a very low rate of return. The County has elected not to increase the discount rate to reflect the partial pre-funding for these specific funds until they can draw up a Trust policy that contains the recommended asset investment mix that is more aggressive than their current investment. 19 P a g e

22 Actuarial Methods and Assumptions For Fiscal Year Ending September 30, 2015 Mortality Disability Turnover Rate RPH-2014 Total Dataset Mortality Table fully generational using scale MP-2014 None Assumption used to project terminations (voluntary and involuntary) prior to meeting minimum retirement eligibility for retiree health coverage. Termination rates are based Wayne County actuarial valuation report as of September 30, Annual sample rates are shown below. YOS Age General Sheriff % 18.00% % 18.00% % 9.00% % 7.00% % 6.00% % 4.50% % 4.38% % 3.22% % 2.44% % 2.34% % 2.12% % 1.70% % 1.20% % 0.00% All Ages 20 P a g e

23 Actuarial Methods and Assumptions For Fiscal Year Ending September 30, 2015 Retirement Rate Annual retirement rates based on Wayne County actuarial valuation report as of September 30, 2011 are as shown below. Age-Based Service-Based Age General Sheriff 10 YOS General Sheriff % 25% 30 30% 22% 56 20% 25% 31 20% 20% 57 15% 25% 32 15% 20% % 25% 33 30% 30% 60 40% 25% 34 40% 40% % 25% 35 50% 50% 63 30% 27% % 25% 64 20% 27% 39 20% 25% % 27% % 100% 67 20% 27% 68 40% 30% 69 80% 30% % 100% Probabilities of retirement were increased to 50% once the member accrues the maximum benefit of 75% of Average Final Compensation. For GASB valuation, this is assumed to happen when employees have 30 years of service. Health Care Trend Rates FYE Medical/Rx FYE Medical/Rx % % % % % % % % % The initial trend rate was based on a combination of employer history, national trend surveys, and professional judgment. The ultimate trend rate was selected based on historical medical CPI information. Pre-65 stipends will remain the same in the future. Post-65 stipends are assumed to increase by 2.0% beginning in 2016 until it reaches the maximum stipend amount of $ at the end of 2021 at which time it is assumed to remain the same. 10 POAM employees who are eligible to retire prior to October 1, 2017 are assumed to retire when they are first eligible. 21 P a g e

24 Actuarial Methods and Assumptions For Fiscal Year Ending September 30, 2015 Retiree Contributions Per Capita Costs Retiree contributions are assumed to increase 5% annually. Annual per capita costs were calculated based on the 2015/16 premium rates actuarially increased using health index factors and current enrollment. The costs are assumed to increase with health care trend rates. Annual per capita costs by plan are as shown below: Age HDHP 80/20 < 55 $ 4, $ 5, $ 6, $ 3, $ 4, $ 4, $ 5,600 The per capita costs represent the cost of coverage for a retiree-only population. Actuarial standards require the recognition of higher inherent costs for a retired population versus an active population. Health Care Coverage Election Rate 100% of active employees eligible for subsidized retiree health benefits with current coverage are assumed to continue coverage at retirement. 0% of active employees eligible for subsidized retiree health benefits without current coverage are assumed to elect coverage at retirement. 100% of active employees eligible stipend benefits are assumed to receive stipend benefits at retirement. 100% of retirees with current coverage are assumed to continue coverage. 0% of retirees without current coverage are assumed to elect coverage in the future. Spousal Coverage Spousal coverage for current retirees is based on actual data. 70% of employees are assumed to be married at retirement. Husbands are assumed to be three years older than wives. 22 P a g e

25 Actuarial Methods and Assumptions For Fiscal Year Ending September 30, 2015 Explicit Subsidy The difference between (a) the premium rate and (b) the retiree contribution. Below is an example of the monthly explicit subsidies for an active POAM under age 65 retiring before October 1, Premium Rate Retiree Contribution Explicit Subsidy A B C = A B Retiree $ $ $ Spouse $ $ $ Implicit Subsidy The difference between (a) the per capita cost and (b) the premium rate. Below is an example of the monthly implicit subsidies for an active POAM age 60 retiring before October 1, 2017 with spouse of the same age. Per Capita Cost Premium Rate Implicit Subsidy A B C = A B Retiree $ $ $ Spouse $ $ $ All employers that utilize premium rates based on blended active/retiree claims experience will have an implicit subsidy. There is an exception for Medicare plans using a true community-rated premium rate. GASB Subsidy Breakdown Below is a breakdown of the GASB 45 monthly total cost for an active POAM age 60 retiring prior to October 1, 2017 and his / her spouse of the same age. Retiree Spouse Retiree contribution $ $ Explicit subsidy $ $ Implicit subsidy $ $ Total monthly cost $ $ $600 $400 $200 GASB Subsidy Breakdown $32 $180 $466 $333 $0 $37 $52 Retiree Spouse Retiree contribution Explicit subsidy Implicit subsidy 23 P a g e

26 Summary of Plan Participants For Fiscal Year Ending September 30, 2015 Active Employees Actives with coverage AND eligible for retiree health benefits 11 Single Non-Single Total Avg. Age Avg. Svc Salary Non POAM $ 43,286,689 POAM $ 32,753,259 Total , $ 73,039,948 Actives without coverage AND eligible for retiree health benefits $ 65,155 Actives ineligible for retiree health benefits (non-rmsa) 12 Single Non-Single Total Avg. Age Avg. Svc Salary With current coverage , $ 61,410,342 Without current coverage $ 289,924 Actives ineligible for retiree health benefits (RMSA) 13 Single Non-Single Total Avg. Age Avg. Svc Salary With current coverage $ 32,680,606 Without current coverage $ 692,666 Actives ineligible for retiree health benefits (RMSA) $ 8,663, For non-poam, only those who have at least 20 years of service as of October 1, 2015 are included above. For POAM, there may be participants who are not going to be eligible for any benefits at retirement. Out of the two actives who currently have no coverage, one POAM active employee is not going to be eligible for any benefits at retirement while the other non-poam active employee is assumed to receive stipend benefits at retirement. 12 These are non-rmsa eligible employees who are ineligible for either the subsidized retiree health benefits or stipend benefits because they do not have the required years of service as of October 1, They have been excluded from the GASB valuation. 13 These are RMSA eligible employees who are no longer allowed to enroll in the County s group health plan at retirement. There is no GASB liabilities for these employees and they have been excluded from the GASB valuation. 14 These employees were indicated by the County as ineligible for retiree health benefits for various reasons. They have been excluded from the GASB valuation. 24 P a g e

27 Summary of Plan Participants For Fiscal Year Ending September 30, 2015 Retirees County retirees with coverage Single Non-Single Total Avg. Age MIRROR , Non-MIRROR 2,130 1,557 3, Total 2,611 2,243 4, County retirees without coverage Total Avg. Age MIRROR Non-MIRROR Total MHA retirees with coverage Single Non-Single Total Avg. Age MIRROR Non-MIRROR Total MHA retirees without coverage Total Avg. Age MIRROR Non-MIRROR Total MIRROR retirees who currently have no coverage are receiving subsidized life insurance benefits. Non-MIRROR retirees who have no coverage are receiving stipend benefits. They have been included in the GASB valuation. 25 P a g e

28 Summary of Plan Participants For Fiscal Year Ending September 30, 2015 Active Age-Service Distribution Including active employees who are eligible for either subsidized retiree health benefits or stipend benefits only. Years of Service Age < 1 1 to 4 5 to 9 10 to to to to to to & up Total Under to to to to to to to to to & up Total , P a g e

29 Appendix For Fiscal Year Ending September 30, 2015 APPENDIX 27 P a g e

30 Appendix For Fiscal Year Ending September 30, 2015 Comparison of Participant Demographic Information The active participants number below may include active employees who currently have no health care coverage. Refer to Summary of Participants section for an accurate breakdown of active employees with and without coverage. As of October 1, 2014 As of October 1, 2015 Active Participants 15 3,430 1,385 Retired Participants 16 4,984 5,046 Averages for Active Age Service Averages for Inactive Age Active participants enrollment as of October 1, 2014 above excludes those indicated as ineligible for retiree health benefits by the County and active MHA employees who are no longer eligible for retiree health benefits. It includes active employees who are eligible for RMSA benefits only. Active participants enrollment as of October 1, 2015 includes only those who are eligible for either subsidized retiree health benefits or stipend benefits. 16 Retired participants enrollment above include County and MHA retirees (regardless of whether they currently have coverage or not) but excludes spouses who are covered under the County s group health plan. 28 P a g e

31 Glossary For Fiscal Year Ending September 30, 2015 Glossary 29 P a g e

32 Glossary For Fiscal Year Ending September 30, 2015 Decrements Exhibit The table below illustrates how actuarial assumptions can affect a long-term projection of future liabilities. Starting with 100 employees at age 35, the illustrated actuarial assumptions show that employees out of the original 100 are expected to retire and could elect retiree health benefits at age 55. Age # Remaining # of Terminations # of Retirements Total # Remaining # of Terminations # of Retirements Total Age Employees per Year* per Year* Decrements Employees per Year* per Year* Decrements Decrements Exhibit Actives Total Terminations Total Retirements * The above rates are illustrative rates and are not used in our GASB calculations. 30 P a g e

33 Glossary For Fiscal Year Ending September 30, 2015 Retirement Rates Exhibit The table below illustrates how actuarial assumptions can affect a long-term projection of future liabilities. The illustrated retirement rates show the number of employees who are assumed to retire annually based on 100 employees age 55 who are eligible for retiree health care coverage. The average age at retirement is Age Active Employees BOY Annual Retirement Rates* # Retirements per Year Active Employees EOY % % % % % % % % % % % Retirement Rates Exhibit Actives Total Retirements * The above rates are illustrative rates and are not used in our GASB calculations. 31 P a g e

34 Glossary For Fiscal Year Ending September 30, 2015 Illustration of GASB Calculations The purpose of the illustration is to familiarize non-actuaries with the GASB 45 actuarial calculation process. I. Facts 1. The employer provides subsidized retiree health coverage worth $100,000 to employees retiring at age 55 with 25 years of service. The employer funds for retiree health coverage on a pay-as-you-go basis. 2. Employee X is age 50 and has worked 20 years with the employer. 3. Retiree health subsidies are paid from the general fund assets which are expected to earn 4.5% per year on a long-term basis. 4. Based on Employee X s age and sex he has a 98.0% probability of living to age 55 and a 95.0% probability of continuing to work to age 55. II. Calculation of Present Value of Future Benefits Present Value of Future Benefits represents the cost to finance benefits payable in the future to current and future retirees and beneficiaries, discounted to reflect the expected effects of the time value (present value) of money and the probabilities of payment. Value Description A. $100,000 Projected benefit at retirement B. 80.2% Interest discount for five years = (1 / 1.045) 5 C. 98.0% Probability of living to retirement age D. 95.0% Probability of continuing to work to retirement age E. $74,666 Present value of projected retirement benefit measured at employee s current age = A x B x C x D 32 P a g e

35 Glossary For Fiscal Year Ending September 30, 2015 Illustration of GASB Calculations (continued) III. Calculation of Actuarial Accrued Liability Actuarial Accrued Liability represents the portion of the Present Value of Future Benefits which has been accrued recognizing the employee s past service with the employer. The Actuarial Accrued Liability is a required disclosure in the Required Supplementary Information section of the employer s financial statement. Value Description A. $74,666 Present value of projected retirement benefit measured at employee s current age B. 20 Current years of service with employer C. 25 Projected years of service with employer at retirement D. $59,733 Actuarial accrued liability measured at employee s current age = A x B / C IV. Calculation of Normal Cost Normal Cost represents the portion of the Present Value of Future Benefits allocated to the current year. Value Description A. $74,666 Present value of projected retirement benefit measured at employee s current age B. 25 Projected years of service with employer at retirement C. $2,987 Normal cost measured at employee s current age = A / B V. Calculation of Annual Required Contribution Annual Required Contribution is the total expense for the current year to be shown in the employer s income statement. Value Description A. $2,987 Normal Cost for the current year B. $3, year amortization (level dollar method) of Unfunded Actuarial Accrued Liability using a 4.5% interest rate discount factor C. $292 Interest adjustment = 4.5% x (A + B) D. $6,788 Annual Required Contribution = A + B + C 33 P a g e

36 Glossary For Fiscal Year Ending September 30, 2015 Definitions GASB 45 defines several unique terms not commonly employed in the funding of pension and retiree health plans. The definitions of the terms used in the GASB actuarial valuations are noted below. 1. Actuarial Accrued Liability That portion, as determined by a particular Actuarial Cost Method, of the Actuarial Present Value of plan benefits and expenses which is not provided for by the future Normal Costs. 2. Actuarial Assumptions Assumptions as to the occurrence of future events affecting health care costs, such as: mortality, withdrawal, disablement and retirement; changes in compensation and Government provided health care benefits; rates of investment earnings and asset appreciation or depreciation; procedures used to determine the Actuarial Value of Assets; characteristics of future entrants for Open Group Actuarial Cost Methods; and other relevant items. 3. Actuarial Cost Method A procedure for determining the Actuarial Present Value of future benefits and expenses and for developing an actuarially equivalent allocation of such value to time periods, usually in the form of a Normal Cost and an Actuarial Accrued Liability. 4. Actuarial Present Value The value of an amount or series of amounts payable or receivable at various times, determined as of a given date by the application of a particular set of Actuarial Assumptions. For purposes of this standard, each such amount or series of amounts is: a) adjusted for the probable financial effect of certain intervening events (such as changes in compensation levels, Social Security, marital status, etc.); b) multiplied by the probability of the occurrence of an event (such as survival, death, disability, termination of employment, etc.) on which the payment is conditioned; and c) discounted according to an assumed rate (or rates) of return to reflect the time value of money. 5. Annual OPEB Cost An accrual-basis measure of the periodic cost of an employer s participation in a defined benefit OPEB plan. 6. Annual Required Contribution (ARC) The employer s periodic required contributions to a defined benefit OPEB plan, calculated in accordance with the parameters. 7. Explicit Subsidy The difference between (a) the amounts required to be contributed by the retirees based on the premium rates and (b) actual cash contribution made by the employer. 8. Funded Ratio The actuarial value of assets expressed as a percentage of the actuarial accrued liability. 9. Healthcare Cost Trend Rate The rate of change in the per capita health claims costs over time as a result of factors such as medical inflation, utilization of healthcare services, plan design, and technological developments. 34 P a g e