2. Question: How long has the incumbent consultant been performing the services?

Transcription

1 10435 Downsville Pike Hagerstown MD October 10, 2018 ADDENDUM 1 To: From: Reference: All Prospective Offerors Scott Bachtell, Supervisor of Purchasing RFP Employee Benefits Consulting Services Proposal Due Date: October 17, 2018, by 11:00 AM EST This addendum is being issued to provide additions, corrections, clarifications and answers to certain questions raised referencing the original RFP packages and any resultant contracts for the above bid. Questions: 1. Question: Who is the current consultant? Answer: Bolton Partners Inc 2. Question: How long has the incumbent consultant been performing the services? Answer: Approximately five (5) years. 3. Question: Why are the services listed in the RFP out to bid? Are they due to the expiration of the current contract or for other reasons? Answer: Current contract is expiring. 4. Question: Is the incumbent consultant eligible to bid in response to this RFP? Answer: Yes, this is an open public bid. 5. Question: Was the work required in prior years similar to that described in the current RFP? Are there any improvements, or additional services that WCPS is seeking? Answer: The works varies from year to year. Please refer to the Scope of Work for the services requested. We are currently considering a full service consultant, and any value added services that may bring. 6. Question: Can you provide a copy of the latest OPEB valuation report? Answer: See attached report. 7. Question: To assist us in gaining a better understanding of the scope of work, can you provide the amount of the total level of effort (hours of work) and fees paid to the consultant in each of the last three years? Answer: Number of hours of work cannot be provided. FY16: $129,524 / FY17: $108,671 / FY18: $55,203

2 8. Question: How many meetings at the client site are required per year in the RFP? Please provide us with the address where those meetings will take place. Answer: There are no set number of meetings per year. Consultant would need to attend all meetings necessary to fulfill duties and obligations of the contract. 9. Question: We noticed there are no specific goals listed on this RFP. Would Washington County Public Schools accept and consider for contracting a proposal that contains meaningful professional 15% (+) MBE participation? Answer: Please reference Section I, Number Question: Please confirm that you want us to execute the Services Agreement and submit this with our technical bid. Typically the Services Agreement is signed after the contract award. Answer: The preference would be for the Service Agreement to be signed and submitted with the technical bid proposal in order to have the agreement fully executed before January first, but it is not mandatory. 11. Question: Regarding Section II, #6 - Technical Proposal requirement H) Financial Capability. As a publicly traded company will the 2017 Annual Report fulfill this requirement? Answer: If a company is publicly traded a web-link to the latest Annual Report is acceptable. Thank you for your interest in bidding with and we apologize for any inconvenience this may have caused. Sincerely, Scott Bachtell Scott Bachtell Supervisor of Purchasing cc: Tricia Riley, Supervisor of Employee Benefits David Brandenburg, Executive Director of Finance This Addendum includes two (2) pages and the attached OPEB Valuation Report

3 OPEB Plan Actuarial Valuation As Required by GASB 74 for FYE 2017 As Required by GASB 75 for FYE 2018 Revised September 21, S. Charles Street, Suite 1000 Baltimore, MD Submitted by: Kevin Binder, FSA Actuary (443)

4 September 21, 2018 Mr. David Brandenburg Downsville Pike Hagerstown, MD Re: GASB74 and GASB75 Actuarial Information for the Measurement Period Ending June 30, 2018 Dear David: This report provides the information needed for the June 30, 2017 GASB 74 disclosure as well as the FYE 2018 OPEB disclosure under the GASB 75 accounting standard. Section 1 is meant to give a high level of summary of the OPEB valuation. Most of the information needed for the CAFR footnote is provided in Section 2 of the report. Section 3 summarizes the valuation data, Section 4 the plan provisions, and Section 5 the actuarial methods and assumptions. This report has been prepared for the for the purposes of complying with the GASB 74 and GASB 75 accounting standards. It is neither intended nor necessarily suitable for other purposes including plan solvency or for determining recommended contributions. Bolton Partners is not responsible for the consequences of any other use, nor the reliance upon this report by any other party. Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: retiree group benefits program experience differing from that anticipated by the assumptions; changes in 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 retiree group benefits program provisions or applicable law. Retiree group benefits models necessarily rely on the use of approximations and estimates, and are sensitive to changes in these approximations and estimates. Small variations in these approximations and estimates may lead to significant changes in actuarial measurements. Due to the limited scope of our assignment, we did not perform an analysis of the potential range of future measurements. Bolton Partners, Inc. 36 S. Charles Street Suite 1000 Baltimore, Maryland (410) (800) Fax (410) Employee Benefits and Investment Consulting

5 Mr. David Brandenburg September 21, 2018 Page Two The report is based on July 1, 2017 census data. The census data and medical premiums for fiscal year 2017 were submitted by. In preparing the valuation we relied on demographic and claims data provided by. We reviewed the data for reasonableness, but did not audit the data. The actuarial methods and assumptions used in this report comply with GASB 74 and GASB 75 and the actuarial standards of practice promulgated by the American Academy of Actuaries. In general, post-employment medical valuations are based on assumptions for medical increases. If medical costs increase at a rate greater than our assumption there could be a dramatic increase in the cost. The healthcare cost trend rate selected for this valuation is consistent with prevalent practices. Standard actuarial practice is to assume an ultimate trend which is consistent with the best estimate of GNP growth. However, the number of years until the ultimate trend is attained and the rate of decrease are not known. There is a significant probability that between now and the next actuarial valuation we will not observe the anticipated amelioration of medical trend. If this is the case, typical practice is to reset the initial trend and to defer the year that the ultimate trend rate is attained. If this occurs annual actuarial losses of 5% to 15 % of liabilities due to the revised trend rate can be expected. Bolton Partners is completely independent of the, its programs, activities, or any of its officers or key personnel. We and anyone closely associated with us does not have any relationship which would impair our independence on this assignment. Kevin Binder is a Member of the American Academy of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained in this report. Kevin Binder, F.S.A., M.A.A.A. Carolyn Bourg Consultant Consultant (443) (443) KBinder@BoltonPartners.com CBourg@BoltonPartners.com Bolton Partners, Inc. 36 S. Charles Street Suite 1000 Baltimore, Maryland (410) (800) Fax (410) Employee Benefits and Investment Consulting

6 Table of Contents 1. Executive Summary... 1 Background... 1 OPEB Trust Arrangement... 1 Funding Policy... 1 Discount Rate Assumption... 1 Measurement Date... 2 The Annual Expense... 2 Transition to GASB Comparison with Previous Valuation... 3 Impact of Health Care Reform... 3 Plan Provisions... 4 Demographic Data... 4 Claims Data... 4 Implicit Subsidy... 4 Demographic Assumptions... 5 Economic Assumptions GASB 75 Disclosures... 6 Change in Net OPEB Liability... 6 Sensitivity of Total OPEB Liability... 6 OPEB Expense... 7 Deferred Inflows/Outflows of Resources Related to OPEB... 8 Schedule of Changes in the Total OPEB Liability and Related Ratios Valuation Data Counts Retirees Coverage Active Age Service Distribution Summary of Principal Plan Provisions General Eligibility Rules Plan Description Percentage of Published Cost Paid by Schools Changes Since Prior Valuation Valuation Methods and Assumptions Cost Method Amortization of Unfunded Liability Future Payroll Growth Election Percentage Age of Spouse Coverage Status Interest Assumptions Trend Assumptions Decrement Assumptions Claims Assumptions Changes Since Prior Valuation Glossary Appendices i Bolton Partners, Inc.

7 Background 1. Executive Summary In June 2015, the Government Accounting Standards Board (GASB) released Statements 74 and 75. GASB Statement 74 replaces Statement 43 for post-employment benefits other than pensions (OPEB) for plan accounting. GASB Statement 75 replaces Statement 45 for postemployment benefits other than pensions (OPEB) for employer accounting. The GASB 74 standard applies starting in FYE 2017 and the GASB 75 standard applied to GASB 75 to post-employment medical benefits that are provided to retirees. Under GASB45 the Net OPEB Obligation was a liability on the Schools financial statements. Under GASB75 the entire unfunded actuarial accrued liability is now on the Schools financial statements. There is no longer a Net OPEB Obligation. The annual expense is simply equal to the increase (decrease) in the unfunded actuarial accrued liability, however to minimize expense volatility some of the increase (decrease) is deferred. OPEB Trust Arrangement has established an irrevocable OPEB Trust. Currently the trust fund is managed by the Maryland Association of Boards of Education (MABE). The trust value as of July 1, 2017 is $55,491,860. Funding Policy will contribute the higher of the budgeted pay-go amount or actual pay-go amount to the trust in FYE Because of the sponsor s funding policy, we anticipate the sponsor s cash requirement will steadily increase as time goes on. The estimated 10-year cash flow projection is provided in appendix 2. Discount Rate Assumption The discount rate used to measure the Plan s total OPEB liability is 4.93% on the measurement date for FYE The discount rate used to measure the Plan s total OPEB liability is 5.50% on the measurement date for FYE The benefit payment stream for the Plan is discounted based on an index rate for 20-year tax exempt general obligation municipal bonds with an average rating of AA/Aa or higher for years when the projected benefit payouts are expected to be unfunded and 6.90% for years when the projected benefit payouts are expected to be funded. Please refer to the Appendix for the derivation of the discount rate. We used a long-term expected rate of return on assets of 6.90% and a longterm expected rate of return on internal fund rate of 3.58% as of June 30, 2017 for our calculations. 1 Bolton Partners, Inc.

8 The Measurement Date 1. Executive Summary (cont.) GASB 74 liabilities are calculated as of the last date of the plan year (June 30, 2017). By contrast GASB 75 liabilities are calculated as of the measurement date and there is a choice in the measurement date. The measurement date can be any date between the last day of the prior fiscal year (June 30, 2017) and the last day of the current fiscal year (June 30, 2018). For purposes of this report, we assumed that will select June 30, 2017 as its measurement date for FYE Similarly, the measurement date for FYE 2017 is June 30, The Annual Expense The annual expense under GASB 75 is equal to the change in the unfunded actuarial accrued liability from the prior year s measurement date (June 30, 2016) to the current year s measurement date (June 30, 2017), with some of the liability changes being deferred to future years. The FYE 2018 expense is $16,301,035. It is equal to the normal cost accrual plus interest on the unfunded actuarial accrued liability. For this purpose, the June 30, 2016 results have been recalculated based on the GASB 75 discount rate selection rules and July 1, 2017 data. It is important to note that changes in the actuarial accrued liability due to experience gains or losses or changes in assumptions are recognized over the expected future working lifetime of all plan participants, including retirees. Retirees are assumed to have working lifetime of 1 year. For example, if the average working lifetime for active employees is 10 years and 70% of the participants are active employees and the remaining 30% of participants are retirees, the expected future working lifetime would be 7.3 years, rounded to 7.0 years. The expected future working lifetime for the Plan for FYE 2018 is 9 years (rounded). Transition to GASB 75 Per paragraph 244 of GASB 75, the difference between the Net OPEB Obligation as of June 30, 2017 and the Unfunded Actuarial Accrued Liability as of the FYE 2017 measurement date (June 30, 2016) determined using a 4.93% rate should be reported as a restatement of the beginning net position. The table below shows the calculation. Development of beginning net position 1. Net OPEB Obligation/(Asset) on 6/30/2017 $28,585, Unfunded Accrued Liability 6/30/2016 (4.93%, EAN) $258,135, Restatement of beginning net position (2. 1.) $229,550,027 2 Bolton Partners, Inc.

9 Comparison with Previous Valuation 1. Executive Summary (cont.) The following table reconciles the Unfunded Actuarial Accrued Liability from the FYE 2017 disclosure to the FYE 2018 disclosure. Please note, the change in actuarial funding method is required by the GASB 75 accounting standard. Comparison with Previous Valuation Data as of December 1, 2015 July 1, 2017 Demographic Data Employees with Medical Coverage 2,297 2,216 Retirees Less Than Age Retirees Age 65 or Greater 1,073 1,171 Reconciliation of Unfunded Liability FYE 2017 Unfunded Liability (prior valuation GASB45) (5.00%) $276,750,300 Expected Increase (Decrease) due to passage of time 16,845,700 Increase (Decrease) due to New Assets (3,296,860) Increase (Decrease) due to Demographic Experience 58,473,000 Increase (Decrease) due to Claims Experience (88,567,000) Increase (Decrease) due to Change in Discount Rate (21,882,000) FYE 2018 Unfunded Liability (Net OPEB Liability) (5.50%) $238,323,140 Impact of Health Care Reform We have adjusted the pre-65 medical care trend due to the projected impact of the Cadillac Tax. The Cadillac Tax is one of the provisions of the Affordable Care Act (ACA) of The Cadillac Tax provision is effective in The Cadillac Tax only applies to plans that cost $10,200 or more for an individual or $27,500 per family. There will be a 40 percent excise tax for expenditures over these thresholds. The cost thresholds are indexed by general inflation each year after Because medical trends are projected to be higher than general inflation we would expect the percentage of the premium that is subject to the premium tax to increase over time. We have assumed that general inflation will average 2.8 percent per annum for purposes of estimating the impact of the excise tax. There are other provisions of the ACA that could impact future costs. Some of the provisions (for example risk adjustment charges for plans that cover healthier populations) could increase costs, while others (for example, less uninsured care costs might be passed on to those with insurance) may reduce costs over time. Because the impact of these provisions is unclear at this time, we have made no other adjustments to the medical care trend. 3 Bolton Partners, Inc.

10 Plan Provisions 1. Executive Summary (cont.) Retirees can continue the same medical, prescription drug, and dental coverage (including family coverage) they had as active employees. pays a portion of the costs of medical and prescription coverage so long as minimum age and service requirements are met. These requirements are described in greater detail in Section 4. Demographic Data Demographic data as of July 1, 2017 was provided to us by Washington County Public Schools. This data included current medical, and life insurance coverage for current employees and retirees. Because the census data is less than 30 months before the last day of fiscal year 2018, it can be relied on to comply with GASB 75 for FYE Although we have not audited this data we have no reason to believe that it is inaccurate. Claims Data Monthly paid claims and enrollment reports for retirees and actives from July 1, 2015 to June 30, 2017 were supplied by the providers. Claims were divided into pre and post 65 age retirees and actives. Although we have not audited the claims data we have no reason to believe that they are inaccurate. Implicit Subsidy The published insurance rates for persons prior to Medicare eligibility are based primarily on the healthcare usage of active employees. Since retirees use healthcare at a rate much higher than employees, using these blended rates creates an implicit subsidy for the retiree group. ASOP 6 requires that the claims assumption we use for this valuation be based on the actual per-capita retiree cost. The difference between the actual usage of healthcare by retirees and the assumption built into the published rates is identified as the implicit subsidy amount. The impact on rates can be seen in Section 5. The liabilities could be reduced by publishing rates for retirees prior to Medicare eligibility that more closely reflect the true cost of healthcare for each group. 4 Bolton Partners, Inc.

11 Demographic Assumptions 1. Executive Summary (cont.) Demographic and salary scale assumptions mirror those used for the Maryland State Teachers Pension Plan. Section 5 details the assumptions for electing coverage. Economic Assumptions The medical trend assumption was developed using the Society of Actuaries (SOA) Long- Run Medical Cost Trend Model (released in 2015). The following assumptions were used as input variables into this model: Rate of Inflation 2.3% Rate of Growth in Real Income / GDP per capita 0.7% Extra Trend due to Technology and other factors 1.3% Expected Health Share of GDP in % Health Share of GDP Resistance Point 25.0% Year for Limiting Cost Growth to GDP Growth 2075 The SOA Long-Run Medical Cost Trend Model and its baseline projection are based on an econometric analysis of historical U.S. medical expenditures and the judgments of experts in the field. The rate of growth in Real Income was reduced from the baseline assumption of 1.5% to 0.7% to be consistent with the long-term payroll growth assumption of 3.00% (2.30% inflation plus 0.70% real wage growth). The long-run baseline projection and input variables have been developed under the guidance of an SOA Project Oversight Group. This model was updated to reflect the future Cadillac Tax. Under the new upcoming GASB 75 standards the asset returns rate of inflation should equal the rate of inflation used in the Society of Actuaries (SOA) Long-Run Medical Cost Trend Model. Total payroll is assumed to increase 3 percent per year. This assumption is used to determine the amortization factor. 5 Bolton Partners, Inc.

12 2. Required Disclosures Change in the Net OPEB Liability Required by GASB 75 Only 1 Total OPEB Liability (a) Plan Fiduciary Net Position (b) Net OPEB Liability (a)-(b) (Balance) as of June 30, 2016 for FYE 2017 $302,340,000 $44,204,912 $258,135,088 Changes for the Year: Service Cost 7,943,000 7,943,000 Interest 14,681, ,681,000 Changes of Benefit Terms 0 0 Experience Losses 3,092,020 3,092,020 Employer Trust Contributions 13,884,583 (13,884,583) Net Investment Income 6,509,385 (6,509,385) Changes in Assumptions 2 (25,134,000) (25,134,000) Benefit Payments 3 (9,107,020) (9,107,020) 0 Net Changes (8,525,000) 11,286,948 (19,811,948) Balance as of June 30, 2017 for FYE 2018 $293,815,000 $55,491,860 $238,323,140 1/ The Bottom Line Only is Required by GASB 74 to be disclosed 2/Change in discount rate from 4.93 to 5.50 percent Sensitivity of Total OPEB Liability Required by Both GASB 74 and GASB 75 The following presents the Total and Net OPEB liability of, as well as what the Schools Total and Net OPEB liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher. 1% Decrease 4.50% Discount Rate 5.50% 1% Increase 6.50% Total OPEB Liability $340,036,000 $293,815,000 $256,289,000 Net OPEB Liability $284,544,140 $238,323,140 $200,797,140 The following presents the Total and Net OPEB liability of the Schools, as well as what the Schools Total and Net OPEB liability would be if it were calculated using a health care cost trend rate that is 1 percentage point lower or 1 percentage point higher. See section 5 for the complete health care cost trend rate. 1% Decrease Rate in 2075 of 2.90% Health Care Cost Trend Rate in 2075 of 3.90% 1% Increase Rate in 2075 of 4.90% Total OPEB Liability $251,542,000 $293,815,000 $347,814,000 Net OPEB Liability $196,050,140 $238,323,140 $292,322,140 6 Bolton Partners, Inc.

13 2. Required Disclosures (cont.) OPEB Expense Required by GASB 75 Only Determination of FYE 2018 Expense 1. Service Cost $7,943, Interest Cost 14,681, Projected Earnings on OPEB Trust (3,214,965) 4. Changes of Benefit Terms 0 5. Net Difference Between Projected and Actual Earnings a. In Current Fiscal Year Recognized in Current Year 1 (659,000) b. From Past Years Recognized in Current Year 0 c. Total (659,000) 6. Differences Between Expected and Actual Experience a. In Current Fiscal Year Recognized in Current Year 344,000 b. From Past Years Recognized in Current Year 0 c. Total 344, Changes in Assumptions a. In Current Fiscal Year Recognized in Current Year 2 (2,793,000) b. From Past Years Recognized in Current Year 0 c. Total (2,793,000) 8. Total OPEB Expense 3 $16,301,035 1 The expected future working lifetime of all participants is 9 years. 2 The expected future working lifetime of all participants is 9 years. 3 Total OPEB Expense is broken down by group using EAN Liability to weight each group. 7 Bolton Partners, Inc.

14 2. Required Disclosures (cont.) Deferred Inflows/Outflows of Resources Related to OPEB Required by GASB 75 Only For the fiscal year ended June 30, 2018, recognized OPEB expense of $16,301,035. At June 30, 2018, reported deferred outflows of resources and deferred inflows of resources related to the OPEB plan from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 2,748,020 $ - Changes of assumptions - 22,341,000 Net difference between projected and actual earnings - 2,635,420 on OPEB plan investments Employer contribution subsequent to measurement date - Total $ 2,748,020 $ 24,976,420 $0 reported as deferred outflows of resources related to OPEB resulting from employer contributions subsequent to measurement date will be recognized as a reduction of the net OPEB liability in the year ended June 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the OPEB plan will be recognized in the expense as follows: Fiscal Year ended June 30: Outflow Inflow Net ,000 3,452,000 (3,108,000) ,000 3,452,000 (3,108,000) ,000 3,452,000 (3,108,000) ,000 3,451,420 (3,107,420) ,000 2,793,000 (2,449,000) Thereafter 1,028,020 8,376,000 (7,347,980) 8 Bolton Partners, Inc.

15 2. Required Disclosures (cont.) Schedule of Changes in the Total OPEB Liability and Related Ratios Required by Both GASB 74 and GASB 75 Last 10 Fiscal Years (Dollar amounts in thousands) Total OPEB liability Service Cost $ 7,943 Interest Cost 14,681 Changes in Benefit Terms - Differences Between Expected and Actual Experience 3,092 Changes of Assumptions (25,134) Information for FYE 2016 and earlier is not available Benefit Payments (9,107) Net Change in Total OPEB Liability (8,525) Total OPEB liability - Beginning of Year 302,340 Total OPEB Liability - End of Year 293,815 Plan Fiduciary Net Position Last 10 Fiscal Years (Dollar amounts in thousands) Contributions - Employer $ 13,885 Net Investment Income 6,509 Benefit Payments (9,107) Administrative Expense - Net Change in Fiduciary Net Position 11,287 Fiduciary Net Position - Beginning of Year 44,205 Information for FYE 2016 and earlier is not available Fiduciary Net Position - End of Year 55,492 Net OPEB Liability 238,323 Fiduciary Net Position as a % of Total OPEB Liability 18.89% Covered-Employee Payroll 1 Net OPEB Liability as a % of Payroll 1 Expected Average Remaining Service Years of All Participants Notes to Schedule: Benefit changes: None. Changes of assumptions: Retirement, termination, and disability assumptions were updated to the most recent tables by the State of Maryland Pension Plan. Discount rate: 6/30/ % 6/30/ % 1/ Because this OPEB plan does not depend on salary, we do not have salary information. 9 Bolton Partners, Inc.

16 Counts 3. Valuation Data The following table summarizes the counts, ages and, coverage, for those currently enrolled in Medical/Drug coverage. Retirees Coverage (1) Number of Participants (a) Active Employees 2,216 (b) Retirees Pre-Medicare 223 (c) Retirees Post-Medicare 1,171 (d) Total (2) Active Statistics 3,610 (a) Average Age (b) Average Service (3) Inactive Statistics (In Pay Status) (a) Average Age Pre-Medicare (b) Average Age Medicare The following table summarizes the counts of coverage by ages for the current retired employees as of 7/01/2017. Age Individual Coverage Husband/Wif e Coverage Parent/Chil d Coverage Family Coverage Less Than Total Greater than Total , Bolton Partners, Inc.

17 Active Age - Service Distribution 3. Valuation Data (cont.) Shown below is the distribution of active participants based on age and service as of the valuation date for those currently enrolled in Medical/Drug coverage.. Years of Service as of 7/1/2017 Age Under Total Under & Up Totals ,216 The following table shows averages in total for Active participants in this valuation. Averages Amount Age: Service: Bolton Partners, Inc.

18 General Eligibility Rules 4. Summary of Principal Plan Provisions Eligible participants include employees, former employees, or beneficiaries of Washington County Public Schools who are receiving pensions. Participants must meet the retirement eligibility requirements of the State of Maryland Employees and Teachers Pension System (EPS). Under EPS, members hired on or after July 1, 2011 are in the Reformed Contributory Pension System. The earliest retirement eligibility under the Reformed Contributory Pension System is the earlier of Rule of 90 (age plus service is at least 90), Age 65 with 10 years of service, or Age 60 with 15 years of service. For other members of EPS, the earliest retirement eligibility is the earlier of: Age 55 with 15 years of service, Age 62 with 5 years of service, Age 63 with 4 years of service, Age 64 with 3 years of service, Age 65 with 2 years of service, or 30 years of service (regardless of age). Under EPS, there are two types of disability benefits, ordinary and accidental. Ordinary disability under EPS requires five (5) years of eligibility service. There is no service credit requirement for accidental disability. 12 Bolton Partners, Inc.

19 Plan Description 4. Summary of Principal Plan Provisions (cont.) Benefits include medical, prescription drug, dental, and vision benefits: Medical Benefits offers three plans; a Premium, Standard, and a Limited plan. All three plans are packaged with prescription drugs; below is a description of each plan. Deductible $100 Individual /$200 Family (Preferred) $200 Individual/ $400 Family (Non-Preferred) Premium Standard Limited $200 Individual /$400 Family (Preferred) $400 Individual/ $800 Family (Non-Preferred) $100 Individual /$200 Family (Preferred) None. (Non-Preferred) Out of Pocket Limit In-Network $1000 Individual/ $2000 Family In-Network $1500 Individual/ $3000 Family In-Network $1000 Individual/ $2000 Family Out-of-Network $1000 Individual/ $2000 Family Out-of-Network $3000 Individual/ $6000 Family Out-of-Network None. Primary Care Specialist $20 (in network) 30% (out of network) $20 (in network) 30% (out of network) Rx $10 Generic/ $30 Preferred/ $50 Brand $20 (in network) 30% (out of network) $20 (in network) 30% (out of network) $10 Generic/ $30 Preferred/ $50 Brand $20 (in network) No out of network coverage $20 (in network) No out of network coverage $10 Generic/ $30 Preferred/ $50 Brand 13 Bolton Partners, Inc.

20 4. Summary of Principal Plan Provisions (cont.) Percentage of Published Cost Paid by Schools WCPS subsidizes the total premium for coverage as follows. Participants Retiring Before July 1, 2011: Pre-Medicare retirees may choose between single, retiree/spouse, parent/child(ren) or family medical coverage, all of which are packaged with prescription benefits. Once the participant is Medicare-eligible, he or she may elect single or retiree/spouse coverage. Medicare-eligible retirees or dependents participate in a Medicare Supplement plan which also includes a prescription drug plan. The subsidy percentage is based on points. The points are determined by adding the participants age and accrued service together. Below is a chart describing the employers subsidized percentage based on the employees points: Age + Service Employer Contribution Percentage Employer Contribution Percentage Age + Service < % % % % % % % % % % % % % % % % % % % % % Actual contribution amounts are used for current retirees. The School s costs are a percentage of published costs. The contribution percentages shown above are blended for all three plans. The retiree subsidy, as a dollar amount, freezes once the retiree becomes Medicare eligible. 14 Bolton Partners, Inc.

21 4. Summary of Principal Plan Provisions (cont.) Percentage of Published Cost Paid by Schools (cont.) Participants Retiring on or after July 1, 2011: Pre-Medicare retirees may choose between single, retiree/spouse, parent/child(ren) or family medical coverage, all of which are packaged with prescription benefits. Once the participant is Medicare-eligible, he or she may elect single or retiree/spouse coverage. Medicare-eligible retirees or dependents participate in a Medicare Supplement plan which also includes a prescription drug plan. Changes since prior valuation None. The subsidy percentage is based on points. The points are determined by adding a participants age and accrued service together. Below is a chart describing the employers subsidized percentage based on the employees points: Age + Service Employer Contribution Percentage 4.80% 26.00% 47.30% 68.50% 81.30% Actual contribution amounts are used for current retirees. The School s costs are a percentage of published costs. The retiree subsidy, as a dollar amount, is never frozen. 15 Bolton Partners, Inc.

22 Cost Method 5. Valuation Methods and Assumptions This valuation uses the entry age normal funding method calculated on an individual basis with level percentage of payroll Amortization of Unfunded Liability 30 Year closed amortization period, which began on July 1, The unfunded liability is amortized using the level percentage of payroll. With total payroll assumed to increase 3 percent per year. Future Payroll Growth Employees with less than 10 YOS Employees with more than 10 YOS Years of Service Rate Age Rate % % % % % % % % % % % % % % % % % % % Election Percentage 100% of eligible retirees are assumed to elect coverage. Age of Spouse Females are assumed to be 3 years younger than their Male spouse. Coverage Status Participants are assumed to continue their current election and plan in the future. 16 Bolton Partners, Inc.

23 Interest Assumptions 5. Valuation Methods and Assumptions (cont.) As of June 30, 2016 As of June 30, 2017 Expected Rate of Return on Assets 6.90% 6.90% Local Government Spot Rate 2.85% 3.58% Blended Discount Rate 4.93% 5.50% Trend Assumptions Year Pre-Medicare Pre-Medicare Post-Medicare Post-Medicare Base Sensitivity Base Sensitivity % 6.60% 5.60% 6.60% % 6.40% 5.40% 6.40% % 7.50% 5.30% 6.30% % 6.25% 4.51% 5.51% % 5.88% 4.36% 5.36% % 5.58% 4.20% 5.20% % 5.16% 3.90% 4.90% % 4.94% 3.74% 4.74% Ultimate 3.10% 4.10% 3.02% 4.02% 17 Bolton Partners, Inc.

24 5. Valuation Methods and Assumptions (cont.) Decrement Assumptions Below is a summary of decrements used in this valuation. Sample Retirement, Disability, and Termination rates are illustrated in the tables below. Mortality Decrements Healthy Male Healthy Female Disabled Description RP 2014 Employee White Collar Mortality Table, Fully Generational, Projected using Scale MP-2014 RP 2014 Healthy Annuitant White Collar Mortality Table, Fully Generational, Projected using Scale MP-2014 (Projected from 2012 for Males and 2016 for Females in year 2014) RP 2014 Disabled Annuitant Mortality Tables, Not Generational, Set forward 1 year for Males Termination Sample Rates Employees with less than 10 Employees with 10 or more Years Years of Service of Service Years of Service Male Female Age Male Female % 16.00% % 3.50% % 12.50% % 3.50% % 12.00% % 3.50% % 9.00% % 2.75% % 7.75% % 2.00% % 6.00% % 1.75% % 5.50% % 1.25% % 4.75% % 1.00% % 4.00% % 1.00% % 3.50% 18 Bolton Partners, Inc.

25 5. Valuation Methods and Assumptions (cont.) Retirement Sample Rates Retirement Male Rates (DOH < 07/01/2011) Years of Service Age % 0.00% 0.00% 0.00% 0.00% 10.00% % 0.00% 1.50% 1.50% 1.50% 10.00% % 0.00% 3.50% 3.50% 3.50% 13.00% % 0.00% 6.50% 6.50% 6.50% 16.00% % 14.00% 14.00% 14.00% 14.00% 25.00% % 14.00% 14.00% 14.00% 14.00% 23.00% % 14.00% 14.00% 14.00% 14.00% 19.00% % 16.00% 16.00% 16.00% 16.00% 25.00% % 16.00% 16.00% 16.00% 16.00% 25.00% % 16.00% 16.00% 16.00% 16.00% 25.00% % % % % % % Retirement Female Rates (DOH < 07/01/2011) Years of Service Age % 0.00% 0.00% 0.00% 0.00% 9.00% % 0.00% 2.00% 2.00% 2.00% 10.00% % 0.00% 5.00% 5.00% 5.00% 15.00% % 0.00% 7.00% 7.00% 7.00% 18.00% % 21.00% 21.00% 21.00% 21.00% 25.00% % 16.00% 16.00% 16.00% 16.00% 23.00% % 16.00% 16.00% 16.00% 16.00% 23.00% % 18.00% 18.00% 18.00% 18.00% 25.00% % 22.00% 22.00% 22.00% 22.00% 25.00% % 20.00% 20.00% 20.00% 20.00% 25.00% % % % % % % 19 Bolton Partners, Inc.

26 5. Valuation Methods and Assumptions (cont.) Retirement Male Rates (DOH >= 07/01/2011) Years of Service Age % 0.00% 0.00% 0.00% 0.00% 43.00% % 8.00% 8.00% 8.00% 13.00% 13.00% % 6.50% 6.50% 6.50% 16.00% 16.00% % 7.00% 7.00% 7.00% 25.00% 25.00% % 7.50% 7.50% 7.50% 23.00% 23.00% % 8.00% 8.00% 8.00% 19.00% 19.00% % 36.00% 36.00% 36.00% 25.00% 25.00% % 16.00% 16.00% 16.00% 25.00% 25.00% % 16.00% 16.00% 16.00% 20.00% 20.00% % 16.00% 16.00% 16.00% 25.00% 25.00% % % % % % % Retirement Female Rates (DOH >= 07/01/2011) Years of Service Age % 0.00% 0.00% 0.00% 0.00% 40.00% % 12.50% 12.50% 12.50% 15.00% 15.00% % 7.00% 7.00% 7.00% 18.00% 18.00% % 7.50% 7.50% 7.50% 25.00% 25.00% % 8.00% 8.00% 8.00% 23.00% 23.00% % 8.50% 8.50% 8.50% 23.00% 23.00% % 33.00% 33.00% 33.00% 25.00% 25.00% % 22.00% 22.00% 22.00% 25.00% 25.00% % 20.00% 20.00% 20.00% 25.00% 25.00% % 20.00% 20.00% 20.00% 25.00% 25.00% % % % % % % 20 Bolton Partners, Inc.

27 5. Valuation Methods and Assumptions (cont.) Disability Sample Rates Disability Decrement Age Male Female % % % % % % % % % % % % Claims Assumptions To determine the assumed cost and the retiree contributions, we weighted the 2015 premium rates by the current enrollment. The gross claims are based on enrollment and paid medical and prescription claims for pre and post age 65 retirees from July 1, 2015 to June 30, Claims and enrollments were divided into Medicare and Non Medicare eligible retirees. The claims were projected to Fiscal Year Pre and post age 65 Medical claims were projected assuming 8% trend; pre and post age 65 prescription drugs were projected assuming 8% annual increases. For the Pre Age 65 claims the July 1, 2016 to June 30, 2017 experience was weighted 70%, the July 1, 2015 to June 30, 2016 experience was weighted 30%. The Post age 65 claims were weighted 100% for July 1, 2016 to June 30, 2017 claims. Administrative and stop-loss fixed costs were assumed to be $58.94 per month pre 65 and $9.24 post 65. Family coverage was assumed to be 1.76 times the cost of the individual coverage for retirees less than age 65 and 2.00 for retirees age 65 or older. 21 Bolton Partners, Inc.

28 5. Valuation Methods and Assumptions (cont.) Claims Assumptions (cont.) Changes Since Prior Valuation FYE 2016 Claims Total Costs Single Family 1. Explicit Costs a. Pre-Medicare $11,288 $19,866 b. Post-Medicare $6,077 $12, Total Medical a. Underage 50 $7,569 $13,322 b. Age $9,161 $16,123 c. Age $10,644 $18,733 d. Age $12,533 $22,058 e. Age $4,458 $8,916 f. Age $5,172 $10,344 g. Age $5,185 $10,370 h. Age $5,337 $10,674 i. Age 85 and older $5,105 $10,210 The discount rate was increased from 5.00% to 5.50% The claims assumption was updated to include the most recent plan experience. 22 Bolton Partners, Inc.

29 6. Glossary Actuarially Determined Contribution: Covered Group: Discount Rate: Election Rate: Employer s Contributions: Entry Age Normal Funding Method: Funded Ratio: Healthcare Cost Trend Rate:. Measurement Date: For Plans with irrevocable trusts, the recommended contribution to the Plan (determined in conformity with Actuarial Standards of Practice) that is projected to result in assets equaling the actuarial accrued liability within a period of time. Plan members included in an actuarial valuation. The rate used to adjust a series of future payments to reflect the time value of money. The percentage of retiring employees assumed to elect coverage. Contributions made in relation to the actuarially determined contributions of the employer (ADC). An employer has made a contribution in relation to the ADC if the employer has (a) made payments of benefits directly to or on behalf of a retiree or beneficiary, (b) made premium payments to an insurer, or (c) irrevocably transferred assets to a trust, or an equivalent arrangement, in which plan assets are dedicated to providing benefits to retirees and their beneficiaries in accordance with the terms of the plan and are legally protected from creditors of the employer(s) or plan administrator. A method under which the actuarial present value of the projected benefits of each individual included in an actuarial valuation is allocated on a level basis over the earnings or service of the individual between entry age and assumed exit. The actuarial value of assets expressed as a percentage of the actuarial accrued liability. The rate of change in per capita health claim costs over time as a result of factors such as medical inflation, utilization of healthcare services, plan design, and technological developments. A day selected by the local government from the last day of the prior fiscal year to the last day of the current fiscal year. The measurement date is not necessarily the same date as the valuation date. 23 Bolton Partners, Inc.

30 6. Glossary (cont.) OPEB Plan: An OPEB plan having terms that specify the amount of benefits to be provided at or after separation from employment. The benefits may be specified in dollars (for example, a flat dollar payment or an amount based on one or more factors such as age, years of service, and compensation), or as a type or level of coverage (for example, prescription drugs or a percentage of healthcare insurance premiums). Other Post-Employment Benefits: Post-employment benefits other than pension benefits. Other post-employment benefits (OPEB) include post-employment healthcare benefits, life insurance, regardless of the type of plan that provides them, and all post-employment benefits provided separately from a pension plan, excluding benefits defined as termination offers and benefits. Pay-as-you-go (PAYGO): Payroll Growth Rate: Plan Liabilities: A method of financing a benefit plan under which the contributions to the plan are generally made at about the same time and in about the same amount as benefit payments and expenses becoming due. An actuarial assumption with respect to future increases in total covered payroll attributable to inflation; used in applying the level percentage of projected payroll amortization method. Obligations payable by the plan at the reporting date, including, primarily, benefits and refunds due and payable to plan members and beneficiaries, and accrued investment and administrative expenses. Plan liabilities do not include actuarial accrued liabilities for benefits that are not due and payable at the reporting date. 24 Bolton Partners, Inc.

31 6. Glossary (cont.) Plan Members: Post-employment: Post-employment Healthcare Benefits: Select and Ultimate Rates: Service Cost: Valuation Date: The individuals covered by the terms of an OPEB plan. The plan membership generally includes employees in active service, terminated employees who have accumulated benefits but are not yet receiving them, and retired employees and beneficiaries currently receiving benefits. The period between termination of employment and retirement as well as the period after retirement. Medical, dental, vision, and other health-related benefits provided to terminated or retired employees and their dependents and beneficiaries. Actuarial assumptions that contemplate different rates for successive years. Instead of a single assumed rate with respect to, for example, the investment return assumption, the actuary may apply different rates for the early years of a projection and a single rate for all subsequent years. For example, if an actuary applies an assumed investment return of 8% for year 2000, 7.5% for 2001, and 7% for 2002 and thereafter, then 8% and 7.5% are select rates, and 7% is the ultimate rate. That portion of the Actuarial Present Value of plan benefits and expenses which is allocated to a valuation year by the Actuarial Cost Method. The as-of date for employee census data. Under GASB75, the valuation date must be within 30 months of the last day of the fiscal year. 25 Bolton Partners, Inc.

32 Appendix 1 The Actuarial Valuation Process Step 1 Determining the Present Value of Benefits The first step of the actuarial valuation process is to determine the Present Value of Benefits (PVB). The PVB represents the estimated amount needed to provide all future OPEB benefits. For a retiree it is based on the following assumptions: The current cost of medical benefits How fast medical costs will increase (medical trend) Mortality For an employee it also considers the following assumptions: How many employees will leave before becoming eligible for the benefit At what age will employees retire What percentage of eligible retirees will elect coverage What percent of eligible retirees will have spouse coverage Based on these assumptions the actuary estimates a future payment stream, so much for the first year, so much for the second year etc The streams of payments are discounted to the valuation date using a discount rate. The discount rate is similar to the rate of return you would expect to earn on funds in a bank or other investment vehicle. The sum of the discounted payment stream is the PVB. Step 2 The Actuarial Funding Method If the entire present value of benefits was deposited into a trust when every new employee was hired, there would be (in the absence of actuarial losses caused by experience different than that assumed) no cost after the first year. The goal of an actuarial funding method is to spread the present value of benefits throughout the employee s career. Accordingly, the second step of an actuarial valuation is to divide the Present Value of Benefits into three components: The normal cost (the accrual for the year) The accrued liability (the amount allocated for past service) The present value of future normal costs (the amount allocated to the future) As illustrated in the following Chart. 26 Bolton Partners, Inc.

33 Appendix 1 (cont.) The Actuarial Valuation Process (cont.) Normal Cost Accrued Liability PV of Future Normal Cost For a retired employee, the present value of benefits equals the accrued liability. Step 3 Determining the Annual Required Contribution (ARC) Under the GASB standard, the Annual required contribution is equal to the sum of the: Normal Cost and An Amortization Payment of the Unfunded Liability The unfunded liability is equal to the Accrued Liability minus the Assets (if any). The amortization payment is not a straight line amortization payment. It is more like a mortgage payment on a house. It includes interest on the unfunded liability and a principal payment, and is designed to be a level payment. The word level could mean level as a dollar payment, or level as a percentage of payroll. If it is a level percentage of payroll amortization payment, the payment will increase as payroll increases. Under the GASB standard, the payment period could be up to 30 years. Also under the GASB standard the payment period could be closed or open. Closed means that payment period decreases each year. The unfunded amount will be zero at the end of the payment period. Open means that the payment periods are reset each year to 30 years. In effect the loan is refinanced every year, and never repaid. 27 Bolton Partners, Inc.

34 Appendix 2 Expected Benefit Payments FYE Total ,192, ,664, ,126, ,616, ,229, ,963, ,800, ,615, ,396, ,349,810 Please note: The expected benefit payment stream shown above assumes that the covered population is a closed group, i.e. there are no new entrants or re-entrants. The Plan s actual benefit payments may be greater or lesser than the amounts shown, depending on actual demographic experience, and claims experience. 28 Bolton Partners, Inc.

35 Appendix 3 Discount Rate Determination as of 6/30/2016 Determine Projected Contributions for Current Participants Projected Contributions Total Contributions Contributions Fiscal Schools For Future For Current Year Contribution Employees Participants Ending (a) (b) (c) = (a) - (b) 2018 $ 14,301,121 $ - $ 14,301, $ 14,730,000 $ 255,374 $ 14,474, $ 15,172,000 $ 499,543 $ 14,672, $ 15,627,000 $ 734,962 $ 14,892, $ 16,096,000 $ 966,436 $ 15,129, $ 16,579,000 $ 1,201,605 $ 15,377, $ 17,076,000 $ 1,450,535 $ 15,625, $ 17,588,000 $ 1,708,594 $ 15,879, $ 18,116,000 $ 1,981,010 $ 16,134, $ 18,659,000 $ 2,265,363 $ 16,393, $ 19,219,000 $ 2,564,750 $ 16,654, $ 19,796,000 $ 2,882,951 $ 16,913, $ 20,390,000 $ 3,214,818 $ 17,175, $ 21,002,000 $ 3,574,694 $ 17,427, $ 21,632,000 $ 3,949,289 $ 17,682, $ 22,281,000 $ 4,345,361 $ 17,935, $ 22,949,000 $ 4,759,741 $ 18,189, $ 23,637,000 $ 5,192,811 $ 18,444,189 Note: Years subsequent to 2035 have been omitted from this table. 29 Bolton Partners, Inc.

36 Appendix 3 Discount Rate Determination as of 6/30/2016 Determine Date when Assets are Projected to be Exhausted Projected Projected Projected Projected Projected Fiscal Beginning Fiduciary Total Benefit Investment Ending Fiduciary Year Net Position Contributions 1 Payments Earnings Net Position Ending (a) (b) (c) (d) (e) = (a) + (b) - (c) + (d) 2018 $ 55,491,860 $ 14,301,121 $ 11,193,000 $ 3,936,169 $ 62,536, $ 62,536,149 $ 14,474,626 $ 11,529,000 $ 4,411,926 $ 69,757, $ 69,757,702 $ 14,672,457 $ 11,875,000 $ 4,901,134 $ 77,205, $ 77,205,293 $ 14,892,038 $ 12,231,000 $ 5,405,654 $ 84,885, $ 84,885,985 $ 15,129,564 $ 12,598,000 $ 5,922,668 $ 92,708, $ 92,708,217 $ 15,377,395 $ 12,976,000 $ 6,445,664 $ 100,568, $ 100,568,275 $ 15,625,465 $ 13,365,000 $ 6,967,655 $ 108,360, $ 108,360,395 $ 15,879,406 $ 13,766,000 $ 7,485,955 $ 116,109, $ 116,109,756 $ 16,134,990 $ 14,179,000 $ 8,002,568 $ 123,851, $ 123,851,314 $ 16,393,637 $ 14,604,000 $ 8,512,746 $ 131,407, $ 131,407,698 $ 16,654,250 $ 15,042,000 $ 9,015,942 $ 138,939, $ 138,939,889 $ 16,913,049 $ 15,493,000 $ 9,514,266 $ 146,350, $ 146,350,204 $ 17,175,182 $ 15,958,000 $ 10,001,467 $ 153,548, $ 153,548,853 $ 17,427,306 $ 16,437,000 $ 10,472,027 $ 160,460, $ 160,460,186 $ 17,682,711 $ 16,930,000 $ 10,918,494 $ 166,936, $ 166,936,391 $ 17,935,639 $ 17,438,000 $ 11,342,718 $ 173,180, $ 173,180,748 $ 18,189,259 $ 17,961,000 $ 11,745,517 $ 179,014, $ 179,014,523 $ 18,444,189 $ 18,500,000 $ 12,120,859 $ 184,435, $ 184,435,571 $ 18,704,383 $ 19,055,000 $ 12,471,596 $ 189,531, $ 189,531,549 $ 18,966,135 $ 19,627,000 $ 12,797,266 $ 194,200, $ 194,200,950 $ 19,227,928 $ 20,216,000 $ 13,086,879 $ 198,215, $ 198,215,757 $ 19,489,463 $ 20,822,000 $ 13,330,696 $ 201,511, $ 201,511,916 $ 19,765,963 $ 21,447,000 $ 13,521,302 $ 203,931,181 Note: Years subsequent to 2040 have been omitted from the table. 1 From Projection of Contributions table, Column (c) 30 Bolton Partners, Inc.