County of Orange Retiree Medical Program

Transcription

1 County of Orange Retiree Medical Program Unfunded Liability Status Report March 20, 2007

2 The Starting Point Retiree Medical Program Unfunded Actuarial Accrued Liability (UAAL) $1,600 $1,400 $1,200 $ in Millions $1,000 $800 $600 $400 $200 $0 $1.413 Billion Total County UAAL as of June 30, 2005 March 20,

3 2006 Restructuring of Retiree Medical Program Split the pool (actives/retirees) 3% per year cap on Retiree Medical Grant increases (vs. 5%) Reduce Grants by 50% at Medicare eligible age Modified exceptions for current retirees March 20,

4 2006 Restructuring of Retiree Medical Program 1% Employee contribution phased out Create Retiree Medical Trust Higher rate of return on plan assets (from 4.25% to 7%) Implement Incentives Grants reduced by 7.5% for each year retiring before age 60 Grants increased by 7.5% for each year retiring after age 60 March 20,

5 2006 Restructuring of Retiree Medical Program Reduced the UAAL from $1.413B to $835M with agreements with OCEA and SEIU Further reduced the UAAL to $598M with agreements with remaining bargaining units, with the exception of AOCDS AFSCME opted out of the program OCEA: Orange County Employees Association SEIU: Service Employees International Union AFSCME: American Federation of State, County and Municipal Employees AOCDS: Association of Orange County Deputy Sheriffs March 20,

6 The 2006 Restructuring Retiree Medical Program Unfunded Actuarial Accrued Liability $1,600 $1,400 $1,200 $ in Millions $1,000 $800 $600 $400 $200 $1.413 Billion $598 Million $0 Prior Plan Current Restructured Plan * * AOCDS included with no change to current Retiree Medical Program March 20,

7 Changes to Retiree Medical Program Letter sent to retirees November 30, 2006 explains restructuring changes to Retiree Medical Program County is working with Retired Employees Association of Orange County (REAOC) to develop alternative retiree health plan designs Several plan design options have been discussed. Five meetings with REAOC to date January 4, :30-3:00 p.m. February 8, :00-5:00 p.m. February 22, :15-11:15 a.m. February 28, :30-5:00 p.m. March 15, :00-2:45 p.m. March 20,

8 Annual Required Contribution (ARC) Definition of ARC Cost of amortizing unfunded liability over a 30 year period, plus Normal cost (future cost of benefits being earned in current year) The combination of amortization costs and normal is the ARC Portion of ARC not paid annually becomes a liability on balance sheet of reporting agency March 20,

9 Annual Required Contribution (ARC) The ARC was $131M before any changes were made to the program After the restructuring in 2006, the ARC was reduced to approximately $54M* Reduction to County cost of $77M per year* *Includes no change to total liability for AOCDS March 20,

10 ARC as % of Payroll Employee Group Before Current General 11.9% 3.4% Probation 16.7% 3.2% Law Enforcement* 18.2% 2.6% AOCDS** 18.6% 18.6% *Law Enforcement excluding AOCDS **AOCDS data broken out from total Law Enforcement employee group March 20,

11 Restructuring of the AOCDS Retiree Medical Program With no change to the AOCDS Retiree Medical Program, the ARC related to their existing $239M UAAL is approximately 18.6% of the related payroll. With the following changes made in sequence, the liability and ARC will be reduced to: Potential Changes Liability Reduction Remaining UAAL ARC $239 M 18.6% 1. 7% Discount (vs. 4.25%) -$80 M $159 M 12.8% 2. 3% CAP (vs. 5%) -$26 M $133 M 10.4% 3. 50% Reduction at age 65 -$16 M $117 M 9.2% 4. Split the Pool -$63 M $55 M 3.8% March 20,

12 Retiree Medical Program Restructuring (in millions) Total County AOCDS Only Total County (No Change (No Change) (if AOCDS to AOCDS) is Restructured) Liability $598 M $239 M $421 M ARC $54.2 M $24 M $35.2 M Currently AOCDS makes up 44% of the County s total ARC and 40% of the County s total liability. March 20,

13 Retiree Medical Program Annual Required Contribution (ARC) $140 $131 Million $120 AOCDS $24 M $100 $ in Millions $80 $60 $40 All others $107 M $54.2 Million AOCDS $24 M $35.2 Million AOCDS $5 M $20 All others $30.2 M All others $30.2 M $0 Prior Plan - ARC Current (no change to AOCDS) Total if AOCDS is Restructered March 20,

14 The End Result Retiree Medical Program Unfunded Actuarial Accrued Liability (UAAL) $1,600 $1,400 $ in Millions $1,200 $1,000 $800 $600 $400 $200 $0 Total UAAL $1.413 B Reductions: OCEA + SEIU $578 M Reductions: Other Groups $237 M Total UAAL $598 M Reductions: OCEA + SEIU $578 M Reductions: Other Groups $237 M Reduction: AOCDS** $177 M Total UAAL $421 M Prior Plan Current Plan* Total County if AOCDS is Restructured *AOCDS included with no change to current Retiree Medical Program ** AOCDS restructuring, if approved March 20,