Gwinnett County Retirement System Health Insurance Plan Report of Actuary on the Retiree Medical Valuation. Prepared as of January 1, 2018

Gwinnett County Retirement System Health Insurance Plan Report of Actuary on the Retiree Medical Valuation Prepared as of January 1, 2018

Cavanaugh Macdonald C O N S U L T I N G, L L C The experience and dedication you deserve May 17, 2018 Ms. Raechell Dickinson Deputy Director Human Resources Gwinnett County Government 75 Langley Drive Lawrenceville, GA 30043 Dear Ms. Dickinson: Executive Summary We have submitted the results of the annual actuarial valuation of the Gwinnett County Retirement System Health Insurance Plan (Plan) prepared as of January 1, 2018. While not verifying the data at its source, the actuary performed tests for consistency and reasonability. The valuation indicates that the Actuarially Determined Employer Contribution (ADEC) is $10,562,991 or 4.05% of active payroll, payable for the 2018 fiscal year. Any net employer claims or premiums paid for retiree health care are considered contributions toward this ADEC. The medical and drug benefits of the current Plan are included in the actuarially calculated contribution rates which are developed using the unit credit actuarial cost method with projected benefits. The discount rate used to value a plan is based on the likely return of the assets held in trust to pay benefits. Because it is our understanding that Gwinnett County will make contributions at least equal to the ADEC each year, the discount rate used in the 2018 valuation is 7.00%. Gains and losses are reflected in the unfunded accrued liability that is assumed amortized by regular annual contributions as a level percentage of payroll within a closed 27-year period, on the assumption that payroll will increase by 3.00% annually. The assumptions recommended by the actuary are, in the aggregate, reasonably related to the experience under the Plan and to reasonable expectations of anticipated experience under the Plan and meet the parameters for the disclosures under GASB. This report describes the current actuarial condition of the Gwinnett County Retirement System Health Insurance Plan, determines the calculated employer contribution rate, and analyzes fluctuations in these contribution rates. The actuarially determined employer contribution rate is based upon current membership data, plan provisions, and the assumptions and funding policies adopted by the County. 3550 Busbee Pkwy, Suite 250, Kennesaw, GA 30144 Phone (678) 388-1700 Fax (678) 388-1730 www.cavmacconsulting.com Offices in Kennesaw, Off GA Bellevue, NE

May 17, 2018 Ms. Raechell Dickinson Page 2 Funding Objectives & Policies Relative to the OPEB fund, a contribution rate has been established which consists of the normal cost and an amortization payment on the unfunded accrued liability (UAL). The amortization of any UAL is made over a closed 30 year period beginning January 1, 2015 (27 years as of January 1, 2018) using a level percent of payroll amortization method. Overall, the total contribution for the OPEB fund is expected to remain stable as a percentage of payroll over future years in the absence of benefit improvements and material experience gains or losses. The total contribution to the OPEB fund calculated in the valuation as of January 1, 2018 is 4.05% of active payroll. This compares with a total contribution of 3.89% of active payroll calculated in the valuation as of January 1, 2017. Actuarially Determined Employer Contribution (ADEC) has increased by $1,236,332 from the January 1, 2017 valuation amount of $9,326,659 to the January 1, 2018 valuation amount of $10,562,991. Since the previous valuation there has been a increase in the unfunded liability and an increase in the normal cost as a dollar amount. The reason for the increase in liability is mainly due to claims experience and the increase in normal cost is primarily due to the increase in active headcounts. The normal cost as a percentage of payroll has decreased since the previous valuation due to payroll growth higher than expected. Progress towards Realization of Funding Objectives The progress towards achieving the intended funding objectives can be measured by the relationship of actuarial assets to the actuarial accrued liabilities. This relationship is known as the funding level and in the absence of benefit improvements, should increase over time until it reaches 100%. As of January 1, 2018, the funding level for the Gwinnett County Retirement System Health Insurance Plan is 66.50%. This compares with a funding level as of January 1, 2017 of 70.29%. Therefore, the funding level has decreased from January 1, 2017 to January 1, 2018. Closing The information presented in this report describes the pertinent issues relative to the valuation. There are no other specific issues that need to be raised beyond these items in order to fairly assess the funded position of the plan as presented in the current valuation. Based on the continuation of current funding policies adopted by the Board, adequate provision is being determined for the funding of the actuarial liabilities of Gwinnett County.

May 17, 2018 Ms. Raechell Dickinson Page 3 The impact of the Affordable Care Act (ACA) was addressed in this valuation. Review of the information currently available did not identify any specific provisions of the ACA that are anticipated to significantly impact results. While the impact of certain provisions such as the excise tax on high-value health insurance plans beginning in 2020 (if applicable), mandated benefits and participation changes due to the individual mandate should be recognized in the determination of liabilities, overall future plan costs and the resulting liabilities are driven by amounts employers and retirees can afford (i.e., trend). The trend assumption forecasts the anticipated increase to initial per capita costs, taking into account health care cost inflation, increases in benefit utilization, plan changes, government-mandated benefits, and technological advances. Given the uncertainty regarding the ACA s implementation (e.g., the impact of excise tax on high-value health insurance plans, changes in participation resulting from the implementation of state-based health insurance exchanges), continued monitoring of the ACA s impact on the Plan s liability will be required. This is to certify that the independent consulting actuary is a member of the American Academy of Actuaries and has experience in performing valuations for public retirement systems, that the valuation was prepared in accordance with principles of practice prescribed by the Actuarial Standards Board, and that the actuarial calculations were performed by qualified actuaries in accordance with accepted actuarial procedures, based on the current provisions of the medical plans and on actuarial assumptions that are internally consistent and reasonably based on the actual experience of the Plan. Future actuarial results may differ significantly from the current results 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 or additional cost or contribution requirements based on the plan s funded status); and changes in plan provisions or applicable law. Since the potential impact of such factors is outside the scope of a normal annual actuarial valuation, an analysis of the range of results is not presented herein. Cavanaugh Macdonald Consulting, LLC does not provide legal, investment, or accounting advice. Thus, the information in this report is not intended to supersede or supplant the advice and interpretations of the County or its audit partners. In our opinion, if the required contributions to the Trust are made by the employer from year to year in the future at the levels required on the basis of the successive actuarial valuations, the current assets along with future anticipated contributions will be sufficient to meet all benefit obligations of the Plan for the current active and retired members. Respectfully submitted, Alisa Bennett, FSA, EA, FCA, MAAA Principal and Consulting Actuary AB:ssr

TABLE OF CONTENTS Section Item Page No. I Summary of Principal Results 1 II Membership Data 3 III Assets 4 IV Comments on Valuation 5 V Payable Under the Plan 6 VI Comments on Level of Funding 7 VII Accounting Information 8 Schedule A Results of the Valuation 12 B Plan Assets 16 C Outline of Actuarial Assumptions and Methods 18 D Summary of Plan Provisions as Interpreted for Valuation Purposes 23

SECTION I SUMMARY OF PRINCIPAL RESULTS GWINNETT COUNTY RETIREMENT SYSTEM HEALTH INSURANCE PLAN REPORT OF ACTUARY ON THE RETIREE MEDICAL VALUATION PREPARED AS OF JANUARY 1, 2018 1. For convenience of reference, the principal results of the valuation as of January 1, 2018 are summarized below along with the results of the valuation as of January 1, 2017: Valuation Date 1/1/2018 1/1/2017 Number Active* Number Retired Number Spouse of Retired Total Annual Salaries Assets: Market Value Actuarial Value Unfunded Actuarial Accrued Liability Amortization Period (Years) 4,733 1,397 788 6,918 $ 260,420,086 $ 140,705,888 $ 135,506,154 $ 68,250,550 27 4,600 1,356 717 6,673 $ 240,314,977 $ 123,008,249 $ 128,246,741 $ 54,194,422 28 Fiscal Year 2019 2018 Actuarially Determined Employer Contribution (ADEC) in dollars: Normal** Accrued Liability*** Total $ 6,592,073 3,970,918 $ 10,562,991 $ 6,237,791 3,088,868 $ 9,326,659 Actuarially Determined Employer Contribution as a Percent of Active Payroll Normal Accrued Liability Total 2.53% 1.52% 4.05% 2.60% 1.29% 3.89% Discount Rate 7.00% 7.00% * Before participation assumption is applied. ** Includes administrative expenses of $599,000 for fiscal year 2018, and $672,000 for fiscal year 2019. *** Accrued liability is assumed amortized as a level percent of payroll over a closed amortization period with payroll growth assumption of 3.00%. 2. The results take into account the plan in effect on January 1, 2018 that caps the County portion of retiree health care costs for all but a small Grandfathered group of retirees. It is our understanding that the County will make contributions at least equal to the ADEC each year; therefore, the discount rate used in the January 1, 2018 valuation is 7.00%. Cavanaugh Macdonald Consulting, LLC Page 1

SECTION I SUMMARY OF PRINCIPAL RESULTS (CONTINUED) 3. The valuation indicates that the Actuarially Determined Employer Contribution (ADEC) is 4.05% of active payroll payable for the 2019 fiscal year. Any net employer claims or premiums paid for retiree health care are considered contributions toward the ADEC. The valuation as of January 1, 2017 calculated an ADEC of 3.89% of active payroll payable for the 2018 fiscal year. Comments on the valuation results as of January 1, 2018 are given in Section IV and further discussion of the contribution levels is set out in Sections V and VI. 4. The last valuation was performed as of January 1, 2017. Since the previous valuation, the assumed initial per capita costs of health care and the assumed rates of health care inflation used to project the per capita health care costs have been revised to reflect recent experience. Furthermore, the amortization method for the unfunded accrued liability has been closed effective January 1, 2015 (which leaves 27 years remaining amortization period as of January 1, 2018). 5. Schedule A outlines the development of the actuarially determined employer contribution and the unfunded actuarial accrued liability. Schedule B outlines the reconciliation of the market value of assets and the development of the actuarial value of assets. Schedule C of this report outlines the full set of actuarial assumptions and methods employed in the current valuation. County Employees are members of the Gwinnett County Defined Benefit Plan or the Gwinnett County Board of Commissioners Defined Contribution Pension Plan. 6. The valuation takes into account the Plan benefits in effect as of January 1, 2018. Cavanaugh Macdonald Consulting, LLC Page 2

SECTION II MEMBERSHIP DATA 1. Data regarding the membership of the Retiree Health Insurance Plan for use as a basis of the valuation were furnished by the Retirement System s office. The following tables summarize the membership of the System as of January 1, 2018, upon which the valuation was based. Active Members as of January 1, 2018 Service Age Under 1 1 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 & Up Total Under 25 63 177 1 0 0 0 0 0 0 241 25 to 29 65 450 103 6 0 0 0 0 0 624 30 to 34 35 274 204 124 1 0 0 0 0 638 35 to 39 31 158 156 202 73 4 0 0 0 624 40 to 44 18 124 101 164 140 50 0 0 0 597 45 to 49 17 117 94 136 143 127 35 1 0 670 50 to 54 14 118 87 112 106 76 55 28 1 597 55 to 59 11 81 62 87 87 40 24 16 2 410 60 to 64 4 39 42 60 45 24 16 13 4 247 65 to 69 0 9 12 25 13 10 3 4 2 78 70 & Up 0 1 2 2 2 0 0 0 0 7 Total 258 1,548 864 918 610 331 133 62 9 4,733 2. The following tables show the number of retired members and their beneficiaries receiving health care as of the valuation date as well as average ages. Retirees Receiving Health Benefits as of January 1, 2018 Retirees Pre-Med Medicare Total Number 684 713 1,397 Average Age 58.61 72.01 65.45 Survivor Beneficiaries & Spouses Receiving Health Benefits as of January 1, 2018 Spouses Pre-Med Medicare Total Number 452 336 788 Average Age 56.77 72.08 63.3 Cavanaugh Macdonald Consulting, LLC Page 3

SECTION III ASSETS Schedule B shows information regarding assets for valuation purposes. As of January 1, 2018, the plan assets held in trust solely to provide benefits to retirees and their beneficiaries in accordance with the terms of the plan total $140,705,888. The actuarial value of assets uses a 5-year smoothing method and the value is $135,506,154 as of January 1, 2018. Cavanaugh Macdonald Consulting, LLC Page 4

SECTION IV COMMENTS ON VALUATION 1. Schedule A of this report outlines the results of the actuarial valuation. The results are shown based on a discount rate of 7.00%. Because it is our understanding that Gwinnett County will make contributions at least equal to the ADEC each year, the discount rate used in the 2018 valuation is 7.00%. The valuation was prepared in accordance with the actuarial assumptions and the actuarial cost method, which are described in Schedule C. 2. The valuation shows that the Plan has an actuarial accrued liability of $98,193,344 for benefits expected to be paid on account of the present active membership, based on service to the valuation date. The liability on account of benefits payable to retirees and covered spouses amounts to $105,563,360. The total actuarial accrued liability of the Plan amounts to $203,756,704. Against these liabilities, the Plan has present assets for valuation purposes of $135,506,154. Therefore, the unfunded actuarial accrued liability is equal to $68,250,550. 3. The normal contribution is equal to the actuarial present value of benefits accruing during the current year and includes assumed administrative expenses. The normal contribution is determined to be 2.53% of total active payroll. Cavanaugh Macdonald Consulting, LLC Page 5

SECTION V CONTRIBUTIONS PAYABLE UNDER THE PLAN ACTUARIALLY DETERMINED EMPLOYER CONTRIBUTION For the 2018 Fiscal Year Item % of Active Payroll Dollar Amount Normal 2.53% $ 6,592,073 Accrued Liability 1.52% 3,970,918 Total 4.05% $ 10,562,991 1. The valuation indicates that a normal contribution of 2.53% of total active payroll is required to meet the cost of benefits currently accruing. 2. The unfunded actuarial accrued liability amounts to $68,250,550 as of the valuation date. An accrued liability contribution of 1.52% of total active payroll is sufficient to amortize the unfunded actuarial accrued liability over a 27-year period, based on a 7.00% investment rate of return assumption and the assumption that the payroll will increase by 3.00% annually. 3. The total Annual Required Contribution is therefore, 4.05% of total active payroll. Cavanaugh Macdonald Consulting, LLC Page 6

SECTION VI COMMENTS ON LEVEL FUNDING 1. The monthly contribution for retirees to opt into the medical plan is based on plan election, coverage tier and Medicare eligibility. 2. The valuation indicates that a recommended employer contribution rate of 4.05% of payroll is required to fund the plan. This corresponds to a contribution required to meet the cost of benefits currently accruing and provide for the amortization of the unfunded actuarial accrued liability over a period of 27 years. Cavanaugh Macdonald Consulting, LLC Page 7

SECTION VII ACCOUNTING INFORMATION 1. Governmental Accounting Standards Board Statement No 45 set forth certain items of required supplementary information to be disclosed in the financial statements of the Plan and the employer. One such item is the distribution of the number of employees by type of membership, as follows: NUMBER OF ACTIVE AND RETIRED MEMBERS AS OF JANUARY 1, 2018 Category Retirees, beneficiaries and spouses currently receiving benefits Terminated employees entitled to benefits but not yet receiving benefits Active members Total Number 2,185 0 4,733 6,918 Another such item is the Schedule of Funding Progress as shown in the following table. SCHEDULE OF FUNDING PROGRESS Actuarial Valuation Date Actuarial Value of Assets ( a ) Actuarial Accrued Liability (AAL) Projected Unit Credit ( b ) Unfunded AAL (UAAL) ( b a ) Funded Ratio ( a / b ) Covered Payroll ( c ) UAAL as a Percent of Covered Payroll ( ( b - a ) / c ) 1/1/2012 $68,117,159 $155,736,605 $87,619,446 43.74% $211,635,669 41.40% 1/1/2013 87,136,272 154,126,909 66,990,637 56.54% 210,699,665 31.79% 1/1/2014 106,219,472 177,473,914 71,254,442 59.85% 206,639,657 34.48% 1/1/2015 114,222,310 189,833,218 75,610,908 60.17% 215,187,152 35.14% 1/1/2016 120,922,616 185,036,569 64,113,953 65.35% 224,111,746 28.61% 1/1/2017 128,246,741 182,441,163 54,194,422 70.29% 240,314,977 22.55% 1/1/2018 135,506,154 203,756,704 68,250,550 66.50% 260,420,086 26.21% Cavanaugh Macdonald Consulting, LLC Page 8

SECTION VII ACCOUNTING INFORMATION (CONTINUED) 2. GASB Statement No. 45 sets forth certain items of required supplementary information to be disclosed in the financial statements of the County. The following required supplementary information was prepared for illustrative purposes. The County is responsible for the preparation and fair presentation of its financial statements in accordance with U.S. generally accepted accounting principles and is subject to audit to obtain reasonable assurance the financial statements are free from material misstatement. Annual OPEB Cost and Net OPEB Asset for Fiscal Year Ending December 31, 2017 (a) Employer Annual Required Contribution was $ 9,521,287 (b) Valuation Discount Rate 7.00% (c) Interest on Net OPEB Asset: (b) * (i) * (-1) (2,582,689) (d) Amortization Factor 17.88918 (e) Adjustment to Annual Required Contribution: (i) / (d) 2,062,451 (f) Annual OPEB Cost: (a) + (c) + (e) $ 9,001,049 (g) Employer made for Fiscal Year Ending December 31, 2017 10,212,000 (h) Increase (Decrease) in Net OPEB Asset (g) (f) $ 1,210,951 (i) Net OPEB Asset Beginning of Fiscal Year 36,895,554 (j) Net OPEB Asset End of Fiscal Year (h) + (i) $ 38,106,505 TREND INFORMATION ($ in Thousands) Fiscal Year Annual OPEB Cost (AOC) Actual County Contribution Percentage of AOC Contributed Net OPEB Asset 2013 $10,687 $11,313 105.86% $30,409 2014 8,930 9,977 111.72 31,456 2015 9,420 11,587 123.01 33,624 2016 9,985 13,257 132.77 36,896 2017 9,001 10,212 113.45 38,107 Cavanaugh Macdonald Consulting, LLC Page 9

SECTION VII ACCOUNTING INFORMATION (CONTINUED) 3. The information presented in the required supplementary schedule was determined as part of the actuarial valuation at January 1, 2018. Additional information as of the latest actuarial valuation follows. Additional Valuation Information Valuation Date January 1, 2018 Actuarial Cost Method Projected Unit Credit Amortization Method Level Percent of Pay, Closed Remaining Amortization Period 27 Years Asset Valuation Method Five-year smoothed market value Actuarial assumptions: Investment Rate of Return* 7.00% Medical Cost Trend Rate* Pre-Medicare Rate 7.75% - 5.00% Ultimate Trend Rate 5.00% Year of Ultimate Trend Rate 2024 Post-Medicare Rate 5.75% - 5.00% Ultimate Trend Rate 5.00% Year of Ultimate Trend Rate 2021 *Includes inflation at 3.00% The assumed investment rate of return reflects the fact that assets are legally held exclusively for other post-employment benefits. Cavanaugh Macdonald Consulting, LLC Page 10

SECTION VII ACCOUNTING INFORMATION (CONTINUED) 4. On June 2, 2015, GASB Statement No. 74 and GASB Statement No. 75 (GASB 74 and 75) were unanimously adopted by the GASB Board. The disclosure requirements of GASB 74 and 75 will be similar to the disclosure requirements for pension benefits under GASB Statement No. 67 and GASB Statement No. 68. GASB 74 relates to accounting disclosures for plan sponsors and, as such, replaces GASB 43 for fiscal years beginning after June 15, 2016. GASB 75 relates to accounting disclosures for contributing employers and, as such, replaces GASB 45 for fiscal years beginning after June 15, 2017. GASB 74 and 75 will require applicable OPEB plan sponsors and contributing employers to disclose the net OPEB liability on the statement of financial position and book an accounting expense based upon the entry age normal actuarial cost method. Beyond the use of a specified actuarial cost method, GASB s new disclosure standards will also require the discount rate used to calculate liabilities to be based upon the yield of 20-year, tax-exempt municipal bonds and the expected rate of return on plan assets, to the extent plan assets are projected to be available for the payment of future benefits. Additionally, GASB 74 and 75 will bring about many other changes in the liability valuation and accounting disclosure processes currently in place which are expected to significantly impact data collection, timing, and effort. As details for the new GASB OPEB disclosure standards emerge, planning and coordination between plan sponsors, contributing employers, actuaries, and auditors is recommended. GASB 74 and 75 reports will be sent under separate cover. Cavanaugh Macdonald Consulting, LLC Page 11

SCHEDULE A RESULTS OF THE VALUATION Valuation Results 7.00% Discount Rate 1. Payroll $ 260,420,086 2. Actuarial Accrued Liability Present value of prospective benefits payable in respect of: (a) Active members and projected spouses fully eligible for benefits $ 98,193,344 (b) Retired members, beneficiaries and RIO s 105,563,360 (c) Total actuarial accrued liability $ 203,756,704 3. Present Assets for Valuation Purposes $ 135,506,154 4. Unfunded Actuarial Accrued Liability (UAAL) [(2)(c) minus (3)] $ 68,250,550 5. Amortization Period 27 6. Normal Contribution $ 6,592,073 7. Amortization of the UAAL 3,970,918 8. Total Contribution (6) + (7) 9. Normal Contribution as a Percent of Payroll (6) (1) 10. Accrued Liability Contribution as a Percent of Payroll (7) (1) 11. Total Contribution as a Percent of Payroll (9) + (10) $ 10,562,991 2.53% 1.52% 4.05% Cavanaugh Macdonald Consulting, LLC Page 12

SCHEDULE A RESULTS OF THE VALUATION (CONTINUED) Actual experience will never (except by coincidence) coincide exactly with assumed experience. It is assumed that gains and losses will be in balance over a period of years, but sizeable year to year fluctuations are common. The change to the Unfunded Actuarial Accrued Liability (UAAL) as of January 1, 2018 is shown below. Changes In Unfunded Actuarial Accrued Liabilities (UAAL) As of January 1, 2018 (1) As of January 1, 2017 (a) Actual Accrued Liability (AAL) $ 182,441,163 (b) Normal Cost 5,638,791 (c) Assumed Administrative Fees 599,000 (d) Net Benefits and Administrative Fees Paid 11,951,440 (2) As of January 1, 2018 (a) Expected AAL {[(1a) + (1b)] x 1.07} {(1d 1c) x [1 + (0.07 x 0.50)]} 189,495,775 (b) Actual AAL 203,756,704 (3) Total AAL Gain/(Loss) (2a 2b) (14,260,929) (a) Gain/(Loss) due to claims experience (7,151,460) (b) Gain/(Loss) due to trend reset (445,305) (c) Experience Gain/(Loss) (6,664,164) (4) Actuarial Value of Assets (AVA) as of January 1, 2017 128,246,741 (5) Net Expected External Cash Flow During the Year (Assumes ARC Payment) (2,430,153) (6) As of January 1, 2018 (a) Expected AVA [(4) x 1.07] + {(5) x [1 + (0.07 x 0.50)]} 134,708,804 (b) Actual AVA 135,506,154 (7) AVA Gain/(Loss) (Includes Additional Employer ) (6b 6a) 797,350 (a) Gain/(Loss) due to investment experience 82,211 (b) Gain/(Loss) due to employer contribution 715,139 (8) Expected Unfunded AAL (UAAL) as of January 1, 2018 54,786,971 (2a) (6a) (9) Actual UAAL as of January 1, 2018 68,250,550 (2b) (6b) (10) UAAL Gain (Loss) (8) (9) $(13,463,579) Cavanaugh Macdonald Consulting, LLC Page 13

SCHEDULE A RESULTS OF THE VALUATION (CONTINUED) Changes In Unfunded Accrued Liabilities (UAL) As of January 1, 2018 (1) Unfunded Accrued Liability (UAL) as of January 1, 2017 $ 54,194,422 (2) Normal Cost 5,638,791 (3) Assumed Administrative Fees 599,000 (4) Expected 9,521,287 (5) Interest 3,876,045 (6) Expected UAL at January 1, 2018 $ 54,786,971 (1) + (2) + (3) - (4) + (5) (7) Actual UAL at January 1, 2018 68,250,550 (8) Total Gain/(Loss) $ (13,463,579) (6) (7) (9) Asset Gain/(Loss) 797,350 (10) Gain/(Loss) due to claims experience, assumptions and trend reset (7,596,765) (11) Liability Gain/(Loss) $ (6,664,164) (8) (9) (10) (12) Liability Gain/(Loss) as a percent of Accrued Liability (3.3%) Cavanaugh Macdonald Consulting, LLC Page 14

SCHEDULE A RESULTS OF THE VALUATION (CONTINUED) Unfunded Accrued Liability Contribution Rate Change (1) Unfunded Accrued Liability Contribution Rate as of January 1, 2017 1.29% (2) Net Actuarial (Gain)/Loss During the 2017 Plan Year* (a) Due to Assets and Employer (Gain)/Loss (0.02)% (b) Due to Claims Experience (Gain)/Loss 0.17% (c) Due to Payroll growth more than expected (Gain)/Loss (0.08)% (d) Due to Assumption Changes 0.01% (e) Due to Other Experience (Gain)/Loss 0.15% (f) Total 0.23% (5) Unfunded Accrued Liability Contribution Rate as of January 1, 20178 1.52 % (1) + (2e) *Comments on Net (Gain)/Loss on Contribution Rate: (a) Asset and Liability (Gains)/Losses: As shown in the tables on the prior two pages. (b) Claims Experience (Gain)/Loss: As shown on tables on prior two pages (c) Payroll Growth: Actual payroll increased by 8.37% compared to expected increase of 3.00% (d) Other Experience (Gain)/Loss: As shown on tables on prior two pages Cavanaugh Macdonald Consulting, LLC Page 15

SCHEDULE B PLAN ASSETS GASB defines plan assets as resources, usually in the form of stocks, bonds, and other classes of investments, that have been segregated and restricted in a trust, or equivalent arrangement, in which (a) employer contributions to the plan are irrevocable, (b) assets are dedicated to providing benefits to retirees and their beneficiaries, and (c) assets are legally protected from creditors of the employers or plan administrator, for the payment of benefits in accordance with the terms of the plan. As of the valuation date, the market value of such assets amounted to $140,705,888. The development of the market value of assets is shown in the following table. Assets Summary Based on Market Value ($ in Thousands) (1) Market Value of Assets as of January 1, 2017 $ 123,008 (2) Additions (a) $ 15,461 (b) Investment Income 20,001 (c) Investment Expenses (565) (d) Total Additions $ 34,897 (3) Deductions (a) Benefits $ 9,811 (b) Insurance Premiums 6,717 (c) Administrative Fees 672 (d) Total Deductions 17,200 (4) Cash Flow $ 17,697 (5) Market Value of Assets as of January 1, 2018 $ 140,705 (1) + (4) (6) Annualized Rate of Return* 15.91% *Based on the approximation formula: I/[0.5 x (A + B I)], where I = Investment Return A = Beginning of year asset value B = End of year asset value Cavanaugh Macdonald Consulting, LLC Page 16

SCHEDULE B PLAN ASSETS Development of Actuarial Value of Assets (1) Actuarial Value of Assets as of January 1, 2017 $ 128,246,741 (2) Market Value of Assets as of January 1, 2018 $ 140,705,888 (3) Market Value of Assets as of January 1, 2017 $ 123,008,249 (4) Net Cash Flow During Plan Year (a) $ 15,461,501 (b) Benefit Payments (16,528,465) (c) Administration Expenses (672,234) (d) Net Cash Flow: (4)a + (4)b + (4)c $ (1,739,198) (5) Investment Income (a) Market Total: (2) (3) (4)d $ 19,436,837 (b) Assumed Rate of Return 7.00% (c) Amount for Immediate Recognition $ 8,544,633 (d) Amount for Phased-In Recognition: (5)a (5)c $ 10,892,204 (6) Recognized Amounts for Plan Year (a) Current Year: 0.20 x (5)d $ 2,178,441 (b) First Prior Year (65,102) (c) Second Prior Year (1,659,361) (d) Third Prior Year - (e) Fourth Prior Year - (f) Total Recognized Investment (Loss) $ 453,978 (7) Actuarial Value of Assets as of January 1, 2018 (1) + (4)d + (5)c + (6)f $ 135,506,154 (8) Rate of Return on Actuarial Value 7.06% The actuarial value of assets recognizes a portion of the difference between the market value of assets and the expected market value of assets, based on the assumed valuation rate of return. The amount recognized each year is 20% of the difference between market value and expected market value. Cavanaugh Macdonald Consulting, LLC Page 17

SCHEDULE C OUTLINE OF ACTUARIAL ASSUMPTIONS AND METHODS VALUATION DATE: January 1, 2018 DISCOUNT RATE: 7.0% per annum, compounded annually. HEALTH CARE COST TREND RATES: Following is a chart detailing trend assumptions for annual health care claims. Year 2018 2019 2020 2021 2022 2023 2024 and beyond Under Age 65 7.75% 7.00% 6.50% 6.00% 5.50% 5.25% 5.00% Trend Age 65 & Over 5.75% 5.50% 5.25% 5.00% 5.00% 5.00% 5.00% The trend is not applied to the employer contribution cap since no increase to the employer contribution cap is assumed. Future increases above the amount of the cap are valued only for the small group of Grandfathered retirees for whom the cap is not applicable. AGE RELATED MORBIDITY: Per capita costs are adjusted to reflect expected cost changes related to age. The increase to the net incurred claims was assumed to be: Participant Age <30 30 34 35 39 40 44 45 49 50 54 55 59 60 64 65 69 70 74 75 79 80 84 85 89 90 and over Annual Increase 0.0% 1.0% 1.5% 2.0% 2.6% 3.3% 3.6% 4.2% 3.0% 2.5% 2.0% 1.0% 0.5% 0.0% Cavanaugh Macdonald Consulting, LLC Page 18

SCHEDULE C OUTLINE OF ACTUARIAL ASSUMPTIONS AND METHODS (CONTINUED) MONTHLY EXPECTED MEDICAL/PRESCRIPTION DRUG CLAIMS (AGE ADJUSTED TO AGE 65): The following charts show expected claims age adjusted to age 65 for the year following the valuation date: Blended Retiree Tier Claims Single Pre-Medicare Eligible $ 1,489 Family Pre-Medicare Eligible 2,977 Single Medicare Eligible 227 Family Medicare Eligible 453 Future retirees are assumed to elect the same plans as current retirees; accordingly the monthly future retiree claims above reflect the blended enrollment of current retirees in the applicable health plans. MONTHLY EMPLOYER CONTRIBUTION CAP: The monthly Employer Contribution for retiree health plan participants will be capped at the following amounts. It is assumed that the cap will be applied to the blended retiree premiums rather than the self-supporting amounts. County Tier Contribution Retiree on Medicare $ 250 Retiree non-medicare 1,000 Retiree + Spouse, 1 on Medicare 1,250 Retiree + Spouse, 2 on Medicare 500 Retiree + Spouse, non-medicare 2,000 The trend is not applied to the monthly Employer Contribution cap. Actual County contribution amounts will be valued until the hard cap is reached. Cavanaugh Macdonald Consulting, LLC Page 19

SCHEDULE C OUTLINE OF ACTUARIAL ASSUMPTIONS AND METHODS (CONTINUED) ANTICIPATED PLAN PARTICIPATION: The assumed annual rates of member participation and spouse coverage are as follows: Plan Participation Male Female Member Participation 90% 90% Spouse Coverage 65% 35% ASSET VALUATION METHOD: Actuarial value, as developed in Schedule B. The actuarial value of assets recognizes a portion of the difference between the market value of assets and the expected market value of assets, based on the assumed valuation rate of return. The amount recognized each year is 20% of the difference between market value and expected market value beginning with the January 1, 2016 valuation. ACTUARIAL METHOD: Costs were determined using the Projected Unit Credit Actuarial Cost Method. The annual normal cost is the present value of the portion of the projected benefit attributable to participation service during the upcoming year, and the Actuarial Accrued Liability (AAL) is equal to the present value of the portion of the projected benefit attributable to service before the valuation date. Service from hire date through full retirement eligibility date was used in allocating costs. BENEFITS VALUED: Medical and drug benefits for retirees and their dependents for both pre-medicare and Medicare eligible recipients. DECREMENTS RATES: Retirement, termination and disability decrements for participants in the Defined Benefit Plan are based on results from the Gwinnett County Defined Benefit Plan Experience Study for the Three-Year Period Ending January 1, 2009. Additionally, the study showed some alterations to the disability rates were necessary for the Defined Contribution Plan. Based on the results from the Defined Contribution Experience Study For the Period January 1, 2007 Through January 1, 2012, it was determined that changes to the termination and retirement decrements for Defined Contribution Plan participants were needed. Cavanaugh Macdonald Consulting, LLC Page 20

SCHEDULE C OUTLINE OF ACTUARIAL ASSUMPTIONS AND METHODS (CONTINUED) MORTALITY: Pre-Retirement Mortality Male Rates: 1983 Group Annuity Mortality Table multiplied by 50%. Female Rates: 1983 Group Annuity Mortality Table. Post- Retirement Mortality 1994 Group Annuity Mortality Static Table Projected to 2001 using scale AA for males and females. Post Retirement Disabled Mortality 1994 Group Annuity Mortality Static Table Projected to 2001 using scale AA for males and females. TERMINATION: Representative values of the assumed annual rates of termination are as follows: Age Under 20 20 25 30 35 40 45 50 55 60 65 & Over Probability of Termination Defined Benefit Plan 18.0% 15.5% 9.3% 7.6% 6.1% 4.9% 4.2% 3.7% 3.2% 2.4% 2.0% Defined Contribution Plan 12.0% 12.0% 10.0% 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.5% 6.5% DISABILITY: Male rates (used for both sexes) derived from a 1977 Social Security Administration study multiplied by 50%. Incidence of disability resulting in eligibility for both disability benefits under the county retirement plan and Social Security. Age Under 20 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55 & Over Probability of Disability 0.0000% 0.0050% 0.0566% 0.0950% 0.1356% 0.2000% 0.3166% 0.5200% 0.0000% Cavanaugh Macdonald Consulting, LLC Page 21

SCHEDULE C OUTLINE OF ACTUARIAL ASSUMPTIONS AND METHODS (CONTINUED) RETIREMENT: Assumed annual rates of retirement are as follows: Age Under 50 50-54 55 56-61 62 63 64 65 66 67-69 70 & Over Probability of Retirement Defined Benefit Plan* 0.0% 30.0% 30.0% 25.0% 30.0% 30.0% 30.0% 50.0% 30.0% 30.0% 100.0% Defined Contribution Plan 0.0% 0.0% 15.0% 15.0% 15.0% 25.0% 25.0% 25.0% 25.0% 50.0% 100.0% *If service is at least 30 years or when member is first eligible for Rule of 75 and is less than age 60, the rate is 37.5%. SPOUSE AGE DIFFERENCE: Wives are assumed to be three years younger than husbands. Cavanaugh Macdonald Consulting, LLC Page 22

SCHEDULE D SUMMARY OF PLAN PROVISIONS AS INTERPRETED FOR VALUATION PURPOSES ELIGIBILITY FOR BENEFITS FROM THE DEFINED BENEFIT PLAN: Normal Retirement Benefits: Members hired prior to November 1, 2004; Attainment of age 65 with at least three years of vesting service. Members hired on or after November 1, 2004; Attainment of age 65 with at least five years of vesting service. Early Retirement Benefits: Amended Provisions: Attainment of age 60 with at least 10 years of service and 3 years of plan participation, or attainment of age of 50 and Rule of 75. Pre-amended Provisions: Attainment of age 60 with at least 10 years of service and 3 years of plan participation, or attainment of age of 55 with 30 years of service. Plan A: Attainment of age 60 with at least 10 years of service and 3 years of plan participation, or 30 years of service regardless of age. Plan B and Plan C: Attainment of age 60 with at least 10 years of service and 3 years of plan participation, or 30 years of service regardless of age, or attainment of age 50 with Rule of 75. Disability Retirement Benefits: Ten (10) years of service and deemed to be totally disabled by the Social Security Administration. ELIGIBILITY FOR BENEFITS FROM THE DEFINED CONTRIBUTION PLAN: Normal Retirement Benefits: Attainment of age 55 with Rule of 65 and at least three years of vesting service. Disability Retirement Benefits: Ten (10) years of service and deemed to be totally disabled by the Federal Social Security Administration. Cavanaugh Macdonald Consulting, LLC Page 23

SCHEDULE D SUMMARY OF PLAN PROVISIONS AS INTERPRETED FOR VALUATION PURPOSES GROUPS ELIGIBLE TO PARTICIPATE IN GWINNETT COUNTY S OPEB BENEFITS PROGRAM: I. Retirees and their Eligible Dependents a. Retirees who have met the specific eligibility requirements for retirement under the Gwinnett County Defined Benefit Pension Plan or the Gwinnett County Defined Contribution Plan may elect to continue receiving group health benefits at the time of retirement. i. The spouse and eligible dependents of an active County Official or Employee may elect to continue receiving group health benefits in the event of death of an active County Official or Employee who had satisfied the retirement eligibility requirements prior to their death. The spouse and eligible dependents of the County employee must have been covered at the time of the County Employee s death. II. Inactive Employees and their Eligible Dependents a. Inactive employees on Unpaid Leave Status with Inactive Status commencing before July 1, 2007 with less than 3 years of service may continue benefits for up to twenty-four (24) months. Those with 3 or more years of service and in an approved absence for up to one year may continue until eligible to retire. Those on Long-Term Disability (LTD) with LTD benefits terminated by the LTD insurer that also have a minimum of ten (10) years of service may continue if they were determined to be totally disabled by the Social Security Administration. b. Inactive employees on Unpaid Leave Status with Inactive Status commencing on or after July 1, 2007 with less than ten (10) years of service may continue benefits for up to twentyfour (24) months. Those with ten (10) or more years of service and in an approved absence for up to one year may continue until eligible to retire. Those on Long-Term Disability (LTD) with LTD benefits terminated by the LTD insurer who also have a minimum of ten (10) years of service may continue if they were determined to be totally disabled by the Social Security Administration. Cavanaugh Macdonald Consulting, LLC Page 24

SCHEDULE D SUMMARY OF PLAN PROVISIONS AS INTERPRETED FOR VALUATION PURPOSES III. Ex-Elected Officials and Their Eligible Dependents a. County Officials that have left office after completion of at least one full term in office and who are not eligible for coverage under another health plan may elect to continue receiving group health benefits prior to leaving office. IV. In-Line of Duty Participants a. When an active employee s death arises in and during the scope of their employment with Gwinnett County, the surviving spouses and eligible dependents may elect to continue receiving group health benefits upon the death of the member. PARTICIPANT ELIGIBILITY FOR BENEFITS FROM THE RETIREE HEALTH INSURANCE PLAN Effective July 1, 2007 employees hired into or transferred into full-time positions must have a minimum of ten (I0) years credited service toward retirement and must retire directly from Gwinnett County in order to be eligible to participate in the retiree health plan. Active employees participating in a Gwinnett County retirement plan prior to July 1, 2007 must only retire directly from Gwinnett County in order to be eligible to participate in the retiree health plan. Effective with retirements beginning on or after January 1, 2005, Medicare-eligible retirees and dependents must participate in both Medicare Parts A and B or in Medicare Part C, to be eligible for County provided retiree health care benefits at the lower "on Medicare" retiree contribution rates. Effective January 1, 2008, all participants and dependents who are eligible for Social Security disability and Medicare must participate in Medicare Part A and B or Part C, and County provided health coverage for these persons will be secondary to Medicare. Cavanaugh Macdonald Consulting, LLC Page 25

SCHEDULE D SUMMARY OF PLAN PROVISIONS AS INTERPRETED FOR VALUATION PURPOSES RETIREE HEALTH INSURANCE PLAN CONTRIBUTIONS: vary based on plan election, dependent coverage, and Medicare eligibility and election. Plan costs are determined for valuation purposes considering claims costs net of member premiums paid. Effective January 1, 20187, the County's monthly Employer Contribution for retiree health plan participants will be set by the Director of Human Resources and the Director of Financial Services. Should the County's Contribution for active employee health plans exceed the amounts detailed below, the County will only contribute the amounts below for retiree plan participants. County Tier Contribution Retiree on Medicare $ 250 Retiree non-medicare 1,000 Retiree + Spouse, 1 on Medicare 1,250 Retiree + Spouse, 2 on Medicare 500 Retiree + Spouse, non-medicare 2,000 Retiree premiums are determined based on a cost-sharing arrangement and, therefore, increase with medical trend as claims costs increase. The County s monthly Employer Contribution for retiree health plan participants will be capped at the above amounts. It is assumed that the cap will be applied to the blended retiree premiums rather than the self-supporting amounts. No trend was applied to the County Contribution hard cap. Actual County contribution amounts will be valued until the hard cap is reached. In addition, there are a small number of grandfathered retirees who are not subject to the cap. Cavanaugh Macdonald Consulting, LLC Page 26

SCHEDULE D SUMMARY OF PLAN PROVISIONS AS INTERPRETED FOR VALUATION PURPOSES The monthly retiree premiums before blending as of January 1, 2018 are as follows: 2018 Retiree Rates Aetna HSA - Silver Enrollment Tier Employer Retiree Monthly Rates Retiree Total Rate Retiree Only $852.86 232.04 1,084.90 Retiree + Spouse $1,865.71 304.10 2,169.81 Retiree + Child(ren) $1,167.59 297.04 $1,464.63 Retiree + Family $2,200.00 349.53 $2,549.53 Aetna HSA - Gold Enrollment Tier Employer Retiree Monthly Rates Retiree Total Rate Retiree Only $858.29 $381.60 $1,239.89 Retiree + Spouse $1,798.70 $681.09 $2,479.79 Retiree + Child(ren) $1,000.83 $673.03 $1,673.86 Retiree + Family $2,200.00 $713.75 $2,913.75 Aetna Traditional Plan Retiree Monthly Rates Enrollment Tier Employer Retiree Total Rate Retiree Only $666.34 $496.06 $1,162.40 Retiree + Spouse $1,204.36 $1,120.42 $2,324.78 Retiree + Child(ren) $456.38 $1,112.86 $1,569.24 Retiree + Family $1,607.15 $1,124.49 $2,731.64 Cavanaugh Macdonald Consulting, LLC Page 27

SCHEDULE D SUMMARY OF PLAN PROVISIONS AS INTERPRETED FOR VALUATION PURPOSES Aetna Medicare and Aetna Silver Blended Enrollment Tier Employer Retiree Monthly Rates Retiree Total Rate Retiree + Spouse (One in Medicare) Retiree + Child(ren) (One in Medicare) Retiree + Family (Two in Medicare) Retiree + Family (One in Medicare) $1,062.23 $295.96 $1,358.19 $364.12 $288.90 $653.02 $595.35 $330.96 $926.31 $1,450.00 $287.92 $1,737.92 Aetna Medicare and Aetna Gold Blended Enrollment Tier Employer Retiree Monthly Rates Retiree Total Rate Retiree + Spouse (One in Medicare) Retiree + Child(ren) (One in Medicare) Retiree + Family (Two in Medicare) Retiree + Family (One in Medicare) $841.80 $671.38 $1,513.18 $73.98 $663.28 $737.26 $649.05 $331.50 $980.55 $1,271.42 $675.73 $1,947.15 Cavanaugh Macdonald Consulting, LLC Page 28

SCHEDULE D SUMMARY OF PLAN PROVISIONS AS INTERPRETED FOR VALUATION PURPOSES Aetna Medicare and Aetna Traditional Blended Enrollment Tier Employer Retiree Monthly Rates Retiree Total Rate Retiree + Spouse (One in Medicare) Retiree + Child(ren) (One in Medicare) Retiree + Family (Two in Medicare) Retiree + Family (One in Medicare) $622.28 $813.41 $1,435.69 $43.98 $670.55 $714.53 $622.19 $331.23 $953.42 $1,025.04 $817.49 $1,842.53 Kaiser Pre- Medicare HMO - Silver Enrollment Tier Employer Retiree Monthly Rates Retiree Total Rate Retiree Only $847.73 $197.55 $1,045.28 Retiree + Spouse $1,713.24 $377.32 $2,090.56 Retiree + Child(ren) $1,040.60 $370.52 $1,411.12 Retiree + Family $2,075.43 $380.98 $2,456.41 Cavanaugh Macdonald Consulting, LLC Page 29

SCHEDULE D SUMMARY OF PLAN PROVISIONS AS INTERPRETED FOR VALUATION PURPOSES Kaiser Pre- Medicare HMO - Gold Enrollment Tier Employer Retiree Monthly Rates Retiree Total Rate Retiree Only $853.85 $340.75 $1,194.60 Retiree + Spouse $1,696.07 $693.14 $2,389.21 Retiree + Child(ren) $927.33 $685.38 $1,612.71 Retiree + Family $2,109.99 $697.32 $2,807.31 Kaiser Pre Medicare Silver HMO Retiree Monthly Rates Enrollment Tier Employer Retiree Total Rate Retiree + Spouse (One in Medicare) Retiree + Child(ren) (One in Medicare) Retiree + Family (Two in Medicare) Retiree + Family (One in Medicare) $989.52 $329.05 $1,318.57 $316.91 $322.22 $639.13 $581.61 $330.81 $912.42 $1,351.70 $332.71 $1,684.41 Cavanaugh Macdonald Consulting, LLC Page 30

SCHEDULE D SUMMARY OF PLAN PROVISIONS AS INTERPRETED FOR VALUATION PURPOSES Kaiser Pre Medicare Gold HMO Retiree Monthly Rates Enrollment Tier Employer Retiree Total Rate Retiree + Spouse (One in Medicare) Retiree + Child(ren) (One in Medicare) Retiree + Family (Two in Medicare) Retiree + Family (One in Medicare) $963.57 $504.32 $1,467.89 $194.87 $496.53 $691.40 $633.35 $331.34 $964.69 $1,377.49 $508.51 $1,886.00 Aetna Medicare Advantage Rates Enrollment Tier Employer Retiree Monthly Rates Retiree Total Rate Retiree $160.36 $112.93 $273.29 Retiree + Spouse $219.46 $327.12 $546.58 Cavanaugh Macdonald Consulting, LLC Page 31

SCHEDULE D SUMMARY OF PLAN PROVISIONS AS INTERPRETED FOR VALUATION PURPOSES The monthly blended non-medicare retiree premiums as of January 1, 2018 are as follows: Blended Monthly Retiree Premiums County Portion of Premium Retiree Portion of Premium Non-Medicare Coverage Tier Total Premium Single Pre-Medicare Eligible $ 328 $ 824 $1,152 Family Pre-Medicare Eligible 621 1,684 2,305 The cap is applied to the blended County Portion above for non-medicare retirees. The following charts illustrate the projected estimated County portion of the retiree premiums in future years based on the Health Care Cost Trend Assumption shown in Schedule C of this report. As is illustrated in the charts, when the hard capped is reached, no future increases to the County portion of the premiums are assumed. Once the hard cap is reached, all health care cost increases will be the responsibility of the retiree. Estimated County Portion of Retiree Premium Blended Non-Medicare Retiree Pre- Medicare Eligible $1,000 Retiree + Spouse Pre- Medicare Eligible $2,000 Hard Cap Year Hard Cap 2018 $ 824 $ 1,684 2019 888 1,815 2020 950 1,942 2021 1,000 2,000 2022 1,000 2,000 2023 1,000 2,000 2024 1,000 2,000 2025 1,000 2,000 2026 1,000 2,000 2027 1,000 2,000 2028 1,000 2,000 2029 1,000 2,000 2030 1,000 2,000 Cavanaugh Macdonald Consulting, LLC Page 32

SCHEDULE D SUMMARY OF PLAN PROVISIONS AS INTERPRETED FOR VALUATION PURPOSES Retiree Medicare Eligible Humana Medicare Advantage Retiree + Spouse 1 Medicare Eligible Retiree + Spouse Medicare Eligible $250 $1,250 $500 Year Hard Cap Hard Cap Hard Cap 2018 $160 $985 $219 2019 170 1,058 232 2020 179 1,129 245 2021 188 1,200 258 2022 198 1,250 271 2023 208 1,250 284 2024 218 1,250 298 2025 229 1,250 313 2026 240 1,250 329 2027 250 1,250 345 2028 250 1,250 363 2029 250 1,250 381 2030 250 1,250 400 2031 250 1,250 420 2032 250 1,250 441 2033 250 1,250 463 2034 250 1,250 486 2035 250 1,250 500 2036 250 1,250 500 2037 250 1,250 500 2038 250 1,250 500 2039 250 1,250 500 2040 250 1,250 500 2041 250 1,250 500 2042 250 1,250 500 2043 250 1,250 500 2044 250 1,250 500 2045 250 1,250 500 2046 250 1,250 500 2047 250 1,250 500 2048 250 1,250 500 2049 250 1,250 500 Cavanaugh Macdonald Consulting, LLC Page 33