2008-01-15 5-C Power PointCity of Alameda
Retiree Healthcare Plan
January 1, 2007 GASB 45 Actuarial Valuation
Preliminary Results
John E. Bartel
$QRTEL
1SSOCIATES, LLC
January 15, 2008
Agenda
Topic
GASB 45 Background 3
Benefit Summary 9
Key Actuarial Assumptions 10
Results 11
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Who Is the Governmental Accounting
Standards Board (GASB)?
^ Set public sector accounting standards
^ Mission:
"...establish and improve standards of....governmental accounting
and financial reporting that will result in useful information for
users of financial reports and guide and educate.... users of those
financial reports."
^ Agencies must comply with GASB standards to have
financial statements comply with GAAP
^ No legal authority
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What Are OPEB?
^ "OPEB" (Other than pension Post Employment Benefits
Retiree healthcare:
C Medical
C Dental
C Vision
Life
* Other
^ Historically accounted for as Pay-As-You-Go:
Generally ignored until employees stop rendering service
i Pay $1 account for $1
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Who/What Does GASB 45 Apply To?
^ New Standard:
Accrual basis accounting
~ As employees render service
^ Applies to All Public Sector Entities
^ Effective for City in 2008/09 fiscal year
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Why Was GASB 45 Established?
^ Designed to better measure and report OPEB
liabilities:
~ Recognize cost of benefits as services are rendered
~ Provide transparency about OPEB costs
~ Assist in planning for future cash flows
~ Mandates fiscal soundness not pre-funding
^ OPEB and Pension Benefits should be treated the
same
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Other Implications
^ Encourages, Does Not Require, Funding
^ Numbers Are Large
^ Bond Rating:
t Have A Plan!
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15, 2008
~llj-11
Reasons to Pre-Fund OPEB
^ Investment Return Can Help Pay For Benefits
~ CaIPERS says 70-80% of pension benefits paid from
investment return
^ If it's appropriate for pensions then why not OPEB?
^ Bond Rating
^ External Pressure
^ If you can't afford to pre-fund then can you afford the
existing benefit?
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Benefit Summary
Miscellaneous Safety/Appointed Officials
^ Eligibility • Service and disabled retire directly from the City
• Ca1PERS requires age 50 & 5 YOS
^ Medical Benefit • PEMHCA Minimum • City pays full premiums for retiree and spouse
Employer
Contribution
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Key Actuarial Assumptions
^ Discount Rate 4.5% & 7.75%
^ Healthcare Trend (Pre-Medicare):
~ HMO Plans 10.4% grading to 4.5% over 10 years
~ PPO Plans 11.3% grading to 4.5% over 10 years
^ Demographic Same as Ca1PERS Pension
Retirement, termination, mortality, etc.
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Results
(OOOs Omitted)
Continue
PayGo
(4.5%)
^ Unfunded Actuarial Liability $ 75,377
^ Expected 2007/08 PayGo 1,861
^ Amount needed to Amortize Unfunded
Liability and Pay Current year's Cost Accrual
(ARC):
Dollar
ARC as % of payroll
6,029
10.8%
Pre-Fund
In Trust
(7.75%)
$ 47,323
1,861
4,361
7.8°/a
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Projections
^ No Pre-Funding: City contributes only pay-as-
you-go cost
^ ARC phased-in over 5 years, starting with
2007/08
^ Full Pre-Funding: City contributes the ARC every
year
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Contributions
(OOOs Omitted)
$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$-
fPay-As-You-Go Full Pre-Funding + 5 Year Phase-In
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2007/08 2012/13 2017/18 2022/23 2027/28 2032/33 2037/38
UAL Projections
(OOOs Omitted)
$200,000
$175,000
$150,000
$125,000
$100,000
$75,000
$50,000
$25,000
$- ~
2007
2012 2017 2022 2027 2032
2037
fPay-As-You-Go Full Pre-Funding ~ 5 Year Phase-In
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Retiree Healthcare Strategies
1. Do Nothing
Continue PayGo
2. Pre Fund Into Irrevocable Trust:
Fiscally Prudent, if Assets Diversified
~ Financially Challenging
Significant Cash Investment Compared to PayGo
3. Change Benefit
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