HomeMy WebLinkAbout2010 Post-Retirement Healthcare Plan Actuarial Valuation reportRECEIVED
Town of $outhold
Post-Retirement Healthcare Plan
JUN 6 201/
Sou~'~old Tov,,n Cl~.rlt
Actuarial Valuation Report
Valuation Date:
Plan Year Beginning:
January 1, 2010
January I, 2010
990 Stewart Avenue · Suite 520 · Garden City · NY 11530
Phone (516) 683-6100 · Fax (516) 683-6163 · www.chernoffdiamond.com
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DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
This report presents the January 1, 2010 Actuarial Valuation results for the retiree
healthcare benefits (medical, prescription drug and behavioral health) provided mainly
through the New York State Empire Plan ("the Plan"). The purposes of this report are to:
(1) Determine the Plan's unfunded postretirement healthcare obligations;
(2)
Determine the Town's annual Fiscal Year accrual for the Fiscal Year ending
December 31, 2010 based on GASB Statement 45; and
(3) Provide information that may be helpful in future planning.
A summary of the major results is shown in the Executive Summary, while the Principal
Valuation Results Section provides more detail.
The Accounting Information Section summarizes GASB Other Postemployment Benefit
(OPEB) accounting treatment including the 2010 fiscal year Annual Required
Contribution (ARC), Annual OPEB cost (AOC) and projected December 31, 2010 Net
OPEB Obligation (NOO).
This report's costs and liabilities are based upon the data and Plan Provisions provided
by the Town, as summarized in the Demographic Information and Plan Provisions
Sections, respectively, and the funding method and actuarial assumptions outlined in
the Methods and Assumptions Section of this report. This report presents our best
estimate of the costs of the Plan in accordance with accepted actuarial principles and
our understanding of GASB Statement 45.
Respectfully,
,m
Chernoff Diamon~ & Co., LLC
John Lin, E.A., M.A.A.A., A.¢.A.
Consulting Actuary
Robert Abzug, A.S.A., E.A., M.,~.,~,.,~., . . .
Principal
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DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
Table of Contents
Executive Summary
Principal Valuation Results
4
Accounting Information
25-Year Payout Projection
Sensitivity Analysis
Demographic Information
Summary of Principal Plan Provisions
10
11
Methods and Assumptions
12
Glossary of Terms
17
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DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
EXecutive SummarY
The Town provides medical, prescription drug and behavioral health to retirees and
their covered dependents. The Town pays a portion of the cost for retirees, disabled
retirees, spouses and dependents. All active employees who retire or are disabled
directly from the State and meet the eligibility criteria will participate.
This summary identifies the value of benefits at January 1, 2010 and cost for the 2010
Fiscal Year:
Present Value of all Projected Benefits
Present Value of Benefits Earned to Date (Actuarial Accrued Liability)
2010 FY Annual Required Contribution**
2010 FY Annual OPEB Cost
2010 FY Expected Benefit Premiums
Results
$90,956,907
$66,597,849*
$6,779,112
$6,624,103
$1,335,873
Calculated under Projected Unit Credit Cost Method.
The Annual Required Contribution reflects a 30-year, level
amortization of the Unfunded Actuarial Accrued Liability.
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DIAI~IOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
Executive Summary (C°"t'd)
This section presents detailed valuation results for the Town's Plan.
The Present Value of all Projected Benefits is the total present value of all expected
future benefits, based on certain actuarial assumptions. The Present Value of all
projected benefits is a measure of total liability or obligation. Essentially, the Present
Value of all projected benefits is the value (on the valuation date) of the benefits
promised to current and future retirees. The Plan's present value of all projected
benefits at January 1, 2010 is $90,956,907.
The ActuarialAccrued Liability is the liability or obligation for benefits earned through
the valuation date, based on certain actuarial methods and assumptions. The Plan's
Actuarial Accrued Liability at January 1, 2010 is $66,597,849. The Actuarial Accrued
Liability represents approximately 73% of the present value of all projected benefits.
Normal Cost is the value of benefits expected to be earned during the year, again based
on certain actuarial methods and assumptions. The 2010 Fiscal Year Normal Cost is
$2,815,146.
The results were calculated based upon plan provisions, as provided by the Town, along
with certain demographic and economic assumptions as recommended by Chernoff
Diamond & Co., LLC with guidance from GASB statement.
Demographic Assumptions
Data was provided by the Town as of December 31, 2009. Standard actuarial method
and assumptions were used to project the data. There is no assumption for future new
hires.
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DIAMOND
,I
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
Executive Summary (Con d)
Economic Assumptions
The GASB statement requires that the discount rate used to determine the retiree
healthcare liabilities should be the estimated long-term yield on the "investments that
are expected to be used to finance the payments of benefits". Since the Town does not
pre-fund the retiree healthcare liabilities, the discount rate should be based on the
portfolio of the Town's "general assets" used to pay healthcare benefits.
This portfolio could suggest a 4.0% to 4.5% discount rate. Based on Chernoff Diamond
& Co., LLC's recommendation as well as the Town's own long term outlook, a discount
rate of 4.00% was assumed.
The trend assumption is used to project the growth of the expected claims over the
lifetime of the healthcare recipients. The GASB statement does not require a particular
source for information to determine healthcare trends, but it does recommend selecting
a source that is "publicly available, objective and unbiased".
Chernoff Diamond & Co., LLC developed the trend assumption utilizing Towns
information in published papers from other industry experts (actuaries, health
economists, etc.), as well as assumptions recommended by New York State Department
of Civil Service.
The balance of this report provides greater detail for the above results.
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DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
Principal Valuation Results
The following highlights the Town's recognition of the above amounts:
The January ~., 2010 assets are
The 2010 FY annual required contribution {ARC) is $6,779,112.
Expected 20~.0 FY benefit payments are $1,335,873.
The following table shows results by active, deferred vested, surviving spouse and
retired employee groups:
Present Value of Projected Benefits
Actives
Deferred Vesteds
Retirees
Total
Results
$69,578,577
So
~21,378,328
$90,956,905
Actuarial Accrued Liability
Actives
Deferred Vesteds
Retirees
Total
$45,219,519
$0
$21,378,328
$66,597,847
Assets
Unfunded Actuarial Accrued Liability
Normal Cost
$0
$66,597,849
$2,8~5,~46
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DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
Accounting Information
The following shows the Annual Required Contribution (ARC), Annual OPEB Cost (AOC),
and projected December 31, 2010 Net OPEB Obligation (NO0), assuming the accounting
standard is first adopted for the 2008 Fiscal Year.
Annual Required Contribution (ARC)
The proposed Standard sets the method for determining the Town's postemployment
benefits accrual, the Annual Required Contribution (ARC), to include both the value of
benefits earned during the year (Normal Cost) and an amortization of the Unfunded
Actuarial Accrued Liability. Accordingly, the following table shows the Town's 2010
Fiscal Year Annual Required Contribution (ARC) based on a 30-year amortization of the
Unfunded Actuarial Accrued Liability as a level dollar amount.
Fiscal Year Ending
December 31, 2010
Normal Cost
Unfunded Actuarial Accrued Liability Amortization
Interest to Year-end
Annual Required Contributions (ARC)
$2,815,146
$3,703,231
~260,735
$6,779,112
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TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
Accounting Information (Cont'd)
Annual OPEB Cost (AOC)
If there is no OPEB obligation on the Town's financial statements at transition, then the
Annual OPEB cost is equal to the Annual Required Contribution. Otherwise, the Annual
OPEB Cost should reflect interest charge on beginning NOO balance and an adjustment
for the NOO amortization included in ARC.
Net OPEB Obligation (NOO) January 1, 2010'
Annual Required Contribution (ARC)
Interest on Beginning Net OPEB Obligation
Adjustment to Annual Required Contribution**
Total Annual OPEB Cost (AOC)
$8,693,713
$6,779,112
$347,749
($502,758)
$6,624,~03
Fiscal Year
Ending
December 31, 2010
Projected Annual
Annual OPEB Cost
OPEB Cost. Contributed
Change to
Net OPEB
Obligation
$6,624,103 $1,335,873 $5,288,230
* Reflects prior year AOC of $6,339,666, and premium/claim amounts of 51,160,291.
** Reflects amortization charge of beginning Net OPEB Obligation (NO0) already
included in ARC.
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TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
AcCounting information (cont,d}
Projected December 31, 20~.0 Net OPEB Obligation (NO0)
Based on the Annual OPEB Cost developed above, the following is the projected
December 31, 20:].0 Net OPEB Obligation (NOO):
Net OPEB Obligation (NOO) January 1, 2010
Annual OPEB Cost (AOC)
Expected Premium Payments
Expected December 31, 2010 Net OPEB Obligation
(NO0)
$8,693,713
$6,624,103
$1,335,873
$~3,981,943
Required Supplementary Information
Below is the projected schedule of funding progress:
Valuation
Date
January1,2010
Actuarial
Accrued Unfunded
Actuarial Liability- Actuarial
Value of Projected Unit Accrued Liability
Assets Credit {UAAL)
(a) (b) (b)-(a)
$0 $66,597,849 $66,597,849
Funded
Ratio
(a)/(b)
0.00%
Covered
Payroll
(c)
$15,492,700
UAAL as % of
Covered
Payroll
[(b)-(a)]/(c)
429.87%
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DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
25,yEAR PAYOUT PROJE ION
Annual payments expected based on assumptions and contributions detailed in the
Methods and Assumptions Section.
December 31, 2010 $1,335,873 December 31, 2023 $3,695,799
December 31, 2011 $1,484,754 December 31, 2024 $3,962,056
December 31, 2012 $1,684,709 December 31, 2025 $4,197,890
December 31, 2013 $1,843,809 December 31, 2026 $4,408,790
December 31, 2014 $1,993,072 December 31, 2027 $4,645,335
December 31, 2015 $2,128,555 December 31, 2028 $4,821,090
December 31, 2016 $2,323,628 December 31, 2029 $4,977,717
December 31, 2017 $2,480,663 December 31, 2030 $5,166,320
December 31, 2018 $2,695,842 December 31, 2031 $5,291,294
December 31, 2019 $2,892,376 December 31, 2032 $5,447,938
December 31, 2020 $3,106,816 December 31, 2033 $5,624,570
December 31, 2021 $3,290,040 December 31, 2034 $5,754,829
December 31, 2022 $3,492,709
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DIAI'IOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
sensitivity Analysis
Results in this report are based on a 4.00% discount rate. This rate was selected based
on the long-term expected returns on funds available to pay for retiree benefits. The
following shows the impact of a 0.5% increase and a 0.5% decrease in the discount rate
(i.e. discount rate increase/(decrease) to 4.5%/3.5%).
Impact of 0.5%
Increase/(Decrease)
Present Value of Projected Benefits $90,956,907 $81,653,988 $101,808,293
Actuarial Accrued Liability $66,597,849 $60,812,610 $73,216,070
Assets $0 $0 $0
Unfunded Actuarial Accrued Liability $66,597,849 $60,812,610 $73,216,070
Normal Cost $2,815,146 $2,449,467 $3,248,637
Unfunded Accrued Liability $3,703,231 $3,572,612 $3,846,237
Amortization
Interest to December 31, 20:[0 $260,735 $270,994 $248,321
Annual Required Contribution (ARC) $6,779,112 $6,293,073 $7,343,195
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DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
DemOgraphic Information
The following table summarizes active, deferred vested, surviving spouse and retiree
demographic information.
Actives 217 N/A
Deferred Vested 0 N/A
Retirees 85 82
Surviving Spouses _6 N/A
Total 308 82
Note:
Data was provided by the Town as of December 31, 2009.
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DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
summar of
Eligibility/or Benefits For Police:
· 20 years of service with Town of Southold.
For Non-Police participants:
· Age 55 and at least 10 years of service with Town of
Southold. (note that 30 years of service is required for
unreduced pension benefits)
Health Benefits Medical Only.
Provided:
Retiree Contributions: 0%
Medicare Part B Full reimbursement on basic premium plus Income-Related
Premium: adjustment.
Dependent Survivor Surviving spouses of deceased retirees may continue
Po#cy: coverage by paying the "premium equivalent" for
participants. They are also entitled to Medicare part B
premium reimbursement (including Income-Related
adjustment).
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DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
Methods and ASsumPti°ns
Actuarial Method
Projected Unit Credit Cost Method
Normal Cost
Determined for each active employee as the Actuarial Present Value of benefits
allocated to the valuation year. The benefit attributed to the valuation year is that
incremental portion of the total projected benefit earned during the year in accordance
with the plan's benefit formula. This allocation is based on each individual's service
between date of hire and date of full benefit eli§ibilit¥.
Discount Rate
4,00% compounded annually
Mortality
In accordance with sample rates as follows:
Pre-Retirement *
Mortality Rates For PFRS Members
Post-Retirement
Mortality Rates For PFRS Members
25 0.0090% 0.0510% 0.0340% 0.0462%
30 0.0090% 0.0510% 0.0389% 0.0462%
35 0.0090% 0.0550% 0.0521% 0.0462%
40 0.0090% 0.0550% 0.0821% 0.2565%
45 0.0090% 0.0890% 0.1700% 0.1374%
50 0.0090% 0.1340% 0.2594% 0.3945%
55 0.0040% 0.2710% 0.4611% 0.5140%
60 0.0040% 0.7390% 0.6976% 1.1909%
65 0.0040% 1.0840% 1.0898% 1.7859%
70 0.0000% 0.0000% 1.8828% 2.5524%
75 3.3320% 4.3840%
80 5.4210% 7.9827%
85 8.7395% 12.4946%
90 14.7447% 17.9390%
95 22.0827% 23.3834%
100 26.9788% 28.8278%
* Accidental mortality and re§ular mortality (all other) were combined to determine overall mortality
rates.
12
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DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
MethodS and AsSumptions i
Pre-Retirement Mortality
Rates For ERS Members
Post-Retirement Mortality Rates For ERS Members
Healthy Disabled
25
30
35
40
45
50
55
60
65
70
75
80
85
90
95
100
0.0236% 0.0215%
0.0428% 0.0262%
0.0503% 0.0284%
0.0518% 0.0349%
0.0968% 0.0602%
0.1326% 0.0818%
0.1614% 0.1107%
0.1771% 0.1331%
0.2494% 0.1597%
0.5544% 0.2704%
0.0661% 0.0351%
0.0801% 0.0478% 5.6321% 3.5637%
0.0851% 0.0709% 9.0672% 3.8534%
0.1072% 0.0973% 13.0245% 4.6104%
0.1578% 0.1428% 9.1650% 6.4048%
0.2579% 0.2294% 8.2193% 6.3152%
0.4249% 0.4010% 5.3000% 4.3853%
0.6624% 0.5525% 3.2348% 2.9140%
1.0827% 0.7799% 4.1424% 2.3710%
1.8241% 1.2021% 4.0789% 3.4001%
3.0325% 2.0184% 4.6658% 4.4128%
5.3926% 3.5874% 5.3926% 6.2387%
9.2780% 6.5684% 9.2780% 8.1540%
15.7604% 12.2460% 15.7604% 12.2460%
25.1313% 20.9552% 25.1313% 20.9552%
38.3158% 35.9090% 38.3158% 35.9090%
Turnover
Sample rates are as follows:
For PFRS Members
0-.99 7.955% 9-9.99 0.875%
1-1.99 5.009% 10-10.99 0.726%
2-2.99 3.084% 11-11.99 0.590%
3-3.99 2.050% 12-12.99 0.509%
4-4.99 1.555% 13-13.99 0.451%
5-5.99 1.295% 14-14.99 0.386%
6-6.99 1.135% 15-15.99 0.327%
7-7.99 1.047% 16-16.99 0.268%
8-8.99 0.987% 17 or greater 0.223%
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DIAI~OND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
MethOds and AssumPtions
Years of Service
Age <_~2 2-2.99 3-3.99 4-4.99 5-9.99 >=10
15 16.960% 10.868% 8.421% 7.517% 7.088% 3.252%
20 16.960% 10.868% 8.421% 7.517% 7.088% 3.252%
25 16.510% 13.088% 9.330% 7.614% 6.826% 3.252%
30 15.074% 12.067% 9.056% 8.130% 5.776% 3.113%
35 13.128% 9.823% 7.479% 6.909% 5.382% 2.692%
40 11.937% 8.036% 6.227% 5.675% 4.406% 2.198%
45 11.360% 7.289% 5.583% 5.050% 3.741% 1.805%
50 11.155% 6.936% 5.231% 4.640% 3.473% 1.360%
55 10.819% 6.852% 5.307% 4.418% 3.326% 1.188%
Retirement Rates
Sample Rates of Retirement are as follows:
Years of PFRS PFRS
Service Tier 1' Tier 2*
20 7.322% 7.322%
21 7.073% 7.073%
22 8.349% 8.349%
23 5.671% 5.671%
24 5.058% 5.058%
25 8.781% 8.781%
26 8.084% 8.084%
27 10.850% 10.850%
28 13.515% 13.515%
29 15.451% 36.241%
30 18.469% 30.508%
Years of PFRS PFRS
Service Tier 1' Tier 2*
31 18.469% 18.469%
32 18.469% 18.469%
33 18.469% 18.469%
34 18.469% 18.469%
35 18.469% 18.469%
36 18.469% 18.469%
37 18.469% 18.469%
38 18.469% 18.469%
39 18.469% 18.469%
40 100.000% 100.000%
Tier 1' Tier 2*
Year of Service Year of Service
Age <20 20-29,999 >=30 <20 20-29,999 >=30
55 14.087% 21,760% 38.944% 5.368% 8,827% 28.216%
60 12.185% 17.497% 24.040% 6.412% 11.768% 23.707%
65 27.247% 31.:].01% 27.759% 19.902% 31.101% 27.759%
70 100.000% 100.000% 100.000% 100.000% 100.000% 100.000%
* Tier 1 - Hired before 7/1/1973, Tier 2 - Hired on or after 7/1/1973
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DIA~IOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
Methods and AsSumptions (c°nvd)
Disability
Sample Disability Rates are as follows:
Disability For ERS Members
Disability For PFRS Members
30 0.0016% 0.0018%
35 0.0099% 0.0138%
40 0.0255% 0.0299%
45 0.0744% 0.0602%
50 0.1751% 0.1283%
55 0.0000% 0.0000%
25 0.137% 0.040%
30 0.137% 0.040%
35 0.327% 0.040%
40 0.506% 0.044%
45 0.625% 0.051%
50 0.677% 0,072%
55 0.712% 0.300%
60 0.780% 0.720%
65 1.001% 1.043%
70 0.000% 0.000%
Health Care Trend Rate
Trend Assumption
2009 10.0% 12.0%
2010 9.0% 11.0%
2011 8.0% 10.0%
2012 7.0% 9.0%
2013 6.0% 8.0%
2014 5.0% 7.0%
2015 5.0% 6.0%
Thereafter 5.0% 5.0%
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DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
MethOds and AsSUmpti°ns (COn-d)
Percent Married
It is assumed that 65% of current male employees and 40% of current female employees
are married. Benefits for a spouse and dependants cease upon the death of the retired
employee.
Spousal/Dependent age difference for current employees
Female spouses are assumed to be 3 years younger. Male spouses are assumed to be 3
years older.
Retiree premiums
Based upon the coverage elected by the Town and applicable premium rates provided by the
New York State Department of Civil Service in accordance with the New York State Employees
Health Insurance Program. All Towns are community rated and therefore unadjusted premiums
were used in accordance with Paragraph 66 of The Implementation Guide for GASB 45. Below is
a summary of the 2009 premiums used in the projection of premiums for 2010 Fiscal Year and
beyond:
Individual - Non-Medicare $7,183 $6,206
Family - Non-Medicare $15,386 $16,421
Individual - Medicare $4,311 $3,930
Family - 1 Medicare Member $12,514 $10,137
Family - 2 or More Medicare Members $9,64:1 $7,860
45 $5,892 $11,784
50 $6,678 $13,356
55 $7,827 $15,654
60 $9,338 $18,676
65 $4,268 $8,536
70 $4,880 $9,760
Average Medicare Part B premium with Income-Related Adjustment: $1,388 for
Police, and $1,157 for others.
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DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
Glossary of Terms
Accrued Service. The service credited under the plan, which was rendered before the date
of the actuarial valuation.
Actuarial Accrued Liability (AAL). The difference between (il the actuarial present value of
future plan benefits; and (ii) the actuarial present value of future normal cost, which is
sometimes referred to as "accrued liability" or "past service liability."
Actuarial Assumptions. Estimates of future plan experience with respect to rates of
mortality, disability, turnover, retirement, rate or rates of investment income and salary
increases. Decrement assumptions (rates of mortality, disability, turnover, and retirement)
are generally based on past experience, often modified for projected changes in conditions.
Economic assumptions (salary increases and investment income) consist of an underlying
rate in an inflation-free environment plus a provision for a long-term average rate of
inflation.
Actuarial Cost Method. A mathematical budgeting procedure for allocating the dollar
amount of the "actuarial present value of future plan benefits" between the actuarial
present value of future normal cost and the actuarial accrued liability. Sometimes referred
to as the "actuarial funding method."
Actuarial Present Value. The amount of funds presently required to provide a payment or
series of payments in the future. It is determined by discounting the future payments at a
predetermined rate of interest, taking into account the probability of payment.
Actuarial Value of Assets. The value of cash, investments, and other property belonging to
a pension or OPEB plan, as used by the actuary for the purpose of an actuarial valuation.
Aggregate Actuarial Cost Method. A method under which the excess of actuarial present
value of projected benefits of the group included in the actuarial valuation over the
Actuarial Value of Assets is allocated on a level basis over the earnings or service of the
individual between the valuation date and assumed exit. The portion of this actuarial
present value allocated to a valuation year is called the normal cost.
Amortization. Paying off an interest-bearing liability by means of periodic payments of
interest and principal, as opposed to paying it off with a lump sum payment.
Annual OPEB Cost (AOC). An accrual-basis measure of the periodic cost of an employer's
participation in a defined OPEB plan.
17
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DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
Glossary of Terms (cont'd)
Annual Required Contribution (ARC). The ARC is the normal cost plus the portion of the
unfunded actuarial accrued liability to be amortized in the current period. The ARC is an amount
is actuarially determined in accordance with the requirements so that, if paid on an ongoing
basis, it would be expected to provide sufficient resources to fund both the normal cost for each
year and the amortized unfunded liability.
Discount Rate. The rate used to adjust a series of future payments to reflect the time value
of money.
Entry-Age Normal Cost Actuarial Method. A method under which the actuarial present
value of projected benefits of each individual included in the actuarial valuation is allocated
on a level basis over the earnings or service of the individual between entry age and
assumed exit age(s). The portion of this actuarial present value allocated to a valuation year
is called the normal cost.
Expected Net Employer Contributions. The difference between the age-adjusted premium
or expected retiree healthcare claims and retired member's share of the premium. This
amount is used to offset the Annual OPEB Cost during the fiscal year.
Governmental Accounting Standards Board (GASB). GASB is the private, nonpartisan,
nonprofit organization that works to create and improve the rules U.S. state and local
governments follow when accounting for their finances and reporting them to the public.
Medical Trend Rate (Health Inflation). The increase in the plan's cost over time. Trend
includes all elements that may influence a plan's cost, assuming those enrollments and the
plan benefits do not change. Trend includes such elements as pure price inflation, changes
in utilization, advances in medical technology, and cost shifting.
Net OPEB Obligation (NOO). An accounting liability when an employer doesn't fully fund
the ARC.
Normal Cost. The annual cost assigned, under the actuarial funding method, to current and
subsequent plan years. Sometimes referred to as "current service cost." Any payment
toward the unfunded actuarial accrued liability is not part of the normal cost.
Other Post Employment Benefits (OPEB). OPEB are post employment benefits other than
pensions. OPEB generally takes the form of health insurance and dental, vision, prescription
drugs or other healthcare benefits.
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POST EMPLOYMENT BENEFITS
OTHER THAN PENSION ACTUARIAL VALUATION
GlOssary of TermS (Cont'd)
Present Value of all Projected Benefits. The present value of the cost to finance benefits
payable in the future, discounted to reflect the expected effects of the time value of money
and the probabilities of payment.
Pre-funding. A method of financing benefits by placing resources in trust as employees
earn benefits so that the resources thus accumulated, along with related earnings, can be
used to make benefit payments as they become due.
Projected Unit Credit Cost Method. A method under which the actuarial present value of
projected benefits of each individual included in the actuarial valuation are allocated based
on each individual's service between date of hire and date of full benefit eligibility. The
benefit attributed to the valuation year is that incremental portion of the total projected
benefit earned during the year in accordance with the plan's benefit formula.
Unfunded Actuarial Accrued Liability (UAAL). The difference between the actuarial
accrued liability and valuation assets. Sometimes referred to as "unfunded accrued
liability."
Valuation Assets. The value of current plan assets recognized for valuation purposes.
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