HomeMy WebLinkAbout2013 Post-Retirement Healthcare Plan Actuarial Valuation Report ■
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■ ACTUARIAL VALUATION REPORT - JANUARY 1, 2013
■
TOWN OF SOUTHOLD
■ POST-RETIREMENT HEALTHCARE PLAN
■
■
■
August 2014
■
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
■ OTHER THAN PENSION ACTUARIAL VALUATION
This report presents the January 1, 2013 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, 2013
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 2013 fiscal year Annual Required Contribution (ARC), Annual OPEB
cost (AOC) and projected December 31, 2013 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,
Chernoff Diamond & Co., LLC
John Lin, A.S.A., E.A., M.A.A.A., F.C.A. Robert Abzug, A.S.A., E.A., M.A.A.A., F.C.A.
■ Consulting Actuary Principal
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TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
■ OTHER THAN PENSION ACTUARIAL VALUATION
Tabie of Contents
r
■ Executive Summary 1
Principal Valuation Results 4
Accounting Information 5
i
® 25-Year Payout Projection 8
■ Sensitivity Analysis 9
■ Demographic Information 10
■ Summary of Principal Plan Provisions 11
■ Methods and Assumptions 12
Glossary of Terms 17
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okIDIAMOND
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, 2013 and cost for the 2013 Fiscal Year:
Results
■ Present Value of all Projected Benefits $98,216,018
Present Value of Benefits Earned to Date (Actuarial Accrued Liability) $65,881,679*
■ 2013 FY Annual Required Contribution** $6,626,231
■ 2013 FY Annual OPEB Cost $6,161,498
■ 2013 FY Expected Benefit Premiums $1,498,955
■ * Calculated under Projected Unit Credit Cost Method.
** The Annual Required Contribution reflects a 30-year, level
amortization of the Unfunded Actuarial Accrued Liability.
1
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■
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
■ OTHER THAN PENSION ACTUARIAL VALUATION
Executive Summary (Cont'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, 2013 is $98,216,018.
The Actuarial Accrued 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, 2013 is $65,881,679. The Actuarial Accrued Liability represents approximately 67%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 2013 Fiscal Year Normal Cost is $2,707,968.
• 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 January 2013. Standard actuarial method and assumptions were
■ used to project the data. There is no assumption for future new hires.
2
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*DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
■ OTHER THAN PENSION ACTUARIAL VALUATION
Executive Summary (Cont'd)
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■
■ 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 3.75%to 4.25% 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 the Town's 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.
■ 3
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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 1, 2013 assets are $0.
. The 2013 FY annual required contribution (ARC) is $6,626,231.
Expected 2013 FY benefit payments are $1,498,955.
■ The following table shows results by active, deferred vested, surviving spouse and retired employee
groups:
Results
■ Present Value of Projected Benefits
Actives $68,237,897
Deferred Vesteds $0
Retirees $29,978,121
■ Total $98,216,018
w Actuarial Accrued Liability
■ Actives $35,903,558
Deferred Vesteds $0
Retirees $29,978,121
Total $65,881,679
■ Assets $0
Unfunded Actuarial Accrued Liability $65,881,679
Normal Cost $2,707,968
4
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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, 2013 Net OPEB Obligation (N00), 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 2013 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, 2013
Normal Cost $2,707,968
Unfunded Actuarial Accrued Liability Amortization $3,663,408
Interest to Year-end $254,855
■ Annual Required Contributions (ARC) $6,626,231
5
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DIAMOND
I
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 N00 balance and an adjustment for the NOO amortization included in
■ ARC.
■ Net OPEB Obligation (NOO)January 1, 2013* $26,064,516
■ Annual Required Contribution (ARC) $6,626,231
■ Interest on Beginning Net OPEB Obligation $1,042,581
Adjustment to Annual Required Contribution** ($1,507,314)
Total Annual OPEB Cost (AOC) $6,161,498
Annual OPEB Cost Summary:
Projected Annual Change to
Fiscal Year Annual OPEB Cost Net OPEB
■ Ending OPEB Cost Contributed Obligation
December 31, 2013 $6,161,498 $1,498,955 $4,662,543
* Reflects prior year AOC of$7,438,199, and premium/claim amounts of$1,178,894.
■ ** Reflects amortization charge of beginning Net OPEB Obligation (NOO) already included in ARC.
6
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TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
. OTHER THAN PENSION ACTUARIAL VALUATION
Accounting Information (Cont'd)
■ December 31, 2013 Net OPEB Obligation (NOO)
■ Based on the Annual OPEB Cost developed above, the following is the projected December 31, 2013
Net OPEB Obligation (NOO):
Net OPEB Obligation (NOO) as of January 1, 2013 $26,064,516
■ Annual OPEB CostAOC
( ) $6,161,498
■ Premium Payments $1,498,955
■ Net OPEB Obligation (N00) as of December 31, 2013 $30,727,059
Required Supplementary Information
■ Below is the projected schedule of funding progress:
Actuarial
Accrued Unfunded
■ Actuarial Liability- Actuarial UAAL as%of
Valuation Value of Projected Unit Accrued Liability Funded Covered Covered
■ Date Assets Credit UAAL Ratio Payroll Payroll
■ (a) (b) (b)-(a) (a)/(b) (c) [(b)-(a)]/(c)
January 1, 2013 $0 $65,881,679 $65,881,679 0.00% $14,268,937 461.71%
7
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DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
■ OTHER THAN PENSION ACTUARIAL VALUATION
25-YEAR PAYOUT PROJECTION
Annual payments expected based on assumptions and contributions detailed in the Methods and
Assumptions Section.
Year Ending Total Year Ending Total
■ December 31, 2013 $1,498,955* December 31, 2026 $4,553,725
December 31, 2014 $2,070,306 December 31, 2027 $4,768,037
■ December 31, 2015 $2,197,310 December 31, 2028 $4,920,421
■ December 31, 2016 $2,393,841 December 31, 2029 $5,050,091
December 31, 2017 $2,563,693 December 31, 2030 $5,217,491
December 31, 2018 $2,915,189 December 31, 2031 $5,232,994
■ December 31, 2019 $3,150,512 December 31, 2032 $5,398,732
■ December 31, 2020 $3,310,316 December 31, 2033 $5,552,796
■ December 31, 2021 $3,536,814 December 31, 2034 $5,657,987
■ December 31, 2022 $3,720,288 December 31, 2035 $5,870,598
. December 31, 2023 $3,863,343 December 31, 2036 $5,990,966
December 31, 2024 $4,170,813 December 31, 2037 $6,177,907
■ December 31, 2025 $4,406,219
■ * Reflects actual premium payment.
8
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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
4.50%/3.50%).
■ Impact of 0.5%
Increase/(Decrease)
■ 4.000A
■ Discount Rate Increase+ .5% Decrease-.5%
■ Present Value of Projected Benefits 7 $98,216,018 $88,650,857 $109,346,759
Funded Status:
■ Actuarial Accrued Liability $65,881,679 $60,684,793 $71,791,998
Assets $0 $0 $0
■ Unfunded Actuarial Accrued Liability $65,881,679 $60,684,793 $71,791,998
Annual Required Contribution(ARQ:
Normal Cost $2,707,968 $2,398,116 $3,071,346
Unfunded Accrued Liability
Amortization $3,663,408 $3,565,103 $3,771,427
Interest to December 31, 2010 $254,855 $268,345 $239,497
Annual Required Contribution (ARC) $6,626,231 $6,231,564 $7,082,270
9
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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.
Participants Dependents
■ Actives 191 N/A
■ Deferred Vested 0 N/A
Retirees 109 93
■ Surviving Spouses 3 N/A
■ Total 303 93
Note:
Data was provided by the Town as of January 2013.
10
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TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
■ OTHER THAN PENSION ACTUARIAL VALUATION
Summary of Principal Plan Provisions
TOWN RETIREES
■ Eligibility for 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 Provided: Medical Only.
■ Retiree Contributions: 0%
Medicare Part B Premium: Full reimbursement on basic premium plus Income-Related
■ adjustment.
Dependent Survivor Policy: Surviving spouses of deceased retirees may continue coverage by
■ paying the "premium equivalent" for participants. They are also
entitled to Medicare part B premium reimbursement (including
■ Income-Related adjustment).
11
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ODIAMOND
■ TOWN OF SOUTHOLD
■ POST EMPLOYMENT BENEFITS
■ OTHER THAN PENSION ACTUARIAL VALUATION
■ Methods and Assumptions
■
■ 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 eligibility.
Discount Rate
4.00% compounded annually
■
■ Mortality
In accordance with "Recommended Actuarial Assumptions for New York State/SUNY GASB 45
■ Valuation" dated December 27, 2012, prepared by Buck Consultants. Sample rates as follows:
■ Pre-Retirement * Post-Retirement
■ Mortality Rates For PFRS Members Mortality Rates For PFRS Members
Age Unisex Healthy Disabled
■ 25 0.0430% 0.0420% 0.0840%
■ 30 0.0430% 0.0420% 0.0840%
35 0.0460% 0.0456% 0.0912%
■ 40 0.0460% 0.0456% 0.0912%
■ 45 0.0700% 0.0744% 0.1488%
50 0.1010% 0.3559% 0.5026%
■ 55 0.1940% 0.4765% 0.9487%
60 0.5200% 0.6652% 0.9787%
■ 65 0.7600% 1.2222% 1.6610%
. 70 0.0000% 1.9628% 1.8397%
75 4.4825% 5.5606%
■ 80 7.0370% 7.2205%
■ 85 10.6837% 13.1540%
90 17.2452% 18.0275%
■ 95 22.7614% 23.3135%
100 28.2774% 28.5996%
■
■ * Accidental mortality and regular mortality(all other)were combined to determine overall mortality rates.
12
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ODIAMOND
■
Ni
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
■ OTHER THAN PENSION ACTUARIAL VALUATION
Methods and Assumptions (Cont'd)
Pre-Retirement
Mortality Rates For ERS Members Post-Retirement Mortality Rates For ERS Members
■ Healthy Disabled
Age Unisex Male Female Male Female
■ 25 0.0460% 0.0540% 0.0540% 0.1080% 0.1080%
30 0.0560% 0.0660% 0.0660% 0.1320% 0.1320%
■ 35 0.0730% 0.0864% 0.0864% 0.1728% 0.1728%
40 0.0900% 0.1068% 0.1068% 0.2136% 0.2136%
■ 45 0.1090% 0.1296% 0.1296% 0.2592% 0.2592
■ 50 0.1650% 0.1968% 0.1968% 2.6435% 3.0548%
55 0.2260% 0.7884% 0.4101% 3.9934% 3.9197%
■ 60 0.2950% 0.8681% 0.6996% 3.1674% 2.9934%
■ 65 0.4640% 1.2923% 1.0182% 3.9558% 3.3020%
70 0.0000% 2.2429% 1.6334% 4.2672% 3.5471%
■ 75 3.4777% 2.7458% 7.1854% 5.3150%
80 5.9411% 4.3886% 10.4521% 7.0127%
■ 85 10.7758% 7.9266% 14.5355% 11.9022%
90 18.6385% 14.2954% 20.1905% 17.2508%
■ 95 23.7448% 20.6791% 24.8404% 22.7653%
■ 100 28.8511% 27.0628% 29.4902% 28.2798%
■ * Accidental mortality and regular mortality(all other)were combined to determine overall mortality rates.
• Turnover
■ In accordance with "Recommended Actuarial Assumptions for New York State/SUNY GASB 45 Valuation" dated
December 27, 2012, prepared by Buck Consultants. Sample rates as follows:
■ For PFRS Members
Years of Service Turnover Years of Service Turnover Years of Service Turnover
■ 0-0.99 7.4270% 8-8.99 0.8060% 16-16.99 0.4050%
1-1.99 4.2230% 9-9.99 0.6620% 17-17.99 0.3370%
■ 2-2.99 2.3250% 10-10.99 0.5460% 18-18.99 0.2640%
3-3.99 1.5100% 11-11.99 0.4470% 19-19.99 0.2150%
■ 4-4.99 1.2770% 12-12.99 0.3920% 20-20.99 0.2150%
5-5.99 1.2110% 13-13.99 0.3950% 21-21.99 0.2600%
6-6.99 1.1050% 14-14.99 0.4170% 22 or greater 0.3440%
■ 7-7.99 0.9580% 15-15.99 0.4270%
13
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TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
■ OTHER THAN PENSION ACTUARIAL VALUATION
Methods and Assumptions (Cont'd)
RIM
■ Turnover (Cont'd)
For ERS Members Years of Service
15 18.375% 10.298% 6.792% 5.938% 4.333% 2.727%
■ 20 18.259% 10.298% 6.792% 5.938% 4.333% 2.727%
■ 25 16.362% 11.473% 9.293% 6.919% 4.701% 2.727%
30 14.716% 11.226% 9.682% 7.945% 4.620% 2.588%
■ 35 13.264% 9.712% 8.247% 7.028% 4.472% 2.215%
40 12.262% 8.081% 6.755% 5.845% 4.033% 1.830%
■ 45 11.659% 7.089% 6.079% 5.094% 3.550% 1.620%
■ 50 11.577% 6.849% 5.608% 4.625% 3.122% 1.250%
55 11.623% 6.914% 5.736% 4.508% 2.912% 1.105%
■ 60 12.585% 7.589% 6.453% 4.808% 2.940% 1.124%
65 13.796% 8.223% 6.726% 5.212% 2.966% 1.138%
>=70 0.000% 0.000% 0.000% 0.000% 0.000% 0.000%
■ Retirement Rates
For ERS Members, in accordance with "Recommended Actuarial Assumptions for New York State/SUNY GASB 45
. Valuation" dated December 27, 2012, prepared by Buck Consultants; For PFRS Members, in accordance with
"Development of Recommended Actuarial Assumptions for New York State/SUNY GASB 45 Valuation" dated
■ March 30, 2011, prepared by Buck Consultants. Sample rates as follows:
■ For PFRS Members
Years of Service Retirement Years of Service Retirement Years of Service Retirement
■ 20-20.99 7.322% 25-25.99 8.781% 30-30.99 18.469%
■ 21-21.99 7.073% 26-26.99 8.084% 31-31.99 36.241%
22-22.99 8.349% 27-27.99 10.850% 32-32.99 30.508%
■ 23-23.99 5.671% 28-28.99 13.515% 33-39.99 18.469%
24-24.99 5.058% 29-29.99 15.451% 40 or greater 100.00%
■ For ERS Members
■ Years of Service
<=54 0.000% 0.000% 0.000%
■ 55 5.923% 8.206% 41.847%
60 4.888% 7.811% 19.944%
■ 65 15.763% 25.788% 27.753%
>=70 100.000% 100.000% 100.000%
14
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c - DIAMOND
_s
■
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
■ OTHER THAN PENSION ACTUARIAL VALUATION
Methods and Assumptions (Cont'd)
■ Disability
In accordance with "Recommended Actuarial Assumptions for New York State/SUNY GASB 45 Valuation" dated
■ December 27, 2012, prepared by Buck Consultants. For PFRS members, all disabilities were assumed to occur
while on-duty. For ERS members, all disabilities were assumed to occur while not working. Sample rates as
follows:
Disability For ERS Members * Disability For PFRS Members
!�ggpe Unisex Age Unisex
25 0.0680% 25 0.0900%
30 0.0680% 30 0.0900%
■ 35 0.0690% 35 0.3020%
40 0.1580% 40 0.6190%
■ 45 0.2360% 45 0.7780%
■ 50 0.3890% 50 0.9030%
55 0.5780% 55 1.0370%
■ 60 0.9090% 60 1.2560%
■ 65 1.4390% 65 1.5050%
70 0.0000% 70 0.0000%
■ * Accidental disability and regular disability(all other)were combined to determine overall mortality rates.
■ Health Care Trend Rate
Medical
Fiscal Year Non-Medicare Eligible Medicare Eligible Drgg Medicare Part B
2013 9.0% 5.5% 7.5% 5.7%
■ 2014 9.0% 5.4% 7.1% 5.6%
2015 8.3% 5.3% 6.7% 5.5%
■ 2016 7.5% 5.2% 6.3% 5.4%
■ 2017 6.8% 5.1% 5.9% 5.3%
2018 6.0% 5.0% 5.5% 5.2%
. 2019 5.5% 4.9% 5.3% 5.1%
2020 5.0% 4.8% 5.0% 4.9%
■ Thereafter 4.8% 4.8% 4.8% 4.8%
Percent Married
It is assumed that 60%of current male employees and 35%of current female employees are married. Benefits
■ for a spouse and dependents cease upon the death of the retired employee.
15
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N TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
■ OTHER THAN PENSION ACTUARIAL VALUATION
Methods and Assumptions (Cont'd)
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■ Spousal/Dependent age difference for current employees
Female spouses are assumed to be 3 years younger. Male spouses are assumed to be 2 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 2013 premiums used in the projection of
■ premiums for 2013 Fiscal Year and beyond:
Coverage Empire
■ Individual - Non-Medicare $9,216
Family- Non-Medicare $20,239
Individual - Medicare $4,792
■
Family- 1 Medicare Member $15,815
. Family- 2 or More Medicare Members $11,391
FundedSelf Plan
Age Individual
• 45 $8,185 $16,370
50 $9,286 $18,572
■ _ 55 _ $10,893 $21,786
■ 60 $13,008 $26,016
65 $4,492 $8,984
70 $5,130 $10,260
■ Average Medicare Part B premium with Income-Related Adjustment: $1,763 for Police, and $1,259 for others.
■ Exercise ("Cadillac")Tax
■ 2018 Cadillac Tax Threshold: $11,850 for Pre-Medicare Individual and $10,200 for Post-Medicare Individual
■ Assumed Annual CPI-IJ for 2018 and Beyond: 2.75%
■ Cadillac Tax Blending: Assumed
16
,c,: s od. gs» t_ ae T CHERNOFF
■ _ _ _ c . __ ___ __ DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
■ OTHER THAN PENSION ACTUARIAL VALUATION
Glossary of Terms
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■ 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 (i) 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
CHERNOFF
-s ', *DIAMOND
TOWN OF SOUTHOLD
POST EMPLOYMENT BENEFITS
. OTHER THAN PENSION ACTUARIAL VALUATION
Glossary of Terms (Cont'd)
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■
■ 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.
18
VCHERNOFF
DIAMOND
TOWN OF SOUTHOLD
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.
19
es- s_ ed ro,_ d, �S Se,-
cs neo C H E RN O F F
_s
*DIAMOND