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HomeMy WebLinkAboutFin Retiree Healthcare Reporting & FundingSAN RAFAEL THE CITY WITH A MISSION Agenda Item No: 6.b Meeting Date: September 18, 2017 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: Finance Prepared by: Mark Moses, City Manager Approval: Finance Director TOPIC: RETIREE HEALTHCARE REPORTING AND FUNDING SUBJECT: ACCEPT GOVERNMENTAL ACCOUNTING BOARD STATEMENT NO. 75 REPORT ON RETIREE HEALTHCARE AND ADOPT OTHER POSTEMPLOYMENT BENEFITS (OPEB) FUNDING POLICY RECOMMENDATION: ACCEPT REPORT AND ADOPT RESOLUTION AS PRESENTED BACKGROUND: In June 2015, the Governmental Accounting Standards Board (GASB) changed its approach in regard to reporting on other postemployment benefits, or OPEB (e.g., retiree healthcare and other retiree benefits aside from defined benefit pension). The prior approach, under GASB Statement No. 45, required that each agency report as a liability the difference between its actual OPEB contribution and its actuarially required contribution. The new approach, GASB Statement No. 75 (GASB 75) is similar to that of GASB 68 for pension reporting: It requires that the net OPEB liability (total OPEB liability less market value of assets) be presented on the City's government -wide statement of net assets (balance sheet). The City is not required to implement GASB 75 until the fiscal year ending June 30, 2018. In order to increase financial transparency, it has elected to implement this statement for the fiscal year ended June 30, 2017. Financial statements reflecting this reporting will be presented during the fall 2017. This staff report transmits the City's first GASB 75 report that is being used in the preparation of these statements. The City of San Rafael is also committed to adopting best fiscal practices and to fully use the knowledge, resources and experience available throughout the industry. Public agencies that offer defined retirement benefits to their employees should fund the cost of those benefits in an equitable and sustainable manner. The City has had an informal policy of contributing the full actuarially required OPEB contribution for the past several years. In order to achieve consistency with best practices, staff has prepared a written OPEB funding policy for the consideration of the City Council, that codifies this practice. The content of this report was reviewed by the City Council Pension-OPEB Subcommittee at its meeting of August 23, 2017, at which time direction was given to bring these items forward. FOR CITY CLERK ONLY File No.: 4-3-476 x 9-3-20 Council Meeting: 09/18/2017 Disposition: Resolution 14395 SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 ANALYSIS: (1) Actuarv's Accountinq Information Report on Retiree Health Care (prepared in accordance with GASB 75). In order to implement GASB 75, the City engaged the actuary firm Bartel & Associates to prepare a GASB 75 -compliant accounting information report. The report used the most recent biennial actuarial valuation, which was prepared as of June 30, 2015, and is attached to this staff report. The City's Plan covers 336 retirees and 348 active employees. The report measures the Net OPEB Liability at June 30, 2017 at $33,786,000. This is based on a total OPEB Liability of $49,543,000, and assets (Fiduciary Net Position) of $15,757,000, and represents a funding status of approximately 32% as presented on slide 5 of the report. The report provides sensitivity analysis that measures the impact on Net OPEB Liability due to changes in the discount rate and due to changes in healthcare trend. A one percent decrease in the discount rate would increase the Net OPEB Liability to $39,500,000, while a one percent decrease would result in a Net OPEB Liability of $28,996,000. A one percent decrease in the healthcare cost trend rate would lower the Net OPEB Liability to $30,786,000, while a one percent increase in the trend would raise it to $37,160,000. The OPEB expense for the fiscal 2016-2017 year as measured under GASB is $3,283,000. Total covered employee payroll for the period was $32,885,000. (2) OPEB Fundinq Policv Staff reviewed the following information and documents that provided the basis for the OPEB funding policy development: • GFOA Sustainable Funding Practices for Defined Benefit Pensions and Other Postemployment Benefits (OPEB) — January 2016 • City of San Rafael Comprehensive Annual Financial Statements (June 30, 2016) • GASB Statement No. 75 — Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions • June 30, 2017 GASBS 75 Accounting Information As of Measurement Date June 30, 2016, Based on the June 30, 2015 Actuarial Valuation Result: The proposed City of San Rafael OPEB Funding Policy was developed with the following provisions: Purpose: The purpose of this policy is to provide assurance that the costs of the City's retiree healthcare will be funded in an equitable and sustainable manner, and that the City will comply with all relevant federal and state laws and applicable regulatory requirements in the administration of its plans. It codifies the City's commitment to fund these benefits based on regular actuarial valuations, and to measure and report them in accordance with Generally Accepted Accounting Principles. Adhering to a funding policy that embodies these funding and accounting principles is a prudent governance practice, and helps achieve intergenerational equity among those who financially support the plan. It also ensures that resources are available to fulfill the City's contractual promises to its employees, and SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3 minimizes the chance that funding of these benefits will interfere with the City's ability to provide essential services to the public. In order to achieve the purpose of thisop licy, the City will take the following. actions: 1.) The City's goal is to fully fund amount of the ADC (Actuarially Determined Contribution*) each year. In the event the City is unable to fund the full amount of the ADC in a given year without borrowing, the Finance Director and City Manager will identify a timeframe under which to return to full funding. 2.) The Pension-OPEB Subcommittee will review the ADC each fiscal year, and recommend the level of funding to be considered by the full City Council for adoption in the budget. 3.) The City supports an ADC that is calculated in a manner that fully funds the long-term costs of retiree medical benefits, while balancing the goals of: a) keeping contributions relatively stable; and b) equitably allocating the costs over the employees' period of active service. 4.) The City will demonstrate accountability and transparency by communicating all of the information necessary for assessing the City's progress toward meeting its retiree medical funding objectives. As part of the annual budget adoption process, the Finance Director and City Manager will report to the City Council on the following: a) most recent actuarially determined OPEB contribution (ADC) b) relationship between ADC and budgeted OPEB contribution c) projected ADC for next three years d) impact of funding full ADC over the three-year planning horizon e) any other significant issues associated with funding retiree medical benefits in a stable and equitable manner as described in #2 above. 5.) The City will implement Governmental Accounting Standards Board Statement No. 75 -Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions beginning with the fiscal year ended June 30, 2016. 6.) Staff will monitor changes to and expansions of OPEB funding best practices, as well as any additional guidance provided by the Government Finance Officer's Association that relate to the funding retiree medical benefits. Staff will return to City Council with modifications to this policy as needed. 7.) The City Manager will ensure that any recommended changes to the plans are fully consistent with the requirements of the Public Employees' Medical & Hospital Care Act (PEMHCA) and any and all other applicable federal and state regulations, and that the City Attorney's Office be assigned or other qualified legal counsel be retained to ensure that all public notice, legal and procedural requirements are fulfilled. * - Under GASB 45, the actuary calculated an "Actuarially Required Contribution," or "ARC." Under GASB 75, the actuary now calculates an "Actuarially Determined Contribution," or "ADC." SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 4 FISCAL IMPACT: There is no direct fiscal impact from accepting the policy as proposed. RECOMMENDATION: Staff recommends that the City Council accept the report and adopt the Resolution as presented. ATTACHMENTS: Accounting Information as of Measurement Date June 30, 2017 (prepared by actuary) Resolution establishing OPEB Funding Policy RAF, f �r r WITH F City of San Rafael B/IRT E L Retiree Healthcare Plan 11SSOC1ATES. L1. June 30, 2017 GASBS 75 Accounting Information As of Measurement Date June 30, 2016 Based on the June 30, 2015 Actuarial Valuation Doug Pryor, Vice President Tak Frazita, Associate Actuary Bartel Associates, LLC August 14, 2017 Contents Topic Page Applicable Dates 1 Note Disclosures 2 Required Supplementary Information 13 Actuarial Certification 18 Supporting Calculations 19 6� 8/14/17 Applicable Dates Applicable Dates and Periods 2016/17 Employer Fiscal Year ■ Measurement Date June 30, 2016 ■ Measurement Period July 1, 2015 to June 30, 2016 ■ Actuarial valuation date June 30, 2015 Note Disclosures Plan Information Fiscal Year End June 30, 2017 ■ Plan Type Single Employer ■ OPEB Trust Yes ■ Special Funding Situation No ■ Nonemployer Contribution Entities None 8/14/17 2 City of San Rafael City of San Rafael Note Disclosures Expected Long -Term Rate of Return* Target I Expected Real Allocation I Rate of Return ■ Asset Class Component • Public Equity 57% 5.96% • Fixed Income 27% 2.65% • TIPS 5% 2.50% • Commodities 3% 5.20% • REITs 8% 8.13% ■ Assumed Long -Term Rate of Inflation 2.75% ■ Assumed Long -Term Investment Expenses n/a ■ Expected Long -Term Net Rate of Return 7.28% ■ Discount Rate" 7.25% * Provided by Ca1PERS' Strategic Asset Allocation Analysis Overview in August 2014 — Strategy 1 ** The fiduciary net position is projected to be sufficient to make projected benefit payments, and the plan assets are expected to be invested using the strategy to achieve the expected return. 6� 8/14/17 3 Note Disclosures Covered Emplovees At June 30, 2017, the reporting date, the following numbers of employees were covered by the benefit terms: ■ Inactives currently receiving benefits ■ Inactives entitled to benefit payments ■ Active employees ■ Total Number of Covered Participants 336 0 348 684 City of San Rafael ~ 8/14/17 4 City of San Rafael Note Disclosures Net OPEB Liabilitv/(Asset) (Amounts in 000's) ■ Measurement Date ■ Total OPEB Liability (TOL) ■ Fiduciary Net Position (FNP) ■ Net OPEB Liability (NOL) ■ Funded status (FNP/TOL) 6� 8/14/17 Fiscal Year Ending 6/30/17 6/30/16 6/30/16 6/30/15 $ 49,543 $ 48,226 15,757 15,608 33,786 32,618 31.8% 32.4% 5 Note Disclosures i Changes in Net OPEB Liability/(Assets) (Amounts in 000's) City of San Rafael Total Fiduciary Net OPEB Net OPEB Liability Position Liability ■ Balance at 6/30/15 $ 48,226 $ 15,608 $ 32,618 ■ Changes for the year • Service Cost 766 - 766 • Interest 3,447 - 3,447 • Difference between actual and - - - • Assumption changes - - - • Contributions - employer - 2,896 (2,896) • Contributions - employee - - - • Net investment income - 157 (157) • Benefit payments and refunds* (2,896) (2,896) - • Administrative expenses - (7) 7 ■ Net Changes 1,317 149 1,167 ■ Balance at 6/30/16 49,543 15,757 33,786 * Includes $702,000 in Implied Subsidy benefit payments ~� 6 City San Rafael 8/14/17 of Note Disclosures Sensitivitv of Net OPEB Liabilitv (Amounts in 000's) ■ Changes in the Discount Rate Discount Rate 6.25% 7.25% 8.25% (1% Decrease) (Current Rate) (1% Increase ) ■ Net OPEB Liability $ 39,500 $ 33,786 $ 28,996 ■ Changes in the Healthcare Trend Rate Healthcare Trend Rate 1% Decrease Current Trend 1% Increase ■ Net OPEB Liability $ 30,786 $ 33,786 $ 37,160 (01'1) 8/14/17 7 City of San Rafael Note Disclosures OPEB Expense for Fiscal Year (Amounts in 000's) 2016/17 ■ OPEB Expense $ 3,283 See slide 23 for OPEB expense detail, which is not required disclosure. (01'1) 8/14/17 8 City of San Rafael Note Disclosures I Deferred Outflows/Inflows Balances at June 30, 2017 (Amounts in 000's) June 30, 2017 Deferred Deferred Outflows of Inflows of Resources Resources ■ Differences between expected and actual experience $ - ■ Changes of assumptions - ■ Net difference between projected and actual earnings on plan investments* 780 ■ Employer contributions made subsequent to the measurement date** 3,475 ■ Total 4,255 * Combine Deferred Inflows and Outflows for footnote disclosure. 17 8/14/17 9 Note Disclosures Recognition of Deferred Outflows and Inflows of Resources in Future OPEB Expense (Amounts in 000's) Deferred Outflows/(Inflows) FYE June 30 of Resources ■ 2018 $ 195 ■ 2019 195 ■ 2020 195 ■ 2021 195 ■ Thereafter - City of San Rafael ~ 8/14/17 10 City of San Rafael Note Disclosures Significant Actuarial Assumptions Used for Total OPEB Liabilitv Actuarial Assumption June 30, 2016 Measurement Date ■ Actuarial Valuation Date ■ June 30, 2015 ■ Contribution Policy ■ City contributes full ADC ■ Discount Rate ■ 7.25% at June 30, 2016 ■ 7.25% at June 30, 2015 ■ Expected Long -Term ■ Same as discount rate - expected City Rate of Return on contributions projected to keep sufficient plan Investments assets to pay all benefits from trust. ■ General Inflation ■ 2.75% per annum ■ Mortality, Retirement, ■ Same as June 30, 2015 actuarial valuation Disability, Termination ■ Mortality Improvement ■ Mortality projected fully generational with Scale MP -14, modified to converge to ultimate improvement rates in 2022 8/14/17 11 City of San Rafael Note Disclosures Significant Actuarial Assumptions Used for Total OPEB Liabilitv Actuarial Assumption June 30, 2016 Measurement Date ■ Salary Increases ■ Aggregate -3% ■ Merit - 6/30/14 MCERA assumptions ■ Medical Trend ■ Non -Medicare — 6.5% for 2017, decreasing 0.5% per year to an ultimate rate of 4.50% for 2021 and ■ Medicare — 6.7% for 2017, decreasing to an ultimate rate of 4.5% for 2021 and later years ■ Helthcare participaiton ■ Capped benefit: 100% currently covered, 80% for future retirees currently waived ■ PEMHCA minimum - 60% ■ Cap Increases ■ None ~ 8/14/17 12 City of San Rafael Required Supplementary Information Schedule of Changes in Net OPEB Liabilitv/(Assets) and Related Ratios (Amounts in 000's) ■ Changes in Total OPEB Liability • Service Cost • Interest • Difference between actual and expected experience • Assumption changes • Benefit payments including refunds • Changes of benefit terms ■ Net Changes ■ Total OPEB Liability (beginnning of year) ■ Total OPEB Liability (end of year) Fiscal Year 2016/17 766 3,447 (2,896) 1,317 48,226 49,543 8/14/17 13 City of San Rafael Required Supplementary Information Schedule of Changes in Net OPEB Liabilitv/(Assets) and Related Ratios (Amounts in 000's) ~ 8/14/17 14 City of San Rafael Fiscal Year 2016/17 ■ Changes in Plan Fiduciary Net Position • Contributions - employer $ 2,896 • Contributions - employee - • Net investment income 157 • Benefit payments and refunds (2,896) • Administrative expenses (7) • Other changes - • Net Changes 149 ■ Plan Fiduciary Net Position (beginnning of year) 15,608 ■ Plan Fiduciary Net Position (end of year) 15,757 ~ 8/14/17 14 City of San Rafael Required Supplementary Information Schedule of Changes in Net OPEB Liabilitv/(Assets) and Related Ratios (Amounts in 000's) Fiscal Year 2016/17 ■ Net OPEB Liability/(Asset) $ 33,786 • Fiduciary Net Position as a percentage of the Total OPEB Liability 31.8% ■ Covered employee payroll* 31,106 • Net OPEB Liability as a percentage of covered 109% employee payroll * Determined for the 12 months period ending on June 30, 2016 (Measurement Date). 6�8/14/17 15 City of San Rafael Required Supplementary Information Schedule of Emolover Contributions (Amounts in 000's) Fiscal Year 2016/17 ■ Actuarially Determined Contribution (ADC) $ 3,450 ■ Contributions in relation to the actuarially 3,475 determined contribution ■ Contribution deficiency/(excess) (25) ■ Covered employee payroll* 32,885 • Contributions as a percentage of covered 11% employee payroll * Determined for the 12 months period ending on June 30, 2017 (fiscal year end). ~ 8/14/17 16 City of San Rafael Required Supplementary Information Notes to Schedule of Emplover Contribution Methods and Assumptions for Actuarially Determined Contribution ■ Valuation Date ■ Actuarial Cost Method ■ Amortization Method ■ Remaining Amortization ■ Asset Valuation Method ■ Discount Rate ■ June 30, 2015 ■ Entry Age Normal, Level Percentage of Payroll ■ Level dollar amount, over approximate 10 -year period ■ 19 years remaining as of June 30, 2016 ■ Investment gains and losses spread over 5 -year rolling period ■ 7.25% 8/14/17 17 City of San Rafael Actuarial Certification This report presents the City of San Rafael Retiree Healthcare Plan 2017 disclosure under Governmental Accounting Standards Board Statement No. 75 (GASBS 75). The report provides information intended for reporting under GASBS 75, but may not be appropriate for other purposes. Information provided in this report may be useful to the City for the Plan's financial management. Future valuations may differ significantly if the Plan's experience differs from our assumptions or if there are changes in Plan design, actuarial methods, or actuarial assumptions. The project scope did not include an analysis of this potential variation. The valuation is based on Plan provisions, participant data, and asset information provided by the City as summarized in this report, which we relied on and did not audit. We reviewed the participant data for reasonableness. As permitted under GASBS 68, the total OPEB liability has been calculated from the June 30, 2015 actuarial valuation. Additional information on participants included in the valuation, actuarial assumptions, and asset infromation can be found in the June 30, 2015 funding actuarial valuation report. To the best of our knowledge, this report is complete and accurate and has been conducted using generally accepted actuarial principles and practices. Additionally, in our opinion, actuarial methods and assumptions comply with GASBS 75. As members of the American Academy of Actuaries meeting the Academy Qualification Standards, we certify the actuarial results and opinions herein Respectfully submitted, Doug Pryor, ASA, EA, MAAA Tak Frazita, ASA, EA, MAAA Vice President Associate Actuary Bartel Associates, LLC Bartel Associates, LLC August 14, 2017 August 14, 2017 ~� 8/14/17 18 City of San Rafael I Supporting Calculations i Recognition of Deferred Outflows/Inflows at June 30, 2017 Differences between Expected and Actual Experience (Amounts in 000's) Meas. Fiscal Period Year 15/16 16/17 Total 11) 8/14/17 Balances of Initial Amount Recognized in OPEB Expense Deferred Initial Recog for FY June 30, 2017 Amt Period 16/17 17/18 18/19 19/20 20/21 Outflows Inflows $ - $ - $ - $ - $ - $ - $ - $ 19 City of San Rafael Supporting Calculations Recognition of Deferred Outflows/Inflows at June 30, 2017 Changes of Assumptions (Amounts in 000's) Meas. Fiscal Period Year 15/16 16/17 Total 8/14/17 Balances of Initial Amount Recognized in OPEB Expense Deferred Initial Recog for FY June 30, 2017 Amt Period 16/17 17/18 18/19 19/20 20/21 Outflows Inflows 20 City of San Rafael II Supporting Calculations I i Recognition of Deferred Outflows/Inflows at June 30, 2017 Projected Versus Actual Earnings on Investments (Amounts in 000's) Meas. Fiscal Period Year 15/16 16/17 Total * Calculation of iniital amount for 2015/16 measurement period: Projected earnings on investments (slide 24), less Actual earnings on investments (net of investment income, slide 14), equals Projected earnings less actual earnings 6� 8/14/17 21 Supporting Calculations Balances of Deferred June 30, 2017 Outflows Inflows $ 780 $ - 780 - Recognition of Deferred Outflows/Inflows at June 30, 2017 Grand Total (Amounts in 000's) Meas. Fiscal Period Year 15/16 16/17 Total 8/14/17 City of San Rafael Initial Amount Recognized in OPEB Expense Initial Recog for FY Amt Period 16/17 17/18 18/19 19/20 20/21 $ 975 5 $ 195 $ 195 $ 195 $ 195 $ 195 Amt Period 195 195 195 195 195 * Calculation of iniital amount for 2015/16 measurement period: Projected earnings on investments (slide 24), less Actual earnings on investments (net of investment income, slide 14), equals Projected earnings less actual earnings 6� 8/14/17 21 Supporting Calculations Balances of Deferred June 30, 2017 Outflows Inflows $ 780 $ - 780 - Recognition of Deferred Outflows/Inflows at June 30, 2017 Grand Total (Amounts in 000's) Meas. Fiscal Period Year 15/16 16/17 Total 8/14/17 City of San Rafael 22 City of San Rafael Balances of Initial Amount Recognized in OPEB Expense Deferred Initial Recog for FY June 30, 2017 Amt Period 16/17 16/17 17/18 18/19 19/20 Outflows Inflows $ 975 n/a $ 195 $ 195 $ 195 $ 195 $ 195 $ 780 $ - 195 195 195 195 195 780 - 22 City of San Rafael Supporting Calculations Components of GASBS 75 OPEB Expense, (Amounts in 000's) (118/14/17 23 Supporting Calculations Components of GASBS 75 OPEB Expense, Calculation of Projected Earnings on Investments (Amounts in 000's) City of San Rafael Fiscal Year 2016/17 ■ Service Cost $ 766 ■ Interest on Total OPEB Liability 3,447 ■ Projected earning on investments (1,132) ■ Employee contributions- Earnings ■ Administrative expense 7 ■ Change in benefits i nnni ■ Recognition of deferred outflows/inflows ■ Employee contributions • Experience - • Assumptions - • Asset returns 195 ■ OPEB Expense 3,283 (118/14/17 23 Supporting Calculations Components of GASBS 75 OPEB Expense, Calculation of Projected Earnings on Investments (Amounts in 000's) City of San Rafael ■ Fiduciary Net Position Dollar Expected Portion of Projected (beginning of year) Amount Return Year Earnings ■ Employer contributions 2,896 — n,ni i nnni Q 1 1 Z7 ■ Fiduciary Net Position 1!),duZS 1.1-D"/0 1vV io 0 1,1„ (beginning of year) ■ Employer contributions 2,896 7.25% 50% 105 ■ Employee contributions - 7.25% 50% - ■ Benefit payments (2,896) 7.25% 50% (105) ■ Administrative expenses (7) 7.25% 50% (0) ■ Projected earnings 1,132 r 1 8/14/17 24 City of San Rafael I Supporting Calculations i Components of GASBS 75 OPEB Expense Calculation of Interest on Total OPEB Liability (Amounts in 000's) 6�8/14/17 25 City of San Rafael I Supporting Calculations I i GASBS 75 Balance Equation (Amounts in 000's) ■ Measurement date ■ Total OPEB Liability ■ Fiduciary Net Position ■ Net OPEB Liability ■ Deferred inflows of resources ■ Deferred outflows of resources ■ Balance Sheet Check: ■ Balance Sheet 6/30/16 • OPEB Expense • Contributions ■ Balance Sheet 6/30/17 8/14/17 26 Fiscal Year Ending Dollar Expected Portion of 6/30/16 $ 48,226 Amount Return Year Interest ■ Total OPEB Liability $ 48,226 7.25% 100% $ 3,496 ■ Service Cost 766 7.25% 100% 56 ■ Benefit payments (2,896) 7.25% 50% (105) ■ Total Interest 3,447 6�8/14/17 25 City of San Rafael I Supporting Calculations I i GASBS 75 Balance Equation (Amounts in 000's) ■ Measurement date ■ Total OPEB Liability ■ Fiduciary Net Position ■ Net OPEB Liability ■ Deferred inflows of resources ■ Deferred outflows of resources ■ Balance Sheet Check: ■ Balance Sheet 6/30/16 • OPEB Expense • Contributions ■ Balance Sheet 6/30/17 8/14/17 26 Fiscal Year Ending 6/30/16 1 6/30/17 6/30/15 6/30/16 $ 48,226 $ 49,543 15,608 15,757 32,618 33,786 - (780) 32,618 33,006 $ 32,618 3,283 (2,896) 33,005 1 City of San Rafael RESOLUTION NO. 14395 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL ADOPTING A RETIREE HEALTHCARE (OPEB) FUNDING POLICY WHEREAS, the City of San Rafael is committed to adopting best fiscal practices, in order to fully use the knowledge, resources and experience available throughout the industry; and WHEREAS, Public agencies that offer retiree health care benefits (Other Post - employment Benefits, or "OPEB") to their employees should fund the cost of those benefits in an equitable and sustainable manner; and WHEREAS, the City desires to demonstrate accountability and transparency by communicating all of the information necessary for assessing the City's progress toward meeting its retiree health care funding objectives. NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of San Rafael does hereby approve and adopt the following Retiree Healthcare Funding Policy: Purpose: The purpose of this policy is to provide assurance that the costs of the City's retiree healthcare will be funded in an equitable and sustainable manner, and that the City will comply with all relevant federal and state laws and applicable regulatory requirements in the administration of its plans. It codifies the City's commitment to fund these benefits based on regular actuarial valuations, and to measure and report them in accordance with generally accepted accounting principles (GAAP). Adhering to a funding policy that embodies these funding and accounting principles is a prudent governance practice, and helps achieve intergenerational equity among those who financially support the plan. It also ensures that resources are available to fulfill the City's contractual promises to its employees, and minimizes the chance that funding of these benefits will interfere with the City's ability to provide essential services to the public. In order to achieve the purpose of thisop licy, the City will take the following actions: 1.) The City's goal is to fully fund the amount of the ADC (Actuarially Determined Contribution*) each year. In the event the City is unable to fund the full amount of the ADC in a given year without borrowing, the Finance Director and City Manager will identify a timeframe under which to return to full funding. 2.) The Pension-OPEB Subcommittee will review the ADC each fiscal year, and recommend the level of funding to be considered by the full City Council for adoption in the budget. * - Under GASB 45, the actuary calculated an "Actuarially Required Contribution," or "ARC." Under GASB 75, the actuary now calculates an "Actuarially Determined Contribution," or "ADC." 3.) The City supports an ADC that is calculated in a manner that fully funds the long-term costs of retiree medical benefits, while balancing the goals of: a) keeping contributions relatively stable; and b) equitably allocating the costs over the employees' period of active service. 4.) The City will demonstrate accountability and transparency by communicating all of the information necessary for assessing the City's progress toward meeting its retiree medical funding objectives. As part of the annual budget adoption process, the Finance Director and City Manager will report to the City Council on the following: a) most recent actuarially determined OPEB contribution (ADC) b) relationship between ADC and budgeted OPEB contribution c) projected ADC for next three years d) impact of funding full ADC over the three-year planning horizon e) any other significant issues associated with funding retiree medical benefits in a stable and equitable manner as described in #2 above. 5.) The City will implement Governmental Accounting Standards Board Statement No. 75 - Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions beginning with the fiscal year ended June 30, 2016. 6.) Staff will monitor changes to and expansions of OPEB funding best practices, as well as any additional guidance provided by the Government Finance Officer's Association that relate to the funding retiree medical benefits. Staff will return to City Council with modifications to this policy as needed. 7.) The City Manager will ensure that any recommended changes to the plans are fully consistent with the requirements of the Public Employees' Medical & Hospital Care Act (PEMHCA) and any and all other applicable federal and state regulations, and that the City Attorney's Office be assigned or other qualified legal counsel be retained to ensure that all public notice, legal and procedural requirements are fulfilled. I, ESTHER C. BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the Council of said City on 18th day of September 2017, by the following vote, to wit: AYES: COUNCILMEMBERS: Bushey, Colin, Gamblin, McCullough & Mayor Phillips NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: None . F "t rem ESTHER C. BEIRNE, City Clerk 4 IftSAN RAFAEL STAFF REPORT APPROVAL THE CITY WITH AMISSION ROUTING SLIP Staff Report Author: Mark Moses Date of Meeting: 09/18/2017 Department: Finance Topic: RETIREE HEALTHCARE REPORTING AND FUNDING Subject: ACCEPT GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENT NO. 75 ACCOUNTING INFORMATION REPORT ON RETIREE HEALTHCARE AND ADOPT OTHER POSTEMPLOYMENT BENEFITS (OPEB) FUNDING POLICY Type: (check all that apply) ❑ Consent Calendar ❑ Public Hearing N Discussion Item X❑ Resolution ❑ Ordinance ❑ Professional Services Agreement ❑ Informational Report *If PSA, City Attorney approval is required prior to start of staff report approval process Was agenda item publicly noticed? ❑ Yes El No I Date noticed: I ❑Mailed ❑Site posted ❑Marin IJ Due Date Responsibility Description CompletedDate Initial / Comment DEPARTMENT REVIEW FRIDAY Director Director approves staff Click here to ❑X noon report is ready for ACM, enter a date. MM 9/1 City Attorney & Finance review. CONTENT REVIEW ' TUESDAY Assistant City Manager ACM, City Attorney & Click here to ❑X morning Finance will review items, enter a date. 9/5 make edits using track City Attorney changes and ask questions 9/11/2017 ❑X using comments. Items will LG be returned to the author Click here to Finance by end of day Wednesday. enter a date. 71 MM DEPARTMENT REVISIONS FRIDAY Author Author revises the report 9/12/2017 0 noon based on comments MM 9/8 receives and produces a final version (all track changes and comments removed) by Friday at noon. ACM, CITY ATTORNEY, FINANCE FINAL APPROVAL MONDAY Assistant City Manager ACM, City Attorney & Click here to morning Finance will check to see enter a date. 9/11 their comments were City Attorney adequately addressed and 9/11/2017 0 sign -off for the City LG Manager to conduct the 9/11/2017 Finance final review. 0 Van Bach TUES City Manager Final review and approval 9/13/2017 M noon Jim 9/12