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Home My WebLink AboutFin GASB 45 Report; Bartel 2013CITY OFAgenda Item No: 4 • e Meeting Date: June 2, 2014 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: Finance Prepared by: Mark Moses City Manager Approvalc`�� Finance Director SUBJECT: RESOLUTION ACCEPTING THE CITY OF SAN RAFAEL RETIREE HEALTHCARE PLAN JUNE 30, 2013 ACTUARIAL VALUATION REPORT RECOMMENDATION: ADOPT RESOLUTION BACKGROUND: The Governmental Accounting Standards Board (GASB) establishes financial accounting and reporting standards for state and local governmental entities. Governments and the accounting industry recognize GASB as the official source of generally accepted accounting principles for state and local government. Accounting and reporting standards addressing pension obligations have been in place for many years. Outside of pensions, jurisdictions often offer their qualifying, retired employees "Other Post -Employment Benefits (OPEB)," such as medical, dental, vision, life, or other benefits. It should be noted that, in San Rafael, the only OPEB offered is medical. In June 2004, GASB issued Statement No. 45, "Accounting and Financial Reporting by Employers for Post - Employment Benefits Other Than Pensions" (GASB 45). GASB 45 was issued "to provide more complete, reliable, and decision -useful financial reporting." GASB 45 requires the City to engage a certified actuary every two years to calculate several actuarial measures estimating the current and future costs and liabilities of our OPEB. The actuary calculates the unfunded liability, normal costs, and annual required contribution (ARC). GASB 45 does not require jurisdictions to fund their OPEBs, but rather meet accounting and financial reporting standards. It is clear, though, that once a full accounting of retiree health liability is available, a jurisdiction has an obligation to their employees and community to plan for these costs and take steps to address them. This issue has grown in magnitude due to quickly rising healthcare costs, the rising number of retirees, and retiree longevity. GASB 45 went into effect in three phases based on a jurisdiction's annual revenues. The City of San Rafael fell into the second phase and therefore the new standards went into effect in Fiscal Year 2008-09. This will be the fourth actuarial valuation SAN RAFAEL CITY COUNCIL AGENDA REPORT / Paye: 2 prepared in compliance with GASB 45. Previous reports were completed for plan valuations as of June 30, 2007, June 30, 2009, and June 30, 2011, respectively. ANALYSIS: The City has taken a number of actions to control health care costs for both active employees and retirees. During the 2008 and 2009 labor negotiation cycles, the City instituted a cafeteria plan approach to employee health care which sets a benefit cap for each bargaining unit. In addition, the retiree health benefit is capped for current employees. Lastly, and most importantly from an OPEB perspective, the retiree health benefit for new employees has now been limited to the minimum allowed under our CalPERS health program. These cost reduction measures have a significant impact on our unfunded OPEB liability over the long run. The savings will be realized "over the long run" because as with any substantive change directed at future retirees, it takes time for employees to cycle through the organization. The actuarial valuation presented with this report is as of June 30, 2013, and shows San Rafael's total retiree health liability (before assets are factored in) at approximately $33.5 million. Up until June 2013, the City of San Rafael maintained a 401(h) fund held and managed by the Marin County Public Employees Retirement Association (MCERA) for the purpose of funding retiree medical expenses. On June 25, 2013, the City transferred the entire balance of $12,027,035 to an irrevocable OPEB trust under the California Employers' Retiree Benefit Trust Fund (CERBT) managed by CalPERS. The purpose of this change was to manage funds dedicated to retiree medical benefits in a trust account designed specifically for such purposes. Although the 401(h) fund fulfilled the general needs of retiree medical funding and investments for several years, both the City and MCERA determined in 2012 that it was better to have the funds managed by an organization with specialized expertise related to compliance and management issues related to OPEB trusts. Investment income coupled with a supplemental contribution brought the balance in the CERBT account to $12,505,000 as of June 30, 2013. After factoring in the plan assets, the City's net liability for its retiree health plan is approximately $21.0 million. The Annually Required Contribution (ARC) for fiscal year 2014- 2015 is approximately $2.1 million. If fully funded, payment of the full ARC each year will reduce the net liability to zero in 21 years. Since fiscal year 2012-2013, the City has adhered to the budgeting principle of fully funding the ARC. The preliminary fiscal year 2014-2015 City operating budget continues this funding practice. OPTIONS: • Adopt the recommendation as reflected in the staff report. • Request further information. RECOMMENDED ACTION: Adopt Resolution accepting actuarial valuation report. ATTACHMENTS: Resolution Retiree Healthcare Plan — June 30. 2013 Actuarial Valuation RESOLUTION NO. 13731 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL ACCEPTING THE RETIREE HEALTHCARE PLAN JUNE 30, 2013 ACTUARIAL VALUATION REPORT WHEREAS, the Governmental Accounting Standards Board (GASB) establishes financial accounting and reporting standards for state and local governmental entities, which recognize GASB as the official source of generally accepted accounting principles for state and local government; and WHEREAS, GASB 45 establishes standards for accounting and financial reporting of "Other Post Employment Benefits" (OPEBs) and requires each public agency to engage a certified actuary to calculate several actuarial measures estimating the current and future costs and liabilities of an agency's OPEBs; and WHEREAS, the City entered into an agreement with Bartel Associates LLC to prepare the GASB 45 required compliance report for an OPEB actuarial valuation as of June 30, 2013; and WHEREAS, in San Rafael, the only OPEB offered is medical which varies by bargaining unit; and NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of San Rafael reaffirms the policy to not increase the cap on City contributions to retiree medical premiums and hereby accepts the June 30, 2013 Actuarial Valuation prepared by Bartel Associates LLC (attached herein). 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 City Council of said City held on Monday the 2nd day of June 2014, by the following vote, to wit: AYES: COUNCIL MEMBERS: Bushey, Colin, Connolly, McCullough & Mayor Phillips NOES: COUNCIL MEMBERS: None ABSENT: COUNCIL MEMBERS: None ESTHER C. BEIRNE, City Clerk CITY OF SAN RAFAEL RETIREE HEALTHCARE PLAN EL June 30, 2013 GASB 45 Actuarial Valuation Doug Pryor, Vice President Harish Ganesan, Actuarial Analyst Tak Frazita, Associate Actuary Bartel Associates, LLC May 6, 2014 CONTENTS Topic Page Benefit Summary 1 Data Summary 5 Actuarial Assumptions Highlights 7 Actuarial Methods 11 Assets 13 Results 17 Actuarial Certification 29 Exhibits Premiums E— 1 Participant Statistics E — 3 Actuarial Assumptions E-33 Definitions E — 37 oAclients\city of san rafie1\projects\opeb\2013 val\report\ba 14-05-06 sanrafaelci 13-06-30 opeb valuation final results.docx BENEFIT SUMMARY ' Annual active conversion of 50 hours of sick leave to HRA (excluded from valuation) 2 Age 52 and 5 or age 70 for Miscellaneous PEPRA members, age 50 and 5 or age 70 for Safety PEPRA members 3 City match 2% Firefighters salary to HRA (excluded from valuation) r ter, x'b R May 6, 2014 1 ` BENEFIT SUMMARY 77 t -- i ■ Medicare Part B Elected Officials, : All other ■ None Unrepresented Bargaining Unitsl ■ No Dental, Vision, or Life Benefits Mid Management & Management ■ Contributions ■ Eligibility' ■ Retire directly from City: Trust • Age 50 (age 55 if hired> 7/1/11 for Miscellaneous) with 10 years service (including reciprocity) or 2,073,000 $ 500,000 • 30 years service (Miscellaneous), 20 years service (Safety); or • Age 70 2,124,000 • Disability retirement ■ Benefit ■ Hired < 1/1/09 Full premium/cap ■ Hired < 1/1/10 Up to cap 1,808,000 ■ Hired > 1/1/09 PEMHCA Min ■ Hired > 1/1/10 PEMHCA Mina ■ Surviving ■ Benefit continues to surviving spouse Spouse (1,000,000) Benefit ' Annual active conversion of 50 hours of sick leave to HRA (excluded from valuation) 2 Age 52 and 5 or age 70 for Miscellaneous PEPRA members, age 50 and 5 or age 70 for Safety PEPRA members 3 City match 2% Firefighters salary to HRA (excluded from valuation) r ter, x'b R May 6, 2014 1 ` BENEFIT SUMMARY 77 t -- i ■ Medicare Part B ■ Hired < 4/1/07 Full reimbursement ■ Hired > 4/l/07 None ■ None ■ Other OPEB ■ No Dental, Vision, or Life Benefits ■ Contributions Fiscal Year Pay -Go Trust Total 2012/13 $ 2,073,000 $ 500,000 $ 2,573,000 2011/12 2,124,000 - 2,124,000 2010/11 1,808,000 (1,000,000) 808,000 2009/10 1,755,000 (1,000,000) 755,000 2008,'09 1.686,000 (1,000,000) 686,000 May 6, 2014 2 '' BENEFIT SUMMARY Bargaining Unit Monthly Cap Min Date SEIU Child Care Unit $543 1/l/10 Unrepresented Mid -Management Employees Retired < 12/1/01: $442 Retired > 12/1/01: Full prem Hired> 4/1/07: $600 1/1/09 San Rafael Fire Chief Officer's Association $557 1/l/10 San Rafael Firefighters' Association, I.A.FF., Local 1775 $557 1/l/10 San Rafael Police Association $386 1/1/10 San Rafael Police Mid -Management Association $566 1/l/10 SEIU 1021 $752 1/l/10 Public Employees Bargaining Unit (PEU) Local 1 $659 1/l/10 Unrepresented Management Employees and Council City Clerk and Elected Part -Time CityAttorne Hired < 4/1/07: Full prem. Hired > 4/1/07: $600 1/1/09 Western Council of Engineers (WCE) $752 1/l/10 " Employees hired on or after date receive only PEMHCA minimum ($115 in 2013, $119 in 2014). r j May 6, 2014 3 � ''O/Maj w. BENEFIT SUMMARY This page intentionally blank May 6, 2014 43 ` 6 Data as of April 2010. ' Data as of December 2011. s Data as of October 2013. P, May 6, 2014 Q 6/30/07 6/30/096 6/30/117 6/30/138 ■ Count 247 291 308 328 • Tier 1 408 377 326 294 • Tier 2 n/a 4 35 76 • Total 408 381 361 370 ■ Average $ 480 $ 537 $ 573 $ 554 • Age 44.7 44.3 44.6 44.0 • City Service 11.6 10.7 10.9 11.1 • Pay $ 72,800 $ 77,900 $ 77,000 $ 77,900 ■ Total Payroll in 000's 29,719 29,689 27,784 28,808 6 Data as of April 2010. ' Data as of December 2011. s Data as of October 2013. P, May 6, 2014 Q 9 Data as of April 2010. 10 Data as of December 2011. 11 Data as of October 2013. May 6, 2014 6 11 6/30/07 6/30/099 6/30/1110 6/30/1311 ■ Count 247 291 308 328 ■ Average • Age 66.6 65.9 66.7 67.4 • Retirement Age 56.6 53.9 54.7 55.2 • Monthly Benefit $ 480 $ 537 $ 573 $ 554 9 Data as of April 2010. 10 Data as of December 2011. 11 Data as of October 2013. May 6, 2014 6 11 ACTUARIAL ASSUMPTIONS HIGHLIGHTS Assumption June 30, 2011 Valuation June 30, 2013 Valuation ■ Valuation . June 30, 2011 • June 30, 2013 Date . 2012/13 & 2013/14 • 2014/15 & 2015/16 ■ Funding • Pay -go with no 401(h) account • Same Policy reimbursement • Total payment not < ARC 2013/14 7.39% • City transferred assets to 2014/15 7.47% CalPERS CERBT (Option 1) ■ General • 3.25% • Same Inflation • Aggregate increases — 3.25% • Same ■ Trust Asset . 7.50% • 7.50% (CERBT MFAD 0.11%) Return 6/30/2011 MCERA assumptions ■ City Return • 4.25% • 4.00% N May 6, 2014 ACTUARIAL ASSUMPTIONS HIGHLIGHTS Assumption June 30, 2011 Valuation June 30, 2013 Valuation ■ Discount • Select & ultimate discount rates • 7.50% Rate based on funded status: 2011/12 7.32% 2012/13 7.28% 2013/14 7.39% 2014/15 7.47% 2015/16+ 7.50% ■ Payroll • Aggregate increases — 3.25% • Same Increases • Merit Increases — Same as 6/30/2011 MCERA assumptions May 6, 2014 8 ACTUARIAL ASSUMPTIONS HIGHLIGHTS Assumption June 30, 2011 Valuation June 30, 2013 Valuation ■ Healthcare • 2% (Management benefit uncapped) Non -Medicare Medicare Non -Medicare Medicare Trend Year All Plans Year All Plans 2009 n/a 2009 n/a 2010 n/a 2010 n/a 2011 Actual 2011 premiums 2011 Actual 2011 premiums 2012 Actual 2012 premiums 2012 Actual 2012 premiums 2013 9.0% 9.4% 2013 Actual 2013 premiums 2014 8.5% 8.9% 2014 Actual 2014 premiums 2015 8.0% 8.3% 2015 8.0% 8.3% 2016 7.5% 7.8% 2016 7.5% 7.8% 2017 7.0% 7.2% 2017 7.0% 7.2% 2018 6.5% 6.7% 2018 6.5% 6.7% 2019 6.0% 6.1% 2019 6.0% 6.1% 2020 5.5% 5.6% 2020 5.5% 5.6% 2021-1 5.0% 5.0% 2021-4 5.0% 5.0% ■ Cap Increases • None • Same 1) May 6, 2014 9 ACTUARIAL ASSUMPTIONS HIGHLIGHTS Assumption June 30, 2011 Valuation June 30, 2013 Valuation ■ Actuarial Loading • 2% (Management benefit uncapped) • 0% ! May 6, 2014 10 ACTUARIAL METHODS i Method June 30, 2011 Valuation June 30, 2013 Valuation ■ Cost Method ■ Entry Age Normal ■ Same ■ Amortization ■ Level percentage of payroll ■ Same Method ■ Actuarial ■ MCERA 401(h) account ■ Investment gains and losses Value of actuarial value projected spread over 5 -year rolling Assets forward to 6/30/12. period ■ Not less than 80% nor more ■ Not less than 80% nor more than 120% of market value than 120% of market value ■ Amortization ■ 23 -year fixed (closed) period ■ 21 -year fixed (closed) period Period for 6/30/12 UAAL for 6/30/14 UAAL ■ Implied ■ Employer cost for allowing retirees to participate, irrespective of Subsidy employer contribution ■ Community rated plans not required to value implied subsidy ■ Implied Subsidy not included May 6, 2014 11 ACTUARIAL METHODS {; I May 6, 2014 This page intentionally blank 12 ASSETS 12 401(h) account transferred to CERBT 6/26/13. Amounts revised from previous valuation based on updated information provided by City. 40, May 6, 2014 13 ASSETS i Actuarial Value of Plan Assets13 (000's Omitted) 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 ■MVA (boy) $14,525 $12,995 $9,568 $ 9,585 $10,889 $11,178 • Contribution 1,119 - - - - 500 • Benefit Payments (1,000) (1,000) (1,000) (1,000) - - • Expenses n/a n/a n/a n/a n/a 0 • Investment 13,784 12,773 11,008 10,861 11,130 12,505 Return 1,649 2,427 1,017 2,303 289 988 ■MVA eo 12,995 9,568 9,585 10,889 11,178 12,666 ■ Approximate (11.4%) (18.7%) 10.6% 24.0% 2.7% 8.8% Return 12 401(h) account transferred to CERBT 6/26/13. Amounts revised from previous valuation based on updated information provided by City. 40, May 6, 2014 13 ASSETS i Actuarial Value of Plan Assets13 (000's Omitted) MCERA asset smoothing through 6/30/12. Rolling 5 year smoothing starting m2012/13. May 6, 2014 14 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 NAVA (boy) $ 14,563 $ 13,784 $ 12,773 $ 11,008 $ 10,861 $ 11,130 • Contribution 1,119 - - - - 500 • Benefit Payments (1,000) (1,000) (1,000) (1,000) - - • Credited Return (899) (11) (765) 853 269 875 NAVA eo 13,784 12,773 11,008 10,861 11,130 12,505 ■ Approximate (6.2%) (0.1%) (6.0%) 7.7% 2.5% 7.9% Return MCERA asset smoothing through 6/30/12. Rolling 5 year smoothing starting m2012/13. May 6, 2014 14 ASSETS Historical Returns May 6, 2014 EL May 6, 2014 16 20% -- - - --------- - --- - -- - - 15% ---- - -- ----- ---- -- - -- ---- - - 10% -- — — - -- - -- -- — --- -- -- -------------- 5% 5% (10%) --------- --- - --- - ----- --- ------------- - ------ -- --- - (15%) --- -- --- - --- -- — --- -- ----- - (20%) 07/08 1 08/09 09/10 10/11 11/12 1 12/13 -MVA -11.4% -18.7% 10.6% 24.0% 2.7% 8.8% .. Expected Retum 7.8% 7.8% 7.8% 7.8% 7.5% 7.5% -f AVA -6.2% -0.1% -6.0% 7.7% 2.5% 7.9% May 6, 2014 EL May 6, 2014 16 14 Adjusted for $1 million reimbursement during 2011/12 treated as 2010/11 payment. May 6, 2014 17 RESULTS s, , $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $o Historical Funded Status (000's Omitted) 6/30/07 6/30/09 6/30/11 6/30/13 Retireepay-go =Retiree AAL less pay -go =Ac6veAAL -;--AVA -*-MVA May 6, 2014 18 6/30/07 6/30/09 6/30/11 6/30/13 ■ Present Value of Benefits • Actives $ 41,880 $ 37,131 $ 14,105 $ 12,988 • Retirees 27,714 35,196 25,802 24,462 • Total 69,594 72,327 39,907 37,450 ■Actuarial Accrued Liability • Actives 25,053 21,066 9,354 9,087 • Retirees 27,714 35,196 25,802 24,462 • Total 52,767 56,262 35,156 33,549 ■Assets 14,563 12,773 9,86114 12,505 ■Unfunded Liability 38,204 43,489 25,295 21,044 ■Normal Cost 2,022 1,805 706 580 ■Pay -Go Cost 1,686 2,045 2,282 2,256 14 Adjusted for $1 million reimbursement during 2011/12 treated as 2010/11 payment. May 6, 2014 17 RESULTS s, , $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $o Historical Funded Status (000's Omitted) 6/30/07 6/30/09 6/30/11 6/30/13 Retireepay-go =Retiree AAL less pay -go =Ac6veAAL -;--AVA -*-MVA May 6, 2014 18 P-1 May 6, 2014 19 f r, May 6, 2014 RESULTS This page intentionally blank 'J 20 AAL Gain /Loss ■ Actual na 6/30/11 $ 35,156 ■ Expected A 6/30/13 37,429 ■ Changes • Premiums < Expected (2,893) • No Actuarial Loading (688) • Discount Rate (16) • Waived re-election 24 • Demographic/Other (307) • Total 3,880 ■ Actual 6/30/13 33,549 P-1 May 6, 2014 19 f r, May 6, 2014 RESULTS This page intentionally blank 'J 20 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 ❑Normal Cost E3 Amortization ARC 6/30/2011 Val 6/30/2013 Val 2012/13 2013/14 2014/15 2015/16 1,728 1,797 1,532 ■ Annual Required Contribution - $ 2,434 2,496 2,112 2,148 • Normal Cost $ 706 $ 699 $ 580 $ 577 • UAAL Amortization 1,728 1,797 1,532 1,571 • Total ARC 2,434 2,496 2,112 2,148 ■ Projected Payroll 28,687 29,619 29,744 30,711 ■ Annual Required Contribution - % • Normal Cost 2.5% 2.4% 1.9% 1.9% • UAAL Amortization 6.0% 6.1% 5.2% 5.1% • Total ARC 8.5% 8.4% 7.1% 7.0% $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 ❑Normal Cost E3 Amortization ARC 12/13 13!14 14/15 15/16 706 699 580 577 1,728 1,797 1,532 1,571 2,434 2,496 2,112 2,148 May 6, 2014 22 May 6, 2014 23 6/30/2011 Val 6/30/2013 Val 6/30/12 6/30/13 6/30/14 6/30/15 ■ Outstanding Balance ■ Payment • Initial UAAL $ 44,908 $ 45,034 $ 45,116 $ 45,143 • (Gain)/Loss • (Gain)/Loss ➢ 2009 val (4,287) (4,299) (4,307) (4,310) ➢ 2011 val (26,626) (26,700) (26,749) (26,765) ➢ 2013 val - - (2,862) (2,864) • NOO (projected) 11,575 11,788 9,400 9,262 • Total 25,571 25,822 20,598 20,467 May 6, 2014 23 �_ May 6, 2014 24 6/30/2011 Val 6/30/2013 Val 2012/13 2013/14 2014/15 2015/16 ■ Payment • Initial UAAL $ 3,035 $ 3,134 $ 3,356 $ 3,465 • (Gain)/Loss ➢2009 val (290) (299) (320) (331) ➢2011 val (1,800) (1,858) (1,990) (2,054) ➢ 2013 val (213) (220) • NOO (projected) 782 820 699 711 • Total 1,728 1.797 1,532 1,571 • Average years 23.0 22.0 21.0 20.0 �_ May 6, 2014 24 RESULTS 777, 77 -7777 Estimated Net OPEB Obligation (NOO)15 (000's Omitted) j " NOO through 6/30/13 as calculated by Bartel Associates; differs from amounts reported in City CAFR. 16 Estimated benefit payments for 2013/14, 2014/15, & 2015/16. f.N, May 6, 2014 25 Fiscal Actual Estimated 2013/14 2014/15 2015/16 Benefit 2012/13 ■ NOO at Beginning of Year $ 9,594 $ 9,516 $ 9,400 $ 9,262 ■ Annual OPEB Cost AOC Payroll Payroll 2014/15 • Annual Required Contribution 2,434 2,496 2,112 2,148 • Interest on NOO 843 704 705 695 • Adjustment for NOO (782) (820) (699) (711) • Annual OPEB Cost 2,495 2,380 2,118 2,132 ■ Contributions 31,709 7.8% 2017/18 8,720 • Benefit Payments 16 2,073 2,210 2,256 2,354 • Trust Pre -Funding 500 286 - - • Total Contribution 2,573 2,496 2,256 2,354 ■ NOO at End of Year 9,516 9,400 9,262 9,040 " NOO through 6/30/13 as calculated by Bartel Associates; differs from amounts reported in City CAFR. 16 Estimated benefit payments for 2013/14, 2014/15, & 2015/16. f.N, May 6, 2014 25 Fiscal Beginning of Year Net OPEB Contribution" Annual OPEB Cost Contribution as % of Benefit Pre- Total Year Obligation Pmts Fund Contrib AOC Payroll Payroll 2014/15 $ 9,400 $ 2,256 $ - $ 2,256 $ 2,118 $ 29,744 7.6% 2015/16 9,262 2,354 - 2,354 2,132 30,711 7.7% 2016/17 9,040 2,459 - 2,459 2,139 31,709 7.8% 2017/18 8,720 2,571 - 2,571 2,138 32,740 7.9% 2018/19 8,288 2,693 - 2,693 2,126 33,804 8.0% 2019/20 7,720 2,793 - 2,793 2,104 34,902 8.0% 2020/21 7,031 2,874 - 2,874 2,074 36,037 8.0% 2021/22 6,231 2,948 - 2,948 2,039 37,208 7.9% 2022/23 5,322 3,014 - 3,014 1,997 38,417 7.8% 2023/24 4,305 3,100 - 3,100 1,950 39,666 7.8% 17 Based on benefits paid to retirees. (1_ May 6, 2014 26 .�rrz'u L�✓r,,,k...�u�,w..��- x � � ,�xx,x �P�'sF:::3€w zN, .v�.„r,i ss�..v.rt>,.�v w...,k.�.�.;.� rf�'^5 w 2..`�9`?�..a:�,.',. Actuarial Obligations June 30, 2013 (000's Omitted) IB For illustrative purposes, assets allocated on AAL. P May 6, 2014 27 RESULTS Annual Required Contribution (ARC) 2014/15 (000's Omitted) �-Miscellaneous Miscellaneous Safety Total ■ PVPB • Actives $ 10,057 $ 2,931 $ 12,988 • Retirees 14,026 10,436 24,462 • Total 24,083 13,367 37,450 ■ AAL 16,172 13,573 29,744 • Actives 7,314 1,773 9,087 • Retirees 14,026 10,436 24,462 • Total 21,340 12,209 33,549 ■ Assets'8 7,954 4,551 12,505 ■ Unfunded Liability 13,386 7,658 21,044 ■ Normal Cost 14/15 434 146 580 ■ Pay Go Costs 14/15 1,327 929 2,256 IB For illustrative purposes, assets allocated on AAL. P May 6, 2014 27 RESULTS Annual Required Contribution (ARC) 2014/15 (000's Omitted) �-Miscellaneous Safety Total ■ ARC- $ • Normal Cost $ 434 $ 146 $ 580 • UAL Amortization19 983 549 1,532 • Total ARC 1,417 695 2,112 ■ Projected Payroll 16,172 13,573 29,744 ■ARC -% • Normal Cost 2.7% 1.1% 1.9% • UAL Amortization 6.1% 4.0% 5.2% • Total ARC 8.8% 5.1% 7.1% 19 For illustrative purposes, amortization amount allocated on AAL. May 6, 2014 28 PI ACTUARIAL CERTIFICATION This report presents the City of San Rafael Retiree Healthcare Plan ("Plan") June 30, 2013 actuarial valuation. The purpose of this valuation is to: ■ Determine the Governmental Accounting Standards Board Statement Nos. 43 and 45 June 30, 2013 Benefit Obligations, ■ Determine the Plan's June 30, 2013 Funded Status, and ■ Calculate the 2014/15 and 2015/16 Annual Required Contributions. The report provides information intended for reporting under GASB 43 and 45, 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. To the best of our knowledge, this report is complete and accurate and has been conducted using generally accepted actuarial principals and practices. Additionally, in our opinion, actuarial methods and assumptions comply with GASB 43 and 45. As members of the American Academy of Actuaries meeting the Academy Qualification Standards, we certify the actuarial results and opinions herein. Respectfully submitted, Cuc Doug Pryor, ASA, EA, MAAA Vice President Bartel Associates, LLC May 6, 2014 May 6, 2014 (111 1 May 6, 2014 29 ACTUARIAL CERTIFICATION This page intentionally blank 30 PREMIUMS 2013 PEMHCA Monthly Premiums Bay Area May 6, 2014 E-1 PREMIUMS 77- 2014 PEMHCA Monthly Premiums Bay Area Plan Non -Medicare Eligible Medicare Eligible r : Plan Single 2 -Party Family Single 2 -Party Family Blue Shield $784.63 $1,569.26 $2,040.04 $261.32 $522.64 $783.96 Blue Shield NetValue 670.21 1,340.42 1,742.55 261.32 522.64 783.96 Kaiser 668.63 1,337.26 1,738.44 288.37 576.74 865.11 PERS Choice 667.03 1,334.06 1,734.28 325.74 651.48 977.22 PERS Select 487.20 974.40 1,266.72 325.74 651.48 977.22 PERSCare 1,083.11 2,166.22 2,816.09 370.43 740.86 1,111.29 PORAC 581.00 1,088.00 1,382.00 418.00 833.00 1,331.00 May 6, 2014 E-1 PREMIUMS 77- 2014 PEMHCA Monthly Premiums Bay Area Plan Non -Medicare Eligible Medicare Eligible Single 2 -Party Family Single 2 -Party Family Anthem Select $ 657.33 $1,314.66 $1,709.06 $341.12 $682.24; $1,023.36 Anthem Traditional 728.41 1,456.82 1,893.07 341.12 682.24 1,023.36 Blue Shield 836.59 1,673.18 2,175.13 298.21 596.42 894.63 Blue Shield NetValue 704.01 1,408.02 1,830.43 298.21 596.42 894.63 Kaiser 742.72 1,485.44 1,931.07 294.97 589.94 884.91 UnitedHealthcare 764.24 1,528.48 1,987.02 193.33 386.66 579.99 PERS Choice 690.77 1,381.54 1,796.00 307.23 614.46 921.69 PERS Select 661.52 1,323.04 1,719.95 307.23 614.46 921.69 PERSCare 720.04 1,440.08 1,872.10 327.36 654.72 982.08 May 6, 2014 E-2 22 Excludes 28 surviving spouses May 6, 2014 E-4 Miscellaneous Police Fire;,, Total ■ Actives • Count 244 62 64 370 • Average Age 46.5 39.9 38.6 44.0 • Average Service 11.5 11.4 9.4 11.1 • Average Pay $ 64,192 $ 103,374 $ 105,255 $ 77,860 • Payroll ($000s) 15,663 6,409 6,736 28,808 ■ Retirees Count < 65 60 34 49 143 Count > 65 99 32 54 185 Total 159 66 103 328 • Average Age 68.7 65.0 66.8 67.4 • Average Ret. Age 21 57.9 50.8 53.7 55.2 22 Excludes 28 surviving spouses May 6, 2014 E-4 Miscellaneous Police Fire Total ■ Actives • Count 245 59 57 361 • Average Age 46.2 39.8 42.7 44.6 • Average Service 10.3 10.8 13.4 10.9 • Average Pay $ 62,374 $ 103,737 $ 111,962 $ 76,964 • Payroll ($000s) 15,282 6,120 6,382 27,784 ■ Retirees Count < 65 62 44 49 155 Count >65 76 32 45 153 Total 138 76 94 308 • Average Age 68.6 64.3 66.0 66.7 • Average Ret. Age 22 58.5 50.4 52.7 54.7 22 Excludes 28 surviving spouses May 6, 2014 E-4 PARTICIPANT STATISTICS Participant Statistics June 30. 200923 23 Data as of March/April 2010. June 30, 2009 active counts approximately 5% higher. 24 Excludes 28 surviving spouses E�. f May 6, 2014 E-5 PARTICIPANT STATISTICS Medical Plan Participation 25 Medical Plan Miscellaneous Police Fire Total ■ Actives 19% 21% Blue Shield NetValue 6% • Count 254 66 61 381 • Average Age 46.0 38.7 43.2 44.3 • Average Service 10.2 9.6 14.4 10.7 • Average Pay $ 64,400 $ 103,000 $ 106,900 $ 77,900 • Payroll ($000s) 16,370 6,797 6,522 29,689 ■ Retirees 1 °/0 6% Total 1 100% Count < 65 64 51 49 164 Count > 65 68 24 35 127 Total 132 75 84 291 • Average Age 68.5 62.4 64.9 65.9 • Average Ret. Age 24 58.0 49.0 52.2 53.9 23 Data as of March/April 2010. June 30, 2009 active counts approximately 5% higher. 24 Excludes 28 surviving spouses E�. f May 6, 2014 E-5 PARTICIPANT STATISTICS Medical Plan Participation 25 Medical Plan Actives Retirees 2:65 Total Blue Shield 15% 24% 19% 21% Blue Shield NetValue 6% 2% 1% 2% Kaiser 69% 51% 41% 45% PERS Choice 5% 4% 12% 9% PERS Select 0% I%i 1%i 0°% 1 PERS Care 2% 5% 260ro 17% PORAL 1 4% 1 12% 1 °/0 6% Total 1 100% 1 100% 100% 100% Excludes waived participants. May 6, 2014 E-6 May 6, 2014 PARTICIPANT STATISTICS This page intentionally blank III E-7 PARTICIPANT STATISTICS Active Medical Coverage Medical Plan Single 2 -Party Family Waived Total Blue Shield 23 7 17 - 47 Blue Shield NetValue 6 3 9 - 18 Kaiser 95 39 82 - 216 PERS Choice 5 4 5 - 14 PERSCare 1 2 2 - 5 PORAC 4 - 7 - 11 Waived - - - 59 59 Total 134 55 122 59 370 May 6, 2014 E-8 a PARTICIPANT STATISTICS Retiree Medical C'.nveraue — Under Am- 6,5 Medical Plan Re ion Sin le 2 -Party Family Waived Total Blue Shield Bay Area 17 6 9 - 32 North 1 - - - 1 South - 1 - - 1 Blue Shield/Net Value Bay Area 2 - 1 - 3 Kaiser Bay Area 29 21 16 - 66 Sacramento - 1 - - 1 North 1 Bay Area __ LA 1 - - - 1 South 1 - - - 1 Out of State 1 - - - 1 PERS Choice Bay Area 2 - - - 2 Sacramento 1 - - 1 North 1 - - - 1 Out of State 1 1 - - 2 PERS Select Bay Area 2 - - - 2 PERSCare Bay Area 2 1 2 - 5 North 1 - - - 1 Out of State - 1 - - 1 PORAC Bay Area 3 8 16 - 117 Waived Sacramento - -- - - 3 3 Total North 65 41 34 3 1143 May 6, 2014 E-9 PARTICIPANT STATISTICS Retiree Medical Coveraue — Over Aue 65 Medical Plan Region Single -Party Family Waived Total Blue Shield Bay Area 12 —2 13 3 - 28 Sacramento 2 1 - 3 North 2 2 South 1 - - - 1 Blue Shield/Net Value Bay Area __ - 1 - - 1 Kaiser Bay Area 31 34 1 1 - 66 Sacramento 1 2 - - 3 LA 1 - - - I South 1 1 - - 2 Out of State 1 1 - - 2 PERS Choice Bay Area - 7 - - 7 Sacramento 1 - - - 1 North - 2 - - 2 South 2 - - - 2 Out of State 9 1 - - 10 PERSCare Bay Area 15 15 - - 30 Out of State 12 1 - - 13 PORAC - 2 - - 2 Waived - - - 4 4 Total 93 84 4 4 185 11. j FF May 6, 2014 E-10 1) May 6, 2014 E-11 City Service 1-4 5-9 10-14 15-19 20-24 25 Total <25 8 5 2 15 25-29 4 3 5 - - 12 30-34 4 5 6 3 1 19 35-39 1 6 11 10 1 - - 29 40-44 1 4 9 7 3 3 1 28 45-49 2 2 6 8 10 4 3 35 50-54 1 4 5 7 7 8 6 38 55-59 - 5 13 8 6 4 6 42 60-64 - 3 4 4 1 1 13 >65 - - 2 6 3 1 1 13 Total 21 34 62 53 35 1 21 18 244 1) May 6, 2014 E-11 lK11 80 PARTICIPANT STATISTICS Active Age Distribution Miscellaneous ii 40 1 0-4 5-9 10-14 15-19 20-24 >25 Service May 6, 2014 E-13 PARTICIPANT STATISTICS r This page intentionally blank i May 6, 2014 E-14 9 10 5 0 <25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-65 >65 Age May 6, 2014 E-16 �"` I ity Service ..: , 1 1-45-9 10-14 15-19 20-24� � < 25 1 - 25-29 3 1 4 - - - - 8 30-34 - - 6 1 - - - 7 35-39 - 1 5 9 1 - - 16 40-44 - - 5 6 3 2 - 16 45-49 - - - 3 1 3 - 7 50-54 - 1 1 1 - - 3 6 55-59 - - 1 - - - - 1 60-64 - - - - - - - - >65 - - - - - - - - Total 4 3 22 20 5 5 3 62 9 10 5 0 <25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-65 >65 Age May 6, 2014 E-16 J 20 10 0 06/30/11 Valuation 006/30/13 Valuation . ----F--1 ------------ ------- F ------------------------------------------- 0-4 5-9 10-14 15-19 20-24 >25 Service May 6, 2014 E-17 PARTICIPANT STATISTICS May 6, 2014 This page intentionally blank E-18 LV m <25 25-29 30-3 35-39 40-44 45-49 50-54 7,5-59 60-65 >65 Age 1 May 6, 2014 E-20 City Service�_,� e 1 1-4 5-9 10-14 15-19� 20-24 > 25 Total <25 1 - - - - - - 1 25-29 6 6 1 - - - - 13 30-34 4 8 1 - - - - 13 35-39 2 1 2 3 - - - 8 40-44 - 1 - 7 1 - - 9 45-49 - - 1 3 3 - 2 9 50-54 - - - 2 1 2 5 10 55-59 - - 1 - - - - 1 60-64 - - - - - - - - >65 - - - - - - - - Total 13 16 6 15 5 2 7 64 LV m <25 25-29 30-3 35-39 40-44 45-49 50-54 7,5-59 60-65 >65 Age 1 May 6, 2014 E-20 0 06/30/11 Valuation 1306/30/13 Valuation --------------------------------------------------------------------- I �, - I �-fl. F - This page intentionally blank i May 6, 2014 E-22 4U 30 20 z 10 0 0 06/30/11 Valuation 1306/30/13 Valuation --------------------------------------------------------------------- I �, - I �-fl. F - This page intentionally blank i May 6, 2014 E-22 May 6, 2014 E-23 �� 6V 70 60 50 a� E 40 z 30 20 10 0 25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-65 >65 Age May 6, 2014 E-24 City Service ., MR 1-45-9 10-14 15-19 20-24 > 2 Total <25 10 5 2 - - - - 17 25-29 13 10 10 - - - - 33 30-34 8 13 13 4 1 - - 39 35-39 3 8 18 22 2 - - 53 40-44 1 5 14 20 7 5 1 53 45-49 2 2 7 14 14 7 5 51 50-54 1 5 6 10 8 10 1 14 54 55-59 - 5 15 8 6 4 6 44 60-64 - - 3 4 4 1 1 13 >65 - - 2 1 6 3 1 1 13 Total 38 53 90 88 45 28 28 370 May 6, 2014 E-23 �� 6V 70 60 50 a� E 40 z 30 20 10 0 25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-65 >65 Age May 6, 2014 E-24 120 110 100 90 80 70 60 Z 50 40 30 20 10 0 PARTICIPANT STATISTICS Active Service Distribution Total 0-4 5-9 10-14 15-19 20-24 >25 Service May 6, 2014 E-25 PARTICIPANT STATISTICS This page intentionally blank Mav 6- 2014 L -'2o PARTICIPANT STATISTICS Retiree Healthcare Coverage by Age Group Miscellaneous Age Single 2 -Party Family Waived Total Under 50 - - 50-54 2 1 2 - 5 55-59 10 4 8 22 60-64 16 12 4 - 32 65-69 21 16 1 3 41 70-74 11 9 - - 20 75-79 7 9 - - 16 80_84 — Over 85 — 6 10 2 4 — - - _ - -- 8 14 Total 83 57 16 3 159 May 6. 2014 E-27 PARTICIPANT STATISTICS Retiree Age Distribution Miscellaneous 45 40 35 30 25 20 z 15 10 5 0 <50 50-54 55-59 60-64 65-69 70-74 75-79 80-84 >85 Age MaN 6. 2014 E-28 PARTICIPANT STATISTICS Retiree Healthcare Coverage by Age Group Police Age Single 2 -Party Family Waived Total Under 50 4 - - - 4 50-54 2 - 1 - 3 55-59 4 1 3 2 10 60-64 8 7 2 - 17 65-69 1 6 10 1 - 17 70-74 3 3 - - 6 75-79 1 3 - - 4 80-84 2 1 - - 3 Over 85 2 - - - 2 Total 32 25 7 2 66 May 6, 2014 E-29 30 2.5 20 PARTICIPANT STATISTICS Retiree Age Distribution Police VA 10 5 0 <50 50-54 55-59 60-64 65-69 70-74 75-79 80-84 >85 Age MaN b_ "2'01-1 F-30 Age Single 2 -Party Family Waived Total Under 50 1 - 1 - 2 50-54 1 1 1 - 3 55-59 4 10 6 1 21 60-64 13 5 5 - 23 65-69 9 11 1 1 22 70-74 5 4 - - 9 75-79 5 4 1 - 10 80-84 4 7 - - 11 Over 85 1 1 - - 2 Total 43 43 15 2 103 LJ 20 15 z 40 0 1306/30/11 Valuation 006/30/13 Valuation X50 50-54 �5-59 60-64 65-69 70-74 75-79 80-84 =85 Age yLIN E-32 ACTUARIAL ASSUMPTIONS Assumption June 30, 2011 Valuation June 30, 2013 Valuation ■ Mortality, • 6/30/11 MCERA valuation • Same Withdrawal, assumptions coverage at age 65 Disability . Scale AA for post-retirement ■ PEMHCA mortality • 4.5% after 2014 ■ Service • 6/30/11 MCERA valuation • 6/30/11 MCERA valuation Retirement assumptions26 assumptions27 ■ Participation Misc Safely Misc Safety at Retirement Benefit 2.7%@55 3%@55 Benefit 2.7%@55 3%@55 ERA 59.8 53.5 ERA 59.8 53.5 ■ Part Time • 25% PARS employees become • Same Employment full time eligible 26 Safety hired > 7/1/11 have 3%(a,55, Miscellaneous hired > 7/1/11 have 2%(a,55 27 2%(462 for Miscellaneous hired after 1/1/13, 2.7%(cc�,57 for Safety hired after 1/1/13 May 6, 2014 E-33 ACTUARIAL ASSUMPTIONS Assumption June 30, 2011 Valuation June 30, 2013 Valuation ■ Waived • N/A e 20% waived retirees re-elect Retiree Re- coverage at age 65 Elections ■ PEMHCA . 4.5% after 2012 • 4.5% after 2014 Minimum Increases ■ Participation . Actives: • Same at Retirement ➢ Capped benefit: o Currently covered: 100% o Currently waived: 80% PEMHCA minimum: 60% • Retirees: same as current election 17 € May 6, 2014 E-34 El ACTUARIAL ASSUMPTIONS Assumption June 30, 2011 Valuation June 30, 2013 Valuation ■ Medical Plan • Currently covered: same as • Same at Retirement current elections • Currently waived: weighted premium based on current retiree elections ■ Marital Status . Covered actives and retirees — • Same ■ Medicare based on current coverage • Same Participation election • Waived actives — 80% married ■ Spouse Age • Males 3 years older than females • Same ■ Dependents • Pre -65: • Same at Retirement ➢ Actives: 20% Retirees: same as current coverage • Post -65: 0% May 6, 2014 E-35 ACTUARIAL ASSUMPTIONS Assumption June 30, 2011 Valuation June 30, 2013 Valuation ■ Medicare • Actives and Retirees under 65: • Same Eligible Rate ➢ Hired < 4/1/86: 80% Misc, 90% Safety Hired > 4/1/86: 100% • Retirees over 65: current Medicare eligible status ■ Medicare • All eligible elect City • Same Participation reimbursement of Part B May 6, 2014 E-36 E ACTUARIAL ASSUMPTIONS Assumption June 30, 2011 Valuation June 30, 2013 Valuation ■ Implied • Non -Medicare eligible retirees pay active medical rates instead of actual cost Subsidy . Active employee premiums subsidize retiree medical cost actuarial assumptions to determine present value of benefits (PVB) Single Retiree Medical Cost • Discount rate is expected long-term return on plan assets 1,000 --- - --', • Allocate PVB to past, current, and future periods I ---Prem n 800 —Mak Cost • Normal Cost is portion of PVB allocated to current fiscal year c Female Cost U 600 • Actuarial cost method used for valuation is Entry Age Normal Cost _T method which determines Normal Cost as a level percent of payroll c 400 • Actuarial Accrued Liability (AAL) is portion of PVB allocated to 200 prior service with the employer 0 • Unfunded AAL (UAAL) is AAL less Plan Assets 30 35 40 45 50 55 60 65 • Assets must be in segregated and restricted trust to be considered Plan Age Assets for GASB 45 • GASB 45 includes active "implied subsidy" of retiree costs • Cash subsidy is employer pay-as-you-go benefit payments for retirees • Community rated plans not required to value implied subsidy e Implied subsidy is difference between actual cost of retiree benefits • PEMHCA is a community rated plan for most employers and retiree premiums subsidized by active employee premiums • Valuation does not include an implied subsidy May 6, 2014 E-37 DEFINITIONS ■ GASB 45 • Project future employer-provided benefit cash flow for current active Accrual employees and current retirees Accounting • Discount projected cash flow to valuation date using discount rate and actuarial assumptions to determine present value of benefits (PVB) • Discount rate is expected long-term return on plan assets • Allocate PVB to past, current, and future periods • Normal Cost is portion of PVB allocated to current fiscal year • Actuarial cost method used for valuation is Entry Age Normal Cost method which determines Normal Cost as a level percent of payroll • Actuarial Accrued Liability (AAL) is portion of PVB allocated to prior service with the employer • Unfunded AAL (UAAL) is AAL less Plan Assets • Assets must be in segregated and restricted trust to be considered Plan Assets for GASB 45 ■ PayGo Cost • Cash subsidy is employer pay-as-you-go benefit payments for retirees e Implied subsidy is difference between actual cost of retiree benefits and retiree premiums subsidized by active employee premiums (1__1 May 6, 2014 E-38 DEFINITIONS xr. Present Value of Benefits I'l ,Vill1 .1111t, ABril,fia. r`V%W1ol,i Phil X°, "t .I Al itll P1,111 kz-�'r: Fate" Nerml Gest May 6, 2014 E-39 DEFINITIONS 3 - ■ Annual • GASB 45 contribution is Normal Cost plus amortization of: Required ➢ Initial UAAL and AAL for plan, assumption, and method changes Contribution ➢ Experience gains and losses (difference between actual experience (ARC) and that expected from assumptions) > Contribution gains and losses (difference between ARC and actual contributions) ■ Net OPEB • NOO is accumulated amounts expensed but not funded Obligation • Net OPEB Asset if amounts funded exceed those expensed (NOO) ■ Annual a Expense for current period including: OPEB Cost . ARC (AOC) ➢ Interest on NOO Adjustment of NOO • Adjustment of NOO prevents double counting of expense since ARCs include amortization of prior contribution gains and losses previously expensed May 6, 2014 E-40 " INSTRUCTIONS: FROM: DEPARTMENT DATE CITY OF SAN RAFAEL ROUTING SLIP / APPROVAL FORM USE THIS FORM WITH EACH SUBMITTAL OF A CONTRACT, AGREEMENT, ORDINANCE OR RESOLUTION BEFORE APPROVAL BY COUNCIL / AGENCY. Mark Moses Finance SRRA / SRCC AGENDA ITEM NO. 2 DATE OF MEETING: June 2, 2014 TITLE OF DOCUMENT: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL ACCEPTING THE RETIREE HEALTHCARE PLAN JUNE 30, 2013 ACTUARIAL VALUATION REPORT 4 Department Head (signature) *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** (LOWER HALF OF FORM FOR APPROVALS ONLY) APPROVED AS COUNCIL / AGENCY AGENDA ITEM. City Manager (signature) NOT APPROVED REMARKS: APPROVED AS TO FORM: 21 �pd City Attorney (si`gna, re)