milwaukee public schools h l i p v j 1, 2015 · 2017-05-03 · milwaukee public schools...

M I L W A U K E E P U B L I C S C H O O L S

R E T I R E E H E A L T H C A R E A N D L I F E I N S U R A N C E P R O G R A M S

A C T U A R I A L V A L U A T I O N A S O F J U L Y 1 , 2 0 1 5

November 22, 2016

Ms. Christiane T. Standlee, J.D.

Senior Director of Benefits & Compensation Services

Office of Human Capital

Milwaukee Public Schools

Administration Building

5225 West Vliet Street

P.O. Box 2181

Milwaukee, WI 53201-2181

Dear Ms. Standlee:

We have performed an actuarial valuation as of July 1, 2015, of the Retiree Healthcare and Life

Insurance Programs sponsored by the Milwaukee Public Schools (MPS). The actuarial valuation was

performed in order to:

Measure the actuarial liability as of July 1, 2015; and

Develop retiree healthcare accounting expense information for fiscal years 2016 and 2017 as

defined under the GASB Statement Nos. 43 and 45.

The actuarial valuation was based on the following:

Census data as of July 1, 2015, and premium information as provided by Milwaukee Public

Schools Staff, and claims, expenses, and enrollment data for the period from August 1, 2013,

to July 1, 2015, as disclosed in the plan’s most recent premium rating reports prepared by the

healthcare actuary and provided by Milwaukee Public Schools Staff;

IRC Section 115 assets as provided by MPS staff;

Actual employer contributions for fiscal year 2016 as provided by MPS staff;

Plan provisions and funding policy in effect as of July 1, 2015, as provided by the Milwaukee

Public Schools and summarized in Section F;

Our understanding of the substantive plan in effect as currently being administered; and

Actuarial assumptions and methods shown in Section G as used for the actuarial valuations of

the Milwaukee Public Schools Supplemental Pension Plans for Teachers and Administrators,

and the City of Milwaukee Employees’ Retirement System (ERS) for other labor units.

Ms. Christiane Standlee


Page 2

The actuarial valuation was based upon information furnished by Milwaukee Public Schools

concerning benefits provided by the Retiree Healthcare and Life Insurance Programs, financial

transactions, plan provisions and active members, terminated members, retirees and beneficiaries. We

checked for internal and year-to-year consistency, but did not audit the data. We are not responsible

for the accuracy or completeness of the information provided by Milwaukee Public Schools.

Future actuarial measurements may differ significantly from the current measurements presented in

this report due to such factors as the following: plan experience differing from that anticipated by the

economic or demographic assumptions; changes in economic or demographic assumptions; increases

or decreases expected as part of the natural operation of the methodology used for these

measurements (such as the end of an amortization period or additional cost or contribution

requirements based on the plan’s funded status); and changes in plan provisions or applicable law.

To the best of our knowledge the information contained in this report is accurate and fairly presents

the actuarial position of the Retiree Healthcare and Life Insurance Programs sponsored by the

Milwaukee Public Schools as of the actuarial valuation date. All calculations have been made in

conformity with generally accepted actuarial principles and practices, with the Actuarial Standards of

Practice issued by the Actuarial Standards Board, and with our understanding of GASB Statements

Nos. 43 (Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans) and 45

(Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than

Pension).

This report should not be relied on for any purpose other than the purpose stated.

Alex Rivera and Lance J. Weiss are Members of the American Academy of Actuaries and meet the

Qualification Standards of the American Academy of Actuaries to render the actuarial opinion herein.

The signing actuaries are independent of the plan sponsor.

We will be pleased to review this report with you at your convenience.

Respectfully submitted,

Alex Rivera, FSA, EA, MAAA, FCA Lance J. Weiss, EA, MAAA, FCA

Senior Consultant Senior Consultant

AR: lw

Enclosures

L:\c2660_MilwaukeeSchools\2016\OPEB\Valuation_FYE2015\Reports\c2660_Val2015OPEB_450_Final.docx

Milwaukee Public Schools OPEB Valuation -i-

TABLE OF CONTENTS

Section Items Pages

Transmittal Letter

A Executive Summary 1-2

B Actuarial Valuation Results at 4.55% Discount and 4.5% Trend 3-7

C

Asset Reconciliation

8

D

GASB Accounting

9-11

E Sensitivity Projections 12-15

F Plan Provisions 16-32

G Actuarial Methods and Assumptions 33-40

H Participant Data 41-43

SECTION A

EX EC U TIV E S U MMA RY

EXECUTIVE SUMMARY (CONTINUED)

Milwaukee Public Schools OPEB Valuation -1-

This report presents the results of our actuarial valuation as of July 1, 2015, for the Retiree Healthcare

and Life Insurance Programs sponsored by the Milwaukee Public Schools. The actuarial valuation

was based on GASB Statement Nos. 43 and 45. Our actuarial valuation was based on a discount rate

assumption of 4.55 percent and an ultimate healthcare trend assumption of 4.5 percent1, as approved

by Milwaukee Public Schools. Milwaukee Public Schools has established an IRC Section 115 trust to

prefund retiree healthcare benefits. The current funding policy is to prefund 5 percent in addition to

gross (retiree and employer) pay-as-you-go costs. Ongoing costs for the fiscal year are paid from the

Section 115 trust. The discount rate of 4.55 percent reflects the plan sponsors prefunding policy. The

key actuarial valuation results using the Entry Age Normal cost method are summarized below:

Board/

Cabinet/ ASC

Building

Trades

1053 Clerical/

Technical

150 Building

Service

150 Food

Service

1616 Education

Employees

420

Engineers

Actuarial Liability as of July 1, 2015 $117,904.6 $22,880.2 $43,383.0 $14,840.3 $46,243.8 $13,238.3 $31,142.8

Normal Cost for FY 2016 $246.7 $126.6 $220.7 $206.6 $526.6 $117.0 $178.3

GASB No. 45 FY 2016 Expense $7,369.8 $1,432.1 $2,776.4 $964.1 $3,041.0 $890.4 $1,883.4

(% of Payroll) 15.6% 22.3% 28.3% 13.5% 27.9% 17.5% 21.0%

FY 2016 Employer Pay-go Contribution $7,041.6 $1,523.7 $2,531.1 $488.4 $1,926.4 $721.1 $1,822.4

(% of Payroll) 14.9% 23.7% 25.8% 6.9% 17.7% 14.2% 20.3%

Payroll $47,176.9 $6,423.5 $9,818.6 $7,130.0 $10,890.6 $5,092.7 $8,985.0

Number of Actives Members 526 91 286 255 548 106 194

Number of Retirees and Surviving Spouses 844 185 341 78 318 104 192

Educational

Assistants

Sub

Teachers Teachers PAMPS Others Total

Actuarial Liability as of July 1, 2015 $75,031.6 $10,695.5 $608,240.5 $11,081.1 $2,807.9 $997,489.6

Normal Cost for FY 2016 $944.4 $0.0 $1,883.4 $64.8 $12.9 $4,527.9

GASB No. 45 FY 2016 Expense $4,796.6 $686.4 $37,559.9 $663.3 $224.2 $62,287.6

(% of Payroll) 21.6% NA 15.0% 9.0% 46.6% 16.5%

FY 2016 Employer Pay-go Contribution $2,912.7 $726.8 $32,684.0 $518.2 $176.0 $53,072.4

(% of Payroll) 13.1% NA 13.0% 7.0% 36.6% 14.1%

Payroll $22,242.0 $0.0 $250,750.1 $7,399.4 $480.9 $376,389.8

Number of Active Members 1,072 0 3,997 97 12 7,184

Number of Retirees and Surviving Spouses 408 91 4,332 66 19 6,978

Retiree Healthcare and Life Insurance Programs

4.55% Discount Rate and 4.50% Ultimate Trend

$ in Thousands

The details of the preceding actuarial valuation results by labor unit are included in Section B of the

report.

Our calculations are based on adoption of GASB Statement No. 45 requirements at July 1, 2007, and

an opening transition liability of zero at that date. The Net OPEB Obligation or balance sheet liability

represents the cumulative differences between Annual OPEB Costs and actual employer

contributions.

EXECUTIVE SUMMARY (CONTINUED)


Plan Experience

The actuarial liabilities decreased from $1,153.0 million as of July 1, 2013, to $997.5 million as of July

1, 2015. If there were no changes and the plan’s actuarial assumptions had been exactly realized during

the two-year period, the actuarial liabilities would have increased to $1,154.0 million as of July 1, 2015.

The key factors contributing to the unanticipated decrease in actuarial liabilities of $156.5 million

include:

Healthcare claims experience and healthcare-related assumption changes resulted in an

estimated (decrease)/increase in actuarial liabilities of $(159.5), million;

Changes in demographic assumptions resulted in no estimated change in actuarial liabilities;

and

Demographic and other experience resulted in a (decrease)/increase in the actuarial liabilities

of approximately $3.0 million.

($ in Millions)

Actuarial Liability as of July 1, 2013 a

$1,153.0

Expected Liability as of July 1, 2015 $1,154.0

Increase/(Decrease) Due To:

Healthcare Experience and Assumption Changes ($159.5)

Changes in Demographic Assumptions 0.0

Demographic Experience 3.0

Actuarial Liability as of July 1, 2015 $997.5

a Includes estimated cost impact of Medicare Advantage program as provided in November 4, 2014,

cost impact letter.

SECTION B

A C TU A R IA L VA LU ATIO N R ES U LTS AT 4 .55 %

D IS C O U N T RATE A N D 4 .5% TR EN D R ATE

VALUATION RESULTS AT 4.55% DISCOUNT RATE AND 4.5% TREND RATE


The following tables show the results of our actuarial valuation assuming a discount rate of 4.55

percent, salary increases comprised of a wage inflation component of 3.0 percent for general

employees and 2.8 percent for other employees, and seniority and merit components and an ultimate

healthcare trend rate of 4.5 percent1. We believe these assumptions are consistent with the

requirements of GASB Statement Nos. 43 and 45. According to paragraph 34(c) of GASB Statement

No. 43 and paragraph 13(c) of GASB Statement No. 45, plans should use a discount rate consistent

with the return on assets backing retiree healthcare benefits, which for pay-as-you-go plans will

usually be the return earned by the employer’s general assets. Milwaukee Public Schools has

established an IRC Section 115 trust to prefund retiree healthcare benefits. The current funding

policy is to prefund 5 percent in addition to gross (retiree and employer) pay-as-you-go costs; that is,

employer contributions equal claims less member contributions for the current retiree group plus 5

percent of actual claims. Milwaukee Public Schools has prefunded an amount in excess of 5 percent

of actual claims for fiscal years 2015 and 2016. Ongoing costs for the fiscal year are paid from the

Section 115 trust.

The following tables are included in this section:

GASB Actuarial Valuation Results as of July 1, 2015, by Labor Unit; and

Projected GASB expense for fiscal year end 2016 by Labor Unit

1

Excess trend rate of 0.38% over the base healthcare trend rate beginning in 2026 for the EPO and PPO Plans applied

only to pre-Medicare per capita claim cost to account for the Excise Tax under Health Care Reform Act.


Milwaukee Public Schools Discount Rate 4.55%

Retiree Healthcare and Life Insurance Programs Salary Scale 1

3.00%

GASB 45 Actuarial Valuation as of July 1, 2015 Ultimate Trend 2

4.50%

Entry Age Normal Cost Method Wage Inflation 3.00%

Board/ Cabinet/

ASC Building Trades

1053 Clerical/

Technical 150 Building Service 150 Food Service

1616 Education

Employees 420 Engineers

Educational

Assistants Sub Teachers Teachers PAMPS Others 3

Total

Retiree Healthcare Program

I) Actuarial Liability

A) Health Insurance

i) Active Employees 4

20,204,304$ 3,724,344$ 10,499,147$ 8,301,214$ 20,044,239$ 3,633,710$ 7,820,272$ 34,929,544$ -$ 141,302,985$ 3,124,437$ 402,513$ 253,986,709$

ii) Retired and Disabled Participants 5

83,597,562 17,957,473 31,195,889 6,309,382 25,684,207 8,965,116 22,065,011 38,134,412 10,308,236 431,908,278 7,274,086 2,302,789 685,702,441

iii) Total 103,801,866$ 21,681,817$ 41,695,036$ 14,610,596$ 45,728,446$ 12,598,826$ 29,885,283$ 73,063,956$ 10,308,236$ 573,211,263$ 10,398,523$ 2,705,302$ 939,689,150$

B) Life Insurance

i) Active Employees 1,445,906$ 330,762$ 463,483$ 16,728$ 15,239$ 220,531$ 418,389$ 1,035,870$ -$ 9,262,926$ 315,459$ 24,933$ 13,550,226$

ii) Retired and Disabled Participants 12,656,789 867,661 1,224,461 212,974 500,154 418,937 839,146 931,780 387,246 25,766,327 367,094 77,683 44,250,252

iii) Total 14,102,695$ 1,198,423$ 1,687,944$ 229,702$ 515,393$ 639,468$ 1,257,535$ 1,967,650$ 387,246$ 35,029,253$ 682,553$ 102,616$ 57,800,478$

B) Total Liabilities 117,904,561$ 22,880,240$ 43,382,980$ 14,840,298$ 46,243,839$ 13,238,294$ 31,142,818$ 75,031,606$ 10,695,482$ 608,240,516$ 11,081,076$ 2,807,918$ 997,489,628$

II) Assets 6

15,228,731 2,955,246 5,603,411 1,916,795 5,972,924 1,709,878 4,022,454 9,691,196 1,381,445 78,561,266 1,431,249 362,675 128,837,270

III) Unfunded Actuarial Liability (UAL) 102,675,830 19,924,994 37,779,569 12,923,503 40,270,915 11,528,416 27,120,364 65,340,410 9,314,037 529,679,250 9,649,827 2,445,243 868,652,358

IV) Net OPEB Obligation (boy) 7

59,923,679 11,628,627 22,048,916 7,542,416 23,502,916 6,728,215 15,827,990 38,133,977 5,435,859 309,131,463 5,631,833 1,427,093 506,962,986

V) Normal Cost

A) Health Insurance 223,882$ 117,957$ 212,487$ 206,522$ 526,467$ 111,570$ 170,843$ 917,614$ -$ 1,736,792$ 58,906$ 12,174$ 4,295,214$

B) Life Insurance 22,802 8,609 8,236 47 125 5,437 7,453 26,780 - 146,625 5,906 689 232,709

C) Total 246,684$ 126,566$ 220,723$ 206,569$ 526,592$ 117,007$ 178,296$ 944,394$ -$ 1,883,417$ 64,812$ 12,863$ 4,527,923$

D) Percentage of Payroll 0.52% 1.97% 2.25% 2.90% 4.84% 2.30% 1.98% 4.25% NA 0.75% 0.88% 2.68% 1.20%

VI) Annual Required Contribution (ARC)

A) Normal Cost 246,684$ 126,566$ 220,723$ 206,569$ 526,592$ 117,007$ 178,296$ 944,394$ -$ 1,883,417$ 64,812$ 12,863$ 4,527,923$

B) Amortization of UAL 10,559,012 1,864,727 3,728,548 995,097 3,470,492 1,122,275 2,365,534 5,084,455 1,054,410 51,902,095 822,008 351,652 83,320,305

C) Total 10,805,696$ 1,991,293$ 3,949,271$ 1,201,666$ 3,997,084$ 1,239,282$ 2,543,830$ 6,028,849$ 1,054,410$ 53,785,512$ 886,820$ 364,515$ 87,848,228$

VII) Annual OPEB Cost

A) ARC 10,805,696$ 1,991,293$ 3,949,271$ 1,201,666$ 3,997,084$ 1,239,282$ 2,543,830$ 6,028,849$ 1,054,410$ 53,785,512$ 886,820$ 364,515$ 87,848,228$

B) Interest on Net OPEB Obligation 2,726,527 529,103 1,003,226 343,180 1,069,383 306,134 720,174 1,735,096 247,332 14,065,482 256,248 64,933 23,066,818

C) Adjustment to ARC (6,162,452) (1,088,292) (2,176,056) (580,759) (2,025,449) (654,982) (1,380,573) (2,967,390) (615,375) (30,291,106) (479,740) (205,231) (48,627,406)

D) Total 7,369,771$ 1,432,104$ 2,776,441$ 964,087$ 3,041,018$ 890,434$ 1,883,431$ 4,796,555$ 686,367$ 37,559,888$ 663,328$ 224,217$ 62,287,640$

E) Percentage of Payroll 15.6% 22.3% 28.3% 13.5% 27.9% 17.5% 21.0% 21.6% NA 15.0% 9.0% 46.6% 16.5%

VIII) Expected Employer Contributions 8

A) Expected Healthcare Benefit Payment 5,695,497$ 1,363,186$ 2,278,649$ 442,531$ 1,758,295$ 646,036$ 1,648,382$ 2,657,643$ 656,076$ 29,118,865$ 461,698$ 158,046$ 46,884,904$

B) Expected Life Insurance Benefit Payment 854,772 54,194 75,877 11,821 33,641 24,776 46,843 51,811 20,014 1,284,572 20,317 5,662 2,484,300

C) Additional Contributions 1,487,195 321,807 534,579 103,158 406,847 152,303 384,889 615,163 153,502 6,902,896 109,438 37,169 11,208,946

D) Total 8,037,464$ 1,739,187$ 2,889,105$ 557,510$ 2,198,783$ 823,115$ 2,080,114$ 3,324,617$ 829,592$ 37,306,333$ 591,453$ 200,877$ 60,578,150$


IX) Actual Employer Contributions 9

7,041,611$ 1,523,699$ 2,531,141$ 488,434$ 1,926,351$ 721,130$ 1,822,385$ 2,912,693$ 726,804$ 32,684,029$ 518,171$ 175,988$ 53,072,439$

X) Expected Retiree Contributions 10

533,820$ 213,380$ 175,210$ 63,533$ 25,373$ 113,778$ 151,483$ 145,270$ (22,993)$ 2,266,406$ 11,513$ (1,226)$ 3,675,547$

X) Payroll 47,176,926$ 6,423,478$ 9,818,599$ 7,130,015$ 10,890,605$ 5,092,744$ 8,985,043$ 22,241,966$ -$ 250,750,131$ 7,399,426$ 480,852$ 376,389,784$

XI) Covered Member Counts

A) Active Employees 526 91 286 255 548 106 194 1,072 -$ 3,997 97 12 7,184

B) Retired and Disabled Participants 5 844 185 341 78 318 104 192 408 91 4,332 66 19 6,978

C) Total 1,370 276 627 333 866 210 386 1,480 91 8,329 163 31 14,162

Amortization: 15-year closed, level dollar

for unfunded retiree liabilities as of July 1,

2011, 25-year open, level percentage of

payroll for remaining liabilities.


1 Plus an additional age or service-based component.

2 Excess trend rate of 0.38% over the base healthcare trend rate beginning in 2026 for the EPO and PPO Plans applied only to pre-Medicare per capita

claim cost to account for the Excise Tax under Health Care Reform Act. 3 Includes participants that have life insurance only.

4 Active employees eligible for future retiree healthcare.

5 Includes Surviving Spouses.

6 Assets allocated to employee group based on total liabilities.

7 Allocated based on unfunded actuarial liability as of June 30, 2015.

8 Expected employer contributions to finance current retiree healthcare and life insurance claims assuming pay-as-you-go funding.

9 Actual employer contributions allocated to employee group based on total expected employer contributions.

10 Expected retiree contributions are offset by projected Part B premium reimbursements.




3.00%

GASB 45 Projected Actuarial Valuation Results as of July 1, 2016, Based on Actuarial Valuation at July 1, 2015 Ultimate Trend 2

4.50%


Board/ Cabinet/

ASC Building Trades

1053 Clerical/

Technical 150 Building Service 150 Food Service

1616 Education

Employees 420 Engineers

Educational

Assistants Sub Teachers Teachers PAMPS Others 3

Total

Retiree Healthcare Program

I) Actuarial Liability

A) Health Insurance

i) Active Employees 4

21,352,518$ 4,014,412$ 11,194,125$ 8,890,087$ 21,494,563$ 3,913,124$ 8,350,781$ 37,457,096$ -$ 149,508,135$ 3,326,830$ 433,275$ 269,934,947$

ii) Retired and Disabled Participants 5

81,577,623 17,380,685 30,285,390 6,143,972 25,054,987 8,712,459 21,383,503 37,152,096 10,106,425 421,786,154 7,132,972 2,245,964 668,962,231

iii) Total 102,930,141$ 21,395,097$ 41,479,516$ 15,034,060$ 46,549,550$ 12,625,583$ 29,734,284$ 74,609,192$ 10,106,425$ 571,294,290$ 10,459,802$ 2,679,240$ 938,897,178$

B) Life Insurance

i) Active Employees 1,535,010$ 354,614$ 492,993$ 17,537$ 16,060$ 236,124$ 445,046$ 1,110,385$ -$ 9,834,313$ 335,851$ 26,772$ 14,404,706$

ii) Retired and Disabled Participants 12,358,671 851,726 1,202,589 210,578 488,514 412,665 829,430 921,199 384,401 25,625,224 363,022 75,428 43,723,449

iii) Total 13,893,681$ 1,206,341$ 1,695,582$ 228,115$ 504,574$ 648,790$ 1,274,477$ 2,031,584$ 384,401$ 35,459,537$ 698,874$ 102,200$ 58,128,155$

C) Total Liabilities 116,823,822$ 22,601,437$ 43,175,098$ 15,262,175$ 47,054,124$ 13,274,373$ 31,008,761$ 76,640,775$ 10,490,826$ 606,753,826$ 11,158,676$ 2,781,440$ 997,025,333$

II) Assets 14,928,333 2,888,125 5,517,130 1,950,277 6,012,812 1,696,266 3,962,455 9,793,542 1,340,570 77,534,040 1,425,911 355,426 127,404,888

III) Unfunded Actuarial Liability (UAL) 101,895,489 19,713,312 37,657,968 13,311,898 41,041,312 11,578,107 27,046,306 66,847,233 9,150,256 529,219,786 9,732,765 2,426,014 869,620,446

IV) Net OPEB Obligation (boy) 6

60,251,838 11,537,032 22,294,215 8,018,069 24,617,583 6,897,519 15,889,036 40,017,838 5,395,422 314,007,321 5,776,990 1,475,322 516,178,187

V) Normal Cost

A) Health Insurance 210,482$ 113,601$ 203,151$ 199,823$ 508,489$ 108,055$ 162,336$ 882,031$ -$ 1,713,618$ 56,850$ 11,691$ 4,170,127$

B) Life Insurance 21,007 8,165 7,790 39 104 5,252 7,095 25,420 - 142,045 5,619 655 223,191

C) Total 231,489$ 121,766$ 210,941$ 199,862$ 508,593$ 113,307$ 169,431$ 907,451$ -$ 1,855,663$ 62,469$ 12,346$ 4,393,318$

D) Percentage of Payroll 0.51% 1.99% 2.25% 2.94% 4.90% 2.33% 1.98% 4.28% NA 0.78% 0.89% 2.69% 1.22%

VI) Annual Required Contribution (ARC)

A) Normal Cost 231,489$ 121,766$ 210,941$ 199,862$ 508,593$ 113,307$ 169,431$ 907,451$ -$ 1,855,663$ 62,469$ 12,346$ 4,393,318$

B) Amortization of UAL 10,821,767 1,903,108 3,824,825 1,033,672 3,589,304 1,154,965 2,418,839 5,260,567 1,078,925 53,291,460 845,133 363,174 85,585,739

C) Total 11,053,256$ 2,024,874$ 4,035,766$ 1,233,534$ 4,097,897$ 1,268,272$ 2,588,270$ 6,168,018$ 1,078,925$ 55,147,123$ 907,602$ 375,520$ 89,979,057$

VII) Annual OPEB Cost

A) ARC 11,053,256$ 2,024,874$ 4,035,766$ 1,233,534$ 4,097,897$ 1,268,272$ 2,588,270$ 6,168,018$ 1,078,925$ 55,147,123$ 907,602$ 375,520$ 89,979,057$

B) Interest on Net OPEB Obligation 2,741,459 524,935 1,014,387 364,822 1,120,100 313,837 722,951 1,820,812 245,492 14,287,333 262,853 67,127 23,486,108

C) Adjustment to ARC (6,400,438) (1,114,023) (2,264,869) (622,743) (2,153,429) (688,209) (1,421,322) (3,149,915) (636,326) (31,626,963) (501,749) (220,905) (50,800,889)

D) Total 7,394,277$ 1,435,786$ 2,785,284$ 975,613$ 3,064,568$ 893,900$ 1,889,899$ 4,838,915$ 688,091$ 37,807,493$ 668,706$ 221,742$ 62,664,274$


VIII) Expected Employer Contributions 7

A) Expected Healthcare Benefit Payment 5,695,422$ 1,357,582$ 2,298,361$ 517,043$ 1,935,571$ 664,430$ 1,664,807$ 2,868,549$ 659,230$ 29,493,540$ 499,829$ 162,752$ 47,817,116$

B) Expected Life Insurance Benefit Payment 836,246 55,907 80,824 12,266 34,397 26,334 50,099 57,713 20,394 1,384,080 21,862 5,719 2,585,841

C) Additional Contributions 1,166,505 278,053 470,738 105,898 396,433 136,085 340,977 587,521 135,020 6,040,706 102,372 33,334 9,793,641

D) Total 7,698,173$ 1,691,542$ 2,849,923$ 635,207$ 2,366,401$ 826,849$ 2,055,883$ 3,513,783$ 814,644$ 36,918,326$ 624,063$ 201,805$ 60,196,598$


X) Payroll 44,963,180$ 6,122,060$ 9,357,868$ 6,795,444$ 10,379,571$ 4,853,770$ 8,563,426$ 21,198,277$ -$ 238,983,848$ 7,052,213$ 458,288$ 358,727,944$

Amortization: 15-year closed, level dollar

for unfunded retiree liabilities as of July 1,

2011, 25-year open, level percentage of

payroll for remaining liabilities.



2 Excess trend rate of 0.38% over the base healthcare trend rate beginning in 2020 for the PPO Plan and 2028 for the EPO plan applied only to pre-

Medicare per capita claim cost to account for the Excise Tax under Health Care Reform Act. 3 Includes approximately 450 participants that have life insurance only.

4 Active employees eligible for future retiree healthcare.

5 Includes Surviving Spouses.

6 Allocated based on expected Net OPEB Obligation as of June 30, 2013, from the interim valuation as of July 1, 2012.

7 Expected employer contributions to finance current retiree healthcare and life insurance claims assuming pay-as-you-go funding.

8 Expected retiree contributions are offset by projected Part B premium reimbursements.

SECTION C

A S S ET R EC ON C ILIATIO N

ASSET RECONCILIATION




GASB 45 Actuarial Valuation Results as of July 1, 2015

Assets Available for Benefits For Year Ending

June 30, 2015 June 30, 2016

93,814,107$ 128,837,270$

Revenues

Employer Contributions

- Pay-as-you-go Contributions 70,961,058$ 41,863,493$

- ERRP Funds -

- Medicare Part D Funds 50,787 -

- EWGP Revenue -

- Medicare Part D Receivables -

- Pre-funding Contributions 27,922,337 11,208,946

Total 98,934,182$ 53,072,439$

Employee Contributions

- Health Care 8,036,898$ 2,421,380$

- Life Insurance 258,235 233,066

Total 8,295,133$ 2,654,446$

Net Investment Income 511,517$ 1,421,787$

Total Contributions 107,740,832$ 57,148,672$

Deductions

Claims and Expenses

- Health Care 71,953,409$ 59,899,795$

- Life Insurance 764,260 (1,318,741)

Total 72,717,669$ 58,581,054$

Total Deductions 72,717,669$ 58,581,054$

Net Change 35,023,163$ (1,432,382)$

128,837,270$ 127,404,888$

Net Assets Held in Trust for Post-Employment

Benefits, Beginning of Year

Net Assets Held in Trust for Post-Employment

Benefits, End of Year

For Year Ending

SECTION D

G A S B A CC O UN TIN G

This information is presented in draft form for review by the Employer’s auditor. Please let us

know if there are any changes so that we may maintain consistency with the Employer’s

financial statements.

GASB 45 ACTUARIAL VALUATION RESULTS AS OF JULY 1, 2015


Development of the Net OPEB Obligation for the Fiscal Year Ending June 30, 2016

Annual Required Contribution 87,848,228$

Interest on Net OPEB Obligation 23,066,818

Adjustment to Annual Required Contribution1

(48,627,406)

Annual OPEB Cost 62,287,640$

Medicare Part D Contributions -

EWGP Revenue -

Medicare Part D Receivables -

MPS Contributions 53,072,439

ERRP Contributions -

53,072,439$

Net OPEB Obligation, beginning of year 506,962,986$

Net OPEB Obligation, end of year 516,178,187$

1The Adjustment to the Annual Required Contribution equals the Net OPEB Obligation at the beginning of the fiscal year

divided by the factor used to amortize the unfunded actuarial liability at the beginning of the fiscal year. The adjustment

is deducted from the Annual Required Contribution if the Net OPEB Obligation is positive at the beginning of the fiscal

year.

GASB 45 ACTUARIAL VALUATION RESULTS AS OF JULY 1, 2015 (CONTINUED)





Schedule of Funding Progress:

Actuarial

Valuation GASB Value of Assets Actuarial Accrued Liability Unfunded AAL (UAAL) Funded Ratio Covered Payroll

Date (a) (b) (b – a) (a / b) (c)

July 1, 2007 0$ 2,222,673,800$ 2,222,673,800$ 0.0 % 501,134,000$ 443.5%

July 1, 2009 0 2,398,129,645 2,398,129,645 0.0 % 507,339,126 472.7%

July 1, 2011 9,368,067 1,393,486,064 1,384,117,997 0.7 % 488,996,859 283.1%

July 1, 2013 60,258,101 1,403,017,033 1,342,488,932 4.3 % 431,242,385 311.3%

July 1, 2015 128,837,270 997,489,628 868,652,358 12.9 % 376,389,784 230.8%

Net OPEB Obligation:

Year Ended

June 30, 2008 175,418,900$ 44,383,435$ 25.3% 131,035,465$ 175,418,900$ 25.3%

June 30, 2009 190,432,565 59,521,830 31.3% 261,946,200 189,880,613 31.3%

June 30, 2010 187,867,651 60,663,201 32.3% 389,150,650 186,702,017 32.5%

June 30, 2011 196,701,424 65,251,881 33.2% 520,600,193 194,969,742 33.5%

June 30, 2012 95,332,485 92,537,745 97.1% 523,394,933 109,216,666 84.7%

June 30, 2013 95,693,459 79,884,695 83.5% 539,203,697 110,503,788 72.3%

June 30, 2014 93,541,008 102,098,171 109.1% 530,646,534 109,858,625 92.9%

June 30, 2015 75,250,634 98,934,182 131.5% 506,962,986 96,317,356 102.7%

June 30, 2016 62,287,640 53,072,439 85.2% 516,178,187 87,848,228 60.4%

UAAL as a

Percentage of

[(b – a)/c]

Annual Required

Contribution

(ARC)Annual OPEB Cost (AOC) Employer Contributions % of AOC Contributed

Net OPEB

Obligation

% of

ARC

GASB 45 ACTUARIAL VALUATION RESULTS AS OF JULY 1, 2015

(CONTINUED)





GASB No. 45 Summary of Actuarial Assumptions and Methods

Valuation Date July 1, 2015

Actuarial Cost Method Entry Age Normal

Actuarial Value of Assets Market Value

Amortization Method

Remaining Amortization Period

Actuarial Assumptions

Investment Rate of Return 4.55% per year

Wage Inflation 3.0% per year for general employees

2.8% per year for other employees

Healthcare Trend 8.5% per year graded down to

4.5% 1 per year ultimate trend in

0.5% increments

Medicare Part B:

Actual trend in 2016 and then

4.5% per year as ultimate trend

The GASB 45 financial disclosure information for the fiscal year end 2016 was based on the

following assumptions and methods.

Level Percent Open for active liability,

Level Dollar Closed for unfunded

retiree liability as of July 1, 2011

15 years closed level dollar of unfunded

retiree liability as of July 1, 2011, 25

years open level percent for remaining

unfunded liability

1 Excess trend rate of 0.38% over the base healthcare trend rate beginning in 2026 for the EPO and PPO Plans applied

only to pre-Medicare per capita claim cost to account for the Excise Tax under Health Care Reform Act.

SECTION E

S EN S ITIV ITY P R O J EC TI O NS


SENSITIVITY PROJECTIONS

One of the key objectives of GASB 45 is to accrue an expense, for the value of future retiree

healthcare and life insurance benefits, during the working lifetime of an active employee. This

objective requires a systematic means of spreading the present value of benefits over the person’s

working career. Actuarial cost methods are specifically designed to meet this objective.

It is important to note that GASB 45 does not require that a plan sponsor pre-fund retiree healthcare

benefits during an employee’s working career. GASB 45 only requires accruing an expense for

retiree healthcare benefits and reporting a balance sheet liability representing the cumulative

difference between annual expense and employer contributions. However, sponsors who pre-fund

retiree healthcare benefits may experience a significant reduction in the annual expense and balance

sheet liability.

The table below compares the annual expense (Annual OPEB Cost) and the balance sheet liability

(Net OPEB Obligation) assuming the current funding policy under which benefits are discounted at

4.55 percent and on a fully funded basis under which benefits are discounted at 7.5 percent.

The current funding policy is to prefund 5 percent in addition to gross (retiree and employer) pay-as-

you-go costs; that is, employer contributions equal claims less member contributions for the current

retiree group plus 5 percent of actual claims. Our projections also assume that healthcare trend for

future retirees will be fresh-started beginning in the 2017 valuation.

The key results are outlined below ($ in millions):

Entry Age Normal

FYE 2016 2025 2016 2025

Annual OPEB Cost $ 62.4 $ 82.8 $ 50.2 $ 65.6

Annual OPEB Cost (% Pay) 16.6% 31.9% 13.3% 25.3%

Employer Contributions 1

$ 60.6 $ 75.0 $ 72.3 $ 93.1

Net OPEB Obligation $ 516.2 $ 566.2 $ 496.6 $ 296.9

Funded Ratio 12.92% 21.70% 17.88% 48.22%

Current Funding

4.55% discount

Full Funding

7.50% discount

MPS made significant changes to the benefit provisions which reduced both the annual expenses and

growth of the liability.

Based on the EAN cost method, the annual expense is projected to increase from $62.4 million in

FY2016 to $82.8 million in FY2025 under the current funding policy (which is mainly pay-as-you-go

funding) and from $50.2 million to $65.6 million under the full funding policy. The annual employer

contribution is projected to increase from $60.6 million to $75.0 million under the current funding

policy and from $72.3 million to $93.1 million under the full funding policy.

1 MPS pre-funded an amount in excess of the funding policy for FY2016. The FY2016 employer contribution shown in the

table is based on the funding policy for comparison purposes with future years. In FY2016, MPS prefunded

approximately 20% of expected employer pay-as-you-go health care cost. For purposes of the projection we have assumed

this relationship will continue in the future. A full funding policy would be to contribute 100 percent of the Annual

Required Contribution.


SENSITIVITY PROJECTIONS (CONTINUED)

KEY OBSERVATIONS

Pre-funding benefits has several key advantages including the use of a higher discount rate which

produces lower expense, and more stable costs. However, pre-funding would require additional near-

term financing sources.


SENSITIVITY PROJECTIONS, CURRENT (MAINLY PAY-AS-YOU-GO) FUNDING



3.00%


4.50%


Ten-year GASB Projection for All Labor Units

( $ in Millions)

Valuation Date 07/01/15 07/01/16 07/01/17 07/01/18 07/01/19 07/01/20 07/01/21 07/01/22 07/01/23 07/01/24


A) Actuarial Liability 997.5$ 997.1$ 1,033.7$ 1,071.2$ 1,110.1$ 1,150.2$ 1,191.5$ 1,234.1$ 1,278.1$ 1,324.9$

B) Assets 3 128.8 127.4 143.2 160.2 178.2 197.5 218.0 239.8 263.0 287.5

C) Unfunded Actuarial Liability (UAL) 868.7 869.7 890.4 911.1 931.8 952.7 973.6 994.3 1,015.0 1,037.5

D) Funded Ratio 12.92% 12.78% 13.86% 14.95% 16.05% 17.17% 18.29% 19.43% 20.58% 21.70%

E) Net OPEB Obligation (eoy) 516.2 518.7 521.2 524.1 527.2 530.6 534.0 537.7 543.3 566.2

F) Annual Required Contribution (ARC)

i) Normal Cost 4.5$ 4.4$ 4.4$ 4.3$ 4.1$ 3.9$ 3.7$ 3.5$ 3.3$ 3.1$

ii) Amortization of UAL 83.3 85.6 88.9 92.3 95.8 99.5 103.2 107.1 111.1 115.4

iii) Total 87.9$ 90.0$ 93.3$ 96.6$ 99.9$ 103.4$ 106.9$ 110.6$ 114.4$ 118.5$

G) Annual OPEB Cost

i) ARC 87.9$ 90.0$ 93.3$ 96.6$ 99.9$ 103.4$ 106.9$ 110.6$ 114.4$ 118.5$

ii) Interest on Net OPEB Obligation 23.1 23.5 23.6 23.7 23.8 24.0 24.1 24.3 24.5 24.7

iii) Adjustment to ARC (48.6) (50.8) (51.8) (52.8) (53.9) (55.0) (56.3) (57.5) (58.9) (60.4)

iv) Total 62.4$ 62.7$ 65.1$ 67.5$ 69.8$ 72.4$ 74.7$ 77.4$ 80.0$ 82.8$

v) Percentage of Payroll 16.6% 17.5% 18.7% 19.8% 21.2% 22.8% 24.6% 26.7% 29.1% 31.9%

H) Expected Contributions 4

i) Employer Health Care Benefit Payments 46.9$ 47.8$ 49.8$ 51.4$ 53.1$ 55.0$ 56.9$ 58.9$ 59.4$ 59.9$

ii) Employer Life Insurance Benefit Payments 2.5 2.6 2.6 2.7 2.7 2.7 2.7 2.8 2.8 2.8

iii) Employer Additional Contributions 11.2 9.8 10.2 10.5 10.9 11.3 11.7 12.1 12.2 12.3

iv) Total Employer Contributions 60.6$ 60.2$ 62.6$ 64.6$ 66.7$ 69.0$ 71.3$ 73.7$ 74.4$ 75.0$


I) Payroll 376.4$ 358.7$ 347.3$ 340.4$ 328.9$ 317.1$ 303.4$ 289.6$ 275.0$ 259.3$

J) Active Member Counts 7,184 6,627 6,180 5,791 5,401 5,025 4,653 4,295 3,951 3,614

K) Retired Member Counts 6,978 7,158 7,231 7,228 7,226 7,208 7,167 7,160 7,154 7,144

(includes survivors and disabled retirees)

L) Ratio of Actives to Retirees 1.03 0.93 0.85 0.80 0.75 0.70 0.65 0.60 0.55 0.51


2 Excess trend rate of 0.38% over the base healthcare trend rate beginning in 2020 for the PPO Plan and 2028 for the EPO plan applied only to pre-Medicare per capita claim cost to account for the Excise Tax under Health Care Reform Act.

3 Reflects actual asset value at June 30, 2016.

4 Employer Benefit Payments adjusted for 2 months lag in retirements for future retirees.

Amortization: 15-year closed, level dollar for unfunded retiree liabilities as of July 1, 2011,

25-year open, level percentage of payroll for remaining liabilities.


SENSITIVITY PROJECTIONS, FULL FUNDING



3.00%


4.50%


Ten-year GASB Projection for All Labor Units

( $ in Millions)

Valuation Date 07/01/15 07/01/16 07/01/17 07/01/18 07/01/19 07/01/20 07/01/21 07/01/22 07/01/23 07/01/24


A) Actuarial Liability 720.6$ 725.8$ 758.1$ 791.9$ 827.8$ 865.8$ 906.1$ 948.8$ 994.2$ 1,044.1$

B) Assets 3 128.8 127.4 162.2 199.7 240.4 284.7 332.8 384.8 441.0 503.4

C) Unfunded Actuarial Liability (UAL) 591.8 598.4 595.9 592.2 587.3 581.0 573.3 564.0 553.1 540.7

D) Funded Ratio 17.88% 17.55% 21.39% 25.21% 29.05% 32.89% 36.73% 40.55% 44.36% 48.22%

E) Net OPEB Obligation (eoy) 496.6 473.5 449.5 424.7 399.2 372.9 346.1 318.9 291.4 296.9 `

F) Annual Required Contribution (ARC)

i) Normal Cost 2.2$ 2.1$ 2.0$ 2.0$ 1.9$ 1.8$ 1.7$ 1.6$ 1.5$ 1.4$

ii) Amortization of UAL 70.1 72.7 74.9 77.1 79.4 81.8 84.2 86.7 89.2 91.7

iii) Total 72.3$ 74.8$ 76.9$ 79.1$ 81.3$ 83.6$ 85.9$ 88.3$ 90.7$ 93.1$

G) Annual OPEB Cost

i) ARC 72.3$ 74.8$ 76.9$ 79.1$ 81.3$ 83.6$ 85.9$ 88.3$ 90.7$ 93.1$

ii) Interest on Net OPEB Obligation 38.0 37.2 35.5 33.7 31.9 29.9 28.0 26.0 23.9 21.9

iii) Adjustment to ARC (60.1) (60.3) (59.5) (58.5) (57.4) (56.2) (54.8) (53.2) (51.4) (49.4)

iv) Total 50.2$ 51.7$ 52.9$ 54.3$ 55.8$ 57.3$ 59.1$ 61.1$ 63.2$ 65.6$


H) Expected Contributions 4

i) Employer Health Care Benefit Payments 46.9$ 47.9$ 49.9$ 51.5$ 53.3$ 55.2$ 57.1$ 59.1$ 59.7$ 60.1$

ii) Employer Life Insurance Benefit Payments 2.5 2.6 2.6 2.7 2.7 2.7 2.7 2.8 2.8 2.8

iii) Employer Additional Contributions 11.2 24.3 24.4 24.9 25.3 25.7 26.1 26.4 28.3 30.2

iv) Total Employer Contributions 60.6$ 74.8$ 76.9$ 79.1$ 81.3$ 83.6$ 85.9$ 88.3$ 90.7$ 93.1$


I) Payroll 376.4$ 358.7 347.3 340.4 328.9 317.1 303.4 289.6 275.0 259.3

J) Active Member Counts 7,184 6,627 6,180 5,791 5,401 5,025 4,653 4,295 3,951 3,614

K) Retired Member Counts 6,978 7,158 7,231 7,228 7,226 7,208 7,167 7,160 7,154 7,144

(includes survivors and disabled retirees)

L) Ratio of Actives to Retirees 1.03 0.93 0.85 0.80 0.75 0.70 0.65 0.60 0.55 0.51


2 Excess trend rate of 0.38% over the base healthcare trend rate beginning in 2020 for the PPO Plan and 2028 for the EPO plan applied only to pre-Medicare per capita claim cost to account for the Excise Tax under Health Care Reform Act.

3 Reflects actual asset value at June 30, 2016.

4 Employer Benefit Payments adjusted for 2 months lag in retirements for future retirees.

Amortization: 15-year closed, level dollar for unfunded retiree liabilities as of July 1, 2011,

25-year open, level percentage of payroll for remaining liabilities.

SECTION F

P LA N P R O V IS IO N S

PLAN PROVISIONS


PLAN MEMBERS

Milwaukee Public School (hereinafter referred to as MPS or the Board) employees can qualify to

continue healthcare benefits as a retiree for themselves and their eligible dependents if they satisfy the

eligibility requirements and were enrolled in an MPS health plan as an active subscriber at the time of

retirement. Members hired or rehired on or after July 1, 2013, are not eligible to continue

healthcare benefits as a retiree.

Board members can qualify to continue healthcare benefits for themselves and their eligible

dependents upon leaving the Board provided they are at least age 55 years of age and have served a

minimum of eight full years on the Board. This provision terminated for all Board members on and

after the 2001 Board organizational meeting except for previous Board members who already

qualified for this benefit and Board members who were in office as of January 25, 2000, who met the

eligibility requirements as of September 1, 1999.

Access to the MPS PPO/Indemnity Health Plan was eliminated as a plan option for active employees

in the following units:

Building Trades Effective September 1, 2010

ASC Unit Effective November 1, 2011

MTEA-Substitute Teacher Unit Effective September 1, 2011

Access to the MPS PPO/Indemnity Health Plan was eliminated as an option for retiree health

insurance effective with dates of retirement on or after the dates indicated below for the following

units:

Building Trades Retirement dates on/after September 1, 2010

ASC Unit Retirement dates on/after November 1, 2011

MTEA-Substitute Teacher Unit Retirement dates on/after August 1, 2011

Active health benefits were eliminated for employees in the following units including the eligibility to

retire with retiree health benefits on/after the following effective dates:

Local 150-FS Unit – 775 hourly Effective September 1, 2011

MTEA-Substitute Teachers Unit Effective September 1, 2012

Local 1053 – Part-time clericals Effective February 1, 2013

Part-time employees* Effective July 1, 2012*

Seasonal Laborers (rehire or layoff) Effective July 1, 2012

(*Note: The eligibility provisions for active health benefits for part-time classified employees was

changed to positions regularly scheduled for 30 or more hours per week or positions that are

scheduled at 75% or more of a full-time position effective July 1, 2012 in the following units: Local

150 Building Service Unit, Local 150 Food Service Unit, MTEA-Educational Assistant Unit, Local

1053 Unit, MTEA-School Bookkeeper Unit, Local 950 Unit, Local 1616 Unit and Building Trades.

A group of active classified employees currently working in positions regularly scheduled for 20

hours but less than 30 hours were grandfathered through August 31, 2013.

PLAN PROVISIONS (CONTINUED)


The eligibility provisions for active health benefits for part-time classified and certificated employees

was changed to positions regularly scheduled for 30 hours or more hours per week or positions that

are scheduled at 75% or more of a full-time position effective July 1, 2013 in the following units ASC

Unit, MTEA-Teachers Unit, PAMPS Unit, Local 1053 exempts, ASC exempts, Office of Board

Governance, Office of Accountability and Efficiency and Cabinet-Level Employees.)

ELIGIBLE SERVICE

Eligible Service includes service with Milwaukee Public Schools as an active employee and service

accrued while on leave, paid or unpaid, for represented employees in accordance with applicable

collective bargaining agreement and plan provisions, or, when such bargaining agreement provisions

expire, in accordance with Board policy and plan provisions; for non-represented employees in

accordance with Board policy and plan provisions. With regard to Local 1053, only regular full-time

service with Milwaukee Public Schools is included for Eligible Service. In addition, service while

covered under the City of Milwaukee Employees’ Retirement System (ERS) counts as Eligible

Service for the following groups, for represented employees in accordance with applicable collective

bargaining agreement and plan provisions, or, when such bargaining agreement provisions expire, in

accordance with Board policy and plan provisions; for non-represented employees in accordance with

Board policy and plan provisions:

ASC Unit including exempts;

Building Trades;

Cabinet-Level employees;

Local 950 Unit;

Local 1053 Unit including exempts;

Local 1616 Unit;

Office of Board Governance;

Office of Accountability and Efficiency; and

Superintendent.

NORMAL RETIREMENT

Eligibility conditions:

Age 55 and 15 years of Eligible Service for dates of retirement before July 1, 2013.

Effective with dates of retirement on/after July 1 2013, whichever of the following occurs earlier:

Age 60 and 20 years of Eligible Service; OR

Age 55 or older with 30 or more years of Eligible Service until sunset on July 1, 2015.

Benefit: On a self-paid basis, continuation in an MPS retiree health plan in single or family coverage

status that the employee was enrolled in at time of retirement. Represented employees who satisfy the

eligibility requirements at the time of retirement may receive a Board-paid subsidy in accordance with

applicable collective bargaining agreement and plan provisions, or, when such bargaining agreement

provisions expire, in accordance with Board policy and plan provisions; non-represented employees

who satisfy the eligibility requirements at the time of retirement may receive a Board-paid subsidy in

accordance with Board policy and plan provisions.



DUTY DISABILITY RETIREMENT

Eligibility Conditions: An MPS employee, who retires on duty-incurred disability pension due to a

compensable workers compensation injury or illness, may continue in an MPS health plan. No age or

service requirements apply.

Benefit: Coverage is Board-paid for five years after the workers compensation settlement; five years

after date of duty incurred disability retirement for Local 150 Building Service Helpers; and five years

after the date of the workers compensation incident for Local 950, Local 1616 and Building Trades.

After the five-year period, the retiree may continue on a self-paid basis. This benefit does not apply to

Local 150 Food Service, MTEA Substitute Teachers and Board Members.

NOTE: Eligibility for this duty disability retirement provision ended June 30, 2013.

DISABILITY RETIREMENT (NON-DUTY)

Eligibility Conditions: The following groups are eligible for continuation in an MPS health plan on

a self-paid basis as a retiree if they apply and qualify for a disability pension under the Wisconsin

Retirement System (WRS) or ERS and have 15 years of Eligible Service (20 years of Eligible Service

effective July 1, 2013):



Superintendent;

Office of Board of Governance;

Office of Accountability and Efficiency; and

MTEA-Teachers Unit.

MEDICARE

Retirees and eligible spouses are required to enroll in Medicare Part B upon attainment of age 65 or

when first eligible due to a disability. Plan Members who participated in Social Security while

working are also required to enroll in Medicare Part A. The Board provides retiree healthcare benefits

that are secondary to Medicare for Medicare eligible retirees and dependents. MPS has applied for

and is receiving the Medicare Part D subsidy as available under the Medicare Modernization Act.

Effective January 1, 2014, MPS has implemented a self-funded Employer Group Waiver Plan with a

Commercial Wrap.

Effective January 1, 2015, all Medicare eligible retirees and their Medicare eligible spouses have been

enrolled in the MPS Group Medicare Advantage Plan that includes a group Medicare Part D

pharmacy benefit.

For non-Medicare retirees and active employees, effective January 1, 2015, the District added a High

Deductible Health Plan (HDHP) with a health savings account (HSA). The HSA is available only to

active employees with an employer contribution of $400 for a single HDHP and $800 for a family

HDHP annually. The HDHP was offered to all active employees with a lower premium share ranging

from 2% to 9% based on their annual salary.



EMPLOYER FUNDING POLICY

MPS finances net retiree claims in excess of retiree contributions directly from its general fund. MPS

has also established an IRC Section 115 trust to prefund retiree healthcare and life insurance benefits

and contributes 105 percent of actual retiree healthcare claims and retiree life insurance premiums

beginning in fiscal year 2011. Trust assets are invested in fixed income securities after a percentage

of pay-as-you-go costs for the following month are invested in cash equivalents.

PREMIUM COST SHARING

RETIREES WITH DATES OF RETIREMENT BEFORE JULY 1, 2013

An eligible employee who meets the age and service requirements with 70 percent or more of the

maximum accumulated sick leave at the time of retirement will receive a monthly Board subsidy at

the Board’s share of the PPO/Indemnity Health Plan active single plan or family plan premium rate in

effect as of the employee’s date of retirement in accordance with applicable collective bargaining

agreement and plan provisions for represented employees, or, when such bargaining agreement

provisions expire, in accordance with Board policy and plan provisions; for non-represented

employees in accordance with Board policy and plan provisions. (Note: The Board’s share of the

applicable active plan premium rate is net of the employee required premium contribution in effect as

of the employee’s retirement date for all groups except MTEA-Teachers and PAMPS.)

For dates of retirement on or after July 1, 2013, an eligible employee who meets the age and service

requirements with 90 percent or more of the maximum accumulated sick leave at the time of

retirement will receive a monthly Board subsidy at the Board’s share of the average of the

PPO/Indemnity Health Plan and EPO Health Plan active single plan or family plan premium rate in

effect as of the employee’s date of retirement in accordance with applicable collective bargaining

agreement and plan provisions for represented employees, or, when such bargaining agreement

provisions expire, in accordance with Board policy and plan provisions; for non-represented

employees in accordance with Board policy and plan provisions. (Note: The Board’s share of the

applicable active plan premium rate is net of the employee required premium contribution in effect as

of the employee’s retirement date.)

The Board’s share of the EPO Health Plan is used for the monthly Board subsidy for Building Trades

employees who retire on or after September 1, 2010, and for MTEA Substitute Teachers who retire

during the period of August 1, 2011, through June 30, 2012. (Note: For the MTEA-Substitute

Teachers Unit, active health insurance ended August 31, 2012, and eligibility for retiree health

insurance ended with dates of retirement on or after July 1, 2012.)

10-month employees in the MTEA–Teachers, Educational Assistants, Accountants/Bookkeepers

Units, ASC Unit (represented and exempt), PAMPS Unit, Local 1053 Unit including exempts and

Cabinet Level employees who submit a retirement notice by March 1 and Substitute Teachers who

submit a retirement notice by April 1 will receive the greater of the June 30 or July 1 premium rate as

their monthly Board subsidy in accordance with applicable collective bargaining agreement and plan

provisions for represented employees, or, when such bargaining agreement provisions expire, in

accordance with Board policy and plan provisions; non-represented employees who satisfy the



eligibility requirements at the time of retirement may receive a Board-paid subsidy in accordance with

Board policy and plan provisions. This provision was expanded to all 10-month benefit eligible

employees effective with submission of a retirement notice by March 1, 2013, and each year forward

by March 1st.

Generally, the Board subsidy remains fixed for the lifetime of the retiree while the retiree continues

enrollment in an MPS health plan for retirees with dates of retirement before July 1, 2013. MPS will

reimburse the retiree for the amount of the retiree’s Medicare Part B premium, including the Income

Related Monthly Adjustment, in an amount not to exceed the Board subsidy. Employees who meet

all other eligibility requirements, but do not meet the 70 percent or, as applicable, the 90 percent

maximum accumulated eligibility requirement for the Board subsidy, may continue coverage in an

MPS health plan as a retiree on a self-paid basis.

When husband and wife both retire from the Board and meet eligibility requirements for retiree health

coverage as of his/her date of retirement effective as indicated in the chart below, the Board will pay

only its portion of one family or two single plans:

Units Retirement date

Administrators and Supervisors 1/01/07 and after

Exempt Administrators and Supervisors 1/01/07 and after

Bookkeeper/Accountants 7/01/12 and after

Building Engineers 2/28/08 and after

Building Service Helpers 4/24/08 and after

Building Trades 2/28/08 and after

Cabinet Level 1/01/07 and after

Clerical-Technical 6/30/09 and after

Exempt from Clerical-Technical 6/30/09 and after

Educational Assistants/Safety Assistants 7/01/12 and after

Food Service, CHA, SNA 2/28/08 and after

Office of Accountability and Efficiency 1/01/07 and after

Office of Board Governance 1/01/07 and after

Psychologists 4/01/11 and after

Substitute Teachers 7/01/12 and after

Superintendent 1/01/07 and after

Teachers 7/01/13 and after

Warehouse, Distribution, Buyers, etc. 3/30/08 and after

A special one-time provision providing the higher PPO/Indemnity Health Plan rate of March 31, 2011

or July 1, 2011, was extended to the following groups for eligible employees who gave their

retirement notice by April 1, 2011, and retired by the end of their regular work year in June, 2011, or

where applicable for 12-month employees who retired June 30, 2011:



Local 1053 Unit including exempts;

MTEA-Bookkeepers Unit;

MTEA-Educational Assistants Unit;

MTEA-Teachers Unit; and

PAMPS Unit.



Effective on the date of the 2001 Board Organizational meeting, Board members are not eligible to

continue in the District’s retiree group health plans upon leaving the Board.

RETIREES WITH DATES OF RETIREMENT ON/AFTER JULY 1, 2013

Effective with dates of retirement on/after July 1, 2013, the Board’s share of the average of the active

PPO/Indemnity Health Plan and the active EPO Health Plan, (single or family plan premium rate) in

effect at date of retirement will be the Board subsidy and is reduced by the employee premium

contribution for the annual base salary band in effect as of the employee’s retirement date. Upon the

retiree reaching Medicare eligibility (currently age 65), the Board subsidy will be adjusted (reduced)

to the Board’s share of the average of the Medicare rates in effect as of the date of retirement, for the

plan the retiree is in upon reaching Medicare eligibility, to reflect coordination with Medicare.

Effective with dates of retirement on/after July 1, 2013, the methodology to determine premium rates

will be changed to establish a pre-Medicare retiree premium rate for self-paid coverage (e.g., for those

retirees who are not eligible for the Board-paid subsidy).

SURVIVING SPOUSE COVERAGE

DEATH OF EMPLOYEE IN ACTIVE SERVICE 1

If an MPS employee dies while in active service and has met the eligibility requirements of 15 or

more years of Eligible Service (or effective July 1, 2013, the eligibility requirements of 20 or more

years of Eligible Service):

1. The surviving spouse and eligible dependents can continue health coverage with the Board paying

its share of the premium until the surviving spouse remarries or is covered by another group

insurance plan.

2. When the surviving spouse turns age 60, he/she (but not any dependents) will be eligible to

continue coverage in a single plan and will be covered as a surviving spouse of an employee who

retired that month.

The Board subsidy will be the Board’s share of the single premium for the PPO/Indemnity

Health Plan, or the EPO Health Plan as applicable in effect as of the date of the surviving

spouse’s turning age 60 if the employee had the required 70% of maximum sick leave balance

as of the employee’s date of death. Thereafter, the surviving spouse is required to pay all

future premium increases.

Effective July 1, 2013, the Board subsidy will be the Board’s share of the single premium for

the average of the PPO/Indemnity Health Plan and EPO Health Plan, or the EPO Health Plan

as applicable in effect as of the date of the surviving spouse’s turning age 60 if the employee

had the required 90% of maximum sick leave balance as of the employee’s date of death.

Upon reaching Medicare eligibility, the Board subsidy will be adjusted (reduced) to the

Board’s share of the Medicare rate in effect as of the surviving spouse’s turning age 60 to

reflect coordination with Medicare. Thereafter, the surviving spouse is required to pay all

future premium increases.

If the employee did not have the required 70% (or 90% effective July 1, 2013) of maximum

sick leave as of the employee’s date of death, continuation in health coverage will be self-paid.

Effective July 1, 2013, the pre-Medicare retiree premium rates shall be used for such self-paid

pre-Medicare coverage. 1 Does not apply to Local 150 Food Service, MTEA-Substitute Teachers and Board Members.



DEATH OF EMPLOYEE AFTER RETIREMENT 1

If the employee dies after retirement:

The surviving spouse (but not any dependents) can continue coverage under the MPS

retiree health insurance in a single plan until the spouse remarries or is otherwise covered

by another group health insurance plan.

The Board subsidy will be adjusted to the Board’s share of the premium rate of a single

active PPO/Indemnity Health Plan, or EPO Health Plan, or the average of the

PPO/Indemnity Health Plan and the EPO Health Plan for dates of retirement on or after

July 1, 2013, as applicable, which was in effect as of the deceased employee’s date of

retirement. For dates of retirement on or after July 1, 2013, upon reaching Medicare

eligibility the Board subsidy will be adjusted (reduced) to the Board’s share of the

Medicare rate in effect as of the date of retirement.

1 Does not apply to MTEA-Substitute Teachers and Board Members who have not met the eligibility requirements as of

September 1, 1999.



PREMIUM RATES AS OF JANUARY 1, 2015

Single

Single +

Spouse/Dependent

1 with Medicare

Single +

Spouse/Dependent

Both with Medicare

Family w/o

Medicare

Family

w/Medicare

Active $ 631.52 $ 1,484.42

Retiree (Non-Medicare) 627.07 $ 828.23 1,473.65 $ 1,057.71 (1 w/Med.)

Retiree (Medicare) 211.15* 838.23 $ 422.30* 641.78 (2 w/Med.)

Single

Single +

Spouse/Dependent

1 with Medicare

Single +

Spouse/Dependent

Both with Medicare

Family w/o

Medicare

Family

w/Medicare

Active $ 644.20 $ 1,514.22



Single

Single +

Spouse/Dependent

1 with Medicare

Single +

Spouse/Dependent

Both with Medicare

Family w/o

Medicare

Family

w/Medicare

Active $ 619.60 $ 1,436.62



Single

Single +

Spouse/Dependent

1 with Medicare

Single +

Spouse/Dependent

Both with Medicare

Family w/o

Medicare

Family

w/Medicare

Retiree (Non-Medicare) $ 887.17 $ 1,098.32 $ 1,774.34 $ 1,098.32 (1 w/Med.)

Retiree (Medicare) 211.15* 1,098.32 $ 422.30* 678.24 (2 w/Med.)

Single

Single +

Spouse/Dependent

1 with Medicare

Single +

Spouse/Dependent

Both with Medicare

Family w/o

Medicare

Family

w/Medicare



Single

Single +

Spouse/Dependent

1 with Medicare

Single +

Spouse/Dependent

Both with Medicare

Family w/o

Medicare

Family

w/Medicare



HDHP

HDHP1

PPO Plan1

EPO Plan1

Self-Pay Retiree Rates

PPO Plan

EPO Plan

1 Premium for active members in the PPO, EPO and HDHP plans includes vision coverage

* MPS Group Medicare Advantage Plan



PREMIUM RATES AS OF JANUARY 1, 2016 (RATES EFFECTIVE THROUGH DECEMBER 31, 2016)

Single

Single +

Spouse/Dependent

1 with Medicare

Single +

Spouse/Dependent

Both with Medicare

Family w/o

Medicare

Family

w/Medicare

Active $ 656.80 $ 1,543.83



Single

Single +

Spouse/Dependent

1 with Medicare

Single +

Spouse/Dependent

Both with Medicare

Family w/o

Medicare

Family

w/Medicare

Active $ 679.64 $ 1,597.48



Single

Single +

Spouse/Dependent

1 with Medicare

Single +

Spouse/Dependent

Both with Medicare

Family w/o

Medicare

Family

w/Medicare

Active $ 637.43 $ 1,478.52



Single

Single +

Spouse/Dependent

1 with Medicare

Single +

Spouse/Dependent

Both with Medicare

Family w/o

Medicare

Family

w/Medicare



Single

Single +

Spouse/Dependent

1 with Medicare

Single +

Spouse/Dependent

Both with Medicare

Family w/o

Medicare

Family

w/Medicare



Single

Single +

Spouse/Dependent

1 with Medicare

Single +

Spouse/Dependent

Both with Medicare

Family w/o

Medicare

Family

w/Medicare



HDHP Plan

EPO Plan

Self-Pay Retiree Rates

PPO Plan1

EPO Plan1

PPO Plan

HDHP Plan1

1 Premium for active members in the PPO, EPO and HDHP plans includes vision coverage.

* MPS Group Medicare Advantage Plan



Members that retired on or after July 1, 2013, and do not receive a Board-paid subsidy pay the Self-

Pay retiree rates.

ACTIVE EMPLOYEE PREMIUM SHARE FOR HEALTH INSURANCE

Effective August 1, 2011, all active employees pay premium contributions for health insurance based

on either a percentage of the active premium rate or a percentage of salary (for the MTEA-Teacher

Unit) in accordance with applicable collective bargaining agreement and plan provisions for

represented employees, or, when such bargaining agreement provisions expire, in accordance with

Board policy and plan provisions; for non-represented employees in accordance with Board policy

and plan provisions.

Prior to August 1, 2011, there was no cost to most active employees; Cabinet members pay 5% of the

premium and Board members pay any difference between the plan they have selected and the lowest

cost plan. Effective with the union contract settlements (2005-2006), there is a conditional employee

premium contribution of 2.5% for those enrolled in the PPO/Indemnity Plan if the premium for this

plan increases greater than 17%. If the conditional premium share is triggered, future retired members

that receive a Board-paid subsidy would receive a subsidy amount equal to the PPO/Indemnity Plan

premium rate at the time of retirement less the 2.5% conditional premium amount. This conditional

premium share was never triggered and has been replaced by the aforementioned required employee

premium contributions effective with the 2010/2011 contract settlements and Board policy.

Effective July 1, 2012, or July 1, 2013, as described below, all active employees will pay a percentage

of premium for health insurance based on their annual base salary as follows:

Annual Base Salary Plan PPO

% of Premium EPO

% of Premium

HDHP

Effective 1/1/2015

% of Premium

$25,000 or Under Single or Family 11% 5% 2%

$25,001 - $50,000 Single or Family 12% 8% 5%

$50,001 - $75,000 Single or Family 13% 10% 7%

$75,000 and above Single or Family 14% 12% 9%

Effective July 1, 2012, new contributions and new plan design for the following employee units:

Local 150 Building Service Helpers Unit Building Trades

Local 150 Food Service Unit MTEA-Bookkeepers/Accountants Unit

Local 950 Building Engineers Unit MTEA-Educational Assistants Unit

Local 1053 Clerical – Technical Unit MTEA-Substitute Teachers Unit

Local 1616 Unit

Effective July 1, 2013, new contributions and new plan design for the following employee units:

ASC Unit including exempts Board Members

Cabinet Level employees Local 1053 Exempts

MTEA-Teachers Unit PAMPS Unit

Office of Chief Accountability & Efficiency Office of Board Governance



Effective July 1, 2015, a new High Deductible Health Plan (HDHP) with a Health Savings Account

(HSA) was made available to all active employees.

LIFE INSURANCE BENEFIT

The Board provides group life insurance coverage to eligible retirees equal to the annual earnings at

retirement to the next even thousand dollars. Coverage is equal to the previous year’s annual earnings

for hourly employees included in 150 Food Services Unit, Local 150 Building Service Helpers Unit,

MTEA-Substitute Teachers Unit, and part-time (20 hours per week; 30 hours per week effective July

1, 2012) 1616 Social Work Aides, Local 950 Unit, 1616 Seasonal Laborers and Building Trades. The

life insurance face amount is reduced by 25 percent of the original amount each March 1 following

the attainment of age 65, 66 and 67. A life insurance amount of 25 percent of the original life

insurance benefit is payable if death occurs after March 1 following the retiree’s 67th

birthday. At the

25 percent reduction the Board will pay a maximum coverage of $15,000 for 950 and Building

Trades, $20,000 for 1053 and 1616 and $25,000 for PAMPS. The Board will pay for a maximum of

$10,000 of coverage for Local 150 Food Services and BSH in retirement. Effective with dates of

retirement on/after July 1, 2013, the maximum benefit payable at the 25 percent reduction at age 67 is

$25,000. Active Substitute Teachers effective September 1, 2012, and active Seasonal Laborers

effective with hire or layoff July 1, 2012, or after are no longer eligible for group life insurance

coverage.

Sunset Provision: Employees who are age 55 or older with 30 or more years of MPS service can

retire before age 60 (prior to July 1, 2015) and qualify for retiree life insurance benefits.

VISION BENEFIT

Retirees and dependents enrolled in the EPO plan receive vision coverage. Effective April 1, 2011,

vision benefits for current and future retirees were discontinued.

DENTAL BENEFIT

Retirees and dependents are not eligible for dental coverage; however, retirees are eligible for self-pay

COBRA coverage for up to 18 months.


EFFECTIVE JANUARY 1, 2015

UNITEDHEALTHCARE MPS HIGH DEDUCTIBLE HEALTH PLAN

ACTIVES AND NON-MEDICARE ELIGIBLE RETIREES


Plan Feature In Network Out of Network

Annual Deductible $ 750 per person

$ 2,250 per family

$ 1,500 per person

$ 4,500 per family

Annual Coinsurance Limit

(Includes Annual

Deductible)

$ 3,250 per person

$ 9,750 per family

$ 4,500 per person

$ 13,500 per family

Covered Services

-Physicians Visits

-Specialist Visits

-Emergency Room

Emergency Care

Non-Emergency Care

-Inpatient Services

-Outpatient Services

Coinsurance

100% after $20 Co-pay



50% after deductible

80% after deductible*


Coinsurance






Prescription Drug Co-pays

(Three-Tier Formulary)

Tier 1

Generic

Tier 2

Preferred

Brand

Tier 3

Non-

Preferred

Brand

Retail Up to 30-day

Supply

$8

10%

with

$25 min.

20%

with

$50 min.

Mail Order 90-day Supply

$16

$50

$100

Retail Up to 30-day

Supply

No benefit


No benefit

Prescription Drug Out-of-

Pocket Annual Limit

$ 3,350 per person

$ 3,450 per family No Benefit

Maximum Lifetime Benefit None None

*Until coinsurance limit is met; 100% thereafter.



UNITEDHEALTHCARE MPS GROUP MEDICARE ADVANTAGE PLAN

MEDICARE-ELIGIBLE RETIREES


Plan Feature In Network/Out of Network

Annual Deductible None


(Excludes Annual Deductible) $ 1,350 per person

Covered Services

-Physicians Visits

-Specialists Visits

-Emergency Room

Emergency Care

Urgently Needed Care

-Inpatient Hospital Stay

-Outpatient Hospital Services

Coinsurance

$20 Co-pay

$35 Co-pay

$65 Co-pay

$35 Co-pay

$0 Per Admit

$100 Co-pay



No out of network benefit

Tier 1

Generic

Tier 2

Preferred

Brand

Tier 3

Non-

Preferred

Brand

Retail Up to 30-day

Supply

$8

$25

$50


$16

$50

$100

Maximum Lifetime Benefit None



UNITED HEALTHCARE MPS CHOICE EPO



Plan Feature In Network Only

Annual Deductible $ 350 per person

$ 1,050 per family


(Excludes Annual

Deductible)

$ 1,350 per person

$ 4,050 per family

Covered Services

-Physicians Visits

-Specialist Visits

-Emergency Room

Emergency Care

Non-Emergency Care

-Inpatient Services


Coinsurance









Tier 1

Generic

Tier 2

Preferred

Brand

Tier 3

Non-

Preferred

Brand

Retail Up to 30-day

Supply

$8

10%

with

$25 min.

20%

with

$50 min.


$16

$50

$100

Prescription Drug Out-of-

Pocket Annual Limit

$5,250 per person

$9,150 per family

Maximum Lifetime Benefit None




UNITEDHEALTHCARE MPS HIGH DEDUCTIBLE HEALTH PLAN



Plan Feature In Network Out of Network

Annual Deductible $ 1,600 per person

$ 3,200 per family

$ 3,200 per person

$ 6,400 per family


(Includes Annual Deductible

and Pharmacy Costs)

$ 3,200 per person

$ 6,400 per family

$ 6,400 per person

$ 12,800 per family

Covered Services

-Physicians Visits

-Specialist Visits

-Emergency Room

Emergency Care

Non-Emergency Care

-Inpatient Services


Coinsurance




Not Covered



Coinsurance




Not Covered





Preventive Only

Tier 1

Generic

Tier 2

Preferred

Brand

Tier 3

Non-

Preferred

Brand

Retail Up to 30-

day Supply

$8

10%

with

$25 min.

20%

with

$50 min.


$16

$50

$100

Retail Up to 30-day

Supply

No benefit


No benefit

Retail & Mail Order

Pharmacy 80% after deductible* None

Maximum Lifetime Benefit None None


LIFE INSURANCE


Eligible Groups Eligibility for Board-paid benefit. Eligibility for self-paid benefit.

ASC-represented Employees

ASC-exempt Employees

Cabinet Members

Office of Board Governance

Office of Chief Accountability and

Efficiency

30 years & age 55, fully Board-paid with dates

of retirement before 7/1/13

15 years & age 55, self-paid to age 65. Fully Board-paid after 65. Self-

paid until 65 at age 50 for Administrators on disability pension.

Effective with dates of retirement on or after 7/1/13, 20 years & age 60,

self-paid to age 65. Maximum benefit coverage amount of $25,000 at

25% reduction.

Building Trades

Local 950 – Building Engineers

N/A 15 years & age 55, self-paid to age 65 & Board-paid after 65 if hired

prior to 1/1/87. Maximum of $15,000 Board-paid at 25% reduction. If

hired after 1/1/87, self-paid until death.

Effective with dates of retirement on or after 7/1/13, 20 years & age 60

self-paid to 65 & Board paid after 65. Maximum of $15,000 Board-paid

at 25% reduction; retiree self pays for coverage above $15,000 to the

$25,000 maximum coverage amount.

Local 1053 – Clerical including

exempts

30 years & age 55, fully Board-paid with dates


Maximum Board-paid $20,000 at 25%

reduction

15 years & age 55, self-paid to age 65 & Board-paid after 65 if hired




self-paid to age 65 & Board-paid after 65. Maximum of $20,000 Board-

paid at 25% reduction; retiree self pays for coverage above $20,000 to

the $25,000 maximum coverage amount.

Local 150 – Building Service Helpers

Local 150 – Food Service Workers

N/A 15 years & age 55, self-paid to age 65; after age 65 Board-paid life

insurance up to a maximum of $10,000 if hired prior to 7/1/86. If hired

after 7/1/86, not eligible for group coverage.


self-paid to age 65; after age 65 Board-paid life insurance up to a

maximum of $10,000 if hired prior to 7/1/86; retiree self pays for

coverage above $10,000 to the $25,000 maximum coverage amount. If

hired after 7/1/86, not eligible for group coverage.

Local 1616 Employees 30 years & age 55, fully Board-paid with dates



reduction

15 years & age 55, self-paid to age 65 & Board-paid after 65 if hired




self-paid to age 65 & Board-paid after 65. Maximum of $20,000 Board-

paid at 25% reduction; retiree self pays for coverage above $20,000 to

the $25,000 maximum coverage amount.

LIFE INSURANCE (CONTINUED)


Eligible Groups Eligibility for Board-paid benefit. Eligibility for self-paid benefit.

MTEA – Teachers

MTEA – Substitute Teachers

30 years & age 55, Board-paid to $50,000 for

dates of retirement before 7/1/13. Must self-

pay any amount over $50,000. Fully Board-

paid after 65.

(Substitute Teachers: Benefit eliminated

effective with dates of retirement on/ after

7/1/12.)

15 years & age 55, self-paid to age 65. Fully Board-paid after 65.


self-paid to age 65. Fully Board-paid after 65. Maximum benefit

coverage amount of $25,000 at final 25% reduction.

(Substitute Teachers: Benefit eliminated effective with dates of

retirement on or after 7/1/12.)

MTEA – Accountants and

Bookkeepers

30 years & age 55, Board-paid to $50,000 for



paid after 65.





MTEA – Educational Assistants 30 years & age 55, Board-paid to $19,000 for



paid after 65.





PAMPS – School Psychologists 30 years & age 55, fully Board-paid with dates

of retirement before 7/1/13.


reduction


Maximum of $25,000 Board-paid at 25% reduction.


self-paid to age 65. Fully Board-paid after 65. Maximum of $25,000

Board-paid at 25% reduction.

Years of service in accordance with applicable collective bargaining agreement and plan provisions for represented employees, or, when

such bargaining agreement provisions expire, in accordance with Board policy and plan provisions; for non-represented employees in

accordance with Board policy and plan provisions.

SECTION G

A C TU A R IA L METH O D S A N D A S S U MP TIO N S

ACTUARIAL METHODS AND ASSUMPTIONS


Development of Per Capita Claim Costs

The development of per capita claim costs is based on paid claims, expenses and enrollment

experience for the period from August 1, 2013, to July 1, 2015, adjusted for claims in excess of the

stop loss limits. Costs were trended to the mid-point of the first valuation year. Costs were developed

separately for pre-Medicare United Healthcare EPO/PPO plans and United Healthcare MPS Group

Medicare Advantage Plan. Standard morbidity tables were used to develop expected claims costs at

each respective postretirement age. We relied on claims, expenses, enrollment data and rating

methodology disclosed in the plan’s most recent rating reports prepared by MPS’ healthcare actuary.

Cost Method and Expense Calculations for Retiree Healthcare Benefits

The retiree healthcare actuarial valuation was based on the entry age normal cost method. Under this

method, each participant’s projected benefits are assumed to be funded by annual installments, equal

to a level percentage of compensation, payable from date of participation to assumed date of

retirement. The total normal cost is the sum of the current year’s annual installment determined for

all active participants. The actuarial accrued liability is the excess value of the present value of future

benefits for all participants (both active and retired) over the present value of future normal costs.

Under GASB Statement Nos. 43 and 45, the entry age normal method is an acceptable cost method.

The Annual Required Contribution (ARC) equals the normal cost plus the amortization of the

unfunded actuarial accrued liability. The amortization cannot exceed 30 years. Our calculations

assume a level-percentage-of-pay 25-year open amortization period excluding retiree liability as of

July 1, 2011, and level-dollar 15-year closed amortization period for retiree liability as of July 1,

2011. The Annual Expense or Annual OPEB Cost equals the ARC plus interest on the Net OPEB

Obligation less an adjustment to ARC.

The Net OPEB Obligation or balance sheet liability is equal to the cumulative difference between the

Annual OPEB Costs and employer contributions. The OPEB liability at the transition date, July 1,

2007, was set to zero.

Actuarial Assumptions

The actuarial assumptions used in our actuarial valuation are outlined on the following pages.

ACTUARIAL METHODS AND ASSUMPTIONS (CONTINUED)


Measurement Date July 1, 2015

Discount Rate 4.55%

Inflation 1 3.00%

Wage Inflation 2 2.80% (3.0% Gen. EEs)

OPEB Assumptions

Fiscal Year

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025+

Age Male Female

55 $8,668 $9,387

60 11,195 10,934

64 13,614 12,743

65 2,377 2,242

70 2,589 2,505

75 2,781 2,713

80 2,919 2,868

85 2,940 2,975

Composite Annual Per Capita

Claim Costs for Calendar Year 2016

8.50%

6.50%

4.50%

4.50%

4.50%

5.00%

6.00%

4.50%

4.50%5.50%

4.50%

4.50%

4.50%

Healthcare Trend 3

4.50%

4.50%

Medicare Part B Trend5

8.00%

7.50%

7.00%

7.75%5.00%4

1 Inflation assumption used to estimate the impact of the Excise Tax under the Health Care Reform Act.

2 Wage inflation used to project payroll.

3 Excess trend rate of 0.38% over the base healthcare trend rate beginning in 2026 for the EPO and PPO Plans, applied

only to pre-Medicare per capita claim cost to account for the Excise Tax under Health Care Reform Act. 4First year trend rates apply to the 6-month period ending June 30, 2016.

5Reflects actual premium amount of $104.90 in 2015 and $121.80 in 2016.

The trend rates shown are net of any increases due to the potential wear-away of the MAPD design changes in 2022.

Effective trend for the Post-Medicare plans affected by the MAPD design changes would be higher until the year 2022.

These higher effective trend rates gradually reduce the initial savings due to the MADP plan design changes. An additional

trend rate of 5.25% is added to trend from 2015 through 2022 for post-Medicare per capita claims costs and premiums.



The premiums used in the actuarial valuation of future retirees is blended based on approximately

30% of the PPO costs and 70% of the EPO costs. Current retirees are assumed to remain in their

current plan (PPO or EPO). Relative value factors were applied to the composite per capita claim

costs.

A 10% load is applied to the pre-Medicare dependent per capita claim cost to account for covered

children that are not directly valued. For retirees that cover only dependent children and not a spouse,

a 10% load is applied to the pre-Medicare retiree per capita claim cost.

Retirement Date % Eligible

On/After July 1, 2013 60%

are assumed to participate as follows:

Eligible for Board-paid subsidy 85%

Eligible for self-paid benefits only 30%

Spouse Coverage

Future retirees that elect coverage at retirement are assumed to enroll as follows:

Single Family

Election 40% 60%

30% of future retirees are expected to elect PPO coverage. 0% of future Building Trades and ASC

Eligibility for Board-paid subsidy

Future retirees who meet eligibility conditions for retiree healthcare benefits

Participation

Females are assumed to be 3 years younger than their spouses.

40% of spouses are expected to continue coverage after the death of the retiree.

% of Maximum Sick Leave Allowance

90%

The table below shows the percentage of retirees assumed to retire with the required percentage of the

maximum sick leave allowance and therefore are eligible to receive a Board-paid subsidy.

retirees are assumed to elect PPO coverage. This retiree health option was eliminated for these groups.



Pension-related assumptions

Pension-related assumptions for participants covered under the Milwaukee Board of School Directors

Supplemental Early Retirement Plan for Teachers (“Teachers Plan”) as stated in the actuarial

valuation report as of July 1, 2015, are assumed for the GASB 45 actuarial valuation.

Pension-related assumptions for participants covered under the Milwaukee Board of School Directors

Early Retirement Supplement and Benefit Improvement Plan (“Administrators Plan”) and participants

in covered positions who became members on or after July 1, 2003, who would otherwise have been

participants in the plan, as stated in the actuarial valuation report as of July 1, 2015, are assumed for

the GASB 45 actuarial valuation.

Other participants are covered under the City of Milwaukee Employees’ Retirement System (“ERS”)

and those assumptions, as stated in the actuarial valuation report as of January 1, 2015, and provided

by the actuary with certain adjustments are assumed.

GRS applied certain adjustments to the rates used in the City of Milwaukee Employees’ Retirement

System actuarial valuation as of January 1, 2015, for purposes of the GASB 45 actuarial valuation in

order to comply with GRS guidelines for decrement rates. For termination rates with at least five

years of service, if the rate provided at a certain age was higher than at the previous age, then the

modified rate at the previous age was used. (GRS guidelines for termination rates are that rates

should decrease as age increases.) For disability rates, if the rate provided at a certain age was lower

than at the previous age, then the modified rate at the previous age was used. (GRS guidelines for

disability rates are that rates should increase as age increases.) For disabled mortality, the healthy

rates with a 3-year set forward were used.

Rates are applied consistently with the pension actuarial valuations (with modifications as described),

using the GASB 45 census data, as provided by MPS. Retirement rates are applied at first eligibility

for pension benefits, although retiree healthcare benefits may not be payable.



Years of

Service Teachers Administrators Age

General

Employees

1 7.00% 6.50% 25 6.900%

5 7.00% 6.50% 30 5.800%

10 5.00% 6.40% 35 4.800%

15 4.50% 5.30% 40 3.900%

20 2.80% 3.80% 45 3.300%

25 2.80% 2.80% 50 3.000%

30 2.80% 2.80% 55 3.000%

60 + 3.000%

Salary Increase1

Demographic Assumptions Mortality

1

Teachers and Administrators

Retired Member Mortality: Wisconsin Projected Experience Table – 2005 for women and 90

percent of the Wisconsin Projected Experience Table – 2005 for men.

Active Member Mortality: 80 percent of post-retirement rates.

The Wisconsin Projected Experience Table – 2005 is consistent with the RP-2000 Mortality Table

projected to 2030. We believe the mortality assumption would produce an adequate margin for

longevity improvements.

General Employees

For regular retirees and for survivors, the RP-2000 Combined Mortality Table with mortality

improvements projected to the year 2009 for the actuarial valuation as of July 1, 2015, for males and

females.

For death in active service, the RP-2000 Combined Mortality Table with mortality improvements

projected to the year 2009 for the actuarial valuation as of July 1, 2015, for males and females, then a

6-year setback for males and females.

For purposes of the retiree healthcare valuation, the mortality assumption for regular retirees and

survivors with a 3-year set forward to the mortality rates for disabled retirees.

Include full generational projection using mortality improvement scale AA.

We believe the mortality assumption contains an adequate margin for longevity improvements.

1 Pension valuation assumptions effective in the July 1, 2015, actuarial valuations for Teachers and Administrators and as stated in the

January 1, 2015, ERS actuarial valuation and provided by the actuary (with certain adjustments) for general employees.



Age

20 0.010% 0.050%

25 0.010% 0.050%

30 0.010% 0.060%

35 0.010% 0.077%

40 0.020% 0.146%

45 0.070% 0.242%

50 0.130% 0.284%

55 0.210% 0.585%

60 0.320% 0.922%

65 0.370% 0.922%

% Separating Within Next Year

Sample Disability Rates 1

Teachers and

Administrators

20% of disabilities are considered to be duty-related.

General Employees

Teachers Administrators

Age Male Female Male Female

20 14.500% 8.000% 13.550% 18.500% 10.000% 11.000%

25 13.700% 8.000% 12.250% 18.550% 9.750% 11.000%

30 11.200% 8.000% 8.700% 12.900% 5.321% 6.500%

35 7.400% 6.000% 8.200% 12.000% 3.928% 5.590%

40 3.800% 4.500% 6.750% 8.000% 3.468% 5.590%

45 1.600% 3.000% 7.000% 7.100% 2.296% 3.346%

50 0.800% 1.500% 6.400% 6.600% 1.825% 2.596%

55 0.000% 0.000% 5.250% 6.000% 1.529% 2.220%

Less Than 5 Years of Service At Least 5 Years of Service

General Employees

Sample Turnover Rates1

% Separating Within Next Year





Service 55 56 57 58 - 59 60 61 62 63 64 65+

0-5 0.0% 0.0% 0.0% 0.0% 5.0% 5.0% 5.0% 5.0% 5.0% 100.0%

6-11 2.0 0.0 1.0 0.0 2.0 6.0 10.0 5.0 10.0 100.0

12 3.0 1.0 2.0 1.0 3.0 7.0 11.0 6.0 11.0 100.0

13 4.0 2.0 3.0 2.0 4.0 8.0 12.0 7.0 12.0 100.0

14 5.0 3.0 4.0 3.0 5.0 9.0 13.0 8.0 13.0 100.0

15 7.0 5.0 6.0 5.0 7.0 11.0 15.0 10.0 15.0 100.0

16 9.0 7.0 8.0 7.0 9.0 13.0 17.0 12.0 17.0 100.0

17 12.0 10.0 11.0 10.0 12.0 16.0 20.0 15.0 20.0 100.0

18 14.0 12.0 13.0 12.0 14.0 18.0 22.0 17.0 22.0 100.0

19 14.0 12.0 13.0 12.0 14.0 18.0 22.0 17.0 22.0 100.0

20 15.0 13.0 14.0 13.0 15.0 19.0 23.0 18.0 23.0 100.0

21 15.0 13.0 14.0 13.0 15.0 19.0 23.0 18.0 23.0 100.0

22 15.0 13.0 14.0 13.0 15.0 19.0 23.0 18.0 23.0 100.0

23 16.0 14.0 15.0 14.0 16.0 20.0 24.0 19.0 24.0 100.0

24 16.0 14.0 15.0 14.0 16.0 20.0 24.0 19.0 24.0 100.0

25 16.0 14.0 15.0 14.0 16.0 20.0 24.0 19.0 24.0 100.0

26 22.0 20.0 21.0 20.0 22.0 26.0 30.0 25.0 30.0 100.0

27 22.0 20.0 21.0 20.0 22.0 26.0 30.0 25.0 30.0 100.0

28 22.0 20.0 21.0 20.0 22.0 26.0 30.0 25.0 30.0 100.0

29 27.0 25.0 26.0 25.0 27.0 31.0 35.0 30.0 35.0 100.0

30 32.0 30.0 31.0 30.0 32.0 36.0 40.0 35.0 40.0 100.0

31 34.0 32.0 33.0 32.0 34.0 38.0 42.0 37.0 42.0 100.0

32 36.0 34.0 35.0 34.0 36.0 40.0 44.0 39.0 44.0 100.0

33 38.0 36.0 37.0 36.0 38.0 42.0 46.0 41.0 46.0 100.0

34 40.0 38.0 39.0 38.0 40.0 44.0 48.0 43.0 48.0 100.0

35 + 50.0 50.0 50.0 50.0 60.0 60.0 100.0 100.0 100.0 100.0

% Separating Within Next Year (Age and Service-Based)

Teachers

Sample Normal Retirement Rates 1,2,3



2 Normal retirement eligibility for general employees is satisfied upon attainment of age 55 with 30 years of service or age 60 with 4

years of service. Early retirement eligibility for general employees is satisfied upon attainment of age 55 with 15 years of service.

3 Retirement rates after July 1, 2013, are decreased by 70% if the member is not eligible to retire with OPEB, and rates are increased

by 180% when the member first becomes eligible to retire with OPEB. Rates after first eligibility for OPEB remain unchanged. Of

the expected retirements, a portion are assumed not to elect healthcare, to elect healthcare and receive a Board paid subsidy and to

elect healthcare and not receive a Board paid subsidy in accordance with the assumptions in this report.



Early Retirement Rates 1,2

General Employees

Certificated Classified Male Female Male/Female

55 25.000% 15.000% 50.000% 30.000% 2.000%

56 20.000% 8.000% 35.000% 20.000% 2.000%

57 30.000% 8.000% 32.000% 18.000% 2.000%

58 20.000% 8.000% 30.000% 28.000% 2.000%

59 15.000% 8.000% 22.000% 23.000% 2.000%

60 35.000% 40.000% 21.000% 19.000%

61 10.000% 20.000% 25.000% 20.000%

62 30.000% 30.000% 30.000% 25.000%

63 25.000% 15.000% 26.000% 19.000%

64 20.000% 15.000% 20.000% 19.000%

65 100.000% 100.000% 23.000% 25.000%

66 100.000% 100.000% 23.000% 23.000%

67 100.000% 100.000% 20.000% 19.000%

68 100.000% 100.000% 20.000% 13.000%

69 100.000% 100.000% 20.000% 13.000%

70 100.000% 100.000% 100.000% 100.000%

% Separating Within Next Year (Age-Based)

Sample Normal Retirement Rates 1,2,3,4

AgeAdministrators General Employees



2 Normal retirement eligibility for general employees is satisfied upon attainment of age 55 with 30 years of service or age 60 with 4

years of service. Early retirement eligibility for general employees is satisfied upon attainment of age 55 with 15 years of service.

3 50% of certificated members are 100% of classified members are assumed to retire once a participant completes 35 years of service.

4 Retirement rates after July 1, 2013 are decreased by 70% if the member is not eligible to retire with OPEB, and rates are increased by

180% when the member first becomes eligible to retire with OPEB. Rates after first eligibility for OPEB remain unchanged. Of the

expected retirements, a portion are assumed not to elect healthcare, to elect healthcare and receive a Board paid subsidy and to elect

healthcare and not receive a Board paid subsidy in accordance with the assumptions in this report.

SECTION H

PA RTIC IPA NT D ATA

PARTICIPANT DATA


Actives

Retirees and

Surviving

Spouses Total

Board/Cabinet/ASC 526 844 1,370

Building Trades 91 185 276

1053 Clerical/Technical 286 341 627

150 Building Service 255 78 333

150 Food Service 548 318 866

1616 Education Employees 106 104 210

420 Engineers 194 192 386

Educational Assistants 1,072 408 1,480

Sub Teachers 0 91 91

Teachers 3,997 4,332 8,329

PAMPS 97 66 163

Accountants 12 19 31

7,184 6,978 14,162

Counts by Labor Unit

PARTICIPANT DATA (CONTINUED)


1 Person 2 Person Total

Board/Cabinet/ASC 470 374 844

Building Trades 77 108 185

1053 Clerical/Technical 217 124 341

150 Building Service 60 18 78

150 Food Service 221 97 318

1616 Education Employees 60 44 104

420 Engineers 101 91 192

Educational Assistants 255 153 408

Sub Teachers 41 50 91

Teachers 2,422 1,910 4,332

PAMPS 39 27 66

Accountants 10 9 19

3,973 3,005 6,978

Retiree and Surviving Spouse Healthcare Coverage Type by Labor Unit

PARTICIPANT DATA (CONTINUED)




Actuarial Valuation as of July 1, 2015

Age Service Distribution for Total Active Population

Attained

Age 0-1 1-4 5-9 10-14 15-19 20-24 25-29 30-34 Over 35 Total

Under 20 0

20-24 3 3

25-29 2 179 49 1 231

30-34 2 121 371 90 19 603

35-39 1 99 257 362 148 11 878

40-44 65 176 244 470 156 5 1 1,117

45-49 1 86 118 203 351 411 146 2 1,318

50-54 49 96 145 275 348 372 103 11 1,399

55-59 38 73 105 239 218 244 84 29 1,030

60-64 31 60 77 99 90 77 20 22 476

65-69 7 12 24 30 13 10 6 5 107

Over 70 1 2 3 5 4 4 1 2 22

Total 6 679 1,214 1,254 1,636 1,251 858 217 69 7,184

While not used in the financial computations, the following group averages are computed and shown because of their

general interest.

46.9 years

16.2 years

Total Pay:

Years of Service at Valuation Date

Age:

Service:

Average Pay:

$376,389,784

$52,393

milwaukee public schools h l i p v j 1, 2015 · 2017-05-03 · milwaukee public schools...

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