wayne county gasb
DESCRIPTION
Independent Actuaries verify 64% reduction in report to County’s Chief Financial Officer Health care liabilities were expected to spike to $1.8 billion in 2015 without restructuringTRANSCRIPT
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Wayne CountyGASB 45 Actuarial ValuationFiscal Year Ending September 30, 2015
Prepared by:Nyhart Actuary & Employee Benefits
8415 Allison Pointe Blvd., Suite 300Indianapolis, IN 46250
Ph: (317) 845-3500www.nyhart.com
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Table of Contents Page Certification 1 Actuarys Notes 3 Executive Summary 5 GASB Disclosures GASB Results 8 Schedule of Funding Progress 9 Schedule of Employer Contributions 10 Historical Annual OPEB Cost 10 Reconciliation of Actuarial Accrued Liability (AAL) 11 Employer Contribution Cash Flow Projections 12 Substantive Plan Provisions 14 Actuarial Methods and Assumptions 19 Summary of Plan Participants 24 Appendix 27 Comparison of Participant Demographic Information 28 Glossary 29 Decrements Exhibit 30 Retirement Rates Exhibit 31 Illustrations of GASB Calculations 32 Definitions 34
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January 26, 2016 Tony Saunders Wayne County 500 Griswold, 20th Floor Detroit, MI 48226 This report summarizes the GASB actuarial valuation for Wayne County 2014/15 fiscal year. To the best of our knowledge, the report presents a fair position of the funded status of the plan in accordance with GASB Statement No. 45 (Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions). The valuation is also based upon our understanding of the plan provisions as summarized within the report. The information presented herein is based on the actuarial assumptions and substantive plan provisions summarized in this report and participant information furnished to us by the Plan Sponsor. We have reviewed the employee census provided by the Plan Sponsor for reasonableness when compared to the prior information provided but have not audited the information at the source, and therefore do not accept responsibility for the accuracy or the completeness of the data on which the information is based. When relevant data may be missing, we may have made assumptions we feel are neutral or conservative to the purpose of the measurement. We are not aware of any significant issues with and have relied on the data provided. The discount rate and other economic assumptions have been selected by the Plan Sponsor. Demographic assumptions have been selected by the Plan Sponsor with the concurrence of Nyhart. In our opinion, the actuarial assumptions are individually reasonable and in combination represent our estimate of anticipated experience of the Plan. All calculations have been made in accordance with generally accepted actuarial principles and practice. 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); and
changes in plan provisions or applicable law. We did not perform an analysis of the potential range of future measurements due to the limited scope of our engagement. To our knowledge, there have been no significant events prior to the current year's measurement date or as of the date of this report that could materially affect the results contained herein.
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Neither Nyhart nor any of its employees has any relationship with the plan or its sponsor that could impair or appear to impair the objectivity of this report. Our professional work is in full compliance with the American Academy of Actuaries Code of Professional Conduct Precept 7 regarding conflict of interest. The undersigned meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. Should you have any questions please do not hesitate to contact us.
Randy Gomez, FSA, MAAA Evi Laksana, ASA, MAAA Consulting Actuary Valuation Actuary
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Wayne County GASB 45 Valuation Actuarys Notes For Fiscal Year Ending September 30, 2015
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The prior years GASB results shown in this report are different from the Countys audited financial statement disclosure for FYE September 30, 2014 due to the October 1, 2013 Trust balance revision. There are changes to the substantive plan provisions since the last full valuation, which was for the fiscal year ending September 30, 2014. All of the changes described below decrease the Countys liabilities.
1. Retirees classified as MIRROR by the County are eligible to retain their current retiree health benefits, however, they are required to enroll in the HDHP 80/20 plan. The required retiree contribution is 10% of monthly premium. When the retiree turns 60, retiree contribution will be frozen at the applicable 10% of HDHP premium in that year until all covered members in the policy turns 65, at which time retiree health benefits come non-contributory. This change is also applicable to Mental Health Authority (MHA) retirees.
2. For all other retirees classified as non-MIRROR by the County, the Countys only obligation to these retirees is in providing stipend benefits as described
in the Substantive Plan Provisions section. These retirees must obtain their health coverage elsewhere. This change is also applicable to Mental Health Authority (MHA) retirees.
3. Non-POAM non-RMSA active employees who have at least 20 years of service as of October 1, 2015 are eligible for the stipend benefits. The Countys
only obligation to these employees at retirement is in providing stipend benefits as described in the Substantive Plan Provisions section. These employees must obtain their health coverage elsewhere at retirement.
4. For POAM employees who are non-RMSA eligible:
a. Those who retire prior to October 1, 2017 are eligible to retain their current health benefits, however, they are required to enroll in the HDHP 80/20 plan. The required contribution at retirement is 10% of monthly premium. When the retiree turns 60, retiree contribution will be frozen at the applicable 10% of HDHP premium in that year until all covered members in the policy turns 65, at which time retiree health benefits come non-contributory.
b. Those who do not retire by October 1, 2017 are eligible to receive stipend benefits if they have at least 20 years of service as of October 1, 2017. The Countys only obligation to these employees at retirement is in providing stipend benefits as described in the Substantive Plan Provisions section. These employees must obtain their health coverage elsewhere at retirement.
5. RMSA active employees are not eligible to enroll in the Countys group health plan at retirement.
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Wayne County GASB 45 Valuation Actuarys Notes For Fiscal Year Ending September 30, 2015
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Two actuarial assumptions have been updated since the last full valuation, which was for the fiscal year ending September 30, 2014:
1. Amortization type for Countys liabilities has been changed to a closed period from an open period (the remaining amortization period as of September 30, 2015 is 30 years). A closed period amortization is a more conservative and prudent approach to take for pre-funding long-term obligations, such as OPEB liabilities. This change has no impact in this years Countys liabilities or Annual Required Contribution.
2. Health care trend rates have been reset to the same initial trend used in the last valuation. Comparison of actual and expected trend rates are as shown
below. This change caused an increase in the Countys liabilities.
FYE Prior
Valuation Current
Valuation FYE
Prior Valuation
Current Valuation
2016 8.5% 9.0% 2021 6.0% 6.5%
2017 8.0% 8.5% 2022 5.5% 6.0%
2018 7.5% 8.0% 2023 5.0% 5.5%
2019 7.0% 7.5% 2024+ 5.0% 5.0%
2020 6.5% 7.0%
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Wayne County GASB 45 Valuation Actuarys Notes For Fiscal Year Ending September 30, 2015
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Summary of Results (Results are shown in thousands) Presented below is the summary of GASB 45 results for the fiscal year ending September 30, 2015 compared to the prior fiscal year as shown in GASB 45 actuarial valuation report for FYE September 30, 2014 revised in November 2015 for corrected Actuarial Value of Assets.
As of October 1, 20131 As of October 1, 2014
Total MHA County Total MHA County
Actuarial Accrued Liability (AAL) $ 1,333,744 $ 8,075 $ 1,325,669 $ 476,656 $ 5,432 $ 471,224
Actuarial Value of Assets (AVA) $ 9,106 $ 0 $ 9,106 $ 9,106 $ 0 $ 9,106
Unfunded AAL $ 1,324,638 $ 8,075 $ 1,316,563 $ 467,550 $ 5,432 $ 462,118
Funded Ratio 0.7% 0.0% 0.7% 1.9% 0.0% 1.9%
FY 2013/14 FY 2014/15
Total MHA County Total MHA County
Annual Required Contribution $ 77,623 $ 693 $ 76,930 $ 20,602 $ 489 $ 20,113
Annual OPEB Cost $ 77,613 $ 628 $ 76,985 $ 20,582 $ 403 $ 20,179
Annual Employer Contribution $ 35,901 $ 309 $ 35,592 $ 16,386 $ 201 $ 16,185
As of September 30, 2014 As of September 30, 2015
Total MHA County Total MHA County
Net OPEB Obligation $ 256,887 $ 1,719 $ 255,168 $ 261,083 $ 1,921 $ 259,162
As of October 1, 2015
Total MHA County
Total Active Participants2 1,385 0 1,385
Total Retiree Participants 5,102 56 5,046
1 Based on FYE 9/30/2014 GASB Report updated in November 2015, which are different from the Countys audited financial statement disclosure for FYE September 30, 2014 due to the October 1, 2013 Trust balance revision. 2 Total active participants above only includes active employees who are either eligible for subsidized retiree health benefits or stipend benefits.
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Wayne County GASB 45 Valuation Actuarys Notes For Fiscal Year Ending September 30, 2015
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Below is a breakdown of total GASB 45 liabilities allocated to past, current, and future service as of October 1, 2014 compared to the prior year. (Results are shown in thousands)
As of October 1, 2013 Total MHA County
Present Value of Future Benefits $ 1,604,299 $ 8,075 $ 1,596,224
Active Employees 717,307 0 717,307
Retired Employees 886,992 8,075 878,917
Actuarial Accrued Liability $ 1,333,744 $ 8,075 $ 1,325,669
Active Employees 446,752 0 446,752
Retired Employees 886,992 8,075 878,917
Normal Cost $ 23,662 $ 0 $ 23,662
Future Normal Cost $ 246,893 $ 0 $ 246,893
As of October 1, 2014 Total MHA County
Present Value of Future Benefits $ 485,971 $ 5,432 $ 480,539
Active Employees 57,215 0 57,215
Retired Employees 428,756 5,432 423,324
Actuarial Accrued Liability $ 476,656 $ 5,432 $ 471,224
Active Employees 47,900 0 47,900
Retired Employees 428,756 5,432 423,324
Normal Cost $ 1,680 $ 0 $ 1,680
Future Normal Cost $ 7,635 $ 0 $ 7,635
Present Value of Future Benefits (PVFB) is the amount needed as of October 1, 2013 and 2014 to fully fund the Countys retiree health care subsidies for existing and future retirees and their dependents assuming all actuarial assumptions are met.
Actuarial Accrued Liability (AAL) is the portion of PVFB considered to be accrued or earned as of October 1, 2013 and 2014. This amount is a required disclosure in the Required Supplementary Information section.
Normal Cost is the portion of the total liability amount that is attributed and accrued for current years active employee service by the actuarial cost method.
Future Normal Cost is the portion of the total liability amount that is attributed to the future employee by the actuarial cost method.
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Wayne County GASB 45 Valuation Actuarys Notes For Fiscal Year Ending September 30, 2015
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Below is a breakdown of total GASB 45 Actuarial Accrued Liability (AAL) allocated to pre and post Medicare eligibility. The liability shown below includes explicit (if any) and implicit subsidies. Refer to the Substantive Plan Provisions section for complete information on the Plan Sponsors GASB subsidies. (Results are shown in thousands)
As of October 1, 2013 Total MHA County
Active Pre-Medicare $ 93,508 $ 0 $ 93,508
Active Post-Medicare 353,244 0 353,244
Total Active AAL 446,752 0 446,752
Retirees Pre-Medicare $ 130,526 $ 396 $ 130,130
Retirees Post-Medicare 756,466 7,679 748,787
Total Retirees AAL 886,992 8,075 878,917
Total AAL $ 1,333,744 $ 8,075 $ 1,325,669
As of October 1, 2014 Total MHA County
Active Pre-Medicare $ 21,719 $ 0 $ 21,719
Active Post-Medicare 26,181 0 26,181
Total Active AAL 47,900 0 47,900
Retirees Pre-Medicare $ 74,917 $ 238 $ 74,679
Retirees Post-Medicare 353,839 5,194 348,645
Total Retirees AAL 428,756 5,432 423,324
Total AAL $ 476,656 $ 5,432 $ 471,224
$396
$7,679
$238
$5,194
$0
$2,000
$4,000
$6,000
$8,000
Pre-Medicare Cost Post-Medicare Cost
Change in AAL - MHA
October 1, 2013 October 1, 2014
$224
$1,102
$96 $375
$0
$400
$800
$1,200
Pre-Medicare Cost Post-Medicare Cost
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Change in AAL - County
October 1, 2013 October 1, 2014
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Wayne County GASB 45 Valuation GASB Disclosures For Fiscal Year Ending September 30, 2015
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GASB Results (Results are shown in thousands)
Required Supplementary Information
FY 2013/143 FY 2014/15
MHA County Total MHA County Total
AAL beg. of year $ 8,075 $ 1,325,669 $ 1,333,744 $ 5,432 $ 471,224 $ 476,656
AVA beg. of year 0 (9,106) (9,106) 0 (9,106) (9,106)
Unfunded AAL (UAAL) $ 8,075 $ 1,316,563 $ 1,324,638 $ 5,432 $ 462,118 $ 467,550
Funded Ratio 0.0% 0.7% 0.7% 0.0% 1.9% 1.9%
Covered payroll N/A $ 181,566 $ 181,566 $ N/A $ 76,105 $ 76,105
UAAL as a % of covered payroll N/A 725.1% 729.6% N/A 607.2% 614.3%
ARC MHA County Total MHA County Total
Normal cost beg. of year $ 0 $ 23,662 $ 23,662 $ 0 $ 1,680 $ 1,680
Amortization of the UAAL 666 50,309 50,975 470 17,659 18,129
Total $ 666 $ 73,971 $ 74,637 $ 470 $ 19,339 $ 19,809
Interest to end of year 27 2,959 2,986 19 774 793
ARC $ 693 $ 76,930 $ 77,623 $ 489 $ 20,113 $ 20,602
Net OPEB Obligation (NOO) MHA County Total MHA County Total
ARC as of end of year $ 693 $ 76,930 $ 77,623 $ 489 $ 20,113 $ 20,602
Interest on NOO to end of year 56 8,551 8,607 69 10,207 10,276
NOO amortization adjustment to the ARC
(121) (8,496) (8,617) (155) (10,141) (10,296)
Annual OPEB cost $ 628 $ 76,985 $ 77,613 $ 403 $ 20,179 $ 20,582
ER contribution for pay-go cost (309) (35,592) (35,901) (201) (16,185) (16,386)
ER contribution for pre-funding 0 0 0 0 0 0
Change in NOO $ 319 $ 41,393 $ 41,712 $ 202 $ 3,994 $ 4,196
NOO as of beginning of year 1,400 213,775 215,175 1,719 255,168 256,887
NOO as of end of year $ 1,719 $ 255,168 $ 256,887 $ 1,921 $ 259,162 $ 261,083
3 Based on FYE 9/30/2014 GASB Report updated in November 2015, which are different from the Countys audited financial statement disclosure for FYE September 30, 2014 due to the October 1, 2013 Trust balance revision.
Annual Required Contribution (ARC) is the annual expense recorded in the income statement under GASB 45 accrual accounting. It replaces the cash basis method of accounting recognition with an accrual method. The GASB 45 ARC is higher than the pay-as-you-go cost because it includes recognition of employer costs expected to be paid in future accounting periods.
Pay-as-you-go Cost is the expected total employer cash cost for the coming period based on all explicit and implicit subsidies. It is also the amount recognized as expense on the Income Statement under pay-as-you-go accounting.
Net OPEB Obligation is the cumulative difference between the annual OPEB cost and employer contributions. This obligation will be created if cash contributions are less than the current year expense under GASB 45 accrual rules. The net obligation is recorded as a liability on the employers balance sheet which will reduce the net fund balance. The value of implicit subsidies is considered as part of cash contributions for the current period. Other cash expenditures that meet certain conditions are also considered as contributions for GASB 45 purposes.
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Wayne County GASB 45 Valuation GASB Disclosures For Fiscal Year Ending September 30, 2015
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Summary of GASB 45 Financial Results (Results are shown in thousands) Presented below is the summary of GASB 45 results for the fiscal year ending September 30, 2015 and prior fiscal years. FY 2012/13 information is combined for County and Mental Health Authority (MHA). Schedule of Funding Progress
As of Actuarial Accrued
Liability (AAL) Actuarial Value of Assets
(AVA) Unfunded Actuarial
Accrued Liability (UAAL) Funded Ratio
Covered Payroll UAAL as % of
Covered Payroll
A B C = A - B D = B / A E F = C / E
October 1, 2014 $ 476,656 $ 9,106 $ 467,550 1.9% $ 76,105 614.3%
MHA $ 5,432 $ 0 $ 5,432 0.0% $ N/A N/A
County $ 471,224 $ 9,106 $ 462,118 1.9% $ 76,105 607.2%
October 1, 20134 $ 1,333,744 $ 9,106 $ 1,324,638 0.7% $ 181,566 729.6%
MHA $ 8,075 $ 0 $ 8,075 0.0% $ N/A N/A
County $ 1,325,669 $ 9,106 $ 1,316,563 0.7% $ 181,566 725.1%
October 1, 2012 $ 1,568,535 $ 0 $ 1,568,535 0.0% $ N/A N/A
4 Based on FYE 9/30/2014 GASB Report updated in November 2015, which are different from the Countys audited financial statement disclosure for FYE September 30, 2014 due to the October 1, 2013 Trust balance revision.
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Wayne County GASB 45 Valuation GASB Disclosures For Fiscal Year Ending September 30, 2015
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Summary of GASB 45 Financial Results (Results are shown in thousands) Schedule of Employer Contributions
FYE Employer
Contributions Annual Required
Contribution (ARC) % of ARC Contributed
A B C = A / B
September 30, 2015 $ 16,386 $ 20,602 79.5%
MHA $ 201 $ 489 41.1%
County $ 16,185 $ 20,113 80.5%
September 30, 20145 $ 35,901 $ 77,623 46.3%
MHA $ 309 $ 693 44.6%
County $ 35,592 $ 76,930 46.3%
September 30, 2013 $ 53,908 $ 89,439 60.3%
Historical Annual OPEB Cost
As of Annual OPEB Cost % of Annual OPEB Cost
Contributed Net OPEB Obligation
September 30, 2015 $ 20,582 79.6% $ 261,083
MHA $ 403 49.9% $ 1,921
County $ 20,179 80.2% $ 259,162
September 30, 20144 $ 77,613 46.3% $ 256,887
MHA $ 628 49.2% $ 1,719
County $ 76,985 46.2% $ 255,168
September 30, 2013 $ 89,486 60.2% $ 216,5716
5 Based on FYE 9/30/2014 GASB Report updated in November 2015, which are different from the Countys audited financial statement disclosure for FYE September 30, 2014 due to the October 1, 2013 Trust balance revision. 6 Original Net OPEB Obligation balance as of September 30, 2013 before the reversal due to elimination of benefit for MHA active employees.
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Wayne County GASB 45 Valuation Reconciliation of Actuarial Accrued Liability For Fiscal Year Ending September 30, 2015
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The Actuarial Accrued Liability (AAL) is expected to change on an annual basis as a result of expected and unexpected events. Under normal circumstances, it is generally expected to have a net increase each year. Below is a list of the most common events affecting the AAL and whether they increase or decrease the liability. Expected Events
Increases in AAL due to additional benefit accruals as employees continue to earn service each year
Increases in AAL due to interest as the employees and retirees age
Decreases in AAL due to benefit payments Unexpected Events
Increases in AAL when actual premium rates increase more than expected. A liability decrease occurs when premium rates increase less than expected.
Increases in AAL when more new retirements occur than expected or fewer terminations occur than anticipated. Liability decreases occur when the opposite outcomes happen.
Increases or decreases in AAL depending on whether benefit provisions are improved or reduced.
(Results are shown in thousands)
FY 2013/147 FY 2014/15
MHA County Total MHA County Total
AAL as of beginning of year $ 8,075 $ 1,325,669 $ 1,333,744 $ 5,432 $ 471,224 $ 476,656
Normal cost as of beginning of year 0 23,662 23,662 0 1,680 1,680
Expected benefit payments during the year (303) (34,891) (35,194) (201) (16,185) (16,386)
Interest adjustment to end of year 317 53,282 53,599 213 18,596 18,809
Expected AAL as of end of year $ 8,089 $ 1,367,722 $ 1,375,811 $ 5,444 $ 475,315 $ 480,759
Actuarial (gain) / loss due to experience 6,270 463,529 469,799 0 0 0
Preliminary AAL as of end of year reflecting actual experience
$ 14,359 $ 1,831,251 $ 1,845,610 $ 5,444 $ 475,315 $ 480,759
Actuarial (gain) / loss due to plan provisions (9,346) (1,416,179) (1,425,525) 0 0 0
Actuarial (gain) / loss due to assumption changes
419 56,152 56,571 0 0 0
Actual AAL as of end of year $ 5,432 $ 471,224 $ 476,656 $ 5,444 $ 475,315 $ 480,759
7 Actuarial Accrued Liability (AAL) as of beginning of year was actuarially rolled-back from end of year AAL on a no gain/loss basis.
Reconciliation of AAL shows what the actuary expects the actuarial accrued liability to be at the beginning of the following fiscal year based on current assumptions and plan provisions. The expected end of year AAL will change as actual plan experience varies from assumptions. Generally, the AAL is expected to have a net increase each year.
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Wayne County GASB 45 Valuation Employer Contribution Cash Flow Projections For Fiscal Year Ending September 30, 2015
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The below projections show the actuarially estimated employer-paid contributions for retiree health benefits for the next ten years. Results are shown separately for current /future retirees and gross claim costs/retiree contributions. These projections include explicit and implicit subsidies. (Results are shown in thousands)
COUNTY
FYE Current Retirees Future Retirees8 Total
2015 $ 15,746 $ 439 $ 16,185
2016 $ 17,163 $ 479 $ 17,642
2017 $ 17,352 $ 883 $ 18,235
2018 $ 17,794 $ 1,492 $ 19,286
2019 $ 18,219 $ 1,824 $ 20,043
2020 $ 18,641 $ 2,097 $ 20,738
2021 $ 19,017 $ 2,395 $ 21,412
2022 $ 19,492 $ 2,677 $ 22,169
2023 $ 19,813 $ 3,085 $ 22,898
2024 $ 19,913 $ 3,397 $ 23,310
FYE Estimated
Claims Costs Retiree
Contributions Net Employer-
Paid Costs
2015 $ 16,796 $ 611 $ 16,185
2016 $ 18,308 $ 666 $ 17,642
2017 $ 18,918 $ 683 $ 18,235
2018 $ 19,979 $ 693 $ 19,286
2019 $ 20,717 $ 674 $ 20,043
2020 $ 21,394 $ 656 $ 20,738
2021 $ 22,044 $ 632 $ 21,412
2022 $ 22,793 $ 624 $ 22,169
2023 $ 23,495 $ 597 $ 22,898
2024 $ 23,884 $ 574 $ 23,310
8 Projections for future retirees do not take into account future new hires.
$0
$5
$10
$15
$20
$25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Mill
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Retiree Contributions Net Employer Paid Costs
$0
$5
$10
$15
$20
$25
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
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Projected Employer Pay-go Cost - County
Current Retirees Future Retirees
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Wayne County GASB 45 Valuation Employer Contribution Cash Flow Projections For Fiscal Year Ending September 30, 2015
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The below projections show the actuarially estimated employer-paid contributions for retiree health benefits for the next ten years. Results are shown separately for current /future retirees and gross claim costs/retiree contributions. These projections include explicit and implicit subsidies. (Results are shown in thousands)
MHA
FYE Current Retirees Future Retirees9 Total
2015 $ 201 $ 0 $ 201
2016 $ 219 $ 0 $ 219
2017 $ 231 $ 0 $ 231
2018 $ 232 $ 0 $ 232
2019 $ 246 $ 0 $ 246
2020 $ 251 $ 0 $ 251
2021 $ 259 $ 0 $ 259
2022 $ 266 $ 0 $ 266
2023 $ 281 $ 0 $ 281
2024 $ 289 $ 0 $ 289
FYE Estimated
Claims Costs Retiree
Contributions Net Employer-
Paid Costs
2015 $ 206 $ 5 $ 201
2016 $ 224 $ 5 $ 219
2017 $ 236 $ 5 $ 231
2018 $ 235 $ 3 $ 232
2019 $ 249 $ 3 $ 246
2020 $ 253 $ 2 $ 251
2021 $ 260 $ 1 $ 259
2022 $ 267 $ 1 $ 266
2023 $ 281 $ 0 $ 281
2024 $ 289 $ 0 $ 289
9 Projections for future retirees do not take into account future new hires.
$0
$60
$120
$180
$240
$300
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Claims and Cost Sharing Projections - MHA
Retiree Contributions Net Employer Paid Costs
$0
$60
$120
$180
$240
$300
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Projected Employer Pay-go Cost - MHA
Current Retirees Future Retirees
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Wayne County GASB 45 Valuation Substantive Plan Provisions For Fiscal Year Ending September 30, 2015
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Retiree Health Benefits Non-POAM employees who have at least 20 years of service as of October 1, 2015 are eligible for stipend benefits once they meet the eligibility requirements noted in the next page.
POAM employees who retire prior to October 1, 2017 by meeting the eligibility requirements noted in the next
page are eligible to retain their current retiree health benefits but they are required to enroll in the HDHP 80/20 plan and pay the required contributions as described on page 17. POAM employees who retire on/after October 1, 2017 are eligible for stipend benefits if they have at least 20 years of service as of October 1, 2017.
Existing retirees classified as MIRROR by the County are eligible for stipend benefits. Existing retirees classified
as non-MIRROR by the County are eligible to retain their current retiree health benefits but they are required to enroll in the HDHP 80/20 plan and pay the required contributions as describe on page 17.
Stipend Benefits Employees and existing retirees eligible for stipend benefits are required to seek health coverage elsewhere and
the Countys only obligation to this group is in providing the stipend benefits as noted below. Prior to Medicare eligibility, the monthly stipend benefits provided by the County are as shown in the table
below.
Retiree only Retiree + Spouse (or 1
Dependent) Family
AGI* Stipend AGI* Stipend AGI* Stipend
< $30k $ 100 < $35k $ 150 < $40k $ 150
$30 to $45k $ 200 $35 to $65k $ 300 $40 to $55k $ 300
>= $45k $ 400 >= $65k $ 750 $55 to $70k $ 400
>= $70k $ 800
Upon Medicare eligibility, the monthly stipend is $130 per person, increasing annually based on percentage
increase in general wage levels for non-supervisory AFSCME for the annual period being calculated, but not more than 2%. If there is negative % change from 1/1/2015 in general wage levels for non-supervisory AFSCME, stipend may decrease but not less than $0. The maximum stipend shall never exceed 12.5% of the starting stipend (or $146.25). Additionally, there is a $5 monthly stipend that will replace the existing $29.50 Medicare Part B reimbursement. The additional $5 monthly stipend is not expected to increase in the future.
* AGI is short for Adjusted Gross Income. For existing retirees, their AGI is based on their pension benefit. For
future retirees, they are assumed to receive the maximum stipends shown above.
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Wayne County GASB 45 Valuation Substantive Plan Provisions For Fiscal Year Ending September 30, 2015
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Eligibility Employees in retirement plans 1 through 6 are eligible for subsidized retiree health benefits if they meet the age and service requirements of the applicable retirement plan. Employees hired or rehired on/after December 1, 1990 must have 30 years of service at retirement to be eligible for retiree health benefits, unless otherwise noted in the union contracts.
Based on the retirement plans normal eligibility requirements and union contract languages, the retiree health
benefits eligibility requirements are as follows:
Union Contract Retirement
Plan* Retiree Health Eligibility
AFSCME Supervisory and Non-Supervisory
DOH < 12/1/1990 DB 2 or DC 4 55/25, 60/15, 65/8
12/1/1990 DOH < 11/16/2001 DB 2 or DC 4 55/30, 60/15
DOH 11/16/2001 Hybrid 5 30 YOS
Building & Construction Trades
DOH < 7/1/1991 DB 2 55/25, 60/15, 65/5
7/1/1991 DOH < 10/1/2001 DB 2 or DC 4 60/15, 55/30
DOH 10/1/2001 Hybrid 5 60/15, 30 YOS
Dieticians & Nutritionists
DOH < 12/1/1990 DC 4 55/25, 60/15, 65/8
12/1/1990 DOH < 12/23/2002 DC 4 60/15, 55/30
DOH 12/23/2002 Hybrid 5 60/15, 30 YOS
Executive & Non-Executive Exempt
DOH < 12/1/1990 DC 4 55/25, 60/15, 65/8
12/1/1990 DOH < 12/23/2002 DC 4 55/30
DOH 12/23/2002 Hybrid 5 55/30
Government Admin Association
DOH < 12/1/1991 DB 2 or DC 4 55/25, 60/15, 65/8
12/1/1991 DOH < 10/1/2001 DB 2 or DC 4 60/15, 30 YOS
DOH 10/1/2001 Hybrid 5 60/15, 30 YOS
* We did not have the actual retirement plan enrollment information so we have assumed the retirement plan
enrollment above based on employees hire date.
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Wayne County GASB 45 Valuation Substantive Plan Provisions For Fiscal Year Ending September 30, 2015
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Eligibility Retiree health benefits eligibility requirements (continued):
Union Contract Retirement
Plan* Retiree Health Eligibility
Government Bar Association
DOH < 12/1/1990 DB 2 or DC 4 55/25, 60/20, 65/8
12/1/1990 DOH < 2/28/2002 DB 2 or DC 4 60/15, 55/30
DOH 2/28/2002 Hybrid 5 60/15, 30 YOS
IUOE Local 324
DOH < 12/1/1990 Hybrid 5 55/25, 60/15, 65/8
12/1/1990 DOH < 8/19/2002 DC 4 60/15, 55/30
DOH 8/19/2002 DC 4 60/15, 30 YOS
Judicial Attorneys Association
DOH < 12/1/1991 Hybrid 5 55/25, 60/20, 65/8, 30 YOS
DOH 12/1/1991 Hybrid 5 60/15, 30 YOS
POAM
DOH < 12/1/1990 DB 2 or DC 4 55/25, 60/20, 65/8, 30 YOS
12/1/1990 DOH < 10/1/2001 DB 2 or DC 4 55/30
DOH 10/1/2001 Hybrid 5 30 YOS
AFSCME 3317 Lieutenants & Sergeants
DOH < 12/1/1990 DB 2 25 YOS
12/1/1990 DOH < 10/1/2001 DB 2 or DC 4 60/15, 30 YOS
DOH 10/1/2001 Hybrid 5 30 YOS
Unite Here Local 24
DOH < 12/1/1990 DB 2 or DC 4 55/25, 60/20, 65/8
12/1/1990 DOH < 5/21/2002 DB 2 or DC 4 55/30, 60/15
DOH 5/21/2002 Hybrid 5 30 YOS
* We did not have the actual retirement plan enrollment information so we have assumed the retirement plan
enrollment above based on employees hire date.
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Wayne County GASB 45 Valuation Substantive Plan Provisions For Fiscal Year Ending September 30, 2015
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Retiree Medical Savings Account (RMSA) Employees hired on/after the cut-off dates shown in the table below are only eligible for Retiree Medical Savings Account (RMSA) benefit. While actively working, these employees contribute 2% of bi-weekly payroll (or a fixed dollar amount as specified by the CBA) and the County will contribute 5% of bi-weekly payroll (or a fixed dollar amount as specified by the CBA). At retirement these employees may utilize the RMSA balance to purchase retiree health benefits through the County by paying the full cost of coverage.
Union Contract Subsidized Retiree Health
Eligibility Cut-Off Date
AFSCME Supervisory Hired on/after 4/4/2008
AFSCME Non-Supervisory Hired on/after 7/31/2008
Building & Construction Trades Hired on/after 12/19/2007
Dieticians & Nutritionists Hired on/after 6/5/2009
Executive & Non-Executive Exempt Hired on/after 3/14/2008
Government Admin Association Hired on/after 10/17/2008
Government Bar Association Hired on/after 4/15/2008
IUOE Local 324 Hired on/after 12/5/2008
Judicial Attorneys Association Hired on/after 9/21/2012
Nurse Unit 1 Hired on/after 6/5/2009
POAM Hired on/after 12/12/2008
AFSCME 3317 Lieutenants & Sergeants Hired on/after 5/2/2007
Unite Here Local 24 Hired on/after 9/29/2008
Spouse Benefit Surviving spouse can continue coverage after the death of the retiree or active employees eligible to retire.
County subsidy and/or stipend benefit continues to surviving spouse upon death of the retiree or active employee eligible to retire.
Life Insurance The County pays for life insurance benefits at retirement. Majority of current retirees have $5,000 life insurance
benefits, but there are others who have varying life insurance benefit amounts. Liability for retirees life insurance benefits paid by Prudential is not included in this report.
For future retirees who are eligible for stipend benefits, theres no subsidized life insurance benefits. For those
who are allowed to retain the subsidized retiree health benefits, they are eligible to receive $5,000 life insurance benefits at retirement.
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Wayne County GASB 45 Valuation Substantive Plan Provisions For Fiscal Year Ending September 30, 2015
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Retiree Cost Sharing All retirees receiving subsidized retiree health benefits are required to enroll in the HDHP 80/20 plan and contribute 10% of the monthly premium. When the retiree turns 60, retiree contribution will be frozen at the applicable 10% monthly premium in that year until all covered members in the policy turn 65, at which time retiree health benefits become non-contributory.
Medical Benefit All retirees receiving subsidized retiree health benefits are required to enroll in the BCBS HDHP 80/20 plan. All
BCBS benefit options are self-insured. The monthly premiums on October 1, 2015 for the BCBS HDHP 80/20 plan are as shown below.
Single 2-person 1 Comp
BCBS HDHP 80/20 $ 370.03 $ 888.08 $ 391.33
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Wayne County GASB 45 Valuation Actuarial Methods and Assumptions For Fiscal Year Ending September 30, 2015
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The actuarial assumptions used in this report represent a reasonable long-term expectation of future OPEB outcomes. As national economic and County experience change over time, the assumptions will be tested for ongoing reasonableness and, if necessary, updated. There are changes to substantive plan provisions and actuarial methods and assumptions since the last GASB valuation, which was for the fiscal year ending September 30, 2014. Refer to the Actuarys Notes section for complete information on these changes. For the current year GASB valuation, we have updated the per capita costs. We expect to update health care trend rates and per capita costs again in the next full GASB valuation, which will be for the fiscal year ending September 30, 2017. Measurement Date September 30, 2015 with results actuarially rolled-back to October 1, 2014 on a no loss/no gain basis. Discount Rate 4.0% partially funded Payroll Growth 3.0% per year (used for amortization purposes only) Inflation Rate 3.0% per year Cost Method Projected Unit Credit with linear proration to decrement Amortization County: Level % of pay over a 30-year closed period MHA: Level dollar over a 15-year closed period Census Data Census information was provided by the County as of September 2015. We have reviewed it for reasonableness
and no material modifications were made to the census data except for the following:
Employees who were noted in the prior valuations census data as ineligible for retiree health benefits due to employment category are assumed to stay ineligible in this years valuation.
Employer Funding Policy Certain funds within the County will make an additional pre-funding contribution at the Countys discretion into
a Section 115 Trust that is equal to the difference between the Annual Required Contribution (ARC) allocated to that fund and the pay-go costs. Allocation of the total ARC to each fund is currently done in the same proportion as their share of retiree healthcare expenses. The Section 115 Trust is currently invested in a Master Demand Account, which is a liquid account with a very low rate of return. The County has elected not to increase the discount rate to reflect the partial pre-funding for these specific funds until they can draw up a Trust policy that contains the recommended asset investment mix that is more aggressive than their current investment.
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Wayne County GASB 45 Valuation Actuarial Methods and Assumptions For Fiscal Year Ending September 30, 2015
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Mortality RPH-2014 Total Dataset Mortality Table fully generational using scale MP-2014 Disability None Turnover Rate Assumption used to project terminations (voluntary and involuntary) prior to meeting minimum retirement
eligibility for retiree health coverage. Termination rates are based Wayne County actuarial valuation report as of September 30, 2011. Annual sample
rates are shown below.
YOS Age General Sheriff
0
All
Age
s
19.00% 18.00%
1 16.00% 18.00%
2 12.00% 9.00%
3 11.00% 7.00%
4 10.00% 6.00%
5+ 20 9.50% 4.50%
25 9.35% 4.38%
30 6.64% 3.22%
35 4.78% 2.44%
40 4.52% 2.34%
45 3.79% 2.12%
50 3.07% 1.70%
55 2.59% 1.20%
60 0.00% 0.00%
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Wayne County GASB 45 Valuation Actuarial Methods and Assumptions For Fiscal Year Ending September 30, 2015
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Retirement Rate Annual retirement rates based on Wayne County actuarial valuation report as of September 30, 2011 are as shown below.
Age-Based Service-Based
Age General Sheriff10 YOS General Sheriff9
55 30% 25% 30 30% 22%
56 20% 25% 31 20% 20%
57 15% 25% 32 15% 20%
58 59 30% 25% 33 30% 30%
60 40% 25% 34 40% 40%
61 62 30% 25% 35 50% 50%
63 30% 27% 36 38 30% 25%
64 20% 27% 39 20% 25%
65 66 30% 27% 40+ 100% 100%
67 20% 27%
68 40% 30%
69 80% 30%
70+ 100% 100%
Probabilities of retirement were increased to 50% once the member accrues the maximum benefit of 75% of
Average Final Compensation. For GASB valuation, this is assumed to happen when employees have 30 years of service.
Health Care Trend Rates FYE Medical/Rx FYE Medical/Rx
2016 9.0% 2021 6.5%
2017 8.5% 2022 6.0%
2018 8.0% 2023 5.5%
2019 7.5% 2024+ 5.0%
2020 7.0% Pre-65 stipends will remain the same in the future. Post-65 stipends are assumed to increase by 2.0% beginning
in 2016 until it reaches the maximum stipend amount of $146.25 at the end of 2021 at which time it is assumed to remain the same.
10 POAM employees who are eligible to retire prior to October 1, 2017 are assumed to retire when they are first eligible.
The initial trend rate was based on a combination of employer history, national trend surveys, and professional judgment. The ultimate trend rate was selected based on historical medical CPI information.
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Wayne County GASB 45 Valuation Actuarial Methods and Assumptions For Fiscal Year Ending September 30, 2015
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Retiree Contributions Retiree contributions are assumed to increase 5% annually. Per Capita Costs Annual per capita costs were calculated based on the 2015/16 premium rates actuarially increased using health
index factors and current enrollment. The costs are assumed to increase with health care trend rates. Annual per capita costs by plan are as shown below:
Age HDHP 80/20
< 55 $ 4,400
55 59 $ 5,400
60 64 $ 6,600
65 69 $ 3,500
70 74 $ 4,200
75 79 $ 4,800
80+ $ 5,600
Health Care Coverage Election Rate 100% of active employees eligible for subsidized retiree health benefits with current coverage are assumed to
continue coverage at retirement. 0% of active employees eligible for subsidized retiree health benefits without current coverage are assumed to
elect coverage at retirement. 100% of active employees eligible stipend benefits are assumed to receive stipend benefits at retirement. 100% of retirees with current coverage are assumed to continue coverage. 0% of retirees without current coverage are assumed to elect coverage in the future. Spousal Coverage Spousal coverage for current retirees is based on actual data. 70% of employees are assumed to be married at retirement. Husbands are assumed to be three years older than
wives.
The per capita costs represent the cost of coverage for a retiree-only population. Actuarial standards require the recognition of higher inherent costs for a retired population versus an active population.
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Wayne County GASB 45 Valuation Actuarial Methods and Assumptions For Fiscal Year Ending September 30, 2015
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Explicit Subsidy The difference between (a) the premium rate and (b) the retiree contribution. Below is an example of the monthly explicit subsidies for an active POAM under age 65 retiring before October 1, 2017.
Premium
Rate Retiree
Contribution Explicit Subsidy
A B C = A B
Retiree $ 370.03 $ 37.00 $ 333.03
Spouse $ 518.05 $ 51.81 $ 466.24
Implicit Subsidy The difference between (a) the per capita cost and (b) the premium rate. Below is an example of the monthly
implicit subsidies for an active POAM age 60 retiring before October 1, 2017 with spouse of the same age.
Per Capita
Cost Premium
Rate Implicit Subsidy
A B C = A B
Retiree $ 550.00 $ 370.03 $ 179.97
Spouse $ 550.00 $ 518.05 $ 31.95
GASB Subsidy Breakdown Below is a breakdown of the GASB 45 monthly total cost
for an active POAM age 60 retiring prior to October 1, 2017 and his / her spouse of the same age.
Retiree Spouse
Retiree contribution $ 37.00 $ 51.81
Explicit subsidy $ 333.03 $ 466.24
Implicit subsidy $ 179.97 $ 31.95
Total monthly cost $ 550.00 $ 520.00
All employers that utilize premium rates based on blended active/retiree claims experience will have an implicit subsidy. There is an exception for Medicare plans using a true community-rated premium rate.
$0
$200
$400
$600
Retiree Spouse
$37 $52
$333
$466
$180
$32
GASB Subsidy Breakdown
Retiree contribution Explicit subsidyImplicit subsidy
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Wayne County GASB 45 Valuation Summary of Plan Participants For Fiscal Year Ending September 30, 2015
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Active Employees
Actives with coverage AND eligible for retiree health benefits11
Single Non-Single Total Avg. Age Avg. Svc Salary
Non POAM 250 518 768 53.0 25.4 $ 43,286,689
POAM 149 466 615 45.2 17.5 $ 32,753,259
Total 399 984 1,383 49.5 21.9 $ 73,039,948
Actives without coverage AND eligible for retiree health benefits10
2 58.0 19.5 $ 65,155
Actives ineligible for retiree health benefits (non-RMSA)12
Single Non-Single Total Avg. Age Avg. Svc Salary
With current coverage 383 767 1,150 49.0 14.0 $ 61,410,342
Without current coverage 5 44.7 5.1 $ 289,924
Actives ineligible for retiree health benefits (RMSA)13
Single Non-Single Total Avg. Age Avg. Svc Salary
With current coverage 312 393 705 42.5 4.4 $ 32,680,606
Without current coverage 21 31.6 3.9 $ 692,666
Actives ineligible for retiree health benefits (RMSA)14
166 56.0 18.6 $ 8,663,530
11 For non-POAM, only those who have at least 20 years of service as of October 1, 2015 are included above. For POAM, there may be participants who are not going to be eligible for any benefits at retirement. Out of the two actives who currently have no coverage, one POAM active employee is not going to be eligible for any benefits at retirement while the other non-POAM active employee is assumed to receive stipend benefits at retirement. 12 These are non-RMSA eligible employees who are ineligible for either the subsidized retiree health benefits or stipend benefits because they do not have the required years of service as of October 1, 2015. They have been excluded from the GASB valuation. 13 These are RMSA eligible employees who are no longer allowed to enroll in the Countys group health plan at retirement. There is no GASB liabilities for these employees and they have been excluded from the GASB valuation. 14 These employees were indicated by the County as ineligible for retiree health benefits for various reasons. They have been excluded from the GASB valuation.
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Wayne County GASB 45 Valuation Summary of Plan Participants For Fiscal Year Ending September 30, 2015
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Retirees
County retirees with coverage Single Non-Single Total Avg. Age
MIRROR 481 686 1,167 61.1
Non-MIRROR 2,130 1,557 3,687 76.9
Total 2,611 2,243 4,854 73.1
County retirees without coverage Total Avg. Age
MIRROR 42 66.4
Non-MIRROR 150 80.0
Total 192 77.0
MHA retirees with coverage Single Non-Single Total Avg. Age
MIRROR 12 10 22 67.3
Non-MIRROR 15 16 31 74.7
Total 27 26 53 71.6
MHA retirees without coverage Total Avg. Age
MIRROR 2 59.7
Non-MIRROR 1 78.3
Total 3 65.9
MIRROR retirees who currently have no coverage are receiving subsidized life insurance benefits. Non-MIRROR retirees who have no coverage are receiving stipend benefits. They have been included in the GASB valuation.
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Wayne County GASB 45 Valuation Summary of Plan Participants For Fiscal Year Ending September 30, 2015
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Active Age-Service Distribution Including active employees who are eligible for either subsidized retiree health benefits or stipend benefits only.
Years of Service
Age < 1 1 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 & up Total
Under 25 0
25 to 29 9 9
30 to 34 1 28 27 56
35 to 39 20 48 31 6 105
40 to 44 12 36 73 77 10 208
45 to 49 6 14 40 170 97 11 338
50 to 54 2 11 23 140 135 28 2 341
55 to 59 7 5 90 69 24 4 199
60 to 64 2 3 2 35 25 19 3 3 92
65 to 69 1 1 1 10 10 1 4 28
70 & up 2 2 1 1 3 9
Total 0 1 80 147 175 530 348 83 11 10 1,385
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Wayne County GASB 45 Valuation Appendix For Fiscal Year Ending September 30, 2015
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APPENDIX
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Wayne County GASB 45 Valuation Appendix For Fiscal Year Ending September 30, 2015
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Comparison of Participant Demographic Information The active participants number below may include active employees who currently have no health care coverage. Refer to Summary of Participants section for an accurate breakdown of active employees with and without coverage.
As of October 1, 2014 As of October 1, 2015
Active Participants15 3,430 1,385
Retired Participants16 4,984 5,046
Averages for Active
Age 48.0 49.5
Service 15.4 21.9
Averages for Inactive
Age 73.0 73.2
15 Active participants enrollment as of October 1, 2014 above excludes those indicated as ineligible for retiree health benefits by the County and active MHA employees who are no longer eligible for retiree health benefits. It includes active employees who are eligible for RMSA benefits only. Active participants enrollment as of October 1, 2015 includes only those who are eligible for either subsidized retiree health benefits or stipend benefits. 16 Retired participants enrollment above include County and MHA retirees (regardless of whether they currently have coverage or not) but excludes spouses who are covered under the Countys group health plan.
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Wayne County GASB 45 Valuation Glossary For Fiscal Year Ending September 30, 2015
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Glossary
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Wayne County GASB 45 Valuation Glossary For Fiscal Year Ending September 30, 2015
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Decrements Exhibit The table below illustrates how actuarial assumptions can affect a long-term projection of future liabilities. Starting with 100 employees at age 35, the illustrated actuarial assumptions show that 44.430 employees out of the original 100 are expected to retire and could elect retiree health benefits at age 55.
Age # Remaining Employees
# of Terminations per Year*
# of Retirements per Year*
Total Decrements
Age # Remaining Employees
# of Terminations per Year*
# of Retirements per Year*
Total Decrements
35 100.000 6.276 0.000 6.276 46 55.938 2.085 0.000 2.085
36 93.724 5.677 0.000 5.677 47 53.853 1.866 0.000 1.866
37 88.047 5.136 0.000 5.136 48 51.987 1.656 0.000 1.656
38 82.911 4.648 0.000 4.648 49 50.331 1.452 0.000 1.452
39 78.262 4.209 0.000 4.209 50 48.880 1.253 0.000 1.253
40 74.053 3.814 0.000 3.814 51 47.627 1.060 0.000 1.060
41 70.239 3.456 0.000 3.456 52 46.567 0.877 0.000 0.877
42 66.783 3.131 0.000 3.131 53 45.690 0.707 0.000 0.707
43 63.652 2.835 0.000 2.835 54 44.983 0.553 0.000 0.553
44 60.817 2.564 0.000 2.564 55 44.430 0.000 44.430 44.430
45 58.253 2.316 0.000 2.316
* The above rates are illustrative rates and are not used in our GASB calculations.
0
20
40
60
80
100
35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55
Decrements Exhibit
Actives Total Terminations Total Retirements
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Wayne County GASB 45 Valuation Glossary For Fiscal Year Ending September 30, 2015
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Retirement Rates Exhibit The table below illustrates how actuarial assumptions can affect a long-term projection of future liabilities. The illustrated retirement rates show the number of employees who are assumed to retire annually based on 100 employees age 55 who are eligible for retiree health care coverage. The average age at retirement is 62.0.
Age Active
Employees BOY
Annual Retirement
Rates*
# Retirements per Year
Active Employees
EOY
55 100.000 5.0% 5.000 95.000
56 95.000 5.0% 4.750 90.250
57 90.250 5.0% 4.513 85.738
58 85.738 5.0% 4.287 81.451
59 81.451 5.0% 4.073 77.378
60 77.378 5.0% 3.869 73.509
61 73.509 5.0% 3.675 69.834
62 69.834 30.0% 20.950 48.884
63 48.884 15.0% 7.333 41.551
64 41.551 15.0% 6.233 35.318
65 35.318 100.0% 35.318 0.000
* The above rates are illustrative rates and are not used in our GASB calculations.
0
20
40
60
80
100
55 56 57 58 59 60 61 62 63 64 65
Retirement Rates Exhibit
Actives Total Retirements
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Wayne County GASB 45 Valuation Glossary For Fiscal Year Ending September 30, 2015
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Illustration of GASB Calculations The purpose of the illustration is to familiarize non-actuaries with the GASB 45 actuarial calculation process. I. Facts
1. The employer provides subsidized retiree health coverage worth $100,000 to employees retiring at age 55 with 25 years of service. The employer funds for retiree health coverage on a pay-as-you-go basis.
2. Employee X is age 50 and has worked 20 years with the employer.
3. Retiree health subsidies are paid from the general fund assets which are expected to earn 4.5% per year on a long-term basis.
4. Based on Employee Xs age and sex he has a 98.0% probability of living to age 55 and a 95.0% probability of continuing to work to age 55.
II. Calculation of Present Value of Future Benefits Present Value of Future Benefits represents the cost to finance benefits payable in the future to current and future retirees and beneficiaries, discounted to reflect the expected effects of the time value (present value) of money and the probabilities of payment.
Value Description
A. $100,000 Projected benefit at retirement
B. 80.2% Interest discount for five years = (1 / 1.045)5
C. 98.0% Probability of living to retirement age
D. 95.0% Probability of continuing to work to retirement age
E. $74,666 Present value of projected retirement benefit measured at employees current age = A x B x C x D
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Wayne County GASB 45 Valuation Glossary For Fiscal Year Ending September 30, 2015
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Illustration of GASB Calculations (continued) III. Calculation of Actuarial Accrued Liability Actuarial Accrued Liability represents the portion of the Present Value of Future Benefits which has been accrued recognizing the employees past service with the employer. The Actuarial Accrued Liability is a required disclosure in the Required Supplementary Information section of the employers financial statement.
Value Description
A. $74,666 Present value of projected retirement benefit measured at employees current age
B. 20 Current years of service with employer
C. 25 Projected years of service with employer at retirement
D. $59,733 Actuarial accrued liability measured at employees current age = A x B / C
IV. Calculation of Normal Cost Normal Cost represents the portion of the Present Value of Future Benefits allocated to the current year.
Value Description
A. $74,666 Present value of projected retirement benefit measured at employees current age
B. 25 Projected years of service with employer at retirement
C. $2,987 Normal cost measured at employees current age = A / B
V. Calculation of Annual Required Contribution Annual Required Contribution is the total expense for the current year to be shown in the employers income statement.
Value Description
A. $2,987 Normal Cost for the current year
B. $3,509 30-year amortization (level dollar method) of Unfunded Actuarial Accrued Liability using a 4.5% interest rate discount factor
C. $292 Interest adjustment = 4.5% x (A + B)
D. $6,788 Annual Required Contribution = A + B + C
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Wayne County GASB 45 Valuation Glossary For Fiscal Year Ending September 30, 2015
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Definitions GASB 45 defines several unique terms not commonly employed in the funding of pension and retiree health plans. The definitions of the terms used in the GASB actuarial valuations are noted below. 1. Actuarial Accrued Liability That portion, as determined by a particular Actuarial Cost Method, of the Actuarial Present Value of plan benefits and expenses
which is not provided for by the future Normal Costs.
2. Actuarial Assumptions Assumptions as to the occurrence of future events affecting health care costs, such as: mortality, withdrawal, disablement and retirement; changes in compensation and Government provided health care benefits; rates of investment earnings and asset appreciation or depreciation; procedures used to determine the Actuarial Value of Assets; characteristics of future entrants for Open Group Actuarial Cost Methods; and other relevant items.
3. Actuarial Cost Method A procedure for determining the Actuarial Present Value of future benefits and expenses and for developing an actuarially equivalent allocation of such value to time periods, usually in the form of a Normal Cost and an Actuarial Accrued Liability.
4. Actuarial Present Value The value of an amount or series of amounts payable or receivable at various times, determined as of a given date by the application of a particular set of Actuarial Assumptions. For purposes of this standard, each such amount or series of amounts is:
a) adjusted for the probable financial effect of certain intervening events (such as changes in compensation levels, Social Security, marital status, etc.); b) multiplied by the probability of the occurrence of an event (such as survival, death, disability, termination of employment, etc.) on which the payment is
conditioned; and c) discounted according to an assumed rate (or rates) of return to reflect the time value of money.
5. Annual OPEB Cost An accrual-basis measure of the periodic cost of an employers participation in a defined benefit OPEB plan.
6. Annual Required Contribution (ARC) The employers periodic required contributions to a defined benefit OPEB plan, calculated in accordance with the parameters.
7. Explicit Subsidy The difference between (a) the amounts required to be contributed by the retirees based on the premium rates and (b) actual cash contribution made by the employer.
8. Funded Ratio The actuarial value of assets expressed as a percentage of the actuarial accrued liability.
9. Healthcare Cost Trend Rate The rate of change in the per capita health claims costs over time as a result of factors such as medical inflation, utilization of healthcare services, plan design, and technological developments.
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Wayne County GASB 45 Valuation Glossary For Fiscal Year Ending September 30, 2015
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Definitions (continued) 10. Implicit Subsidy In an experience-rated healthcare plan that includes both active employees and retirees with blended premium rates for all plan
members, the difference between (a) the age-adjusted premiums approximating claim costs for retirees in the group (which, because of the effect of age on claim costs, generally will be higher than the blended premium rates for all group members) and (b) the amounts required to be contributed by the retirees.
11. Net OPEB Obligation The cumulative difference since the effective date of this Statement between annual OPEB cost and the employers contributions to the plan, including the OPEB liability (asset) at transition, if any, and excluding (a) short-term differences and (b) unpaid contributions that have been converted to OPEB-related debt.
12. Normal Cost The portion of the Actuarial Present Value of plan benefits and expenses which is allocated to a valuation year by the Actuarial Cost Method.
13. Pay-as-you-go A method of financing a benefit plan under which the contributions to the plan are generally made at about the same time and in about the same amount as benefit payments and expenses becoming due.
14. Per Capita Costs The current cost of providing postretirement health care benefits for one year at each age from the youngest age to the oldest age at which plan participants are expected to receive benefits under the plan.
15. Present Value of Future Benefits Total projected benefits include all benefits estimated to be payable to plan members (retirees and beneficiaries, terminated employees entitled to benefits but not yet receiving them, and current active members) as a result of their service through the valuation date and their expected future service. The actuarial present value of total projected benefits as of the valuation date is the present value of the cost to finance benefits payable in the future, discounted to reflect the expected effects of the time value (present value) of money and the probabilities of payment. Expressed another way, it is the amount that would have to be invested on the valuation date so that the amount invested plus investment earnings will provide sufficient assets to pay total projected benefits when due.
16. Select and Ultimate Rates Actuarial assumptions that contemplate different rates for successive years. Instead of a single assumed rate with respect to, for example, the investment return assumption, the actuary may apply different rates for the early years of a projection and a single rate for all subsequent years. For example, if an actuary applies an assumed investment return of 8% for year 20W0, then 7.5% for 20W1, and 7% for 20W2 and thereafter, then 8% and 7.5% select rates, and 7% is the ultimate rate.
17. Substantive Plan The terms of an OPEB plan as understood by the employer(s) and plan members.