Note 10 Post-Employment Health Care Benefits

Meeting Date: November 13, 2014

Agenda Item #11

Note from TheGardeningSnail: Parts of this page may have been prepared by running a PDF Image Document through a program which converts image to text. My apologies for any Textual Gremlins that may have slipped in.

Note 10 – Post-Employment Health Care Benefits Plan Description

For all employees employed by the City as of July 1, 1989 who retire from the City’s employment under the Public Employee ‘s Retirement System currently in effect other than disability retirement, the City will continue to pay the premiums for health and dental care coverage in an amount equal to the amount paid if the employee wa.s still employed by the City.

In disability cases, dependent medical and dental coverage will continue until death of the retired employee or until dependents no longer are qualified as dependents under the current medical and dental plan.

Employees hired after July 1, 1989, shall enjoy City paid post-retirement health benefits as follows

(a) employee must have been continuously employed by the City for twenty years (disruptions in service due to lay-offs are exempted), (b) post-retirement health insurance for employee only shall be limited to the actual cost of insurance, not to exceed $300 per month, (c) disability retirement will be as if employee met the twenty year employment requirement described above and (d) at age sixty-five, Medicare shall become the retired employee’s primary insurance.

For the fiscal year ending June 30, 2014, eleven retirees were receiving such benefits. The City is financing these benefits on a pay as you go basis.

Funding Policy

The City is currently funding the OPEB Plan on a pay-as-you-go basis. Additional amounts to prefund future benefits have not been paid.

Note 10 – Post-Employment Health Care Benefits (Continued) Annual OPEB Cost and Net OPEB Obligation

The City’s annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the perameters of GASB 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded acturarial liabilities (or funding excess) over a period of thirty (30) years. The following table shows the amount contributed to the plan, and changes in the City’s net OPEB obligation:

Annual required contribution (OPEB cost)

$ 199,328

Interest on net OPEB obligation


Adjustment to annual required contribution


Annual OPEB cost (expense)


Age adjusted contributions made


Increase in net OPEB obligation


Net OPEB obligation, beginning of year


Net OPEB obligation, end of year

$ 589,557

Note 10 Post Employment Health

Note 10 – Post-Employment Health Care Benefits (Continued)

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding status and progress, as shown above, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and included the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefits costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

The annual OPEB cost was determined as part of the June 30, 2013 actuarial valuation. Additional information as of the last actuarial valuations follows:

Note 10 Post Employment Health 2


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