BICKMORE & ASSOCIATES, INC.-2014

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Actuarial Valuation of Other Post - Employment Benefit Programs as of April 1, 2012 for the City of Sample City A. Executive Summary This report presents the results of the April 1, 2012 actuarial valuation of the City of Sample City (the City) other post - employment benefit (OPEB) programs. Briefly, benefits include subsidized medical coverage for eligible retirees. The purpose of this valuation is to assess the OPEB liabilities and provide disclosure information as required by Statement No. 45 of the Governmental Accounting Standards Board (GASB 45). In recent prior years, the City has been prefunding its OPEB obligations by consistently making contributions greater than or equal to the Annual Required Contribution (ARC) each year. However, budgetary constraints have required that the City at least temporarily discontinue making contributions to the OPEB trust. A change in level of OPEB funding generally affects the discount rate used to develop the OPEB liability and ARC. The 4.47% discount rate used in this valuation was calculated by blending expected long term rates of return for the portion of future benefits expected to be funded by existing trust assets, with benefits expected to be paid from other sources. The expected long term rate of return on trust assets was reduced from 7.6% to 7.0% reflecting changes in future market returns for the asset allocation strategy selected by the City for the assets invested in PARS. The remaining plan benefits are assumed to be paid from sources with a long term future rate of return of 4 %. Additional discussion of funding policy, including discount rates, is found on page 8 and determination of the blended discount rate is provided in Appendix 1 on page 25. None of the rates used should be considered a guarantee of future investment performance, but rather assumptions about the expected long term rate of return for assets used to pay future retiree benefits. Exhibits presented in this report are based on the assumption that results of this April 1, 2012 valuation will be applied in determining the annual OPEB expense for the fiscal years ending June 30, 2012 and 2013. We calculate the GASB 45 actuarial accrued liability (AAL) to be $42,581,526 and the normal cost to be $1,428,449 on the valuation date. The City reported OPEB trust assets in PARS as of April 1, 2012 of $5,761,456 to offset these liabilities. Thus, the unfunded actuarial accrued liability (UAAL) as of this date is $36,820,071, and the funded ratio is 13.5 %. The following summarizes the results for the fiscal year ending June 30, 2012: • We calculate the annual required contribution (ARC) to be $3,043,152. • The City contributed $1,242,576 during the period, equal to retiree premiums paid. • Based on the calculations and contributions described above, we project a net OPEB obligation of $2,187,501 on June 30, 2012. These results are shown in tables beginning on page 11. Projected results for the fiscal year ending June 30, 2013 are also shown in these tables. To illustrate the difference in the ARC due to the change in funding policy (i.e., the reduction in City contributions to the OPEB trust), Appendix 4 shows prefunding results for the fiscal year ending June 30, 2013. Had the City continued contributing 100% of the ARC each year, the UAAL would be $24.3 million, instead of $36.8 million, the ARC would be $2.2 million instead of $3.0 million and the funded ratio would be 19.2% instead of 13.5 %. Btckmore