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 Citv C. Sources of OPEB Liabilities Post- employment benefits other than pensions (OPEB) comprise a part of compensation that employers offer for services received. The most common OPEB are: • Medical • Dental Prescription drug • Vision Life insurance Other possible post - employment benefits may include outside group legal, long -term care, or disability benefits outside of a pension plan. OPEB does not generally include vacation, sick leave or COBRA benefits, which fall under other GASB accounting statements. A direct employer payment toward the cost of OPEB is referred to as an "explicit" subsidy and these are included in the determination of OPEB liabilities. In addition, if claims experience of employees and retirees are pooled when determining premiums, the retirees pay a premium based on a pool of members that, on average, are younger and healthier. For certain types of coverage, such as medical, payment of the same premium rate results in an "implicit subsidy" of retiree claims by active employee premiums since the retiree premiums are lower than they would have been if the retirees were insured separately. Paragraph 13.a. of GASB 45 generally requires an implicit subsidy of retiree premium rates be valued as an OPEB liability. Exceptions may exist when the plan is part of a "community- rated" program. GASB guidance indicates that an agency whose membership is a small portion (in the neighborhood of 1 %) of the total coverage of a multiple employer plan, may reasonably conclude that any change in their group's mix of retirees and active employees would not affect the premium rates for the plan. In those circumstances, while an implicit subsidy may exist, it is not required to be disclosed. OPEB Obligations of the City The City provides continuation of medical coverage to its retiring employees. For retirees and their dependent(s) who have chosen to retain this coverage: • The City contributes directly to the cost of retiree medical coverage. These benefits are described in Table 3 and liabilities have been included in this valuation. • Employees are covered by the CalPERS medical program. The experience of public agency employer membership in this program is community -rated ( "OPEB Assumption Model ", April 2010) and the City's membership in this program is incidental relative to the total number of members covered. This report, therefore, does not make age - related premium adjustments or compute an implicit rate subsidy for employees covered under this program. ' When a terminating employee's unused sick leave credits are converted to provide or enhance a defined benefit OPEB, e.g., healthcare benefits, such converted sick leave credits should be valued under GASB 45. Bekmore 4 i