HomeMy WebLinkAbout2007-08-21-10:00AM-WORKSHOPmum
P 12. 28
ERK
BRAZOS COUNTY TtE,s
BRYAN, TEXAS
NOTICE OF MEETING
AND AGENDA
BRAZOS COUNTY COMMISSIONERS COURT
WORKSHOP SESSION
THE COMMISSIONERS COURT OF BRAZOS COUNTY WILL MEET IN A
WORKSHOP SESSION ON TUESDAY 21 AUGUST 2007 AT 10:00 A.M. IN THE
COMMISSIONERS COURTROOM OF THE BRAZOS COUNTY COURTHOUSE, 300
E. 26TH STREET, SUITE 115, BRYAN, TEXAS.
1. Call to Order
2. Presentation and discussion of Actuarial Valuation of Postretirement Benefits under
GASB 45.
3. Adjourn
The Brazos County Courthouse is wheelchair accessible. Handicap parking spaces are available. Any request for sign
interpretive services must be made two business days before the meeting. To make arrangements, call (979) 361 -4102.
Office of the County Judge • 300 East 26 '" St. • Suite 114 *Bryan, Texas 77803 • Fax: (979) 361 -4503
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COMMISSIONERS' COURT
WORKSHOP SESSION
August 21, 2007
The Commissioners' Court of Brazos County, Texas met
in a Workshop Session in the Commissioners' Courtroom in
the Courthouse in Bryan, Brazos County, Texas, beginning at
10:00 a.m. on Tuesday August 21, 2007, with the following
members of the Court present:
Randy Sims, County Judge, Presiding;
Lloyd Wassermann, Commissioner of Precinct l;
Duane Peters, Commissioner of Precinct 2;
Kenny Mallard, Commissioner of Precinct 3;
Carey Cauley, Commissioner of Precinct 4;
Karen McQueen, County Clerk.
Attached is a list of the citizens and officials in
attendance.
Attached is a transcript of the meeting.
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BRAZOS COUNTY COMMISSIONERS COURT
Actuarial Valuation of Postretirement Benefits
under GASB 45
August 21st, 2007
Sims: I will open the workshop session of the Commissioner's Court. We will
meet in workshop session on Tuesday the 21st, August 2007 at 10:05 in
the Commissioner's Courtroom, Brazos County Courthouse, 300 E. 26th
Street, Suite 115. First item on the agenda is presentation and discussion
of actuarial Valuation of Postretirement Benefits under GASB 45. Katie?
Conner: Well, as you may remember we opted to hire a professional actuarial firm
to help us determine what our potential, what our liability is for
postretirement and health insurance. Right now we offer; if you've been
here eight years the retiree has the ability to stay on our health insurance
currently at the same price that employees pay. So we hired Milliman,
which is a nationwide actuarial firm. I just talked to Brian this morning
and he says he has done two or three of these presentations so everybody
is getting ready. GASB 45, for us, is effective beginning the year ending
9/30/07. So we do have to get moving so to say. This is Brian Wilson
with Milliman.
Wilson: Howdy.
Sims: Hi.
Conner: The Court or Commissioner Carey Cauley, Commissioner Kenny
Mallard, County Judge Randy Sims, Commissioner Duane Peters, and
Commissioner Lloyd Wasserman.
Wilson: I've got six copies here so I think we're all right.
Conner: That's enough for them. Do we need more copies.
Tumlinson: I'm Jim Tumlinson with Milliman also.
Sims: Hi Jim, how are you?
Tumlinson: Doing good. We're both actuaries who've worked on this valuation. I'll
let Brian lead the presentation and I'll provide some help and answers if
any questions come up?
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Wilson: How much time do you want me to take up?
Sims: I think we should take it as far as we can because this is important to us.
Ok?
Wilson: All right. Absolutely. I'll start with a little bit of background for you.
Historically, plant sponsors... when I say a plant I'm referring to anybody
who offers retiree medical benefits... they've accounted for their retiree
medical on a pay as you go basis. In other words, when benefits come in
the money goes out. It's part of the budget process but there is no real
accounting for it for potential future benefits.
The Governmental Accounting Standards Board a couple of years ago
decided that these are really part of the compensation package of
employees and should be accounted for at the time that the benefits are
earned which is during the employees service with the entity. So they
wrote GASB 45 and are asking employers to record on their books a
liability for these potential future benefit payments and for the liability
for current retirees. So Katie contacted me a few months ago and we sent
a proposal and we've done an evaluation of your plan.
I'm going to start with the back ... I'm sorry I don't have a copy of the
report for everybody, I wasn't anticipating quite a large crowd. If we got
to the back of the report in the appendices section... Appendix C is
actually a basic summary of your plan. It's on page 18 of the report if you
have a copy. Page numbers are in the bottom right corner. You basically
have five covered groups here for Retiree Medical ... you have the
County, the Health Department, CSCD, 911 and the Rape Center. On the
CSCD, the active employees there are not eligible for retiree medical. But
there are currently eight grandfathered retirees that are getting benefits.
Eligibility as it was explained to us is employees who are retiring at age
60 with eight years of service or if they retire with 30 years of service or
when the sum of their age and service is 75. We'll call that 75 points.
Dependants are eligible for coverage while the retiree is alive. Often
times people offer coverage in the event of disability but our
understanding is that it's not eligible here unless your otherwise eligible
for retirement.
Retiree pay a small portion, basically a cost sharing, typically between
the employer and the employee. And what the retirees are required to pay
if you're listed here; member who retired prior to January 1 of 2000 are
paying about $105.00 a month, $11.00 a month for dental. If you're
retiring after January of 2000 retirees are paying $25.00 a month and
$11.00 a month for dental also.
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You don't offer life insurance. Basic medical benefits covered are on the
next page, page 19. And I'm not going to go through all of this but it goes
through the co- insurance, the deductibles for individuals with family.
From this, it's actually a two part step here from our basic understanding
of your plan; we have health actuaries in our office that analyze your
historical or your recent claims information. In other words, how much
you paid in the last couple of years based on your actual demographic
group. Using your plan and your actual medical claims experience they
try to assign an actual cost per year. And expected cost per year per
individual. If we can flip forward a couple of pages to the assumptions
section at the bottom of page 16, we actually have what we call "Per
Capita Claims Cost ". This is per person expected claims cost for retirees
and this is annual. So you can see for an age 55- year -old, we're
anticipating $6,700 in medical claims per year for a male. And that
escalates each year up to 64 where we're anticipating $10,400 in annual
medical claims per individual. At 65 it drops down because they then
become eligible for Medicare and Medicare is picking up a good large
chunk of their claims. So it drops down to $3,163.00 at 65 and then starts
to increase again as they get older.
Now that is the 2007 expected cost there. It increases as you get old
because the older individuals tend to go to the doctor more and to have
more medical needs. Also, as we're projecting these cost into the future,
we are expecting medical trend to go up each year. Our trend assumption
for cost shows on the next page.
Mallard: I'm sorry, I just want to verify this; this is based at age 55 and that's on
all employees or just employees that are age 55 whether they qualify for
retirements or not.
Wilson: This is actually on retirees at 55. If you're actives are not being accounted
for as their actives. That's actually a pay as you go. We're accruing
benefits for actives. Now if a person is 55 and active he is not being
accounted for under GASB 45. It's a separate accounting for him. This is
only for retirees.
Mallard: Ok. So this is the number for folks that have actually retired at that age.
Wilson: Yes sir.
Mallard: Ok. Thank you.
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Wilson: Sure. So if you can thing about someone who retired at 55, we expect
maybe $5,000.00 or $6,000.00 for him this year. Maybe up to $7,000.00
and change next year, $7,500.00 the year after that. We say go on up to
$10,000.00 at 64 then drop it down with Medicare to $3,100.00 then
increasing after that. We're going to take these expected future payments,
or medical claims, and we're going to discount these back today for
retiring. And that will be the liability for one individual.
Mallard: Medicare covers the majority of that. Probably the most active amount
after age 65 is probably the prescriptions. And the drugs is probably the
largest benefit...
Wilson: That's right. Exactly. Probably over 50% is for prescription drugs. In fact
on a couple of cases we've had, that's one of the things that they were
looking at is pushing people into the new Medicare Part D for
prescriptions drugs. And it's a drop step. But by about 50% that's post 65
claims.
Mallard: So they're saying that they are requiring them to use that prescription
drug first and then come under the medical plan?
Wilson: Actually that would push the amount entirely.
Mallard: Entirely?
Wilson: Yes sir. This is just one example. We're not talking about...
Mallard: Right. I understand.
Wilson: Ok.
Mallard: I'm just curious how that...
Wilson: And they haven't done it, that's what they're considering.
Mallard: Right.
Wilson: Well employees are in the same place you are; it's coming out and there
you go. It's a bigger number than we anticipated... what can we do? And
that's one of the things they're seriously considering.
Mallard: But they're not required to use the Medicare prescription drug if they had
the County plan. They wouldn't be required... they're required to use, I
guess, the medical under Medicare at age 65 but they're not required to
use the Part D. Which they wouldn't be required to use that.
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Wilson: Yall are currently picking up pharmacy.
Mallard: Ok. Thank you.
Wilson: As I talk about those medical claims increasing with age and the dropping
off ...as we project them out to the future ... the next concept really is
medical trends. Cost aren't staying the same form 2007, 2008, 2009.
They're actually going up. Medical cost have been going up, double
medical experience because I'm seen double digit inflation in the last
several years.
We have our assumptions on the top of page 17 there. We're anticipating
11 % on Pre - Medicare files this year then dropping down to 10 %.
Ultimately we're anticipating it to drop down into the 6 %, maybe 5%
range. Otherwise we'd all be working for the medical insurance. Our
medical industry eventually would just consume the whole economy.
So these are our basic assumptions. We have a few others. We borrowed,
extensively ... yall are part of Texas County and District for pension. We
borrowed from the Texas County and District assumptions for as far
probability of withdrawing, probability ages of retirement. We did not
take their mortality rates, we actually used a more current mortality table.
And a place where we didn't also borrow is the discount rate. In other
words what rate we're going to discount all these expected future benefit
payments. What rate are we going to use ... this counts them back to the
day. And we've illustrated all of our numbers have two discount rates;
4% and 7 %.
With GASB 45, if you pre -fund your benefits instead of going as a pay as
you go ... if you actually set up a segregated trust to set aside money each
year then we can use a discount rate that is a reasonable assumption for
what you may earn in this segregated trust depending on how you
invested it.
If you were going to continue paying medical claims as you go for claims
use a discount rate that is reasonable for what you could earn on general
assets that are of the County. So, we've illustrated a 4% as kind of an
approximation of what you may be earning on general assets and we've
also illustrated at 7% which you may be able to earn if you actually set up
a segregated trust that was invested somewhat in some mix of equities
and fixed income.
If we can flip back a little bit; I'm going to go on to page six ... the data is
on Exhibit 1 report. We talked about the benefits that are available to
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retirees. We talked about our assumption for annual claims. Experience
with these retirees. What we expect them to do. How much we expect
those claims to increase in the fixture and how we're going to discount
them back to today. Given you, here, a little synopsis of your data;
you've got about 600 active employees today. These 600 employees are
potentially accruing benefits that they'll become eligible for if they retire
from the County. And as far as actual retirees; you've got 83 retirees and
25 beneficiaries. So 108 people that are already retired receiving benefits.
So we've taken our plan provisions, established plan's cost, we've given
them established assumptions for how this plans cost are going to
increase in the future. We've taken your data and we've run an evaluation
for all of these individuals that you reported to us.
If you flip to the top of page 7 we've got the "Actuarial Present Value of
Total Projected Benefits." Now this is benefits that are accrued to date
and benefits that are potentially going to be earned for future service. The
number there discounted at 4% for the total group is $149,000.00,000.
That's split between actives and retirees. $135,000.000.00 for the active
employees and $14,000,000.00 for the retirees. I want to state again that
the $135,000,000.00 for actives is a number for what we anticipate them
to incur as a retiree, not for any of their liability as an active employee. I
just want to make sure that that concept is not being lost.
Discounting it at 7% instead of 4 %, the $149,000,000.00 goes to
$64,000,000.000. That's exactly expected benefit pay. That's just the
difference in the power of discount is what you're seeing there. A drop in
my ability.
Conner: I'm sorry, I'm going to interrupt here because I think it's going to be a
key point; basically the difference between the 4% and the 7 %, the 4%
leaves it with the County, not in a trust and therefore we could borrow
from it. We could borrow from it at the 4% because that is the unfunded
and we would be making probably more conservative investments... we
would be doing like we do now with our general fund money is what that
assumption is. But then on the 7 %, that `s assuming you put it away from
you, you can't touch it so you can't budget it, you can't build anything
with it. You put it way over here and yet you can be more aggressive in
your investments. Is that the basic?
Wilson: Yeah. Yeah.
Conner: I just want to make sure you understand the difference between 4% and
7 %.
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Sims: So at 4 %, we could money from that fund to...
Wilson: There really isn't...
Sims: You can borrow it from somebody.
Wilson: Yes.
Conner: You're not really setting it aside, you're just saying, yeah we might use it
for that. I mean you're not creating a trust, you're not creating a plan.
Like our retirement plan is a funded plan. We send the money to TCDRS,
they won't let us have it back.
Sims: No, I understand that.
Conner: That's the difference.
Mallard: But I didn't know there was anything the County could do to earn 7 %. I
mean I thought we were so restricted in our investments that...
Conner: And that may be something...
Wilson: You may have covenant restrictions that would prevent you from
(inaudible).
Mallard: They don't really want us investing in (inaudible).
Conner: You know the TCDRS, you get a better investment rate right now. But
TCDRS is getting a current investment rate better than we are.
Mallard: I don't understand that.
Conner: The trust side?
Wilson: Yeah.
Mallard: Maybe we should let them invest it for us.
Wilson: Well see, to set up a trust it would be under the premise that you're
actually going fund this trust with ... we're going to go through it,
eventually, with what we define as the annual required contribution also.
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Mallard: Is all this based on GASB 45 and doesn't take into effect the law that
Travis County is working saying that Texas is different and we don't
have to do this.
Conner: Not just working on, it passed. That law passed.
Mallard: It passed in the legislature but...
Conner: And the governor signed it.
Wilson: The governor signed it and maybe in six weeks...
Mallard: What is the courts going to do to it, if anything?
Conner: Right. We don't know. Or the bonding rating companies. Now they've
indicated that it won't but then again those laws are a little bit differently.
We'll get to that a little bit later.
Mallard: Ok.
Wilson: But, no, we have not considered that at all. This is GASB 45 as we
understand it. There is a new law out) there in the Texas past that says
Texas entities are not subject to GASB 45 or generally accepted
accounting principals. I'm not sure what people are going to do. I haven't
heard anybody say, "Well we're not going to comply." Except for the
very large entities, Teacher's Retirement Systems and some of the very
large entities were the big lobby behind that. I can't opine on that too
much either.
Mallard: But that's good information to know that those folks are basically saying
that they don't feel like they have to.
Wilson: But the smaller entities I've talked to, still intend to comply. So we've got
this `Present Value of Benefits Earned' plus benefits that are expected to
be earned here in the top of Exhibit 2. So drop to Exhibit 3, you'll want
to split that down into what is attributable... we want to break it into past
service and future service... what's already accrued under past service.
That's the `Actuarial Accrued Liability' we have in Exhibit 3.
So if we stay with the 4% number, the present value of all future benefits,
the total protected benefits was $149,000,000.00. But what's attributable
to past service? Well $60,000,000.00 that is attributable to past service.
And the difference... the retirees are identical. Because they're done,
they've accrued everything. It's the actives. So of the $135,000,000.00
for actives, only $46,000,000.00 is attributable to past service. And you
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can do a similar proration for that 7% liabilities. The `Actuarial Accrued
Liability' is not ... neither of these numbers are going to be instantly on
the books. We're going to go through what goes on the books
immediately. The actual Accrued Liability' will go as a foot note entry.
But you're not going to have to immediately put $60,400,000.00 on your
books as your GASB 45 liability. We're go through that on the next page.
Page 8. From these two concepts on page 7, we're going to develop the
annual required contribution for the plan. Here's where we get into what
the actual accounting entries are. The normal cost we have defined there
in Section A is the cost of benefits that are expected to be earned this year
during 2007/2008. So we're anticipating $6,000,000.00 in benefits to be
earned this year.
If you look down in Exhibit B, this is 4 % ... you see on the right column
the $60,400,000.00 there, number B1; that is your accrued liability back
from page 1 at 4 %. So we're going to take that $60,400,000. 00 and
we're going to amortize it. You're annual required contributions is going
to be the benefits that accrue this year plus an amortization of the
actuarial accrued liability. We're going to amortize it over 30 years. So
amortizing your $60,400,000.00 over 30 years is 3.6 per million per year
amortization. So if we take the $6,000,000.00 normal costs and the
$3,600,000.00 amortization that unfunded... your annual required
contribution for this first fiscal year would be $9,600,000.00. Now when
we say annual required contribution, that's an accounting term, it's not
the expectation of what you're going to pay in benefits during the year.
That's an accounting term. And this is at 4 %.
We flip to Exhibit 5; we've developed the same concept but it's 7%
instead of 4 %. At 7 %, the annual required contribution is in the bottom
right corner, it's $5,400,000.00. Now this presumes that you actually are
going to establish a trust and you do intend to fund it. So if you did start a
trust that you intended to fund then we would expect to see $5,400,000.00
going into the trust as contribution during the year. Does that make some
sense?
So at 7% you accounting entry for your annual required contribution is
$9,600,000.00 is being paid in medical benefits. If you're establishing a
trust, your annual contribution is $5,400,000.00 and that amount would
be expected to be set aside in the trust for future benefit payments.
If we flip one more page to page 10, we've illustrated here projected
benefit payments for the next twenty years. Right now we're estimating
for this upcoming fiscal year that the County is paying $566,000.00 in
benefits. With future trend, you can see in five years we're expecting that
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number to double. And by ten years to double again and in twenty years
to be up to $6,200,000.00. So from $566,000.00 anticipated that it's
going to cost you this year to pay your retiree medical benefits ... in
twenty years we anticipate it's going to be $6,200,000.00.
The $566,000.00 is what we actually expect in medical claims expense
for you in this upcoming year. So it's neither the $9,600,000.00 or the
$5,400,000.00 the annual required contribution.
We go to Exhibit 7, we've kind of combined all the concepts here under
the accounting standard. You see the annual required contribution. At the
beginning of the year, you're not going to have a liability for the plan.
The beginning of your liability is zero. You're going to expense the
annual required contribution during the year and then we're going to back
out what you pay in benefits during the year. So at the end of the year
without prefunding the plan ... under the 4% column ... we anticipate you
to expense $9,600,000.00. With interest on the contributions, pay out
$647,000.00 in contributions. At the end of the year to actually have the
$8,900,000.00 almost $9,000,000.00 liability for GASb 45 recorded on
the books. So that would be your actual accounting entry at then end of
the first fiscal year.
If you prefunded the plan, then you're contribution would equal the
annual required contribution and at the end of the year there would still
not be a liability.
I may have gone through it too fast, I don't know. You want to ask
questions or...?
Let me point out again that this is effective for the fiscal year that's going
to be starting 10 /1 of '07. So you'll notice these are all September 30th of
'08. The GASB 45 applies for the first fiscal year that began after
December 15th of '06. So you're first fiscal year beginning after that is
this one coming up on 10 /1. So on 9/30 of '08 is when this will begin to
hit your disclosure. Yes sir?
Cauley: I'm not too hot with these figures and things like that but on page 10, you
were saying in the first year, $566,000.00... how much are we actually
paying?
Conner: For retiree claims?
Cauley: Yes.
Conner: At this point...
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Cauley: Is this a real figure or is this a figure that you pull out of the...
Wilson: It should be pretty close to what you're actually paying. I don't recall if
yall had it broke down between retirees and actives.
Tumlinson: If you take $500,000.00 and divide it by 108 ... that's your current retiree
level ... you get just over $4,600.00. So it's about $4,600.00 a year that are
going towards these retirees on average. As Bryan pointed out for those
that are under age 65 before Medicare kicks in ... those are a little bit more
expensive than those after 65. But I think that's about right, about
$4,600.00 or more per retiree.
Conner: They did get information from Blue Cross, Blue Shield.
McLeod: On our actual claims?
Conner: On our actual claims. So when he says it's pretty close, it's not based on
industry, it's based on...
Mallard: The large amount when they hit is basically a window is for 65 and at the
age of their retirement. And so if we plugged today's actually what
people are retiring and we can only guesstimate how that's going to go in
the future. But assuming as Brazos County grows then our employment
will grow at a certain percentage so I assume we plug that in and that's
what our basis is. But our true exposure is between ... I'm trying to think
of when the earliest can retire.
Conner: I can retire at 55.
Mallard: You have to have how many years of service at 55?
Conner: 55.
Wilson: It's 75.
Mallard: So not that many people are going to fill (inaudible). So you have to say
probably closer to age 60 and then at 65 they'll go under Medicare. So we
really have most of the retirees are probably somewhat being in that area
of being in that five year time period.
McLeod: Kenny, if I'm guessing, you're going to find people eligible to retire
shortly after fifty.
Mallard: Age sixty is the...
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McLeod: Fifty.
Mallard: Fifty?
Wilson: You could if you were hired at 25 ... but the time you're 50, you have 75
points.
Mallard: Yeah.
Conner: Well, look at our Exhibit 1.
Wilson: You have about a hundred people who are under age 30 who currently
have less than five years of service. On page 6, at the top, we're looking
at between ages zero and 30; you have about 120 in that little group of
four there. Forty -five and fifty -four people at 21 ... those guys would all
be eligible.
Mallard: It would be interesting to know what our history is of people hiring at that
age making it for 20 -25 years.
Wilson: And that's part of our assumption.
Mallard: We can assume that everybody's going to do that. There's a percentage of
them that will. Can we read our previous history and interpolate that for
the future ... would maybe give us some credibility?
Wilson: You could but I don't know that there's a lot of credibility with less than
a hundred retirees. That's where we borrowed from Texas County and
District. If we flip back to page 16, you actually have...
Mallard: Well, it's a guesstimate of mine that people probably stayed with the
County longer previous than they do today. I think people don't seem to
have a problem about changing jobs and moving jobs. So, I'm seeing
that ... maybe if we went with the history of the County in the past I would
think that that would be a maximum. I'm asking that as a question. This
is just my gut feeling that people probably don't stay as long. Use to
when you went to work somewhere ... my father's generation... you
probably stayed there. But today, it's not that way. Which means that
they may be moving. Of course, they may be moving from one
government job over to the County and then retiring here at a lesser time.
I just don't have a feel for what's really true in that instance. That would
be a question that I would really need to try to get answered to find out
how that's working. People are staying at the same job but are they still
accruing retirement years and they move from one government job to the
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other so that they still could retire at 20 or 25 years even though maybe
they haven't been employed at the County for eight years. Right now,
they'd have to be employed here for eight years before they can retire and
get this benefit.
Wilson: That's correct.
Mallard: They can just move in here and stay one year and then retire and do that.
So that would slow that effect down.
Conner: But that was taken into account when calculating these numbers.
Wilson: Yeah.
Mallard: It was?
Conner: As well as TCDRS information with regards to their plan retire rates.
Because we only have a hundred experience. But TCDRS has several
thousand people more. So I guess what he's saying is he did use some
TCDRS's history.
Mallard: What was the answer though?
Conner: This number.
Wilson: Well the assumption we borrowed which you can see on the top of page
16; for someone age 50, we're assuming there's about a 14% chance that
they're going to retire at age 50. This presumes that they are eligible to
retire. If someone has less than the eight years, we don't attach this
probability to them. They have to be eligible. But if someone is eligible,
then we attach this probability at each of these ages as likelihood they'll
retire at that age.
Mallard: So 40 to 44 is only...
Conner: Half a percent.
Wilson: It's five percent. And actually on the page before, page 15, in the middle
of the page there are withdrawal rates; and those are going to impact how
long people stay around. If you look at those rates and go through the
math there, there's about a 50% chance that someone's going to work
eight years. So there's about a 50% chance that someone's going to leave
the County before they get to their eight years. So once they hit that eight
years and get to these ages, then on page 16, you would apply those
percentages to what age they actually decide to retire at. So we are taking
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into account that half the people or more will end up leaving before they
reach the retirement age. And then once they hit that retirement age, we
value the benefit and discount it back. Yes sir?
Cauley: What do the actuary tables show about death rate?
Wilson: Mortality?
Cauley: Yeah.
Wilson: We're using a table that's a recent study; it's called RP2000 and a study
by the Society of Actuaries. I didn't even list any of the specific age
probabilities but average life expectancy on that is about 78... somewhere
right in there.
Cauley: For?
Wilson: Actually for a newborn ... average life expectancy for a newborn is about
78.
Cauley: All newborns?
Wilson: Yes sir. It's a little different for males and females...
Tumlinson: I think for females, the average life expectancy is going to be in the lower
80s, about 83.
Cauley: Different with races too.
Wilson: There are some studies done that way, we're using a single table that
doesn't split.
Tumlinson: We're using blended mortality ... it does take into account male and
female only. Other than that, it's a blended mortality.
Wilson: We have actually included an assumption for improvements in future life
expectancy. So you can take a static table and say, `Life expectancy today
is going to remain the same in the future.' Or you could say, `Life
expectancy is going to actually increase in the future.' Make an
assumption for increases in life expectancy also.
Tumlinson: I think the net result of what happens when you get this report and you
get over the large numbers here is you say, `Ok, let's look at the
accounting portion of that.' And the accounting portion is what Brian
talked about on Exhibit 7 which is page 11. You have to think about the
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end of the next fiscal year when you get to September 30th of '08, if you
decide not to set aside a trust fund, then you're looking at the 4%
numbers and you're saying, `Ok, we've got this annual required
contribution...', which Brian did a pretty good job of saying it's not
really a contribution but it's an expense. You can almost think of it as an
accounting expense on your books of $9,600,000.00. But then if we
expect you to pay about $640,000.00 in benefits for the year ending
September 30th of '08, then you get a deduction for that. So about
$9,000,000.00 is going to go on your books as a liability for having this
benefit.
And so, you want to think about that number and how does that compare
with the overall assets and other income that the County has. And if that
number is kind of unpalatable which is what we're finding out ... that
these numbers are bigger than anybody expected... it's plan design
changes and things like that.
So these numbers are based on your current plan and what we expect to
happen based on your current plan. So to the extent that you change and
maybe make a little more cost sharing for retirees or do something a little
different to maybe take advantage a little bit more of Medicare Part
D ... then with plan design things, you can change these liabilities a little
bit. So those are things that we are also able to help with.
Conner: And that's where we hope to get today ... try to give you some statistics.
You talked about putting $8,900,000.00 on the books. Well we have
$75,000,000.00 in net assets so that's going to drop it down to about
$66,000,000.00 in net assets. Not a big difference except when you start
looking at retirement. Right now for retirement we participate in TCDRS
at 11.8% of our salaries. For every dollar we budget for salaries, we
budget 11.8% of that...11.8 cents... for retirement. Annually, that is about
$2,700,000.00. This is $8,900,000.00. So that means if you wanted to
convert it to like we do for retirement... meaning a percentage of
payroll ... we'd have to be at almost 60% to fund this. To give you some
estimates.
Sims: Could I ask a question having to do with assets. Assets mean nothing to
this. I mean could have a hundred billion dollars worth of assets but we
don't sell assets. So, that don't go away. You understand where I'm
coming from. What I'm looking at is what we've got to do is put cash
money into this thing every year. And assets don't mean anything. That's
just a figure out there that we'll never touch.
Conner: Well that's why I was giving you the comparable retirement information.
Vol q g Page la
17 of 35
Sims: Right. I got ya. But that's scary when you start talking about assets that
Counties never sell. I mean a corporation could liquidate and do all kinds
of things out there. But not County government.
Conner: Well if I remember correctly, Mr. Brown, "It's just a balance sheet. ",
which is what the assets are. Apparently it doesn't matter to him, he's an
accounting professor at UT. But I wanted you to understand the other
number as how it compare to what we already do for retirement.
Sims: Right.
Wilson: We run into the same thing with private companies where we're doing
their retired medical. And in some cases the accounting numbers are very
important because those go the books and the can affect stock prices and
things like that. That's not an issue for you. Other companies say, "We
don't care about accounting. Thanks. These are numbers that we may
have to deal with, but what we're interested in is cash." And hopefully
that's helpful to see. The cash flow we showed was on Exhibit 6 here.
That kind of says that with your current plan and your current population,
here's what's coming. A lot of this has to do with the fact that you'll be
adding retirees. You'll be adding retirees faster than those that will drop
off due to mortality.
But also because of Medicare inflation. These are future benefits.
Normally, with your retirement plan you can say, `We're going to be
paying a lot of retirement benefits one day but those are out in the future
so we can discount those back. But here your benefits are becoming more
and more expensive because of Medicare inflation.
So for an average retiree, $4,600.00 today ... we're saying that's going to
be $5,000.00 nest year and $5,500.00 the year after that. So even though
it's a year or two out, it's just as expensive as what you're paying today
because of the inflation. So the inflation is kind of overriding the
discount there. They are very expensive benefits... this is what you can be
expected to have to pay.
Funding might be an option or it might not be and option because you're
only limited with certain revenues that you have. Like you said, you can't
go and sell off a building or something and there's only so much you
want to do with bonds.
Mallard: All right, we just bury our head in the sand and say, `We don't care.
We're not going to do it.' And we rock along and at some point in the
future we wake up and take our head out of the sand and see that, `Hey,
this is getting kind of large.' Currently, under what the State is saying, at
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that point in time if we felt like that it was bankrupt the County or
something along that line then we could say, `We're no longer going to
pay those benefits.'
Wilson: That's right. That's been the State's argument to pass that law. They said,
"Hey, this isn't really a problem. This is a two year commitment." The
State renews that commitment to pay retirement medical every two years.
"And because it's not a promise for your lifetime, why do we have to
account for the whole lifetime of the person. It's just a two year
commitment so we're not going to record it on our books. We can cancel
it at any time."
Mallard: I'm assuming the GASB 45 is coming up because of large corporations
that are looking at filing bankruptcy and things like that. That doesn't
have anything to do with it?
Conner: No, they didn't do it years and years ago.
Mallard: So they're actually putting money aside because they've been forced...
Conner: That's why they don't offer retiree health insurance. It's true. This is Tom
Wallis, our external auditors; he's going to argue for GASB 45
Wallis: No, I'm not going to argue for it ... I'm going to tell you what happens if
you don't.
Sims: We're ready. Let's go.
Wilson: So basically, the evaluation follows GASB 45 and it follows certain
accounting principals so it makes sense from those principals.
Wallis: First off, this is not ... but I'm not going to talk about actuarial issues or
anything like that. That's not my bag. And I'm not going to talk about
what you should do in terms of purpose. That's not bag. That's your
decision. But what I do want to talk about is a little bit about what
Commissioners Mallard mention a minute ago ... the fact that the
legislature in their infinite wisdom and all the accountants and all the
accounting wisdom that they have ... they decided to pass a law that said,
`...if you are a local government in Texas with four or five exceptions,
you don't have to follow GASB 45...'
Now the Governmental Accounting Standards Board is the standards
setter for governments. Any governmental accounting. They establish the
standards for governments across the United States. And they're moving
more and more toward adopting standards that are international
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standards. The Financial Accounting Standards Board which is for
businesses looks everyday to what the international accounting standards
are doing. They have task forces together bringing the United States
accounting standards in to line with international accounting standards.
And auditing standards are the same way. All of those standards are
moving toward and international level of accounting so that financial
statements from one country to the next country can be compared and
that they know everybody is following the same standards. Well, in the
United States, we have standards between all accounting groups.
Now we have to look to the users of the financial statements to see
whether or not that's good for them or not. Well, the bond rating agencies
look at Counties and Cities and other local governments across the United
States and they want to be able to compare the financial statements from
one to the other.
Well Texas is the only State that has legislated account extensions. I think
it's a very poor policy because nobody in the legislature is an accountant.
I take it back, there's one accountant in the Legislature. And the
recommendations were, initially, because the numbers are so large, it
might impair the government's ability to continue paying this. In the case
of Texas, somebody mentioned to me, that the GASB 45 liability is how
many billions...?
Wilson: It's billions, I don't know the number.
Wallis: Between 25 and 50 billion dollars for the State of Texas. Well Mrs.
Combs who is the comptroller of public accounts didn't like that number.
The Travis County auditor didn't like that number for his County. And so
they proceeded to ask for this. Now, naturally, if I'm going to give an
opinion on your financial statements and you do not follow GASB 45, I
have certain standards that I have to follow. And those standards are
going to be a little different because I'm going to give you ... you know in
the past our audit has always been complete and we've always been able
to satisfy ourselves that you are following general accepted accounting
principals or those accounting principals general accepted in the United
States of America. There's no provision in there to say `General
Accepted Accounting Principals as followed in Texas.' They said the
United States of America.
So now I'm stuck with not telling you that your financial statements
present fairly. I'm stuck with saying your financial statements do not
present fairly. That assumes that $9,000,000.00 is material to your
financial statements. I believe it is. Or $6,000,000.00 depending on how
you want to do it. I believe it is. So you'll get an auditor report from me
Vol q g' Page 105.
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that says from an adverse opinion, it says you financials do not present
fairly in accordance with general accepted accounting principals. It will
have a little paragraph that says, "As ascribed more fully (inaudible) to
the financial, the County has prepared these financial statements using the
County principals subscribed or permitted by the State of Texas; which
practices different from accounting principals differ from accounting
principals general accepted in the United States of America. Those
regulatory accounting practices recognize the cost of (inaudible) benefits
other than retirement benefits on a pay as you go basis. Accounting
principals generally accepted in the United States require that annual
required contributions rated post employment benefits other than
retirement benefits attributable to employee services already rendered. Be
recorded as expenses as the employee earns the benefits; which if not
funded would increase the liabilities, reduce the net assets, change the
expenses in government activities. The effect on the financial statements
taken as a whole ... other variances between these regulatory accounting
principals, the accounting principal generally accepted by the United
States of America." Although not reasonably determined or presumed to
be material because you would pay these gentlemen to do actuarial
studies every year or up date that if you opted to go on a pay as you go
basis.
In our opinion because of the facts of the matter as discussed in the
preceding paragraph, the financial statements referred above do not
present fairly in conformity with accounting principals generally accepted
by the United States of America.
That's not a very positive statement. I can assure you that your GFOA...
Conner: Yeah, the Government Finance Officer Associations.
Wallis: ...you will not get that, don't bother to send it in. Don't bother to send
your comprehensive annual report to them, you will get an F. For failure
to follow it. Those are the consequences of that. What is the bond rating
agency is going to do is; I suspect that they're going to look at each entity
individually and see if they can get the unfunded post- retirement benefits
so that they can plug it in. And then they'll rate you. But they're going to
rate you down a little bit because they have to go that extra work. And
you're going to have to hire these gentlemen anyway to get that number
to give to the bond rating agencies. Or at least disclose it in your financial
statements. Remember that since 2001 and 2002 everybody's working
toward more transparent financial information.
The citizens of Brazos County want to know or should know the financial
condition of the County without anything being hidden from them. If we
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don't tell them ... if we don't even know ourselves... what this unfunded
cost is, how are they going to find out what it is? We're looking at
$566,000.00 next year in actual out of pocket cost. But in 20 years we're
looking at $6,000,000.00 a year in our of pocket cost. That's after the
retirees have paid in what they're going to pay. They're portion that
they're going to pay. That's what the County is going to absorb in those
periods of time.
I'm not looking at the 90 million dollars or the 60 million dollars or the
146 million dollars ... I'm looking at what the actual money spent is. The
cash, Judge, that's going out of your pocket. And you need to at least
provide for the ... budget it. But look where it's going to go. It's going to
go high.
We would have to consider disclosement of liability. And I think that's
what I'm here to tell you today. And I think that even though the State of
Texas has given you the opportunity not to comply with GASB 45,
you're basically obligated to do it anyway. Because it will cost you more
in interest cost. Right now we don't have very much debt. Very little
amount of debt in the county. I understand we'll probably get some debt
pretty soon and that may cost us more because our rating may go down.
And, after all, it's just a balance sheet. Let's put the money on there. And
it's only one of the balance sheets that we present, the governmental
funds, right? Let's go ahead and provide for that liability. And you might
even consider funding it. You fund your retirement. This is putting your
health care cost on the same basis as retirement. Only difference on
retirement is you have a fixed cost, a fixed benefit out there. With this
you don't have a fixed benefit, that benefit flows. And that's what makes
the large number there. Any questions?
Mallard: If we go ahead and fund this and we continue to fund it at an escalating
amount; is that the same problem ... now that we're funding it, it's still not
all right, it's still an escalating number...
Wallis: That's correct.
Mallard: ... and at some point in time it's going to become a number that we can
not afford to tax the citizens of Brazos County any more. And so are we
at the same decision making mode down the road that we can't even
afford to do this.
Wallis: I'm not going to tell you what programs or what you can afford to do or
what the citizens of Brazos County are going to pay because I'm just
going to tell you that I'm an expert in accounting and I'll tell you what's
going to happen if you do this or do that.
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22 of 35
Mallard: I understand. And I won't be here to make that decision, necessarily,
anyway. But we're going to start the process and go down a path and it
seems like either path is escalating to a huge amount of dollars and at
some point in time the United States, in total, has to make a decision
about how we're going (inaudible).
Wallis: Theoretically, after thirty years, wouldn't that cost down? Theoretically?
Wilson: Yes, you finished amortizing the initial unfunded liability and it'd drop
down to the cost of benefits accruing.
Mallard: So, theoretically, a minor silver lining.
Wallis: After thirty years the cost should ... I'm not gonna say ... it should level
somewhat. But again, medical cost has to level too for that to happen.
Because the medical cost is accelerating at such high rates that if it
doesn't decline we're all going to be in the health care ... where that's all
we do is pay for medical.
Mallard: Yeah. Well that's what I'm saying; at some point in time in probably the
not too distant future a decision is going to have to be made in the United
States about health care.
Wallis: That's right.
Mallard: Is there any guesstimates from all three of you on what that's going to
do? Will that change this number? I assume that if the good thing
happens and we get a handle on what we're doing, we change that
number and we get the health care cost down, then these numbers will
hopefully get better. Assuming that ... (overtalking).
Wallis: That's the difference; they look at the future, I look at the past.
Wilson: I don't want to try to guess what the politicians are going to do.
Mallard: Well no, but I mean assuming the best part of it ... that it gets better and
they get a handle on the cost or how we deal with it ... then this number
would go down.
Wilson: Well, to some extent, we're assuming that the double digit inflation
we've been seeing for the last eight or ten years will decrease.
Mallard: So that's part of what you plugged in?
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Wilson: Yeah. We're assuming 11 % inflation this next year but then 10% the year
after that and grading down to ultimately 6% which is still well in excess
of general inflation rate at 2.5% to 3 %. So to some extent, yeah, we're
anticipating it coming somewhat under control.
Mallard: Have yall done any studies in Europe or just read what they're doing in
Europe but they're health care is somewhat different. You don't get it
when you want it, you get it when they think they'll get to you. People
die because they can't get it. You don't hear the bad things that come out
of that. But at some point ... I mean, I guess, do they have a better plan? I
know I'm going beyond yall's scope so I'm begging for answers on that.
I don't know because I see that either way we go, this number is going to
be a big number for the County.
Wilson: Well the good news is you've got an initial valuation and you have a
handle on what's out there. Because what hasn't changed from yesterday
to today is the promise you currently have to retirees and County workers
who eventually may retire. You currently have this promise out there and
yesterday or before you got this report, you didn't really have a good idea
of what you committed to. And now, at least you know that number. So
that's step one ... to get a handle around what the number is. Then step
two is to kind of monitor it and see if you can afford it, do we need to
make some changes.
If you look at the pension industry; the same thing is going on. With the
government we've got Medicare on the health side but you've also got
Social Security for retirement benefits. You know, everybody's been
saying we can't afford to continue this. And so what's happened is Social
Security benefits have been going down a little bit because they haven't
been increasing quite as fast as inflation. And with private companies,
there's more cost sharing for retirees. They're having to do more through
their own savings and 401 K type arrangements and pensions are getting a
little bit less and less. And so I think you're probably going to see some
of those same things going on with what the government entities are
going to do. I think there's going to be more cost sharing until, hopefully,
medical inflation drops down a little bit. That would be good for
everybody.
Mallard: Is there a guesstimate if we change the funding structure ... we ask the
retirees to chip in a little bit more. Would that make any significant
difference?
Wilson: Absolutely. It could, yeah. How much more are you willing to ask
them...
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Mallard: What is the true cost for our employees on health benefits?
Conner: It's $6,700.00 a year.
Wallis: But that's an average cost. Because you're younger people, actually the
cost of their insurance is less compared to the older people. I'm not on the
insurance but what you do for your employees is you average those out
and charge that to the employees or figure it on an individual cost. So you
need to look at what it cost at an age.
Mallard: Well I'm just trying to keep it simple and we said, "All right, instead of
charging $25.00, we're going to charge 25% or 50 %... ", or something
like that. That still seems like it's a lot of money to the employees but is
that an insignificant amount as far as keeping this cost down? I don't
know.
Wilson: No, not at all. Right now, it looks like you're asking to pay about 20% of
the cost. And if you increase the 20% cost sharing to 50% then that's
significant. Very significant.
Mallard: I mean I really don't want to do that but I'm just trying to figure out all
the options and what we can do. I want to continue benefits for our
retirees... that's my goal. But we have to figure if we can do it and how
can we do it. Is there a way you can give us some numbers assuming
changing that one number to maybe a couple of percentages... say 25 %,
50 % ... along that line.
Wilson: Absolutely. That's the second step. Following the evaluations that we've
done with many of our clients including government entities and it does
make a bit difference because it all compounds out. Some of the types of
things we've done is look at... currently, you're asking the employees to
pay 20% and the county is paying 80% is the approximate ratio right
now. But as we expect Medicare inflation to go up 10% to 12% and then
eventually 9 %, 8 %, and so on in this valuation. What are the options that
other cities and counties have done? We have other cities in Texas that
we're the actuary for... Louisiana, Florida, all over... several other
counties in Texas and what they've done or thinking about doing is
saying; `If our benefits are going to cost us 10% more next year, we're
asking the retirees to pick up a large percentage of those future increases.'
Or in some cases even all new increases. We kind of said `We're paying
for this level right now and to the extent that it gets more expensive...',
that's kind of a more drastic approach ... but any increases in the cost of
this benefit are going to be picked up by retirees. In other cases, they're
asking the retirees to pick up, maybe, 25% and then you retire after 2010
Vol qK Page //D
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maybe those will pay 40% and so on. And those make a dramatic
difference.
We can, basically, get you to where you want to be and what you think
you can afford. And those things can be changed over time. They do
make a big difference.
Mallard: I don't know that it makes sense to try to get a guesstimate on that
number; it may reduce what we have to set aside each year if we do
change that.
Tumlinson: And you kind of have two things there. Right now as cost go up, you're
not passing any of the increase on to retirees. You're pulling their portion
the same. So as medical costs inflate, the city is really going to pick up
more and more of the tab. Another part is what is this initial cost sharing?
So future inflation right now is only being picked up by the county. But
then the cost sharing right now could be changed also. Right now only
20% is being picked up. You shift that to 40% but keep that relation...
Sims: Or any place in between.
Tumlinson: Or somewhere in between. Then you could degree... decide to keep that
relation the same in the future. So it's kind of two things. We want to
keep this relation the same in the future and then how much do we want
the retirees to share in the cost. There's two questions there.
Mallard: Well it seems like every time we make a change and it doesn't effect
anybody previously... unless we set up as, as time goes on, this is what
we're going to do and that number may increase. I don't know whether
you can do that or not.
Peters: That's what I wanted to ask Tom; did I understand when the legislature
passed that law that they're saying that every two year budget when they
set it that they could lop off those current retirees that they...
Wallis: What the legislature says is this; we can not be obligated beyond one
budget cycle. In that case it would be one year for you because you have
an annual budget cycle and they have a bi- annual budget cycle. Since this
is not a promise that's not a liability for us. We can not assume liabilities
beyond one budget cycle just like you can't set up anything beyond one
budget cycle. So since we can't do that, that's not a real liability for us.
We promise but, you know, we might pay for your health insurance later
and we might not ... it depends on if we have any money. We got plenty of
money we'll pay it. If we don't, well, tough luck. That's going to cause
some real difficulty with regard to retirees because there's a promise and
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there's a fact. I think the County is going to keep up with it's promises.
They're going to keep budgeting for this to the extent that they possibly
can. And that's the reason that, really, you're looking at it now is to say,
`Can we keep this up forever? Or what do we need to do to change it ?'
Now I think that's what I'm hearing, not necessarily what you might do
or might not do. But you're saying, `We're examining the issue. We're
trying to get out hands around it, find out how big it is. What can we do
about it ?' And then make a decision. Ok? But that's what the legislature
said. They said, "It's not a promise. We're not promising this beyond one
budget cycle, two years." And you would say, `Well, we're not going to
promise it beyond one year.' And you want to make sure your employees
understand that.
My wife works for A &M; she expects for us to get post employment
health insurance at a very low rate. And if we don't, I'm dead in the water
anyway, `cause when I retire from Ingram, Wallis & Company, I don't
get anything. That's it. So she expects that. That's going to create some
real difficulty. And I expect that quite a number of employees of the State
and other State agencies, Counties, Cities, whatever... expect what was
promised to be given. Not get it for the first five years or three years or
two and a half years and then somebody say, `Oh well, stop.' I expect
some people to have to hire a few lawyers to explain to them that we can
do that at any time. Or to be sure that in red letters across the deal it says,
`This is what we hope to do but this isn't a promise.' It's not going to
help with your...
Sims: Subject to financial liability.
Wallis: Subject to how we feel that day. But in truth and fact that is true because
you don't have to keep this up. You can stop today.
Sims: That's what the State of Texas did with the CHIPS program.
Wallis: That's right. You may choose when you start it, when you stop it and
who you pay and who you don't pay any time. You have that power. And
that's what the State of Texas had. But from an accounting standpoint,
from a reality standpoint, that's not really what's going to be practical.
And that's the reason they said two years because it's one budget cycle.
Peters: That's been my concern for a good while. Right now it's not a problem
but that was my concern; what happens in the future? What happens ten,
twenty years from now. And I may retire one day and some future court
may say, `We can't afford it.', and then it gets chopped of. That's why
I'm glad we're going through this process and try to...
Vol qg_ Page I I a-
27 of 35
Wallis: So you can plan for the future too.
Peters: You bet. You bet.
Wallis: If I'm planning for the future and I say, `Well, you know, I might retire
and get that benefit.' I'm not going to make any plans to buy any
additional insurance. I know when I retire from Ingram, Wallis &
Company, there's not promise there. There's no wish, there's no hope. It
goes away. In fact, it goes away at age 65. So I'm on my wife's insurance
too. Because I'm paying for the future, not for the current coverage. The
future coverage is what I want. I'm planning for that. Now if I thought
there might be coverage down at Ingram, Wallis & Company, why would
I spend that money? If they'd just let me stay on, I'd pay the (inaudible).
So the employee needs to plan for that. You need to tell them what to
plan for. I'm not an expert there, you're just hearing on Tom now. This
isn't expert talking.
Sims: Ingram, Wallis ... you do have an asset there.
Wallis: I have something; we don't know what it is. It may be a liability, Judge.
Are there any questions for me?
Sims: This was an eye opener, believe me it was.
Wallis: You really want to talk to these guys about how to control it, I'm just
going to report it. And I think I know how to do that. They do the
calculations for me.
Wassermann:
I have a question. I was under TRS 44 years ... they can jerk that?
Wallis: TRS is funded. Now recently, if you noticed though, the TRS is even
under a little bit of pressure because the head investment person for TRS
announced that they were going to put a certain percentage of their
investments in non - traditional investments to try to boost up their rate of
return by like one percent of a half of a percent. That half of a percent,
however, turns out to be about three billion dollars a year if they can get
that average return up that much. Because their assets are so large. And
you're retirement plan here is funded. And remember that when we look
at retirement, although we're looking at the accounting the way for
retirement and other post retirement benefits... your teacher retirement
says this is what you'll get; average of the last three years' salary...
Wassermann:
Average of the best three.
Vol �8 Page C1�
28 of 35
Wallis: We can calculate what that retirement is going to be with a good deal of
certainty. Unfortunately, we can't calculate what those medical costs are
going to be with a great deal of certainty. Now these guys will tell you,
`Yeah, we know these trends... and we know that sort of stuff', but even
old Tom could guesstimate pretty close what that retirement was going to
cost you. But I can't tell you, even close... because my crystal ball is
out ... what that health care cost is going be next month, much less in
twenty years. And that is a real difference. And that's one of the
reasons... and that cost is escalating right now and has been for a number
of years. So that's a problem that we're looking at there. But I think
you'll agree with what I just said. It may not be exactly right but these are
the guys that are going to help you control that. I'm just going to report.
No further questions, I'll see you guys later. If anybody has a question,
you know my phone number... call me. Thank you very much.
Sims: Thank you. Appreciate it, Tom.
Mallard: Today I would like to see them go back and predict it a little bit if we
changed the contribution rate from the retirees.
Conner: Hypothetically, what do you want to change it to?
Mallard: Right now it's $25.00 dollars is that right?
Conner: Yes.
Mallard: That's not 20 %.
McLeod: It's 19 %.
Mallard: What is the individual rate?
Female: Individual rate is $25.00 a month. County pays $475.00.
Mallard: That's what I'm talking about. It's $475.00...$25.00 is not 20% of
$475.00.
Peters: Ten percent would be $47.00...
Mallard: Twenty -five percent of $400.00 is $100.00.
McLeod: Yall need to take the actual total premium which is $500.00.
Vol q 9'_ Page I/
29 of 35
Mallard: That's what I asked. What is the employee rate and I was told it was four
hundred and some odd dollars.
Conner: It's 19 %.
Mallard: I would like to see 25% and 50 %.
Peters: We looked at some other counties where if you work like eight years, the
county might pay something ... at some period, let's say 50% and if you're
here 15 years it pays 75% and if you're here 20 years it pays 100 %. We
could do something like that where longer term employees would receive
more benefit. I think that's really kind of the encouragement ... of that
health insurance eventually paying it is for the long term employee.
Mallard: Well if we get 25% and 50 %, can't we interpolate from that fairly easily?
Wilson: Yeah, we can get something reasonable. As long as... are you talking
about keeping that relationship in the future also. I mean if you say,
`We're going to make it 25% in 2007 but then we're not going to pass the
future. You want to hold that relationship.
Sims: No, extend it on out the same. Because that's the only way you can get a
good number that you can bank on.
Mallard: I don't want to stop what we're doing, I just want to know what
difference that would make. It may not make that much difference, I
don't know. It may make a lot of difference as far as that number is. But
that's what I'd like to know. Because I want to continue to provide this
benefit to retirees.
Mann: Judge, I have a couple of comments I wanted to make. Because this hits
close to home. I understand what the actuaries have said here, I
understand what the problem is and there's going to have to be an
adjustment because it can't keep going like it is. But I also would hope
that yall would think about what the expectation is when everybody who
is on staff now went to orientation that was listed as a benefit. And it
wasn't presented as, `Well, as long as we can do this.' It was presented as
a benefit.
And what's really reinforced that is if you'll remember back, I think, it
was 2003, the Sheriff went to the Court about increasing salaries and we
brought to you what the benefits were with College Station and with
Brian and so forth. And at that time the Court said, "Well, we have
medical insurance for retirees." And that was held up as something
significant on par or exceeding what the benefits were that the cities
Vol a g Page 115
30 of 35
provided. So the County has been presenting this as guaranteed benefit, if
you will, to the employees.
So I guess what I'm saying is it might be good to look at where you draw
this line at. Do you grandfather anybody or just go ahead and make it
effective right away? But I think there's an expectation out there by a
large group of employees that this is a guaranteed benefit. I realize that
we're `at will', I realize about this statute for one budget cycle. But from
a moral standpoint, from the expectation of the employees that work
here ... that's the perception. And that's the way it's been sold by the
Court. So, I think these are things that are going to have to be taken into
consideration before you make a decision as to how you're going to
mitigate this over a period of time.
There are a lot of people who rather than leave employment with the
County to go to work for another agency are staying here because of that
benefit. So, just a lot of things that come into play here outside of the
actuarial part of it, outside the fiscal part of it, that are going to have to be
balanced out with whatever course you take.
And I realize something is going to have to change. Because there's no
way you can continue to fund it. I understand that. But I just want to
encourage yall to think about those aspects of it was well as you seek a
solution for it. Thank you.
Sims: Thank you. I think there is a lot of things that we can do and I think
we've got to take a look at all aspects ... what the solutions are. But I've
always made the comment ... and I hate to say it, but it's almost coming
true ... you hire on with the County, you never get fired. And the thing
about it is, we may have to put freezes on employment. That would help
us over a period of time because we have fewer of them. But this is just
some things ... you know, I think businesses go through it. They have a lot
more flexibility than counties do to solve some of these problems. But I
understand where you're coming from but we're just going to have to
take a look and see what the percentages is participation that people are
going to have to absorb to continue to get health care insurance. I know
that we were saying...
Tape ends mid - sentence.
Tape continued. Tape begins mid - sentence.
Sims: The last thing I was going to say ... I'm not real sure that ... I know that I
expect someone to help pay for my insurance at what percentage ... I don't
Vol �g Page 11(o.
31 of 35
know. When I decided to retire. But I think what we were saying, Jim, is
the total package that we were providing was insurance, retirement, and
this type of thing was as good if not better than the cites were. When we
were talking about salaries increases and this type of thing. Anything
else?
Conner: I just want to make sure we are clear. The initial evaluation was
$12,000.00. If we want them to make changes ... if we want to do like,
`what ifs', then they will come back with an estimate on how much that
will cost.
Sims: Can you instruct them to do that?
Conner: Yes, but I just want to make sure you're clear.
Sims: Because we need some `What ifs'.
Conner: It's not free and I want to definitely secure...
Sims: I understand. I think that's our next step, is it not?
Cauley: Yeah, I think...
Conner: So you want them to calculate 25% if the retirees pay 25% of actual cost
or of the $5,700.00 that we set aside for the employees. Twenty -five
percent of what?
Mallard: Twenty -five percent of the employee cost.
Conner: Twenty -five percent of the employee's cost and then 50 %, right?
Mallard: Yes. And that way we can kind of interpolate in between that. That's why
I want two numbers so we can interpolate.
Conner: And then Commissioners Peters wanted something like Jefferson
County?
Peters: Yes.
Conner: Where it does different years of service?
Mallard: Longevity... you get more benefit.
Conner: I just want to make sure that we're clear now.
Vol Q K Page I 1 -7
32 of 35
Sims: Yes.
Conner: Can we do it. Ok.
Jeans: They mentioned the portion of pharmaceuticals cost for retirees ... I'd just
like to know what kind of percentage that is of that $5,000.00 or whatever
we're talking about?
Wilson: Just pharmaceuticals?
Jeans: Yes. The part of the pharmacy cost.
Tumlinson: I'm sorry, I didn't here that.
Jeans: You mentioned the Medicare pharmacy schedule...
Conner: Part D.
Jeans: ...Part D. Do you have any idea what the cost is for the pharmacy part?
Tumlinson: A lot of the premiums I've been seeing ... there are multiple plans out
there, I don't know if you're aware that there are thirty plus plans out
there that people go online and sign up for. But it seemed like an average
premium was $100.00 to $150.00 a month.
Jeans: I'm not talking about the premium; I'm talking about the actual cost of
the pharmacy. What part of the $5,000.00 would be?
Mallard: Well at age 65 the Medicare... it's about $3,200.00, so it would only be a
portion of that.
McLeod: He wants to know what portion of that is pharmaceutical.
Tumlinson: Perhaps 50% of that.
Jeans: 50% of the $5,000.00; that's $2,500.00.
Tumlinson: It's $3,200.00.
Mallard: $3,200.00, not $5,000.00. So about $1,500.00 probably goes into
pharmaceutical.
Sims: Yes sir?
Mann:
Vol
Do we expect another workshop before any changes are made?
O � Page i 19
33 of 35
Sims: Yes.
Conner: I would think that we would be doing the same thing except with
different numbers.
Sims: Yeah, we'll be working other numbers.
Mann: When a course is decided, are we likely to effect those changes in the
renewal of insurance or immediately?
McLeod: It depends on how soon they can get those figures to us because our
insurance renews January 1St
Wilson: But he does bring up a good question and the other gentleman did
too... the plan changes that you're asking for... do we want to put them
across globally or is there a grandfather? Do we want to grandfather the
current retirees at the current level or are we looking at changes the
structure for the actives or...?
McLeod: I want to grandfather the current.
Mallard: I don't know that we can ... we haven't been changing previous retirees, in
fact there are some older retirees that are paying much more than $25.00.
McLeod: That's right. Yes. Basically when they change it goes forward not
backwards.
Mallard: And then it changed fiver or six years ago to $25.00. But the didn't
receive that benefit so it wasn't grandfathered and now the folks from
about five years ago to today are only paying $25.00 a month. And I
assume if we made another change, then it would be for the future
retirees as opposed to the previous ones. I think that's what the law
says ... that we're obligated...
Peters: There was an attempt at the time that that change was made to go back
and pay those already retired folks at the same rate but then found out
that the State law wouldn't allow that. So that's why they're having to
pay more.
McLeod: When we changed to the eight years for retirees insurance; at that time
and I think that policy also says that the retirees will bear any increase
that is assessed to the current employees.
Peters: I believe you're right.
Vol ag Page 119
34 of 35
McLeod: So if the premium goes up more then retirees have to pay that increase as
we go.
Wilson: We have reflected that in our calculations.
Mallard: But we need to get what that is too, as well. We need to know that. We
need to know if this would affect current retirees. That's in our policy
manual somewhere.
Wilson: She wanted me to reiterate that we're not anticipating future increases.
Future total increases in medical are not being ... none of that is being
passed on to retirees. The $25.00 they're paying this year is going to be
$25.00 next year. If it was at $475.00 per individual goes up to $500.00
next year we could include the 25 to 35 next year. That would decrease
the cost for the County. And that's what we're going to look at.
Sims: And I think that's going to be looking for. If we go down the road they're
going to have to pick up more. Let's put it this way, they may not be
picking up percentage wise more, but they're going to have to continue
to ... the percentage is going to increase the dollars that they're going to
pay.
Wilson: The dollars, yeah.
Sims: Anything else? Thank you very much. I think this was a good exercise as
to what we need to start looking at because we don't have unlimited
funds. As I say, the taxpayers are tired of increases in tax rates and I was
not kidding when say we use too much of our funding. We can't provide
the services that our people are use to getting in Brazos County ... not
employees but the citizens then all of a sudden this whole Court changes.
And you'll see new faces up here. I appreciate you putting all this
together. We look forward to the information that you're going to bring
back to us in the future. Anything else Katie?
Conner: I don't think so.
Sims: Thank yall very much; I will adjourn this workshop session. Thank you.
End of tape.
Vol a$ Page �aa
35 of 35
The foregoing minutes of the Commissioners Court
Workshop held August 21st, 2007, have been examined and
approved in open Court this the /,f day of , 20 01,
in Bryan, Brazos County, Texas.
Lloyd Assermann
Commissioner,
Precinct No. 1
,i
Duane Peters Kenny Mall d
Commissioner, Commissioner,
Precinct No. 2 Precinct No. 3
ab--)ei1+
Carey Cauley, Jr.
Commissioner,
Precinct 4
Attest:
Karen McQueen
County Clerk
Vol qg_ Page 10-i
Pg -/ - or Z",
BRAZOS COUNTY
COMMISSIONER'S COURT
DAY
/0', 00
Name
OF 14,,
20 07
-AM/PAdq
Lot Al;Z
�re��e .yet+
�v� � ° XuQ'
'C' L
ij
Organization
(PLEASE PRINT)
--SO y
A(—
Au4 �
77
Pg 4 or 4-
BRAZOS COUNTY
COMMISSIONER'S COURT
DAY OF 20 0 7
-AM /I,
Name
(PLEASE PRINT)
q3
Organization
(PLEASE PRINT)
\
Brazos
Inc. Pf
AS,; '45
As Of 901"tober 1, 2007
�eet
--
��4� 0
Houston, IX77082-7330
�
9
AM i I, L i4l A N Cs z,$).4A:L. V sR.M
Mi liman
Consultants and Actuaries
August 10, 2007
Ms. Katie Conner
County Auditor
Brazos County
Brazos County Auditor's Office
300 E. 26th St., Suite 314
Bryan, TX 77803
Re: Actuarial Valuation of Postretirement Benefits ur q, j `GAS 45 for
Brazos County A'
Dear Ms. Conner:
333 Clay Street.
Suite 4330
Houston, TX 77002 -7338
Phone: (713) 658 -8451
Fax: (713) 658 -9656
www.milliman.com
Pursuant to your request, we have completed pn aetuarial valuation of the b& fit`cost and
funded status relating to the future retiree medical bepefits,pfovided by the County as of
January 1, 2007 for the fiscal year beginning Oefober 1, 2007. We have used a
measurement date of January 1, 2007,.as permitted underFthe Guide to Implementation of
GASB Statements 43 and 45. They results of our cal ions are set forth in the
following report, as are the actuarial Aigsupn t }on i methods End; brief summary of the
retiree eligibility and benefits upon gich oW calculations have been made. Our
determinations reflect the procedures andpethgds ate . W,, # ed in Statement 45 of the
Governmental Accounts Standards Bo Accoun`��g and Financial Reporting by
Employers for Poste lt3 ,Benefits Ot�i than Pensions" ( "Statement ").
Actuarial computhd s, undeen�`the Statemen " tce for purposes of fulfilling certain
employer accounting r' errt� The calculations reported herein have been made on
a basis con 't with o ders�?ie Statement. Determinations for purposes
other empli financial counting requirements of the Statement may
diffe >;mficantly a res ,reported herein.
In pre - : g our calclbaterially s fo This report, we have relied without audit, on the
employe - , plan prns, and other plan financial information as provided by the
City. If an - is info on, as summarized in this report, is inaccurate or incomplete,
the results sho ould affected and this report may need to be revised.
This report is intein for the sole use of the addressee and is intended only to supply
sufficient informatfor the Plan Sponsor to comply with the stated purpose of the
report and may not be appropriate for other business purposes. Reliance on information
contained in this report by anyone for other than the intended purpose puts the relying
entity at risk of being misled. Accordingly, no person or entity, including the addressee,
should base any representations or warranties in any business agreement on any
statements or conclusions contained in this report without the written consent of
Milliman.
OFFICES IN PRINCIPAL CITIES WORLDWIDE
�¢ l-
Ms. Katie Conner
August 10, 2007
Page 2
On the basis of the foregoing, we hereby certify that, to the best of our knowledge and
belief, this report is complete and accurate and has been prepared in accordance with
generally recognized and accepted actuarial principles and practices which are consistent
with the applicable Actuarial Standards of Practice.
We further certify that, in our opinion, each actuarial assumption, method and technique
used is individually reasonable taking into account the experience of the Plan and
reasonable expectations. Nevertheless, the emerging liabilities and costs of the plan will
vary from those presented in this report to the extent that actual ex- erience differs from
that projected by the actuarial assumptions.
Please contact us if you have questions about our report` or, would like additional
information.
Y:,
We, Jim Tumlinson, Jr. and Bryan Wilson, are confuting actuaries for Mean, Inc. and
are Members of the American Academy of ;Actuaries and meet the Qualification
Standards of the American Academy of Actuart g to render the act uan I opinion
contained herein.
Respectfully submitted,
Jim Tumlinson, Jr. MAAA Bryan Wilson, MAAA
Consulting ActuaryO Consulting Actuary
OFFICES IN PRINCIPAL CITIES WORLDWIDE
98: fa(a
Contents
Introductionand Purpose ....................................................................... ............................... 3
Exhibits..................................................................................................... ............................... 5
Exhibit 1
— Summary of Participant Data .................. ....:`:.. <..............................
6
Exhibit 2
— Actuarial Present Value of Total Projected Benefits ............................
7
Exhibit 3
— Actuarial Accrued Liability .......... :. . ...............................
7
Exhibit 4
— Annual Required Contribution - 4.0% .... ......... . .....................
8
Exhibit 5
— Annual Required Contribution = 7.0% ......................... „ ....................
9
Exhibit 6
— Projected Benefit Paymentg�, ....... .....••... ..................... .........
10
Exhibit 7
— Financial Statement Disclosure, ., ...................... ................
11
Exhibit 8
— Schedule of Funding Progress :. .................. ...............................
12
Appendices ..............
............................... �........,............. ,.. ... ...............................
13
Appendix A
— Actuarial Cost Method ....... ......................................................
14
Appendix B
— Actuarial Assumptions
Appendix C
Plan PrOvigions ......... ....................................... ...............................
18
AppendixD - l -Q ssary .............. ............................. ...............................
20
:"r.
�r
"V
r
Actuarial Valuation of Postretirement Benefits Under GASB 45
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Milliman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
�� J97
Introduction and Purpose
Historically, governmental entities offering postretirement medical plans — especially those that
are self - funded — have accounted for such plans on essentially a cash basis. Consequently, the
cost for such plans is attributed to the period of time that an employee is retired and not
performing substantial work for the employer. In 2004, the Governmental Accounting Standards
Board issued Statement No. 45 entitled "Accounting and Financial 12eporting by Employers for
Postemployment Benefits Other Than Pensions " ( "GASB 45 ") to &d,&css the accounting of these
plans.
The major change under GASB 45 is to attribute the cist`of postretiremehtbenefits to the time
during which the employee is working for the employer. Reasons provided b ' : QASB for this
change include:'
z� T
Recognize the cost of benefits in periods when' lated services are received by the
employer. „' %
Provide information about the acttt„a fiat liabilities for promised benefits associated with
past services and to what extent those,benefit °kare funded.
Provide information; that is useful to assess potential demands on the employer's future
cash flows. s
._
While GASB 45 allocafe the cos of a postretirtment benefit plan over the years of active
employment (when the proi efits,ipotentially motivating an employee), it does
not require t d�'� of sii �berlefits 'T'h re are two key points that need to be noted in this
regard. FKt the clf the diount rate used in measuring the liabilities of the benefits is
tied tq tl funding vehiiir lacktttete GASB 45 requires the use of a discount rate that is
relatedl t6 e long -term I t nt Meld on investments used to finance the payments of
benefits plat ust use a discount rate equal to what the sponsor earns on its
general assets "`, ce a low, "discount rate leads to higher liabilities, a funded plan will have
lower liabilities un ed plan with identical provisions and membership.
." ;a
While the discount raf"t� sue provides some encouragement for funding plans, there is a second
key point. GASB 455" requires that assets can only be considered if they are: (1) held in an
irrevocable trust, (2) dedicated solely to provide benefits under the plan to retirees and their
beneficiaries, and (3) are protected from creditors. This restriction may limit what can be
funded, depending upon legal restraints and tax issues.
Actuarial Valuation of Postretirement Benefits Under GASB 45
This material assumes that the reader is familiar with Brazos County's post- employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Milliman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
In order to illustrate how the results are impacted if the Plan is funded, results are shown using
two different discount rates. If the Plan were funded, the entity may be able to invest in higher
risk securities. For purposes of this report, we have determined the liabilities using a 7%
discount rate, to reflect the potential effect of funding these liabilities using a trust fund. Without
funding, the discount rate is assumed to be 4 %, which represents a conservative estimate of
short-term pooled funds. If the plan sponsor chooses to fund these liabilities, the actual discount
rate will reflect the actual investments selected by the plan sponsor.
Census information was collected and the valuation was performed ' as of January 1, 2007.
Pursuant to Questions 42 and 43 from the "Guide to Implementation of GASB Statements 43
and 45 ", the liabilities and costs in this report could be used for the fiscal year beginning October
1, 2007 and ending September 30, 2008.
These pages estimate the cost of the entity's current retiree. health progri ,and the potential
impact of GASB 45. The intended purpose of this information is to pravice actuarial cost
information to the entity to help with financial and ie>tefit planning. Milliman dies not intend to
benefit and assumes no duty or liability to other parti'
should only be used in its entirety to assure complete
methodology and assumptions underlying, the estimates.
In preparing this report, we relied on the overall aeph
entity. We reviewed the information for reasoiiaM." ei1q,
To the extent that any of this data or information is bfo(
to be revised. We have not collected actual clam infi
were developed from oundersfading of the plan and
ive this work 5 -IThe summary
ling of the estimates and the
e census ,information provided by the
but we did not audit the information.
,ct, the results of this report may need
iation of the entity. Per capita claims
lliman's Health Cost Guidelines.
A number of assumpti'es cave seen made in pi%ecting retiree health costs that should be
reviewed prior to interpre�l ,then Y alts bown i this report. These assumptions, as well as
the actuaria- qJ ogy, descnG8d =iti Ai is report. The projections in this report are
estimated end, as sued " e entit�ctual liability will vary from these estimates. The actual
liabillity Will not be kno� until stk #tnte that all eligibility is exhausted and all benefits are
paid the'projections anc IMP
,projections should be updated as actual costs under this program
develop.
The Medicare rnizatia Act (MM provides for a federal subsidy to sponsors of a
postretirement ben fiat provides prescription drug coverage, provided the coverage is at
least actuarially equi nt to the prescription drug benefits provided by Medicare Part D.
GASB has released a oposed Technical Bulletin that indicates this future subsidy should not be
reflected. We have not reflected any effect of this future subsidy in the calculations shown in
this report.
Actuarial Valuation of Postretirement Benefits Under GASB 45
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. N illiman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
RS i�9
Actuarial Valuation of Postretlrement Benefits Under GASB 45
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. N illiman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
q9 -, - - / I r11\
Exhibit 1 — Summary of Participant Data
Actuarial Valuation of Postretirement Benefits Under GASS 45
6
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. N itliman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
Years
of Service
Age
45
0
0
0
0
0
0
45
0 -24
0
25 -29
54
21
0
0
0
0,
"' 0
0
75
30 -34
35
32
6
0
0
0i
0
0
73
35 -39
42
20
15
2
2
0
0
0
81
40 -44
33
20
11
4
8 ,,
1
0
77
45 -49
32
27
14
11
5 '
0
0
89
50 -54
19
26
10
3
8
3
0 `"
"° 0
69
55 -59
12
16
7
6
1
2
0
0"
44
60 -64
9
11
9
3
5.
(,
0
0 0
37
65 -69
4
2
2
2
0;,
., "° 0 `
1
0
11
70&Up
0
0
1
1
1=
0
0
0
3
Total
285
175
75
_; 32
30.
6
1
0
604
Actuarial Valuation of Postretirement Benefits Under GASS 45
6
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. N itliman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
Exhibit 2 — Actuarial Present Value of Total Projected Benefits
Medical and Dental
Active $2,530,251
Retiree 0
Total $2,530,251
Exhibit 3 — A tbar
Accrued Liability
$54,845,136
9,535,097
$64,380,233
Medical and Den I WI _�
Active $1,561,055 $42,399 $0 $1,629,723 $46,167,177
Retiree 0 12,239,980 1,743,217 304,239 14,287,436
Total 61,055 $55,216,379 $1,743,217 $1,933,962 $60,454,613
Medical and Dental
Active $650,258 $20,549,140 $0 $790,906 $21,990,304
Retiree 0 8,184,305 1,137,962 212,830 9,535,097
Total $650,258 $28,733,445 $1,137,962 $1,003,736 $31,525,401
Actuarial Valuation of Postretirement Benefits Under GASB 45 7
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. N illiman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. 'This material should only be reviewed in its
entirety.
Current Plan
at 0.
9 -1 -1
County
CSCD
Health Dept.
Total
Medical and Dental
Active
$7,196,591
$122,611,853
$0
$4,855,488
$134,663,932
Retiree
0
12,239,980
1,743,217
304,239
14,287,436
$134,851,833
$148,951,368
Total
$7,196,591
$1,743,217"'
t $5,159,727
Medical and Dental
Active $2,530,251
Retiree 0
Total $2,530,251
Exhibit 3 — A tbar
Accrued Liability
$54,845,136
9,535,097
$64,380,233
Medical and Den I WI _�
Active $1,561,055 $42,399 $0 $1,629,723 $46,167,177
Retiree 0 12,239,980 1,743,217 304,239 14,287,436
Total 61,055 $55,216,379 $1,743,217 $1,933,962 $60,454,613
Medical and Dental
Active $650,258 $20,549,140 $0 $790,906 $21,990,304
Retiree 0 8,184,305 1,137,962 212,830 9,535,097
Total $650,258 $28,733,445 $1,137,962 $1,003,736 $31,525,401
Actuarial Valuation of Postretirement Benefits Under GASB 45 7
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. N illiman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. 'This material should only be reviewed in its
entirety.
Exhibit 4 — Annual Required Contribution — 4.0%
The amortization of the Unfunded Actuarial Accrued Liability is calculated here assuming 30 level annual
payments. GASB 45 allows for these payments to be calculated as a level percent of payroll. If this were done,
the FYE 2008 ARC would be lower, but future years would be higher as payroll increases.
Actuarial Valuation of Postretirement Benefits Under GASB 45
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Milliman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
qg 133
Y
V
�y
9 -1 -1
County
CSCD
Health
Total
A. Normal Costs
(1) Current Year Normal Cost as of January I, 2007
$ 279,302
$ 5,138,384
$ 0
$ 216,491
$ 5,634,177
(2) Assumed Interest to the End of the Fiscal Year
$ 19,843
$ 365,064
$ ' 0
$ 15,381
$ 400,288
(3) Current Year Normal Cost as of Sept. 30, 2008
$ 299,145
$ 5,503,448
$ ' , 0
$ 231,872
$ 6,034,465
[(I) + (2)]
:14
B. Determination of Current Year Amortization
Payment
(1) Unfunded Actuarial Accrued Liability (see Exhibit
$ 1,561,055
$ 5";21, (k379
$ 1,743,217
$1,933,962
$ 60,454,613
3).
(2) Maximum Permissible Amortization Period
30 jars
30 years
30 years
30 years
30 years
>
,
(3) Level Dollar Amortization Factor
17.9837'
17.9837
17.9837
17.9837
17.9837
(4) Amortization Amount as of January 1, 20Q?
$ 86,804
$ 3,070;357
$ 96,933
$ 107,540
$ 3,361,634
[(1) / (3)]
t:.
(5) Assumed Interest to the End of the* 'fatal Year-,
$ 6,167.r
$ 218,138
$ 6.887
7,640
$ 238,832
(6) Amortization Amoun as A September 3062008
92,971
$ 3,288,495
$ 103,820
$ 115,180
$ 3,600,466
[(4) + (5)]
v
C. Determivatrb,Annual Required 0 tribuUon
(1) Normal Cost for Btl Attributable torvice in
$ 299,145
$ 5,503,448
$ 0
$ 231,872
$ 6,034,465
the Year (A.3.) _
(2) Amortization of Unfunded al creed
$ 92,971
$ 3,288,495
$ 103,820
$ 115,180
$ 3,600,466
Liability (B.6.) `s
r
(3) Annual Required Contribution (ARC) [(1) + (2)]
$ 392,116
$ 8,791,943
$ 103,820
$ 347,052
$ 9,634,931 ,
The amortization of the Unfunded Actuarial Accrued Liability is calculated here assuming 30 level annual
payments. GASB 45 allows for these payments to be calculated as a level percent of payroll. If this were done,
the FYE 2008 ARC would be lower, but future years would be higher as payroll increases.
Actuarial Valuation of Postretirement Benefits Under GASB 45
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Milliman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
qg 133
Y
V
�y
Exhibit 5 — Annual Required Contribution — 7.0%
The amortization of the Unfunded Actuarial Accrued Liability is calculated here assuming 30 level annual
payments. GASB 45 allows for these payments to be calculated as a level percent of payroll. If this were done,
the FYE 2008 ARC would be lower, but future years would be higher as payroll increases.
Actuarial Valuation of Postretirement Benefits Under GASB 45
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Mil iman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
9 -1 -1
County
CSCD
Health
Total
A. Normal Costs
(1)
Current Year Normal Cost as of January 1, 2007
$
104,589
$
2,234,967
$ 0
$ 95,266
$
2,434,822
(2)
Assumed Interest to the End of the Fiscal Year
$
13,147
$
280,929
$ 0
$ 11,975
$
306,050
(3)
Current Year Normal Cost as of September 30,
$
117,736
$
2,515,$96
$ 0
$ 107,241
$
2,740,872
2008 [(1) + (2)]
B.
Determination of Current Year Amortization
Payment
(1)
Unfunded Actuarial Accrued Liability (see Exhibit
$
650,258
$,3645
$ 1,137,962
$1,003,736
$
31,525,401
3)
4
2 -
+;
(2)
Maximum Permissible Amortization Period
30 years
30 years °
30 years
30 years
30 years
(3)
Level Dollar Amortization Factor
13 2777 �
1
13.2777
- 13.2777
13.2777
13.2777
(4)
Amortization Amount as of January I, 2007
$
4$,974
$
2,164,038
$ 85,705
$ 75,596
$
2,374,313
[(I) / (3)]
(5)
Assumed Interest to the End of Atiejfcal Year, _
$ 6,1561
$ 272,014
$ 10,773
9,502
$ 298,445
(6)
Amortization Amount ,as,of September 3Q `2008
$
S 130
$
2,436,052
$ 96,478
$ 85,098
$
2,672,758
[(4) + (5)] .
C.
Determinaho o�Annual Required Cfhtribution`:
(1)
Normal Cost for Ben is Attributable to&vice in
$
117,736
$
2,515,896
$ 0
$ 107,241
$
2,740,872
the Year (A.3.) .'
(2)
Amortization of Unfunded *at �ecrued
$
55,130
$
2,436,052
$ 96,478
$ 85,098
$
2,672,758
Liability (B.6.)
(3)
Annual Required Contribution (ARC) [(1) + (2)]
$
172,866
$
4,951,948
$ 96,478
$ 192,339
$
5,413,630
The amortization of the Unfunded Actuarial Accrued Liability is calculated here assuming 30 level annual
payments. GASB 45 allows for these payments to be calculated as a level percent of payroll. If this were done,
the FYE 2008 ARC would be lower, but future years would be higher as payroll increases.
Actuarial Valuation of Postretirement Benefits Under GASB 45
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Mil iman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
Exhibit 6 — Projected Benefit Payments
Actuarial Valuation of Postretirement Benefits Under GASB 45 10
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. M iliman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
q8 X35
Exhibit i — Financial Statement Disclosures
The following table shows the calculation of the Annual Required Contribution and Net OPEB
Obligation.
Actuarial Valuation of Postretirement Benefits Under GASB 45 11
This material assumes that the reader is familiar with Brazos County's post- employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Milliman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
q8 131
Determination of Annual Required
Contribution
Normal Cost at fiscal year end
$ �0,034 ,465
2,740,872
Amortization of UAAL
3,600,466
2,672,758
Annual Required Contribution (ARC)
,t : 9,634,31
$ 5,4f3,630
Determination of Net OPEB Obligation
Annual Required Contribution
$ 9,634,E 1
$ 5,413,630
Interest on prior year Net OPEB Obligation
0
Adjustment to ARC
0
0
Annual OPEB Cost
$ 9,434,931
$ 5,413,630
Contributions mane
(647,014)
(5,413,630)
Increase in Net 4tJ3..0bhga T n
$ 8,987,917
$ 0
M.
Net OPLR,,,' hg to -begin ua of year
0
$ 0
Net *' 'B Obligati of �
$ 8,987,917
$ 0
yea a
The followf � ble shows tho nnual OPEB cost and net OPEB obligation for the prior 3 years
assuming the �l is not preft i' ded (4% discount):
z
t,O:
0
Q bu e _
.
09/30/2006
N/A
N/A
N/A
N/A
09/30/2007
N/A
N/A
N/A
N/A
09/30/2008
4.0%
$9,634,931
6.72%
$8,987,917
Actuarial Valuation of Postretirement Benefits Under GASB 45 11
This material assumes that the reader is familiar with Brazos County's post- employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Milliman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
q8 131
Exhibit 8 — Schedule of Funding Progress
Actuarial Valuation of Postretirement Benefits Under GASB 45 12
This material assumes that the reader is familiar with Brazos County's post- employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Milliman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
ag 137
Unfunded
Actuarial
Actuarial
Actuarial
Actuarial
Discount
Accrued
Accrued
Valuation
Value
Liabilities
Liabilities
Funded
Date
of Assets
Rate
(AAL)")
(UAAL) (2)
Ratio
October 1, 2005
N/A
N/A
N/A
;,N /A
N/A
October 1, 2006
N/A
N/A
N/A
IOTA
N/A
October 1, 2007
0
4.0%
60,454613 `.
60,4546 t�j
0.0%
Actuarial Valuation of Postretirement Benefits Under GASB 45 12
This material assumes that the reader is familiar with Brazos County's post- employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Milliman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
ag 137
Actuarial Valuation of Postretirement Benefits Under GASB 45 13
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may cot be appropriate for other purposes. Miiliman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
Appendix A — Actuarial Cost Method
Unit Credit Actuarial Cost Method
The actuarial cost method determines, in a systematic way, the incidence of plan sponsor
contributions required to provide plan benefits. It also determines haw actuarial gains and losses
are recognized in pension costs. These gains and losses result frQ, the difference between the
actual experience under the plan and the experience by the actuarial assumptions.
The cost of the Plan is derived by making certain specific assumptions alto rates of interest,
mortality, turnover, etc. which are assumed to hold for many years into th6ffuture. Since actual
experience may differ somewhat from the long tern) assumptions, the costs determined by the
valuation must be regarded as estimates of the true hosts. of the 1,,,Jan.
.'
Actuarial liabilities and comparative costs shown in this ort were computed using the Unit
Credit Actuarial Cost Method, which consists of the follow cost components:
1. The Normal Cost is the Actuarial Present Value of'behcfits allocated to the
valuation year.
2. The Actuarial 40 fu Liability is ;the Actuarial' Present Value of benefits
accrued as o the valiiatiou date.
3. Valuation As ,are ecitt l to the markery,41 -le of assets as of the valuation date,
if any.
4 i'ifunde&- rial'A >iued Liability is the difference between the Actuarial
Accrued Llaliih yIld the gitltption Assets. It is amortized over the maximum
pe niissible penot der G 45 of 30 years.
It should be n that GAS :45 allows a variety of cost methods to be used. We elected this
method because °' ^ gener 'Per easy to understand and is widely used for the valuation of
postemployment b s, er than pensions. Other methods used do not change the ultimate
liability, but do alloca ' differently between what has been earned in the past and what will be
earned in the future. a different method was used, either the normal cost would decrease and
the unfunded amortization would increase, or the normal cost would increase and the
amortization decrease. Please note that the net effect of the change may result in an increase or
decrease in the annual required contribution (ARC). If desired, we can provide more details.
Actuarial Valualion of Postretirement Benefits Under GASB 45 14
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. N illiman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
9g 139
Appendix B — Actuarial Assumptions
In addition to the actuarial method used, actuarial cost estimates depend to an important degree
on the assumptions made relative to various occurrences, such as rate of expected investment
earnings by the fund, rates of mortality among active and retired employees, rates of termination
from employment, and retirement rates. In the current valuation, the actuarial assumptions used
fnr the ralrnlatinn of rnctc anrd linhilitiPC nrP ac fnllnxxic-
Without prefunding:
With prefunding:
Mortality Rates
Healthy Lives:
Withdrawal Rates (fron
Rates are base
,01"
Svc
6-
9
4 12
1?
Disability IN
None
4.00% per annum, compO,lded.iliinually
7.00% per annum, comport annually
RP2000 Healthy Table :with Projection Scale AA (sex distinct)
)R.4 RPnort fnr'Mh4 -ci7.P orniin and Pntry aas• 't(1 _ 101
years oervice. Sample rates are shown below:
Males
Females
27
4
296
�.
.119
.064
.069
,x:046
.049
: .033
� h
.036
.Y .022
.024
Actuarial Valuation of Postretirement Benefits Under GASB 45
15
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. N illiman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. 'Ibis material should only be reviewed in its
entirety.
qg
Retirement Rates (from WEIRS report)
Age
Male
Female
40 -44
0.05
0.05
45-49-
0.10
0.10
50 -61
0.14
0.16
62
0.32
0.32
63
0.18
0.18
64
0 18
0 18
65 0.35 0.35
66 -74 0.25 0.25
over 74 1.00 1.00
Coverage Assumption
100% of employees eligible for retiree medical benefits are assumed to, elect continued
medical coverage in retirement.
Spousal Coverage Assumption
50% of active members are assumed to elect coverage fi3r a spouse upon retirement.
Spouse Age Difference
If spouse's date of birth is not provided' females are assumed td be three years younger
than males.
Administrative Expense Lbac ,
8% administrative 1100 on grds� per capita claims costs
Cavita Medical lie ge #it. Cos
The assumed annual pets p la cost, of, medical benefits is shown below. These amounts are
GROSS of t'e test -shari g amounts and,reflect the 8.0% administrative expense load.
r : %:A9e lllgda1 5 Dental
Female Male Female
55
$6,71F;
$6,295
$275
$289
60
n ,564
$8,035
$275
$289
64
$10,410
$9,766
$275
$289
65
$3,163
$3,221
$275
$289
70
$3,579
$3,645
$275
$289
Actuarial Valuation of Postretirement Benefits Under GASB 45 16
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Milliman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
qK i41
Medical Inflation (Trend Assumption)
The trend assumptions for medical costs, Medicare Supplement premiums, pharmacy costs,
and dental costs are summarized below: -
Year
Medical
Pre - Medicare
Medical
Post- Medicare
Dental
2007
11.0%
10.0%
5.0%
2008
10.0%
9.5%
5.0%
2009
9.0%
9.0%
5.0%
2010
8.0%
8.5%
5.0%
2011
7.0%
8.q°`0
5.0%
2012
6.0%
%
5.0%
2013
6.0%
7b
5.0%
2014
6.0%
6.3°x:'
5.0%
2015+
6.0%
5.0%
Retiree premiums are not indexed for inflation,,"
g.
Increase in Per Capita Medical Benefit Costs by Agefi
Annual per capita benefit costs are pro' cted to increase withje as described below:
Age Range Age Related '-Growth
of Berle, fit Cost
Pre- 5% per an(lum,
Medicare 'K compounded
compounded
annually
Dates of hire wet , t report l" "for the 30 active 9 -1 -1 participants. Estimates were made based on
entry age for the Co „qW Offoyees.
Actuarial Valuation of Postretirement Benefits Under GASB 45
17
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. h illiman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
VOL 70 Pa,sE 14�
Appendix C — Plan Provisions
Groups and coverage for Retiree Medical Coverage
Group Covered
Brazos County Yes
Health Dept. Yes
CSCD No (8 grandfathered retirees)
9 -1 -1 Yes
Rape Crisis No
Elieibility and Coverage on or after January 1, 2007
Members may retire upon attaining one of the following:
(1) age 60 and above with eight (8) or mbft "�,%rs of
(2) 30 or more years of service regardless of a #or
(3) when the sum of their age and years of servk
75 or more.
Dependents are also eligible for cover' ge.while the retiree i4 a. e.
In the event of disability, medical coverage is not available if the, participant is not otherwise
eligible for retirement.
r.
For members retiring:ppor to J#` yary 1, 2000
S 6use
Medtclfl* ::... J,05.00 $74.96
L?e ftal* $19.86
rir hers yeti
<4.
Medi�4
Dental* i
* not
ring aio�lanuaryr ;`2000:
Retid Souse
$25.00 $265.00
$11.04 $19.86
Life Insurance Benefits - None
Medical Plan Benefits Summary - (see next page)
Actuarial Valuation of Postretirement Benefits Under GASB 45 18
This material assumes that the reader is famiiiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. N illiman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety.
Summary of Medical Benefits
Actuarial Valuation of Postretirement Benefits Under GASB 45 19
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Milliman does not
intend to benefit and assumes no duty or liability to other parties who receive Ithi This material should only be reviewed in its
entirety. l S
i',.,, ^. , i
f:,, r
3��"�" .NYC ..��.
�' t'
•.y �: : :3x
Deductible
Individual
$250
$500
Family
$500
$1,000
Member Coinsurance
15%
30%
OOP Max
Individual
$2,000
$6,000
Family
$4,000
$12,000
Lifetime Max
$1.00, 000
Physician Office Visit/Consultation (Intl lab /x -ray)
$20
30%
Inpatient Visits
15%
30%
Home Infusion Therapy
15%
30
Physician surgical services in any setting
15%
30%
Independent Lab /X -ray
0%
30
Allerov In'ections without office visit
0%
30%
Skilled Nursing Facility ($10,000 combined cy max)
15%
�10
Home Health Care ($10,000 combined cy max)
15 %
A1,30
Hos ice Care 20 000 combined lifetime max
15 1/6U
Af)
Inpatient Services
Hospital Services (Facility)
15%
'.
�.
34a .
Physician Services
15% -11
' 'W„
30%
`_
Outpatient Services
Physician Services (office setting)
$20
30%
Other Outpatient Services
15%
:.
30%
Inpatient Services;•
Hospital Services (Facility)
30
Physician Services
15% '
30
i
Outpatient Services
Physician Services (office setting)
$20'
%
30%
Other Outpatient Services
16
30%
Same as tiny other
Dhvsical illness
Serious Mental Illness
Facility Charges ?,
15% a . r $100
15% after $100
Physician Charges
E
1 �
15
Ambulance e,
15;V` 1
15%
Routine Physicals
"a
30%
Well Baby
$20
30%
Immunizations ears 8 o4er
$20
30%
Routine Lab/ ijA
$20
309/6
Vision & g Exams :
&birth
$20
30%
Immur uo to a e 6
"`
0%
0%
11 000 max e, ..� onth period for hearlmh1faffilds
15%
30%
1000 max er dffl It
25%
30%
Deductible
Individualk
$50
Family
$150
Group I - Preventive Care
0
Group II - Basic Care `'
20%
Group III - Major Care
50%
Annual Maximum (Groups I, 11, III)
$1,500
Orthodontic ($1,500 lifetime max)
50%
Predetermination Amount
300
Actuarial Valuation of Postretirement Benefits Under GASB 45 19
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Milliman does not
intend to benefit and assumes no duty or liability to other parties who receive Ithi This material should only be reviewed in its
entirety. l S
Appendix D — Glossary
The following is an explanation of many of the terms referenced by the Proposed Statement of the
Governmental Accounting Standards Board, "Accounting and Financial Reporting by Employers for
Postemployment Benefits Other than Pensions ".
1. Actuarial Cost Method. This is a procedure for determining the. Actuarial Present Value of
Benefits and allocating it to time periods to produce the Actual Accrued Liability and the
Normal Cost. The Statement assumes a closed group of empjgyees "4pd other participants unless
otherwise stated; that is, no new entrants are assumed. Six Methods ' � ermitted — Unit Credit,
Entry Age Normal, Attained Age, Aggregate, Frozen Envy Abe, and 1 Attained Age.
2. Actuarial Accrued Liability. This is the
attributable to periods prior to the valuation
not provided by future Normal Costs).
of the Actuarial Present! blue of Benefits
kie Actual Cost Meth (jj.; "that portion
3. Actuarial Present Value of Benefits This is the valu�,� of the applicable date, of future
V
payments for benefits and expenses undo t*e Plan, where eat;, 1payment is:
(a) Multiplied by the probability of the event occurri*ng on which the payment is conditioned,
such as the probability of survival, death, disabili ty;ernunation of employment, etc.; and
(b) Discounted at the assur_04 discount rate -,,
4. Actuarial Value offtets. T4 is the value of4cgg ,investments and other property belonging
to the Plan, as used b tti actu og the purpose "of an Actuarial Valuation.
5. AmorEtin ent Thl 4s the amour of the contribution required to pay interest on and
to a6rtize over a A -n peQ the Unfunded Actuarial Accrued Liability or the Unfunded
Ff� Actuarial Accrtt Liability;" `closed amortization period is a specific number of years
court , Wom one date tl reducj g to zero with the passage of time; an open amortization
period 10 that begins again or is recalculated at each actuarial valuation date.
6. Annual Reiff' 11' d Co 'butions ( "ARC "). This is the employer's periodic required
contribution to ' ; ed benefit OPEB plan, calculated in accordance with the set of
requirements for `: ulating actuarially determined OPEB information included in financial
reports.
7. Attribution Period. The period of an employee's service to which the expected postretirement
benefit obligation for that employee is assigned. The beginning of the attribution period is the
employee's date of hire. The end of the attribution period is the normal retirement date. For
disability retirement, the end of the attribution period is the date of disability.
Actuarial Valuation of Postretirement Benefits Under GASB 45
20
This material assumes that the reader is familiar with Brazos County's post - employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Milliman does not
intend to benefit and assumes no duty or liability to other parties who receive this work. This material should only be reviewed in its
entirety. q8 14.5
8. Benefit Payments. The monetary or in -kind benefits or benefit coverage to which participants
may be entitled under a post employment benefit plan, including health care benefits and life
insurance not provided through a pension plan.
9. Funding Excess. This is the excess of the Actuarial Value of Assets over the actuarial accrued
liability.
10. Normal Cost. This is the portion of the Actuarial Present Value of Benefits allocated to a
valuation year by the Actuarial Cost Method.
11. Net OPEB obligation. This is the cumulative difference since the effective date of this
statement between annual OPEB cost and the employer's cobutio s to the plan, including the
OPEB liability (asset) at transition, if any, and excludm (a) shoit4erm differences and (b)
unpaid contributions that have been converted to OPEB -elatd debt.;
12. Other Postemployment Benefits ("OPEB"). is refers to postemployment benefits other
than pension benefits, including healthcare benefi�+ egardles :..of the type of pl that provides
them, and all other postemployment benefits provlc _'Jq, r l}� from a pension,plan, excluding
benefits defined as termination benefits or offers. ;,: Q "`
13. Return on Plan Assets. This is the actual investment rei icon plan assets during the fiscal
year.
3
14. Substantive Plan. The terms of the postretirement behefit, plad'as understood by an employer
that provides postretireroegt benefits and the employees Mii6 render services in exchange for
those benefits. The suKstarltive`plan is the basis for the ace6unting for the plan.
15. Unfunded
over the Actuarial V
excess of the actuarial accrued liability
Actuarial Valuation of Postretirement Benefits Under GASB 45
21
This material assumes that the reader is familiar with Brazos County's post- employment benefit programs, their benefits, eligibility,
administration and other factors. The material was prepared solely to provide assistance to Brazos County in reviewing the impact of the
proposed GASB Statement 45 on Brazos County's financial statements. It may not be appropriate for other purposes. Hiliman does not
intend to benefit and assumes no duty or liability to other parties who receive this wort:. This material should only be reviewed in its
entirety.
a8 1�