2012 Comprehensive Annual Financial Report - the City of Tukwila

CITY OF TUKWILA: 2012 CAFRNOTES TO THE FINANCIAL STATEMENTSNOTE 10 – OTHER POSTEMPLOYMENT BENEFIT (OPEB) PLANPlan DescriptionThe City is the administrator of the Retiree Medical and Long-Term Care Benefits for LEOFF 1Employees Plan which is a closed, single-employer, defined benefit, other post-employment benefit plan(OPEB). The benefits are authorized under state statute, RCW Chapters 41.16 and 41.18 and 41.26 andmay be amended by the state legislature. This plan provides medical, dental and long-term care benefitsto eligible retirees. Membership is limited to eligible law enforcement officers and fire fighters hired priorto the March 1, 1970 establishment of LEOFF, as well as eligible members of LEOFF hired prior toOctober 1, 1977. Financial reporting for the LEOFF retiree healthcare plan is included in the City’sComprehensive Annual Financial Report. Triennially, a complete actuarial valuation financial report isprepared by Milliman USA, Incorporated. This report is available from the City.MembershipAs of December 31, 2012, there were 3 active employees and 38 retirees meeting the eligibilityrequirements of a LEOFF 1 member. This is considered a closed group with no new members.Funding PolicyFunding for LEOFF 1 retiree healthcare costs is provided entirely by the City as required by RCW. TheCity’s funding policy is based upon pay-as-you-go financing requirements. The employee or retiree is notrequired to contribute to the cost of the plan. The annual contribution represents the cost of employerpaidbenefits.Annual OPEB Cost and Net OPEB ObligationThe City’s annual other postemployment benefit (OPEB) cost is calculated based on the annual requiredcontribution (ARC), an amount actuarially determined in accordance with the parameters of GASBStatement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projectedto cover normal cost each year and amortize unfunded actuarial liabilities over a period 21 years as ofJanuary 1, 2008. The following tables show the components of the City’s annual OPEB cost for the year,the amount actually contributed to the plan, and changes in the City’s net OPEB obligation.ANNUAL OPEB COST AND NET OPEB OBLIGATION2010 2011 20121 Annual normal cost (BOY) $ 105,058 $ 91,385 $ 91,3852 Amortization of UAAL (BOY) 1,196,165 1,124,502 1,124,5023 Interest to EOY (1 + 2 x i*) 65,061 48,635 48,6354 ARC at EOY (1 + 2 + 3) 1,366,284 1,264,522 1,264,5225 Interest on Net OPEB Obligation 90,941 112,598 145,7276 Adjustment to ARC 143,332 213,809 287,9457 Annual OPEB cost (4 + 5 - 6) 1,313,893 1,163,311 1,122,3048 Employer contributions 317,771 335,090 332,1419 Change in Net OPEB Obligation (7- 8) 996,122 828,221 790,16310 Net OPEB Obligation at BOY (11 prior yr) 1,818,820 2,814,942 3,643,16311 Net OPEB Obligation at EOY (9 + 10) $ 2,814,942 $ 3,643,163 $ 4,433,326* (i) is the assumed interest rate that year: 5% in 2009, 4% in 2011, and 4% in 2012.The net OPEB obligation of $4,433,326 is included as a non-current liability on the Statement of NetPosition.92