2012 Comprehensive Annual Financial Report - the City of Tukwila

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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
CITY OF TUKWILA: 2012 CAFRNOTES TO THE FINANCIAL STATEMENTSFiscalYearEndedAnnualRequiredContributionInterest onNet OPEBObligationARCAdjustmentANNUAL DEVELOPMENT OF OPEB COSTAnnualOPEB CostTotalEmployerContributionsChange inNet OPEBObligationNet OPEBObligationBalance‐‐‐ Amortization‐‐‐(Gain)/Loss Factor *2008 $ 1,366,284 $ - $ - $ 1,366,284 $ 557,103 $ 809,181 $ 809,181 $ 809,181 13.4622 $ - $ 809,1812009 1,366,284 40,459 61,839 1,344,904 335,265 1,009,639 1,818,820 1,031,019 13.0853 61,839 1,818,8202010 1,366,284 90,941 143,332 1,313,893 317,771 996,122 2,814,942 1,048,513 12.6896 143,332 2,814,9422011 1,264,522 112,598 213,809 1,163,311 335,090 828,221 3,643,163 929,432 13.1657 213,809 3,643,1632012 1,264,522 145,727 287,945 1,122,304 332,141 790,163 4,433,326 932,381 12.6523 287,945 4,433,326* Based on a 21-year closed amortization as of January 1, 2008The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the netOPEB obligation were as follows:(Gain)/LossEndingBalancePERCENTAGE OF ANNUAL OPEB COST CONTRIBUTEDFiscal Year EndingAnnual OPEBCostEmployerContributionPercentage ofAnnual OPEBCost ContributedNet OPEBObligationDecember 21, 2010 1,313,893 317,771 24 2,814,942December 21, 2011 1,163,311 335,090 29 3,643,163December 21, 2012 1,122,304 332,141 30 4,433,326Funded Status and Funding ProgressAs of January 1, 2011, the most recent actuarial valuation date, the plan was 0% funded. The actuarialaccrued liability for benefits was $14.8 million, and the actuarial value of assets was $0, resulting in anunfunded actuarial accrued liability (UAAL) of $14.8 million and a funded ratio of 0%. The funded ratio is0%, because the City funds benefits on a pay-as-you-go basis.Valuation DateSCHEDULE OF FUNDING PROGRESS (rounded to thousands)Actuarial Valueof AssetsActuarialAccruedLiabilitiesUnfunded ActuarialAccrued Liabilities(UAAL) Funded Ratio Covered PayrollUAAL as aPercentage ofCovered PayrollJanuary 1, 2008 $0 $16,103 $16,103 0% $581 4%January 1, 2011 0 14,805 14,805 0% 371 3Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts andassumptions about the probability of occurrence of events far into the future. Amounts determinedregarding the funded status of the plan and the annual required contributions of the employer are subjectto continual revision as actual results are compared with past expectations and new estimates are madeabout the future.Actuarial Methods and AssumptionsProjections of benefits for financial reporting purposes are based on the substantive plan (the plan asunderstood by the employer and the plan members) and include the types of benefits provided at thetime of each valuation. The actuarial methods and assumptions used include techniques that aredesigned to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial93
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2012 Comprehensive Annual Financial Report - the City of Tukwila

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