5.1. ERMUSR 05-14-2013 - Laserfiche WebLink

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ELK RIVER MUNICIPAL UTILITIES ELK RIVER,MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2012 AND 2011 Note 5: POSTEMPLOYMENT BENEFITS OTHER THAN PENSION -CONTINUED The Utilities' annual OPEB cost,the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for December 31, 2012 and the preceding three fiscal years was as follows: Three Year Trend Information Percentage Year Annual Annual OPEB Net OPEB Ending OPEB Cost Contributed Obligation 12/31/2012 $ 4,601 - % $ 40,360 12/31/2011 5,663 - % 35,759 12/31/2010 9,853 - % 30,096 Funded Status and Funding Progress. As of December 31,2011,the actuarial accrued liability for benefits was $42,681, all of which was unfunded. The covered payroll (annual payroll of active employees covered by the plan) was $2,286,547 and the ratio of the unfunded actuarial accrued liability to the covered payroll was 1.87 percent. The projection of future benefit payments for an ongoing plan involves estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress,presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan(the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets,consistent with the long-term perspective of the calculations. The following simplifying assumptions were made: Retirement age for active employees- Based on the historical average retirement age for the covered group, active plan members were assumed to retire at age 62,or at the first subsequent year in which the member would qualify for benefits. Participation Rate-It is assumed that 10 percent of active participants continue coverage until age 65. Participants are assumed to continue in their current coverage type(single or family). It is assumed that 100 percent of retirees will continue their current coverage until age 65. Life Expectancy- Life expectancies were based on mortality tables from the National Center for Health Statistics. The 2000 United States Life Tables for Males and for Females were used. Turnover-Non-group-specific age-based turnover data from GASB Statement 45 were used as the basis for assigning active members a probability of remaining employed until the assumed retirement age and for developing an expected future working lifetime assumption for purposes of allocating to periods the present value of total benefits to be paid. Healthcare cost trend rate-The expected rate of increase in healthcare insurance premiums was based on projections of the Office of the Actuary at the Centers for Medicare&Medicaid Services. A rate of 8.5 percent initially, reduced to an ultimate rate of 5.0 percent after seven years, was used. 51