5.1. ERMUSR 04-08-2014 - Laserfiche WebLink

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ELK RIVER MUNICIPAL UTILITIES ELK RIVER,MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2013 AND 2012 Note 5: POSTEMPLOYMENT BENEFITS OTHER THAN PENSION-CONTINUED 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. Health insurance premiums-2011 health insurance premiums for retirees were used per the valuation report. Withdrawal-The probability that an employee will remain employed until the assumed retirement age was determined using non-group specific age-based turnover data provided in Table 1 in Paragraph 35b of GASB 45. Disability-None Actuarial Method-Projected Unit Credit with 30-year amortization of the unfunded liability. Valuation date-January 1,2011 Based on the historical and expected returns of the Utilities' short-term investment portfolio,a discount rate of 4.0 percent was used. In addition,a simplified version of the entry age actuarial cost method was used.The unfunded actuarial accrued liability is being amortized as a level dollar amount over an open basis.The remaining amortization period at December 31, 2013 was thirty years. Note 6: SUBSEQUENT EVENT On February 12,2014 the Utilities issued$2,030,000 of Electric Revenue Refunding Bonds, Series 2014A,to provide resources for the crossover refunding of$2,180,000 of the outstanding principal of the Electric Revenue Bonds,Series, 2006A on August I, 2014. It is anticipated that the refunded maturities will be called and prepaid at a price of par plus accrued interest on May 1,2014,which is within 90 days of settlement of the bonds. 102 •