4.1 ERMUSR 04-10-2018 - Laserfiche WebLink

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Elk River Municipal Utilities Elk River, Minnesota Notes to the Financial Statements December 31, 2017 Note 5: Postemployment Benefits Other Than Pensions (Continued) 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 60, 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"Getzen" model published by the Society of Actuaries. A rate of 6.8 percent initially, reduced to an ultimate rate of 5.4 percent, was used. Health Insurance Premiums-2017 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, 2017 Based on the historical and expected returns of the Utilities' short-term investment portfolio, a discount rate of 3.5 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, 2017 was thirty years. 47 111