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REQUEST FOR ACTION <br />To Item Number <br />Ci Council 7.1 <br />Agenda Section Meeting Date Prepared by <br />Administration Februa 19, 2008 Tim Simon, Finance Director <br />Item Description Reviewed by <br />Selection of Actuarial Firm for GASB Statement No. 45 Lori ohnson, Ci Administrator <br />Calculation -Other Post Employment Benefits Reviewed by <br />Action Requested <br />City Council is asked to approve the selection of Van Iwaarden for actuarial services for other post <br />employment benefits (OPEB) calculations. <br />Background/Discussion <br />In June 2004, Governmental Accounting Standards Board (GASB) issued statement No. 45 -accounting <br />and financzal reporting by employer~~ forpo,rtemploymnet benefits other than pen.rion.r. These OPEB include items like <br />postemployment healthcare, and insurance provided separately from the retirees pension plan. The intent <br />of the standard was to move from a cash basis or pay-as-you go way of paying for OPEB to an accrual <br />basis of accounting. The City has done an excellent job of controlling the OPEB which will result in a <br />substantially reduced liability when compared to other municipalities. <br />GASB statement No. 45 wants cities to determine the additional cost of including retired employees in <br />the same health plan used by our active employees. This is known as the "implicit rate subsidy" which <br />means if retirees pay the same health insurance costs there is an implicit subsidy to the retiree. Not only <br />does this liability take into account the current retirees, but we will make assumptions and probabilities of <br />all employees at the City. <br />Cities with fewer than 200 employees retirees are required to have an actuarial valuation at least <br />triennially. We currently have around 120 full-time employees. Once the GASB statement No. 45 liability <br />is determined, then we will discuss Statement No.43, which is the Financial Reporting for <br />Postemployment Benefit Plans. The City of Elk River will have to implement the statement for the 2008 <br />financial statements. <br />Based on review of the proposals, reference checks, and discussion with the actuarial firms we are <br />recommending Van Iwaarden to perform the OPEB liability calculation. We feel the firm will not only <br />calculate the liability, but also provide input in the funding discussion. <br />Financial Impact <br />This is budgeted in the Finance department budget for 2008. The proposals ranged from $4,500 to <br />$5,000. <br />S:ACouncil\Tim\Actuarial Scrviccs.doc <br />