7.2. SR 04-06-2009 - Laserfiche WebLink

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Item #5.2. ~f'~ ~lE~'I®~N®Uh7 TO: P'layor and City Council FROirI: Tim Simon, Finance Director DATE: September 8, 2Q08 SUBJECT: Actuarial Valuation Other Past-Employment Benefits In June 2004, Goveznmental Accounting Standards Board (GASB) issued statement No. 45 - accozir~ting and financial repartrng by employers, for po.rtemployrnent benefits other tharr pe~~siorts. Employees are compensated for the services provided. The benefits received today include items like wages and insurance premiums. The benefits received in the future can include items like retirement income and post retirement health care benefits. These fiiture benefits other than pensions are called Other Post-Employment Benefits (OPEB). The intent of the standard was to move fiom a cash basis or pay-as- you go way of paying for OPEB to an accrual basis of accounting. Cities with fewer than 200 employees/retirees are required to have an actuarial valuation at least triennially. We currently have around 120 full-time employees. GASB statement No. ~~ is applicable to the City of Elk River in determining the additional cast of including retired employees in the same health plan used by our active employees. This is known as the "implicit rate subsidy" which means if retirees pay the same health insurance casts there is an implicit subsidy to the retiree. Not only does this liability take into account the current retirees, but we will make assumptions and probabilities of all employees at the City. Other municipalities may offer future benefits like retiree health insurance premiums paid and budgeted by the City in which case the liability may be significantly higher. For our 2008 financial statements the City performed an actuarial valuation of the other post-employment benefits. The firm Van Iwaarden has completed the actuarial calculation and the results will be incorporated in the 2008 financial statements. The primary number used to determine the liability to report in the financial statements is the actuarial accrued liability which is $88,718. I have discussed the amounts with the City's auditors and they indicated that the preliminary amounts look immaterial to the financial statements and may only require note disclosure. If we decide to report the liability in the Statement of Net assets, the City could designate fund balance in the Severance Pay