5.1. ERMUSR 04-14-2009 - Laserfiche WebLink

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ELK RIVER MUNICIPAL UTILITIES ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 AND 2007 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 fiscal year 2008 were as follows: Fiscal Year Ended Percentage of Annual Annual OPEB Net OPEB OPEB Cost Cost Contributed Obligation December 31,2008 $ 10,213 - % $ 10,213 Funded Status and Funding Progress. As of December 31, 2008, the actuarial accrued liability for benefits was $56,892, all of which was unfunded. The covered payroll (annual payroll of active employees covered by the plan) was $2,300,000, and the ratio of the unfunded actuarial accrued liability to the covered payroll was 2.47 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 aze subject to continual revision as actual results are compared with past expectations and new estimates aze made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the fmancial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuazial accrued liabilities for benefits. Methods and Assumptions. Projections of benefits for fmancial 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 actuazial 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 healthcaze insurance premiums was based on projections of the Office of the Actuary at the Centers for Medicaze & Medicaid Services. A rate of 10.0 percent initially, reduced to an ultimate rate of 5.0 percent after ten years, was used. -29-