Okaloosa County BOCC — May 20, 2014 — CAFR_13 — reading text

provisions may only be amended by legislative action. The FRS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained on the State of Florida Department of Management Services website at www.dms.myflorida.com. The FRS provides assistance to retirees of all state-administered retirement systems in paying health insurance costs. Eligible retirees received an extra $5 per month for each year of creditable service completed at the time of retirement with a minimum monthly payment of $30 and a maximum payment of $150. To be eligible to receive the Health Insurance Subsidy (HIS), a retiree under any state-administered retirement must provide proof of health insurance coverage, which can include Medicare. Any spouse or financial dependent who receives a monthly retirement benefit may also receive the HIS. Funding Policy The HIS program is funded by required contributions from FRS participating employers. According to the FRS actuarial valuation of HIS completed July 1, 2012, the unfunded actuarial liability of the HIS program was $8.8 billion. The annual required contribution (ARC) calculated in July, 2012, for the fiscal year ending June 30, 2013 is 1.71% of active payroll. Effective July 1, 2013, with the passage of Senate Bill 1810, the employer-paid contribution rate for the HIS program increased from 1.11% of the employer’s payroll to 1.20% of the employer’s payroll. This contribution is added to the amount submitted for retirement contributions but is deposited in a separate trust fund (The Retiree Health Insurance Subsidy Trust Fund) from which Health Insurance Subsidy payments are authorized. If these contributions fail to provide full subsidy benefits to all participants, the subsidy payments may be reduced or canceled. NOTE 15 - POSTEMPLOYMENT BENEFITS Board of County Commissioners Plan Description In addition to providing the pension benefits described, the Board of County Commissioners and all other elected officials except for the Sheriff (County) provides post-employment health care and dental insurance benefits (OPEB) for eligible retired employees and their spouses through a single-employer defined benefit plan administered by Blue Cross Blue Shield of Florida (BCBSFL). Pursuant to the provision of Section 112.0801, Florida Statues, employees who retire from the County and eligible dependents, may continue to participate in the group insurance plan. Retirees and their eligible dependents shall be offered the same health and hospitalization insurance coverage as is offered to active employees at a premium cost of no more than the premium cost applicable to active employees. The County subsidizes the premium rates paid by the retirees by allowing them to participate in the plan at blended group (implicitly subsidized) premium rates for both active and retired employees. These rates provide an implicit subsidy for retirees because, on an actuarial basis, their current and future claims are expected to result in higher costs to the plan on average than those of active employees. Benefits, benefit levels, employee contributions and employer contributions are governed and amended through its personnel manual by the County’s Self Insurance Fund with approval by the Board. The plan does not issue a separate report. 74  Okaloosa County, Florida NOTES TO FINANCIAL STATEMENTS Fiscal Year Ended September 30, 2013 NOTE 15 - POSTEMPLOYMENT BENEFITS - CONTINUED Board of County Commissioners - Continued Benefits Provided The County provides post-employment health care and dental benefits to its retirees. To be eligible for benefits an employee must retire under the County’s retirement plan and must have been covered under the medical plan as an active employee immediately prior to retirement. Elected officials are not eligible for benefits if they qualify for retirement. All health care benefits are provided through the County’s health care provider, BCBSFL. The benefit levels are the same as those afforded to active employees. Benefits include general inpatient and outpatient medical services; dental care; and prescriptions. Upon a retiree reaching age 65 years of age, Medicare becomes the primary insurer and the County’s plan becomes secondary. Membership At September 30, 2013, membership consisted of: Retirees and Beneficiaries Currently Receiving Benefits 50 Terminated Employees Entitled to Benefits But Not Yet Receiving Them - Active Employees 736 Total 786 Participating Employers 1 Funding Policy The County contracted Insurance Broker negotiates the premium rates with BCBSFL. The County has not advance-funded or established a funding methodology for the annual OPEB costs or the net OPBE obligation. Rather, the required contribution is based on pay-as-you-go financing requirements. Retirees and beneficiaries currently receiving benefits are required to contribute 100% of their current premium costs which for fiscal year 2013 was $484,392. The County contributes the remainder to cover the costs of providing the benefits to the retirees via the insured plan. Active employees do not contribute to the plan until retirement. Annual OPEB Costs and Net OPEB Obligation The County annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC) amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a closed period not to exceed 30 years. The following shows the components of the County’s net OPEB obligation: 75  Okaloosa County, Florida NOTES TO FINANCIAL STATEMENTS Fiscal Year Ended September 30, 2013 NOTE 15 – POST EMPLOYMENT BENEFITS – CONTINUED Board of County Commissioners – Continued Annual OPEB Costs and Net OPEB Obligation – Continued Annual Required Contribution $ 375,103 Interest on Prior Year Net OPEB Obligation 35,152 Adjustment to Annual Required Contribution (50,821) Annual OPEB Costs 359,434 Estimated Employer Contributions made (290,614) Increase (Decrease) in Net OPEB Obligation 68,820 Net OPEB Obligation , Beginning of Year 878,801 Estimated Net OPEB Obligation, End of Year $ 947,621 The County first had an actuarial valuation performed for the plan as of September 30, 2013 to determine the employer’s ARC for the fiscal year ended September 30, 2013. The County’s annual OPEB cost (expense) of $290,143 was equal to the ARC for the fiscal year, as the transition liability was set at zero as of October 31, 2007. The County’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for 2013 and the prior two (2) years were as follows: Percentage of UAAL as a Fiscal Annual OPEB Cost Net OPEB Annual Covered Percentage of Year Ended OPEB Costs Contributed Obligation Payroll Covered Payroll 9/30/2011 $ 401,963 45.28% $ 828,569 $ 31,547,282 11.40% 9/30/2012 $ 354,810 85.90% $ 878,801 $ 31,617,251 12.00% 9/30/2013 $ 359,434 80.90% $ 947,621 $ 31,108,775 12.20% Funded Status and Funding Progress As of September 30, 2013, the most recent actuarial valuation date, the plan was 0% funded. The actuarial accrued liability (AAL) for benefits was $3,788,681 and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $3,788,681. Actuarial valuation of 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 ARCs 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 financial statements in the government-wide financial statements of Okaloosa County, Florida, presents multi-year trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the 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 actuarial 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. 76  Okaloosa County, Florida NOTES TO FINANCIAL STATEMENTS Fiscal Year Ended September 30, 2013 NOTE 15 – POST EMPLOYMENT BENEFITS – CONTINUED Board of County Commissioners – Continued Actuarial methods and Assumptions – Continued In the September 30, 2013, actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 4.0% investment rate of return, which is a blended rate of the expected long-term investment returns on the employer’s own investments calculated based on the funded level of the plan at the valuation date, and an annual healthcare cost trend rate of 6.1% initially, reduced by decrements to an ultimate rate of 4.7% in 2082. The Unfunded Actuarial Liability (UAAL) is being amortized