Okaloosa County BOCC — May 20, 2014 — reading text

32.53% $3,584,471 $17,517,844 20.50% 9/30/2013 $379,727 $136,371 35.91% $3,827,827 $16,531,416 23.20% Funded Status and Funding Progress As of July 1, 2011, the most recent actuarial valuation date, the actuarial accrued liability of benefits of $2,873,292 was unfunded. 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. In the July 1, 2011, actuarial valuation, the individual entry age normal 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 8.5% initially, reduced by decrements to an ultimate rate of 5.5% in 2020. The Unfunded Actuarial Liability (UAAL) is being amortized assuming 30 level annual payments. The remaining amortization period at September 30, 2013, was 25 years. NOTE 16 - RISK MANAGEMENT The County is exposed to risk of loss for claims and judgments for public liability, workers’ compensation, employee medical benefits and other special risks. The County uses the Self Insurance Internal Services Fund to account for all risks from workers’ compensation loss, general liability, and medical benefit claims for all County employees except those of the Sheriff, from catastrophic damage to real and tangible property and from special risk policies for the Board. A mixture of commercial insurance coverage and self-insurance, which is described below, manages the risk to the County. There has been no significant reduction in insurance coverage from the prior fiscal year, and insurance coverage has been sufficient to cover all claims made in the prior three fiscal years. 79 Packet Pg. 137  Okaloosa County, Florida NOTES TO FINANCIAL STATEMENTS Fiscal Year Ended September 30, 2013 NOTE 16 - RISK MANAGEMENT - CONTINUED A. Method of Risk Management Public Liability Florida Statutes 768.28(5) limits the maximum County liability for claims and judgments by any one person and any one incident to $200,000 and $300,000, respectively. The County self-insures public liability claims for automobile, general and professional liability. A third party administrator manages claims. Currently, the County retains the risk for the first $100,000 ($50,000 for automobile liability, $5,000 for hired automobile physical damage) of each claim or incident. In 2013, the County elected not to renew a Stop Loss Aggregate insurance policy which covered losses over $2,200,000 ($50,000 for automobile liability, $1,000 for physical damage. The Sheriff maintains a commercial insurance policy for public liability and bears no risk of loss under this type of coverage. Property Insurance The County self-insures the risk of physical loss to its real property, business property and equipment. The County retains the risk of the first $50,000 of physical damage to County property. In the case of a named storm, the self-insurance retention changes to a 3% deductible on each structure with a minimum deductible of $100,000 on all damaged structures for a capped deductible of $5,000,000 per storm. Excess insurance is purchased to cover the physical damage exposure over the self-insured retention amount. Workers’ Compensation The County contracts with a Third Party Administrator to have its workers’ compensation claims processed. The County retains risk for all claims up to $350,000 per incident. Excess insurance is purchased to cover losses up to a statutory limit for workers’ compensation and $1,000,000 for employers’ liability. The County retains no liability for claims that have been settled by purchase of annuity contracts. The Sheriff participates in the Florida Sheriff’s Association Workers’ Compensation Program. It is a fully insured, guaranteed cost program with a deductible trust fund and insurance with a commercial carrier. The Sheriff retains no risk. Employee Medical Benefits The Board of County Commissioners and all other elected officials of Okaloosa County, except the Sheriff, use a fully insured commercial insurance plan to fund employee medical benefits. The Board of County Commissioners or elected official pays the premiums for the employees while the individual pays for dependent and retiree coverage. The County bears no risk of loss under this type of coverage. The Sheriff utilizes a self-funded health plan to provide comprehensive medical benefits to the employees, retirees and their dependents. It is funded by contributions from the Sheriff’s Office and employees. In compliance with Florida Statute, Section 112.08, an actuarial review of the Plan demonstrates that the current rate structure of the Plan plus the current net assets available for benefits appears adequate to support current outstanding claims as well as those projected claims and expenses for the next plan year. Excess insurance is purchased from a commercial carrier to provide a specific claim and aggregate limits coverage. Specific claim coverage benefits the covered individual by providing unlimited coverage to begin when a specific claim exceeds $95,000 plus an 80 Packet Pg. 138  Okaloosa County, Florida NOTES TO FINANCIAL STATEMENTS Fiscal Year Ended September 30, 2013 NOTE 16 - RISK MANAGEMENT - CONTINUED A. Method of Risk Management - Continued Employee Medical Benefits - Continued additional corridor of $125,000. Aggregate limits coverage limits the Sheriff’s total risk exposure. This coverage provides the Sheriff with an additional $1,000,000 in coverage for the coverage year when total claims paid less the total paid under the specific claim excess coverage exceeds 125% of the expected claims for the current plan year. The Sheriff uses an internal service fund to account for risks from medical benefit claims. Claim expenditures and liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. At September 30, 2013, the amount of these liabilities was $658,809. This liability has been determined based on an actuarial evaluation of all claims reported and all claims incurred but not reported (IBNR) as of September 30, 2013. Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amount of payouts and other economic and social factors. Reconciliation of Claims Liablities for Medical Benefits As of As of Okaloosa County Sheriff September 30, 2013 September 30, 2012 Unpaid claims and adjustment expenses at beginning of year $ 1,152,782 $ 654,793 Incurred claims and claim adjustment expenses A) Provision for insured events of current fiscal year 3,402,850 4,583,682 B) Increases (decreases) in provision for insured events of prior fiscal years - - Total incurred claims and claim adjustment expenses 4,555,632 5,238,475 Payments A) Claims and claim adjustment expenses attributable to insured events of current fiscal year 3,896,823 4,085,693 B) Claims and claim adjustment expenses attributable to insured events of prior fiscal year - - Total payments 3,896,823 4,085,693 Unpaid claims and claim adjustment at end of year $ 658,809 $ 1,152,782 Special Risk Policies The Board of County Commissioners purchases commercial crime coverage against theft of money and securities with a $25,000 deductible. All of the other elected officials, except the Sheriff, are covered under the policy. Florida Statute requires certain classes of employees (law enforcement) be provided with a special death and disability benefit. The Board of 81 Packet Pg. 139