Coast Community College District 2018 GASB 75 Roll-Forward Valuation Presented By: Geoffrey L. Kischuk, FSA, FCA, MAAA Total Compensation Systems, Inc. November 7, 2018
Goal: • Provide information to allow Coast Community College District to understand the most recent OPEB valuation and make informed decisions about retiree health benefits
Background • Like GASB 45, GASB 75 requires public agencies to account for retiree health benefits like pensions – Accrue benefits while people are working – Retiree premiums/costs taken from liability • GASB standards apply to accrual basis financial statements – Used in Accreditation reviews – Used by bond-rating agencies • Budgets based on amounts paid for retiree benefits – Amounts paid for retiree health premiums/costs – Contributions to a trust
Background • GASB 75 replaced GASB 45 in the 2016-17 fiscal year • GASB 75 now requires annual valuations • Every other year, a streamlined “roll - forward” valuation method can be used – Liability calc uses prior year data – Liability updated using valuation assumptions rather than new data – Assets must use updated actual values • Coast is using a roll-forward valuation for 2017-18 compliance
Key Valuation Assumptions • 6.0% interest rate • 4% annual increase in retiree premiums paid by Coast • CalPERS and CalSTRS demographic tables (i.e. mortality, turnover and retirement)
Valuation Results at 6/30/18 • Total OPEB Liability (TOL) – (the present value of earned benefits): $107.4 million • Service Cost (value of benefits earned in one year): $4.9 million • The Fiduciary Net Position (FNP) – i.e. the value of plan assets – was $76.1 million • Net OPEB Liability (NOL) – is $31.3 million • Expected 2018-19 retiree costs: $6.7 million (Note: retiree costs reflect actual claims and other costs – not necessarily the same as rates used internally by Coast)
Comparison with 6/30/17 Valuation 6/30/17 6/30/18 Total OPEB Liability (was AAL) $103,166,889 $107,409,737 Service Cost (was NC) $4,772,670 $4,903,918 • Expected AAL changes over time: • Increased with interest • Increased for new accruals for employees (i.e. normal cost) • Decreased for benefits paid for retirees • Based on the above, we expected the AAL to continue to increase.
Comparison with 6/30/17 Valuation • TOL increased by the expected amount because no new data was used • Service Cost also increased by the expected amount • FNP increased $382,212 more than expected
Looking Forward to 6/30/19 • As long as Coast has an ongoing retiree health benefit program, expect TOL and SC to increase • Increases will be uneven due to actuarial gains and losses – extent depends on plan design •If the plan is being “fully funded” and investment income matches assumption of 6.0%, assets will keep pace with liability increases • There are special situations that can cause large changes
Looking Forward • Unless limited by plan design or agreement, actual premium increases can be much different from assumed • CalPERS and CalSTRS periodically update their demographic tables – can cause increase or decrease
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