|
ITEM: |
CONSENT
CALENDAR |
||||
|
|
|||||
|
9. |
RECEIVE
GOVERNMENT ACCOUNTING STANDARDS BOARD STATEMENT NO. 75 ACCOUNTING AND
FINANCIAL REPORTING FOR POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS |
||||
|
|
|||||
|
Meeting
Date: |
February 25, 2021 |
Budgeted: |
N/A |
||
|
|
|||||
|
From: |
David J. Stoldt,
|
Program/ |
N/A |
||
|
|
General
Manager |
Line
Item No.: |
|
||
|
|
|||||
|
Prepared
By: |
Suresh
Prasad |
Cost Estimate: |
N/A |
||
|
|
|||||
General Counsel Review: N/A |
|||||
Committee Recommendation: The Administrative Committee reviewed this item on February 10, 2021 and recommended approval. |
|||||
|
CEQA Compliance: This action does not constitute a project
as defined by the California Environmental Quality Act Guidelines Section
15378. |
|||||
SUMMARY: In July 2004, the
Governmental Accounting Standards Board (GASB) issued Statement Nos. 43 &
45, establishing financial reporting requirement for post-employment benefits
other than pensions. The District
currently provides health insurance benefits as a post-employment benefit and
has complied with GASB 43 & 45 requirements by including current and future
cost information in its financial statements beginning with Fiscal Year 2009-2010. Previously, for GASB 45 purposes, District used
the actuarial firm Milliman, Inc. to compile the required data using the
alternative measurement report method.
In June 2015, GASB issued
Statement No. 75 replacing GASB 45, financial reporting requirement for
post-employment benefits other than pensions, which now includes
information with respect to the total obligation to provide future retiree
health and welfare benefits with fiscal year beginning June 15, 2017. Since this is a
report that requires a full actuarial report, District used Precision
Actuarial, Inc. to prepare this report to meet GASB Statement No. 75 for the
fiscal year ending June 30, 2020 attached as Exhibit
9-A. It
is noteworthy to mention that the GASB 75 standard only applies to reporting
the liability and does not stipulate any requirement for funding the liability.
As stated
in the Executive Summary, page 3, the District’s Net OPEB Liability as of June
30, 2020 is estimated at $4,116,712, most of which remains unfunded. In comparison, District’s Net OPEB
Liability as of June 30, 2019 was estimated at $4,542,208.
The District’s annual expense of $237,425 would fully fund the current and future costs amortized over time. In FY 2019-2020, the District paid premium contributions towards medical coverage for twelve retirees and one surviving spouse of retiree in the amount of $117,237. This actual cost would be deducted from any contribution made for the year. For example, if the District had fully funded its contribution in FY 2019-2020, the $117,237 would have been deducted from the $237,425 resulting in a net contribution of $120,188. It should be noted that both current and future costs must be recalculated on an annual basis based on then current employee data and District benefit levels, so the contribution amounts may vary somewhat each subsequent year. The District can elect to either partially fund, fully fund or continue to fund the costs on a pay-as-you-go basis. The District’s budget in the past has included funds for pay-as-you-go basis. The District budget starting with fiscal year 2018-2019 has also included an additional $100,000 set aside towards OPEB reserve funds.
RECOMMENDATION: The Administrative Committee recommends that
the Board receive the GASB 75 OPEB Valuation Report
prepared by Precision Actuarial, Inc.
BACKGROUND: In July 2004, GASB
issued Statement Nos. 43 & 45, establishing financial reporting
requirements for post-employment benefits other than pensions. The District provides health insurance as a
post-employment benefit and is required to comply with GASB 43 & 45 and
include the required information in its audited financial statements beginning
in FY 2009-10.
In June
2015, GASB issued Statement No. 75 replacing GASB 45, financial reporting
requirement for post-employment benefits other than pensions, which now includes
information with respect to the total obligation to provide future retiree
health and welfare benefits with fiscal year beginning June 15, 2017.
The
main thrust of GASB OPEB standard is to require that public-sector employees
recognize the cost of other post-employment benefits over the service life of
their employees rather than on a pay-as-you-go basis. While the liability amount must be included
in each entities annual audited financial statements, the GASB statements do
not require that the amount actually be funded. Government entities can either
partially fund, fully fund or continue to fund the costs on a pay-as-you-go
basis.
Beginning with the fiscal year 2018-2019 budget, District has started setting aside funds towards the unfunded pension and other postemployment benefits (OPEB). With each budget cycle, staff will continue to recommend adding additional funds to these reserve accounts.
9-A GASB 75 OPEB Valuation Report
U:\staff\Boardpacket\2021\20210225\Consent
Calendar\09\Item-9.docx