Agenda - Council Work Session - 06/28/2016

Home

NOTE 11—OTHER POST-EMPLOYMENT BENEFITS PLAN (CONTINUED) E. Actuarial Methods 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. F. Actuarial Assumptions OPEB benefits were calculated using the percentage of projected payroll method, a 4.50% discount rate, Pay-As-You-Go funding, Projected Unit Credit actuarial cost method, 30-year open amortization of the UAAL increasing at 3.75% per year (the payroll growth rate). OPEB benefits were attributed linearly to each assumed decrement age based on the ratio of a participant's accrued service on the valuation date to their projected service at each decrement age. The actuarial assumptions included a 4.5 percent investment rate of return(net of administrative expenses)based on the City's own investments,a 3.0%general inflation rate,and an annual healthcare trend rate of 9.0%initially,reduced by decrements to an ultimate rate of 5.0 percent after 12 years. Both rates include a 3.75%payroll growth rate assumption. NOTE 12—FLEXIBLE BENEFIT PLAN The City has a flexible benefit plan which is classified as a"cafeteria plan" (the Plan)under § 125 of the Internal Revenue Code. All full-time and part-time regular employees of the City are eligible. Eligible employees can elect to participate by contributing pre-tax dollars withheld from payroll checks to the Plan for health and dental care, dependent care, life insurance premiums, and disability insurance benefits. Payments are made from the Plan to participating employees upon submitting a request for reimbursement of eligible expenses actually incurred by the participant. Before the beginning of the plan year,which is from January 1 to December 31,each participant designates a total amount of pre-tax dollars to be contributed to the Plan during the year. At December 31,the City is contingently liable for claims against the total amount of participants' annual contributions to the health and dental care portion of the Plan,whether or not such contributions have been made. The City serves as trustee and utilized the service of Americas Veba Solutions -Genesis to handle all plan record keeping. The Plan is included within the General Fund in the financial statements. All property of the Plan and income attributable to that property is solely the property of the City subject to the claims of the City's general creditors. Participants'rights under the Plan are equal to those of general creditors of the City in an amount equal to the eligible healthcare and dependent care expenses incurred by the participants. The City believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. NOTE 13—TAX INCREMENT FINANCING REVENUE NOTES The City has entered into several private development agreements regarding certain tax increment properties. Reimbursements to developers for special trunk assessments were contemplated in the development agreements. The vehicle used for this reimbursement is called a tax increment revenue note. 88