The City of Kyle, as a matter of adopted policy, offers health insurance coverage to retirees who were hired prior to April 1, 2009 and who retired after completing twenty-five (25) years or more of continuous service as a full-time employee. These types of benefit provided by an employer to its retirees (other than pension plans) is commonly referred to as an Other Post-Employment Benefits (OPEB) plan.
REQUIREMENTS FOR ACTUARIAL VALUATIONS
The Governmental Accounting Standards Board (GASB), the authoritative body that is responsible for establishing standards by prescribing accounting and financial reporting requirements for all state and local governmental entities, issued Standards 43 and 45 outlining specific accounting and financial reporting requirements for Other Post-Employment Benefits (OPEB) offered by governmental entities.
These standards require that expenses associated with retiree health benefits be accrued over the working lifetime of employees rather than expenses on a "pay-as-you-go" basis as retirees incur claims. GASB requires that all government entities conduct actuarial valuations every two to three years depending on the entity's size.
OTHER POST-EMPLOYMENT BENEFITS OFFERED BY THE CITY
The City of Kyle offers health insurance coverage for its retirees who have completed twenty-five (25) years or more of continuous service as a full-time employee. In 2009, the City amended its health insurance coverage benefits plan and as a result, three groups of employees for purposes of eligibility were established with different benefit coverage. The three employee groups are as follows:
Group 1 Retirees:
All former full-time employees, who have retired from the City after twenty-five (25) years or more of continuous service as an officer or employee of the City. All current full-time employees who have completed five (5) or more years of continuous service as a full-time employee of the City of Kyle by 4-1-2009 and complete a total of twenty-five (25) years or more of continuous service as an officer or employee of the City.
For Group 1 retirees, the City pays 100% of the cost of providing health insurance coverage which is to be at the same level as all other regular employees. The City also pays 100% of the cost of providing dental and vision coverage for this group of retirees until they reach the age of 65. This benefit is for the retired City employee only and not for their spouse or family.
Under Group 1, the City currently has one retiree receiving benefits and potentially sixteen (16) current employees who could be eligible to receive benefits if they complete 25 years of continuous service.
Group 2 Retirees:
All current full-time employees who have completed less than five (5) of continuous service as a full-time employee of the City of Kyle by 4-1-2009 and complete a total of twenty-five (25) years or more of continuous service as an officer or employee of the City.
For Group 2 retirees, the City pays a maximum of $300.00 per month towards the cost of providing health insurance coverage which is to be at the same level as all other regular employees. The $300.00 per month amount was set in April 2009 (base year) and is to be adjusted annually each October 1st based on the change in consumer price index (CPI) during the preceding 12-month period April though March. This benefit is for the retired City employee only and not for their spouse or family.
The City does not provide dental and vision coverage at its cost to retirees in Group 2.
Under Group 2, the City currently does not have any retirees receiving benefits. There are potentially forty one (41) current employees who could be eligible to receive health insurance coverage benefits if they complete 25 years of continuous service.
Group 3 Retirees:
Any full-time employee hired after 4-1-2009 and subsequently completes twenty-five (25) years or more of continuous service as an employee of the City.
Currently there are one hundered thirteen (113) full-time employees who were hired after April 1, 2009. The City, under the amended plan, does not offer health insurance coverage to retirees in Group 3.
FINANCIAL REPORTING & DISCLOSURE REQUIREMENTS FOR OPEB
Employers that participate in OPEB plans are required to measure and disclose an amount for annual OPEB cost including the following:
- Annual Required Contributions (ARC). This is the employer's annual required contribution to the plan.
- Net OPEB Obligation (NOO). This is the difference between the required annual contribution and the entity's actual contribution.
- Actuarial Accrued Liability (AAL). This is the liability amount already accrued for past service as determined by actuarial cost method.
- Unfunded Actuarial Accrued Liability. This is the amount of actuarial accrued liability that is in excess of assets reserved for OPEB.
- Historical Trend for three (3) Valuations.
SOLICITATION PROCESS FOLLOWED BY CITY STAFF
On May 20, 2016, the City issued a Request for Proposal (RFP) No. 2016-04-PM soliciting proposals from firms providing actuarial services to perform the City's actuarial valuation of Other Post-Employment Benefits Plan as of Fiscal Year ending September 30, 2016.
A total of four (4) proposals were received from the following firms in response to the Request for Proposals issued by the City of Kyle:
- Dean Actuaries, LLC
- Foster & Foster
- Gabriel Roeder Smith & Company
- Howard Nyhart Company, Inc.
The proposals were evaluated and scored by City staff using the following criteria:
1. Completeness of proposal
2. Understanding of scope of services required
3. Valuation approach & methodology
4. Assigned personnel's experience
5. Experience with valuations of OPEB of Texas municipal governments
6. Fee/Cost
The following documents are attached to provide complete and detailed information:
1. RFP Notice
2. RFP No. 2016-04-PM for Actuarial Valuation Services
3. Scoring Matrix
4. City Ordinance No. 281-4, Establishing Retiree Health Benefits
5. City Ordinance No. 564, Amending Retiree Health Benefits
6. Fiscal Note
STAFF RECOMMENDATION
City staff recommends approval of a professional services agreement with Dean Actuaries, LLC, to provide actuarial valuation services for the City's Other Post-Employment Benefits Program (OPEB) for Fiscal Year ending September 30, 2016. |