ITEM:

CONSENT CALENDAR

 

9.

CONSIDER EXPENDITURE OF BUDGETED FUNDS TO COMPLY WITH GOVERNMENTAL ACCOUNTING STANDARDS BOARD ACTUARIAL REQUIREMENT FOR EMPLOYEE POST-RETIREMENT MEDICAL BENEFITS

 

Meeting Date:

May 17, 2010

Budgeted:

No

 

From:

Darby Fuerst,

Program/

N/A

 

General Manager

Line Item No.:††††

 

Prepared By:

 

Rick Dickhaut

Cost Estimate:

$2,800

General Counsel Review:N/A

Committee Recommendation: The Administrative Committee reviewed this item on May 7, 2010 and recommended approval.

CEQA Compliance:N/A

 

SUMMARY:In July 2004, the Governmental Accounting Standards Board (GASB) issued Statement No. 45, Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions.The District currently provides health insurance benefits as a post-employment benefit and must comply with GASB 45 and include the results on its Fiscal Year 2009-10 financial statements.Government entities with less than 100 employees are allowed to use a simplified approach to GASB 45 called the alternative measurement method rather than having a full actuarial evaluation.This method allows small entities such as the District to comply with GASB 45 at a fraction of the cost of a full actuarial evaluation by using an on-line computer program to calculate the liability.This is much less expensive than a full actuarial evaluation because District staff will enter employee data and do other up-front work.Staff has identified several companies that offer on-line tools to calculate the liability under the simplified approach and has tested a couple of the tools.The Districtís contribution structure is somewhat complicated due to its two tier system that was negotiated after GASB 45 was adopted and staff has determined that a tool offered by a company called Milliman best meets the Districtís needs.The cost of using the tool for a two-year period is $2,800.While staff has identified cheaper alternatives to the Milliman tool, it has been determined that the Milliman application will provide a more accurate calculation of future liabilities and Milliman actuarial staff will also review the final product for accuracy and make any necessary adjustments.The 2009-10 budget includes $5,000 for this purpose.It is estimated that the cost for a full actuarial study would be $5,000 to $10,000.

††††

RECOMMENDATION:District staff recommends that the Board authorize a contract with Milliman to complete an actuarial valuation using the alternative measurement method for post-employment health insurance costs at a cost not-to-exceed $2,800.

 

BACKGROUND: ††In July 2004, the Governmental Accounting Standards Board (GASB) issued Statement No. 45, Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions. The District provides health insurance as a post-employment benefit and is required to comply with GASN 45 by the end of the current fiscal year.The main thrust of GASB 45 is to require for the first time 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.Once the liability amount is calculated, it must be included in each entities annual audit report.However, GASB 45 does not require that the amount actually be funded so entities can either partially fund, fully fund or continue to fund the costs on a pay-as-you-go basis.District staff will address the funding issue after the actuarial valuation has been completed and future costs are known.

 

EXHIBITS

None

 

 

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