Meeting Date:

December 11, 2017





David J. Stoldt,




General Manager

Line Item No.:



Prepared By:

Suresh Prasad

Cost Estimate:



General Counsel Review:  N/A

Committee Recommendation:  The Administrative Committee reviewed this item on December 5, 2017 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 2009-10.  District has been using the actuarial firm Milliman, Inc. to compile the required data using the alternative measurement report method as discussed in the background section below.  Milliman, Inc. has completed the report for last fiscal year and is enclosed as Exhibit 9-A. 


As the table in Section 4, page 9 in the document indicates, the “Actuarial Accrued Liability” as of June 30, 2017 was $3,227,615, all of which remains unfunded.  Using a discount rate of 5.0%, as shown in Section 1, page 3 that the adjusted “Annual Required Contribution” of $301,058 to fully fund the current and future costs over the amortization period of 24 years.  In FY 2016-2017, the District paid premium contributions for medical coverage for nine retirees and one surviving spouse of retiree’s at a cost of $84,479.  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 2016-2017, the $84,479 would have been deducted from the $301,058 resulting in a net contribution of $216,579.  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.


RECOMMENDATION:  District staff recommends that the Board receive the Alternative Measurement Method Report prepared by Milliman, Inc., continue to pay retiree medical costs on a pay-as-you-go basis.


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.  The main thrust of GASB 43 & 45 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.  Entities with less than 100 employees are allowed to use a simplified approach to GASB 43 & 45 calculations 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 43 & 45 at a fraction of the cost of a full actuarial evaluation by using an on-line computer program to calculate the liability. 



9-A      GASBhelp Financial Report