8F Consent 2009 0518 - Laserfiche WebLink

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Establishment of OPEB Trust May 18, 2009 not been accumulated to pay that obligation, there is an unfunded portion. The ARC is the amount required to pay both the current or normal cost and to retire the unfunded portion (Unfunded Actuarial Accrued Liability) over a specified time, usually 20 to 30 years. Along with periodic actuarial valuations, it is a practical necessity for an agency to establish both an OPEB Health Care Plan and OPEB Trust to obtain the financial reporting benefits of GASB 45. Not adhering to GASB 45 would endanger the City's "clean" opinion on its financial statements and possibly negatively impact future bond ratings. For these reasons, and sound fmancial planning, staff is recommending adoption of the attached enabling documents. Retiree Medical-Current and Future Policy Currently, the City funds retiree medical benefits on a "pay as you go"basis. That is, the City budgets only for the amount that has to be paid in a particular fiscal year for qualified retirees. No funding is provided for future benefits. Council indicated through the budget process that it wishes to begin funding the City's OPEB obligation on an actuarial basis, which is to pay an annual amount that covers both current costs and starts to accumulate assets to pay future costs. More specifically, Council had an actuarial study of the City's OPEB obligation prepared as of June 30, 2007. The actuarial valuation provides essential information about benefit payments including the computation of any UAAL and the ARC, both of which are required disclosures for GASB 45. In addition, Council set aside funds in the City's Self Insurance Fund, and currently has $1.' million available to use in transitioning from a "pay as you go"basis to an actuarially based payment policy. Establishment of a Plan and Trust Moving to an actuarially funded OPEB plan requires several steps. Documents that must be adopted by Council include a Public Agencies Post-Retirement Health Care Plan. This document sets out such information as eligible employees, City contributions and funding and investment information. The Plan is adopted through the use of an Adoption Agreement. The Adoption Agreement also adopts the Public Agencies Post-Retirement Health Care Plan Trust Agreement. The Trust receives contributions from the City, pays benefits and invests accumulated funds in accordance with instructions provided by the "Plan". The funds of the Trust are held for the exclusive purpose of providing OPEB benefits and cannot be used for any other purpose, including any other obligations of the City. In addition, staff is also requesting that Council authorize, by adoption of the attached resolution, the City Manager to enter into an administrative services contract to provide such services as record keeping, monthly reporting and monitoring for compliance with federal and state laws.