City of Burlington

Postretirement Benefits Plans

Actuarial Valuation Report

as of July 1, 2015

December 2015

December 28, 2015 Mr. Rich Goodwin Assistant CAO for Finance City of Burlington 149 Church Street Burlington, VT 05401 Dear Mr. Goodwin:

This report presents the results of our actuarial valuation of the Postretirement Benefits Plan of the City of

Burlington. The valuation reflects data and assumptions as of July 1, 2015.

The purpose of this valuation is to determine the value of the expected postretirement benefits for current and

future retirees and the Actuarial Accrued Liability and Annual Required Contribution recognized under

Governmental Accounting Standards Board Statement No. 45 (GASB 45) requirements for the fiscal year ending

June 30, 2015. These amounts are not necessarily appropriate for use for a different fiscal year without

adjustment.

This valuation was performed using employee census data and plan provisions provided by City personnel. The

results of the valuation are dependent on the accuracy of the data and other information provided. These data

were not audited by Buck although they were reviewed for reasonableness.

Our calculations for this valuation do not reflect any other postemployment benefits than those described in this

report.

The calculations reflect updated claims and premium information provided by the City. The results of the valuation

are dependent on the accuracy of the claims and premium information provided.

This report is prepared for City of Burlington to be used as a source of information for the plan sponsor’s financial

statements. Use of this report for any other purpose may not be appropriate and may result in mistaken

conclusions due to failure to understand applicable assumptions, methodologies, or inapplicability of the report for

that purpose. No one may make any representations or warranties based on any statements or conclusions

contained in this report without the written consent of Buck. The attached pages should not be provided without a

copy of this report in its entirety.

The assumptions for pre and postretirement mortality have been updated since the last valuation to reflect

updated mortality expectations for the plan’s population. Withdrawal decrements for both Class A and Class B as

well as retirement decrements for Class B were updated based on the 2007 – 2012 experience study. We believe

the assumptions used for this valuation are reasonable for the measurement of the obligation for financial

reporting purposes. It should be recognized, however, that there can be significant differences between actual

experience and the assumptions. Moreover, other sets of reasonable assumptions can yield materially lesser or

greater results.

GASB stipulates that if benefits are not pre-funded, the discount rate used should be the rate of interest on the

City’s general assets. This rate is assumed to be 4.0% for this valuation, which assumes an inflation rate of 3.00%

and a real rate of return of 1.0% based on the understanding that the City currently has no plans to pre-fund these

benefits. Any changes to funding policy may result in changes to the discount rate assumption.

The following assumptions have been updated since the prior valuation as of July 1, 2013:

Per capita baseline costs were updated to reflect 2016 premium rates and census information.

Stephen R. Oates ASA, EA, MAAA, FCA Principal

Buck Consultants, LLC

200 Berwyn Park

Suite 110

Berwyn, PA 19312

Stephen.oates@xerox.com

tel 610.651.8534

fax 610.647.6054

Mortality has been updated from the IRS 2014 Static Mortality Table for non-commenced members to RP-

2000 Combined Mortality Table with fully generational projections using BB projection scale.

Retirement rates for Class B have been updated based experience.

Withdrawal rates for Class A and B have been updated based experience.

Future actuarial measurements may differ significantly from the current measurements presented in this report

due to such factors as the following: retiree group benefits program experience differing from that anticipated by

the assumptions; changes in assumptions; increases or decreases expected as part of the natural operation of the

methodology used for these measurements (such as the end of an amortization period); and changes in retiree

group benefits program provisions or applicable law. Retiree group benefits models necessarily rely on the use of

approximations and estimates, and are sensitive to changes in these approximations and estimates. Small

variations in these approximations and estimates may lead to significant changes in actuarial measurements.

Because of limited scope, Buck performed no analysis of the potential range of such future differences.

Based on the foregoing, the cost results and actuarial exhibits presented in this report were determined on a

consistent and objective basis in accordance with applicable Actuarial Standards of Practice and generally

accepted actuarial procedures. They fully and fairly disclose the actuarial position of the Plan based on the

employee and plan cost data submitted.

The passage of healthcare reform in March 2010 ushered in a number of changes that might be expected to

impact postretirement medical plans over time. We analyzed the effects of these changes for the City and

summarized the results in Exhibit 8 of the report.

Earlier this year, GASB announced the adoption of new accounting standards (GASB Statement Nos. 74 & 75) for

postemployment benefits other than pensions. The new rules are effective for fiscal years beginning after June 15,

2017 for an unfunded plan, and have not been reflected in this valuation. Updated accounting standards for a

funded plan would be effective for fiscal years beginning after June 15, 2016. The new GASB statements will

materially impact the plan’s financial reporting in the future, but are not yet applicable for the City and were

considered beyond the scope of this actuarial valuation.

This report represents a statement of actuarial opinion by the undersigned actuary, who is a member of the

American Academy of Actuaries (AAA) and is qualified to issue that opinion. In issuing that opinion, the actuary

relied upon information provided to us by City personnel. Mr. Oates is available to answer questions about this

report.

Respectfully submitted,

Stephen R. Oates, ASA, EA, MAAA, FCA

Principal, Health Practice

Table of Contents Exhibit 1: Summary of Valuation Results ......................................................................................... 1

Exhibit 2: Projected Health and Life Insurance Payments ............................................................... 2

Exhibit 3: Membership Data and Medical Premium ......................................................................... 3

Exhibit 4: Schedule of Funding Progress on a Pay-As-You-Go Basis – 4% .................................... 4

Exhibit 5: Net OPEB Obligation ........................................................................................................ 5

Exhibit 6: Discount Rate Sensitivity .................................................................................................. 6

Exhibit 7: Actuarial Methods and Assumptions ................................................................................ 7

Exhibit 8: Healthcare Reform Considerations ................................................................................ 11

Exhibit 9: Summary of Substantive Plan Provisions ....................................................................... 12

Exhibit 10: Glossary of Terminology ............................................................................................... 13

1

Exhibit 1: Summary of Valuation Results

July 1, 2015 Actuarial Accrued Liability

Subsidized Retiree Medical

$ 2,417,784 Retiree Life Insurance Benefits

1,360,960

Total AAL

$ 3,778,744

Actuarial Value of Assets

$ 0

Unfunded Actuarial Liability "UAL" [Liability - Assets] $ 3,778,744

Funded ratio [Assets/UAL]

0.0%

Annual covered payroll (estimated)

$ 36,668,126

UAL as percentage of covered payroll

10.3%

Normal Cost (FYE 2015)

$ 188,101

Amortization of UAL (FYE 2015)

$ 118,941

Interest to end of fiscal year (FYE 2015)

$ 9,775

Annual Required Contribution "ARC"

For FYE 2015

$ 316,817

Estimated benefit payments for FYE 2016

$ 125,352

Summary results split by division:

General

Fund

Burlington

Electric

Department

Revenue

Departments

Total

6/30/2015 Accrued Liability @ 4%

Subsidized Retiree Medical 1,911,468 309,742 196,574 2,417,784

Retiree Life Insurance Benefits 779,813 373,937 207,210 1,360,960

Total 2,691,281 683,679 403,784 3,778,744

FYE 2015 Annual Required Contribution @ 4%

Normal Cost 125,971 31,528 30,602 188,101

Amortization of UAL 85,373 21,487 12,081 118,941

Interest Cost 6,427 1,738 1,610 9,775

Total 217,771 54,753 44,293 316,817

Estimated Benefit Payments * 101,334 19,133 4,885 125,352

1 Reflects implicit pre-Medicare subsidy (age-based medical cost less retiree premium) and expected

value of life insurance benefits.

2

Exhibit 2: Projected Health and Life Insurance

Payments

Fiscal Year

Ending Total

2016 $ 125,352

2017 136,540

2018 159,469

2019 196,235

2020 210,546

2021 222,619

2022 249,346

2023 260,521

2024 298,418

2025 320,228

2026 294,309

2027 296,329

2028 297,820

2029 298,138

2030 321,057

2031 299,970

2032 293,680

2033 299,558

2034 314,776

3

Exhibit 3: Membership Data and Medical Premium

Continuation in the Group Medical plan is available to retirees and their families at the following monthly premium rates:

Medical Plans

Blue Cross Blue Shield

Individual $580.50

2 Person $1,330.14

Family $1,735.12

Medi-Comp

Individual $284.56

General

Fund

Burlington

Electric

Department

Revenue

Departments

Total

Participant Information

Number Active 440 128 131 699

Retirees with Life Insurance 1 245

60

13

318

Total Number of Participants 685 188 144 1017

Retirees & Spouses 30

3

0

33

with Subsidized Medical 2

Average Age / Service for Actives 41.7 / 9.9 50.3 / 16.0 46.8 / 10.8 44.2 / 11.2

Payroll 21,798,731 9,030,565 5,838,831 36,668,126

Retiree Life Insurance-in-force 962,000 340,000 82,000 1,384,000

1 A subset of this group also receives subsidized retiree medical benefits.

2 Individuals who are covered for Medi-Comp are not included in the valuation, because it is our

understanding that their coverage is not subsidized by the City.

4

Exhibit 4: Schedule of Funding Progress on a Pay-As-

You-Go Basis – 4%

Actuarial UAL as

Actuarial Actuarial Accrued Unfunded Percentage

Valuation Value of Liability AAL Funded Covered of Covered

Date Assets (AAL) (UAL) Ratio Payroll Payroll

(a) (b) (b) - (a) (a) / (b) (c) [(b)-(a)] / (c)

July 30, 2009 $ 0 $ 3,593,453 $ 3,593,453 0.00% $33,073,193 10.9%

June 30, 2011 $ 0 $ 3,920,235 $ 3,920,235 0.00% $34,624,868 11.3%

June 30, 2013 $ 0 $ 3,862,554 $ 3,862,554 0.00% $36,346,808 10.6%

June 30, 2015 $ 0 $ 3,778,744 $ 3,778,744 0.00% $36,668,126 10.3%

5

Exhibit 5: Net OPEB Obligation

Year

Ending

June 30

Annual

Required

Contribution

Interest on

NOO

ARC Adj.

(i.e. NOO

Amortiz.)

Annual

OPEB Cost

(1)+(2)-(3)

Actual

Contribution1

Change in

NOO (4)-(5)

NOO

Balance

(1) (2) (3) (4) (5) (6) (7)

2009 $ 304,548 $ 306,048 $ 591,000

2010 $ 320,729 $ 24,427 $ 20,356 $ 342,800 $ 2,800 $ 322,000 $ 913,000

2011 $ 339,340 $ 36,520 $ 30,433 $ 345,427 $ 118,314 $ 227,113 $1,140,113

2012 $ 359,232 $ 36,500 $ 30,433 $ 365,299 $ 118,314 $ 246,985 $1,387,098

2013 $ 325,922 $ 55,484 $ 46,237 $ 335,169 $ 363,122 $ (27,953) $1,359,145

2014 $ 342,643 $ 54,366 $ 45,305 $ 351,704 $ 381,268 $ (29,564) $1,329,581

2015 $ 316,817 $ 53,183 $ 44,319 $ 325,681 $ 125,352 $ 200,329 $1,529,910

2016 $ 332,918 $ 61,196 $ 50,997 $ 343,117 TBD TBD TBD 1 2014 contribution per the City’s FYE 2014 CAFR.

2015 contribution per the GASB 45 valuation expected net benefit payments. Information prior to 2011 was taken from the city’s audited 2010 Annual financial Report. Information for FYE 2012 was taken from the City’s 2012 Annual financial report. FYE 2016 is based on a no gain/loss roll forward of the July 1, 2015 valuation.

6

Exhibit 6: Discount Rate Sensitivity

Full Funding

3.0% 4.0% 8.0%

AAL at 6/30/2015 $4,334,181 $3,778,744 $ 2,412,162

ARC for FYE 2015 Normal Cost $ 226,335 $ 188,101 $ 101,120

Amortization of UAL $ 117,394 $ 118,941 $ 127,867

Interest Cost $ 8,432 $ 9,775 $ 13,305

Total ARC $ 352,161 $ 316,817 $ 242,292

Pay-as-you Go Funding: GASB 45 required the use of a discount rate that reflects the estimated long-term investment return on assets that are expected to finance the payment of benefits. Since the plan is currently on a pay-as-you-go basis, the discount rate should reflect the expected long term return on unrestricted general funds of the city. This report presents results using a discount rate of 4.00%. Due to the current low interest rate environment, we are also providing results under an alternative discount rate of 3.00%. this alternative scenario is intended to illustrate the potential increase in plan liabilities should low interest rates persist and management selects a lower discount rate for a future valuation. It should be noted that GASB 45 is based on long term expectations, thus short term swings in the interest rate environment do not need to be reflected in the calculations.

Full Funding: If the city elects to start fully funding the ARC and investing assets for a longer-term time horizon, selection of a higher discount rate would likely be warranted. We have provided sensitivity results at the 8% rate used for the City’s funded pension plan. This rate assumes the City will invest assets in a manner supporting selection of such a rate, which implicitly assumes a relatively high proportion of equity investments.

7

Exhibit 7: Actuarial Methods and Assumptions

1. Actuarial Cost Method

The actuarial accrued liability (AAL) and normal cost under the projected unit credit actuarial method are used to determine the GASB expense. Under this method, medical benefits are estimated for each active plan participant on the basis of the assumptions described in this section and the plan provisions described below. The total actuarial present value is the present value of these benefits. The actuarial present value of each individual is attributed ratably over the service of the individual from date of hire to retirement. The portion of this actuarial present value allocated to a valuation year is called the normal cost. The portion of this actuarial present value not provided for at a valuation date by the actuarial present value of future normal costs is called the AAL.

2. Asset Valuation Method: Not Applicable. It is our understanding no assets have been set aside to fund these postretirement benefits.

3. Amortization of Unfunded Actuarial Accrued Liability: The Unfunded Actuarial Accrued Liability (UAAL) is being amortized over an open thirty years (meaning it is assumed to refresh each year using 30 years) on a level percent of pay assuming 4% aggregate annual payroll growth.

4. Measurement Date: The valuation is performed as of July 1, 2015. The results are intended for use for GASB 45 purposes for employer fiscal year ending June 30, 2015.

5. Economic Assumptions

Discount Rate 4.00%

Administrative Expenses It is assumed that administration fees are 5% of the life insurance benefit cost. Group medical administration fees were assumed to be included in the medical plan costs.

6. Demographic Assumptions

Normal Service Retirement

Retirement rates are based on age and Class of employee. Rates are provided below:

Age Class A Age Class B

55 20% 65 25%

56 20% 66 20%

57 20% 67 25%

58 20% 68 20%

59 20% 69 25%

60 100% 70 100%

8

Separation from Service Representative values of the assumed annual rates of withdrawal and vesting, early service retirement, death, and disability are as follows:

Class A

Age

Withdrawal

and Vesting

Early Service

Retirement1 Disability

20 14.0%

25 7.0 0.2%

30 6.0 0.3

35 6.0 0.4

40 5.0 0.5

42 4.6 0.6

45 4.0 15.0% 0.7

50 3.0 15.0 1.3

53 1.2 20.0 1.8

54 0.6 20.0 2.0

Class B

Withdrawal and Vesting Early

Service

Retirement

Age Years 0 - 2 Years 3+ Disability

25 27.5% 15.0% 0.1%

30 22.0 12.0 0.1

35 22.0 10.0 0.1

40 16.5 4.0 0.2

45 16.5 4.0 0.3

50 16.5 4.0 0.5

55 16.5 4.0 5.0% 0.9

60 16.5 4.0 10.0 1.7

61 16.5 4.0 15.0 2.1

62 16.5 4.0 20.0 2.5

63 16.5 4.0 25.0 2.9

64 16.5 4.0 25.0 3.4

1 Rates are assumed to be 100% higher when first eligible for unreduced benefits.

9

Active and Retired Healthy Mortality Before Retirement: RP-2000 Mortality with Scale BB fully generational improvement. After Retirement: RP-2000 Mortality with Scale BB fully generational improvement. After Disability: RP-2000 Disability

Plan Participation

20% of future retirees are assumed to participate in the retiree medical plan.

All future retirees are assumed to participate in the life insurance plan.

Marital Characteristics

Retirees: 40% of employees who elect to participate in the medical plan at

retirement are also assumed to cover their spouse. Wives are assumed to be three years younger than their husbands.

7. Benefit Assumptions

Pre-Age 65 Retirees: Current retirees who are under age 65 may continue coverage in the Group Medical plan by paying full COBRA premiums. The Group Medical plan is currently administered by Blue Cross Blue Shield of Vermont.

Current active employees who are assumed to retire prior to age 65 having met the Plan’s age and service eligibility criteria may continue coverage in the Group Medical plan by paying the full COBRA premiums.

Post-Age 65 Retirees:

The city of Burlington does not subsidize this benefit. Retirees pay the full cost for coverage in the Medi-Comp plan. All retirees who reach age 65 are assumed to qualify for Medicare.

Medical Plan Costs:

The City is self-insured. Per capita costs were developed from COBRA rates adjusted for age morbidity. The annual medical cost for an individual normalized to age 65 was assumed to be $13,043. Annual individual retiree premium is $6,966 at July 1, 2015. The City’s GASB 45 liability for retiree medical is based on the implicit subsidy provided between the age-adjusted morbidity cost and the premium paid for by the retiree. Benefits for dependent children were assumed not to be subsidized, with premiums assumed to cover the cost of benefit provided.

10

Age-Based Morbidity: Per capita costs are adjusted to reflect expected cost increases related to age. The increase in net incurred claims due to age was assumed to be:

Age Annual

Increase

49 and below 2.5%

50-54 3.3%

55-59 3.6%

60-64 4.2%

65 and over 0.0%

Medical Cost and Premium Trend Rates Assumed:

Rates are applied to go into effect as of the end of the applicable fiscal year. These rates have been updated since the prior valuation based on recent survey information on short-term cost increases as well as industry expectations on long-term trend rates and years until ultimate trend rates are reached.

8. Census Data

The active and retiree census were provided by the City of Burlington.

9. Subsequent Events

GASB has recently announced the adoption of new accounting standards for postemployment benefits other than pensions. The new rules are effective for fiscal years beginning after June 15, 2017 for an unfunded plan, and have not been reflected in this valuation. Updated accounting standards for a funded plan would be effective for fiscal years beginning after June 15, 2016.

Fiscal Year

Beginning Medical Trend

2015 7.75%

2016 7.50%

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028 (and after)

7.25%

7.00%

6.75%

6.50%

6.25%

6.00%

5.75%

5.50%

5.25%

5.00%

4.75%

4.50%

11

Exhibit 8: Healthcare Reform Considerations

Health care delivery is going through a revolution due to the enactment of Health Care Reform. The Patient Protection and Affordable Care Act (PPACA), was signed March 23, 2010, with further changes enacted by the Health Care and Education Affordability Reconciliation Act (HCEARA), signed March 30, 2010. This valuation uses various assumptions that were modified based on considerations under PPACA. This Section discusses particular legislative changes that were reflected in our assumptions. We have not identified any other specific provision of PPACA that would be expected to have a significant impact on the measured obligation. As additional guidance on the Act continues to be issued, we continue to monitor any potential impacts.

Individual Mandate for Insurance – Under PPACA, individuals (whether actively employed or otherwise) must be covered by health insurance or else pay a penalty tax to the government. While it is not anticipated that the Act will result in universal coverage, it is expected to increase the overall portion of the population with coverage. We believe that this will result in an increased demand on health care providers, resulting in higher trend for medical services for non-Medicare eligible retirees. (Medicare costs are contained by Medicare payment mechanisms already in place, plus additional reforms added by PPACA and HCEARA.) While we believe that the mandate could result in somewhat higher participation overall, we do not believe that City of Burlington will experience higher participation.

Employer Mandate – Health Care Reform includes various provisions mandating employer coverage for active employees, with penalties for non-compliance. Those provisions do not directly apply to the postemployment coverage included in this valuation.

Removal of Benefit Maximums: It is our understanding that the City’s plan is in compliance with the insurance reform requirements of health care reform legislation. Any impact on plan costs for benefit mandates are reflected in the premiums on which the retiree medical valuation is based. As such, no special adjustment was made by the actuary for this issue.

Medicare Changes: This City of Burlington does not provide a subsidy to Medicare-eligible retirees. Thus no impact is reflected for changes to Medicare Parts C and D.

Expansion of Child Coverage to Age 26: The law provides for the extension of child coverage to age 26.

The City of Burlington does not provide subsidized benefits for children. No special adjustment was made

by the actuary for this issue.

Excise Tax on High-Cost Employer Health Plans (aka Cadillac Tax): There is considerable uncertainty

about how the tax will be applied, and considerable latitude in grouping of participants for tax

measurement testing purposes. However, since retirees pay 100% of health premium costs in this plan, it

is expected that retirees will bear the burden of any premium excise tax that applies. Thus no impact is

reflected.

Other: We have not identified any other specific provision of health care reform that would be expected to have a significant impact on the measured obligation. As additional guidance on the legislation is issued, we will continue to monitor any potential impacts.

12

Exhibit 9: Summary of Substantive Plan Provisions

1. Retirement Eligibility

Class A: Police hired before 6/30/2006: the earlier of age 42 with 20 years of service, or age 55 with 3 years of service. Fire hired before 12/31/2006: The earlier of age 42 with 20 years of service, or age 55 with 3 years of service. All others: The earlier of age 45 with 20 years of service, or age 55 with 3 years of service.

Class B: Age 55 with 3 years of service The School group is not covered by the City plan and was excluded from this valuation.

2. Ordinary Disability Eligibility

All members are eligible where permanently disabled.

3. Retirement Medical Insurance:

Retired employees pay 100% of their post-retirement medical premium costs, which are based on COBRA rates for pre-65 coverage.

4. Life Insurance:

The City of Burlington provides $2,000 in life insurance for retirees, except for members of AFSME and IBEW unions who receive $10,000 in life insurance. Certain current retirees have $6,000 of life insurance in force.

5. Dental Insurance:

Retired employees pay 100% of their dental costs. Dental coverage for retirees is generally available for up to 18 months. The City of Burlington does not subsidize this benefit.

13

Exhibit 10: Glossary of Terminology

Active Plan Participant – Any active employee who has rendered service during the credited service period and is expected to receive benefits, including benefits to or for any beneficiaries and covered dependents, under the postretirement benefit plan. Actuarial Accrued Liability (AAL) – The actuarial present value of benefits attributed to employee service rendered to a particular date. Actuarial Assumptions – Assumptions as to the occurrence of future events affecting pension or OPEB costs, such as: mortality, withdrawal, disablement and retirement; changes in compensation and Government provided pension or OPEB Benefits; rates of investment earnings and asset appreciation or depreciation; procedures used to determine the Actuarial Value of Assets; characteristics of future entrants for Open Group Actuarial Cost Methods; and other relevant items. Actuarial Cost Method – A procedure for determining the Actuarial Present Value of pension plan benefits or OPEB Benefits and expenses and for developing an actuarially equivalent allocation of such value to time periods, usually in the form of a Normal Cost and an Actuarial Accrued Liability. Actuarial Present Value –- The value, as of a specified date, of a future benefit cost or a series of benefit costs, with each amount adjusted to reflect (a) the time value of money (through discounts for interest and (b) the probability of payment (for example, by means of decrements for events such as death, disability, withdrawal or retirement) between the specified date and the expected date of payment. Actuarial Valuation – The determination, as of a valuation date, of the Normal Cost, Actuarial Accrued Liability, Actuarial Value of Assets, and related Actuarial Present Values for a pension plan or OPEB plan. Actuarial Valuation Date – The date as of which an Actuarial Valuation is performed. Amortization (of Unfunded Actuarial Accrued Liability) – That portion of the pension plan or OPEB plan contribution which is designed to pay interest on and to amortize the Unfunded Actuarial Accrued Liability or the Unfunded Frozen Actuarial Accrued Liability. Amortization Period (Open Basis) – A period that begins again or is recalculated at each Actuarial Valuation Date. Within a maximum number of years specified by law or policy (for example, thirty years), the period may increase, decrease, or remain stable. Annual OPEB Cost (AOC) – An accrual-basis measure of the periodic cost of an employer’s participation in a Defined Benefit OPEB plan. Annual Required Contribution – Consists of the normal cost and a portion of the total unfunded actuarial accrued liability (UAAL). The normal cost and UAAL are derived from the actuarial present value of benefits, the actuarial cost method and the plan assets Discount Rate – The interest rate used in developing present values to reflect the time value of money. Employer’s Contributions – Contributions made in relation to the Annual Required Contributions of the employer (ARC). An employer has made a contribution in relation to the ARC if the employer has (a) made payments of benefits directly to or on behalf of a retiree or beneficiary, (b) made premium payments to an insurer, or (c) irrevocably transferred assets to a trust, or equivalent arrangement, in which Plan Assets are dedicated to providing benefits to retirees and their beneficiaries in accordance with the terms of the plan and are legally protected from creditors of the employer(s) or plan administrator. Funded Ratio –- The Actuarial Value of Assets expressed as a percentage of the Actuarial Accrued Liability.

14

Health Care Cost Trend Rate – An assumption about the annual rate(s) of change in the cost of health care benefits currently provided by the postretirement benefit plan, due to factors other than changes in the composition of the plan population by age and dependency status, for each year from the measurement date until the end of the period in which benefits are expected to be paid. The Health Care Cost Trend Rate implicitly considers estimates of health care inflation, changes in health care utilization or delivery patterns, technological advances, and changes in the health status of plan participants. Differing types of service, such as City care and dental care, may have different trends. Net OPEB Obligation – The cumulative difference since the effective date of GASB Statement No. 45 between Annual OPEB Cost and the Employer’s Contributions to the plan, including the OPEB Liability (asset) at Transition, if any, and excluding (a) short-term differences and (b) unpaid contributions that have been converted to OPEB-Related Debt. Normal Cost – That portion of the Actuarial Present Value of pension plan benefits or OPEB Benefits and expenses which is allocated to a valuation year by the Actuarial Cost Method OPEB Expense – The amount recognized by an employer in each accounting period for contributions to an OPEB plan on the accrual basis of accounting. Other Postemployment Benefits (OPEB Benefits) –- Postemployment benefits other than Pension Benefits. Other Postemployment Benefits (OPEB) include Postemployment Healthcare Benefits, regardless of the type of plan that provides them, and all Postemployment benefits provided separately from a pension plan, excluding benefits defined as Termination Offers and Benefits. Pay-As-You-Go – A method of financing a pension plan or OPEB plan under which the contributions to the plan are generally made at about the same time and in about the same amount as benefit payments and expenses becoming due. Postemployment – The period between termination of employment and retirement as well as the period after retirement. Postemployment Healthcare Benefits – Medical, dental, vision, and other health-related benefits provided to terminated or retired employees and their dependents and beneficiaries. Select and Ultimate Rates – Actuarial Assumptions that contemplate different rates for successive years. Instead of a single assumed rate with respect to, for example, the Investment Return Assumption, the actuary may apply different rates for the early years of a projection and a single rate for all subsequent years. For example, if an actuary applies an assumed investment return of 8 percent for year 2013, 7.5 percent for 2014, and 7 percent for 2015 and thereafter, then 8 percent and 7.5 percent are Select Rates, and 7 percent is the Ultimate Rate. Substantive Plan – The terms of a postretirement benefit plan as understood by an employer that provides postretirement benefits and the employees who render services in exchange for those benefits. The substantive plan is the basis for the accounting for that exchange transaction. In some situations an employer’s cost-sharing policy, as evidenced by past practice or by communication of intended changes to a plan’s cost-sharing provisions, or a past practice of regular increases in certain monetary benefits may indicate that the substantive plan differs from the extant written plan. Unfunded Actuarial Accrued Liability (Unfunded Actuarial Liability) – The excess of the Actuarial Accrued Liability over the Actuarial Value of Assets.