Conejo Valley Unified School District · 2019. 6. 19. · Mr. Victor Hayek, Dty. Supt., Business Services Conejo Valley Unified School District 12/5/2018 1400 East Janss Road Thousand

GASB No. 75 ACTUARIAL VALUATION

Fiscal Year Ending June 30, 2018 (Measured at June 30, 2018)

Nyhart Actuary & Employee Benefits530 B Street, Ste. 900, San Diego, CA 92101(619) 239-0831 – www.nyhart.com

Conejo Valley Unified School District

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Retiree Health PlanGASB 75 Report Fiscal Year Ending June 30, 2018 (Measured at June 30, 2018)

Table of Contents

Certification 1

Summary of Changes from GASB 45 to GASB 75 3

Valuation Results Summary 4

GASB 75 Summary 5

Statement of Fiduciary Net Position 6

Schedule of Changes in Net OPEB Liability and Related Ratios 7

OPEB Expense 8

Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB 9

Net OPEB Liability Sensitivity 10

Schedule of Contributions 11

Valuation Data 12

Benefit Plan Provisions 13

Actuarial Assumptions and Methods 14

Glossary 17

Mr. Victor Hayek, Dty. Supt., Business ServicesConejo Valley Unified School District 12/5/20181400 East Janss RoadThousand Oaks, CA 91362

This report summarizes the GASB actuarial valuation for the Conejo Valley Unified School District's Other Post Employment Benefit (OPEB) for the fiscal year endiJune 30, 2018 (measured at June 30, 2018). Nyhart prepared this report to meet employer financial accounting requirements under Governmental Accounting Standards Board (GASB) Statement No. 75 (Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions).To the best of our knowledge, the report presents a fair position of the funded status of the plan in accordance with GASB Statement No. 75.

The information presented herein is based on the actuarial assumptions and substantive plan provisions summarized in this report and participant information furnished to us by the Plan Sponsor. We have reviewed the employee census provided by the Plan Sponsor for reasonableness when compared to the prior information provided but have not audited the information at the source, and therefore do not accept responsibility for the accuracy or the completeness of the data on which the information is based. When relevant data may be missing, we may have made assumptions we feel are neutral or conservative to the purpose of the measurement. We are not aware of any significant issues with and have relied on the data provided.

The discount rate, other economic assumptions, and demographic assumptions have been selected by the Plan Sponsor with the concurrence of Nyhart. In our opinion, the actuarial assumptions are individually reasonable and in combination represent our estimate of anticipated experience of the Plan. All calculations have been made in accordance with generally accepted actuarial principles and practice.

Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following:plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic 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 roll-forward techniques); and changes in plan provisions or applicable law.

We did not perform an analysis of the potential range of future measurements due to the limited scope of our engagement.

To our knowledge, there have been no significant events prior to the current year's measurement date or as of the date of this report that could materially affect the results contained herein.

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Neither Nyhart nor any of its employees has any relationship with the plan or its sponsor that could impair or appear to impair the objectivity of this report. Our professional work is in full compliance with the American Academy of Actuaries “Code of Professional Conduct” Precept 7 regarding conflict of interest. The undersigned meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein.

Should you have any questions please do not hesitate to contact us.

Luis Murillo, ASA, MAAA Randy Gomez, FSA, MAAAConsulting Actuary Consulting Actuary

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Retiree Health Plan

GASB 75 Report Fiscal Year Ending June 30, 2018 (Measured at June 30, 2018)

Summary of Changes from GASB 45 to GASB 75

GASB 75 is the new accounting and disclosure standard for OPEB liabilities for fiscal years beginning after June 15, 2017. Prior to GASB 75, the District accounted and disclosed for its OPEB liability under GASB 45. Both GASB 45 and GASB 75 required measuring a present liability of OPEB benefits for employees and retirees called the Actuarial Accrued Liability (now called the Total OPEB Liability under GASB 75). Under GASB 45, the Actuarial Accrued Liability was disclosed on the financial statement footnotes with only a portion of the unfunded actuarial liability recognized as a balance sheet liability (this portion was referred to as the Net OPEB Obligation). GASB 75 eliminated the Net OPEB Obligation and replaced it with the full value of the unfunded Actuarial Accrued Liability (referred to as the Net OPEB Liability in GASB 75 terms).

Under GASB 45, many Plan Sponsors that funded an OPEB trust decided to use the GASB 45 Annual Required Contribution (ARC) as a target in their funding strategy. GASB 75 eliminated the ARC and did not provide an equivalent funding target to the ARC. GASB 75 made clear it applies to financial reporting and does not provide guidance on funding strategies. As a result, the actuary now provides the Plan Sponsor (those with funded plans) with a separate actuarially determined contribution (ADC) as their funding target. The ADC calculation may use different actuarial assumptions and methods than those required by GASB 75.

Another important change under GASB 75 was the selection of the discount rate. GASB 45 was vague in the selection of the discount rate, relying on the actuary's best estimate. GASB 75 removed a degree of professional judgment in selecting this key assumption and now there is more consistency in financial disclosures across different types of government entities. Unfunded and partially funded OPEB plans must select a discount rate assumption tied to a yield or index for 20-year, tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher.

Lastly, GASB 75 continues the biennial valuation requirement for all entities regardless of their size but now also requires interim-year updates for changes in the bond indices and other significant changes. Under GASB 45, interim-year updates were not required unless there was a significant event and also smaller entities could perform triannual valuations.

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Retiree Health Plan


Valuation Results Summary

Explicit Implicit TotalPresent Value of Employer ContributionsActives 13,934,592$ 11,527,520$ 25,462,112$ Retirees 1,220,354 985,515 2,205,869 Total 15,154,946$ 12,513,035$ 27,667,981$

Total (Accrued) OPEB LiabilityActives 9,530,310$ 7,889,523$ 17,419,833$ Retirees 1,220,354 985,515 2,205,869 Total 10,750,664$ 8,875,038$ 19,625,702$

Projected Employer Contributions Explicit Implicit Total

2019 552,992$ 407,961$ 960,953$ 2020 632,972 477,621 1,110,593 2021 701,329 537,884 1,239,213 2022 714,185 551,322 1,265,507 2023 769,833 613,589 1,383,422 2024 810,739 662,076 1,472,815 2025 833,932 675,791 1,509,723 2026 918,046 741,966 1,660,012 2027 978,017 811,980 1,789,997 2028 945,892 790,669 1,736,561

Actuarial Assumptions as of Valuation DateInflation 2.75%Salary increases 3.00%Discount rate 3.50%

Plan MembershipInactive plan members or beneficiaries currently receiving benefits 65 Inactive plan members entitled to but not yet receiving benefits 0 Active plan members 1,249

1,314

As of Valuation Date: June 30, 2018

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Retiree Health Plan


GASB 75 Summary

Net OPEB LiabilityThe components of the Net OPEB Liability at June 30, 2018

Total OPEB Liability 19,625,702$ Plan fiduciary net position 0 Net OPEB Liability 19,625,702$

Plan fiduciary net position as a % of the Total OPEB Liability 0.00%

OPEB Expense at June 30, 1,515,517$

Actuarial AssumptionsThe Total OPEB Liability was determined using the followingactuarial assumptions.

Inflation 2.75%Salary increases 3.00%Discount rate 3.50%

Plan MembershipThe Total OPEB Liability was determined based on the planmembership as of June 30, 2018

Inactive plan members or beneficiaries currently receiving benefits 65 Inactive plan members entitled to but not yet receiving benefits 0 Active plan members 1,249

1,314

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Retiree Health Plan


Statement of Changes in Fiduciary Net Position

June 30, 2016Additions June 30, 2018Contributions:

Employer 902,303$ Member 0 Nonemployer Contributing Entity 0 Total contributions 902,303$

Investment income:Net increase in fair value of investments 0$ Interest and dividends 0 Less investment expense, other than from securities lending 0 Net income other than from securities lending 0$ Securities lending income 0 Less securities lending expense 0 Net income from securities lending 0$ Net investment income 0$

Other 0 Total additions 902,303$ DeductionsBenefit payments 902,303$ Administrative expense 0 Investment Fees 0 Total deductions 902,303$ Net increase in net position 0$

Net position restricted for OPEBBeginning of year 0$ End of year 0$ 0$

Note: The employer contributions include retiree benefit payments inclusive of subsidy not reimbursed from the trust.

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Retiree Health PlanGASB 75 Report Fiscal Year Ending June 30, 2018 (Measured at June 30, 2018)

Schedule of Changes in Net OPEB Liability and Related Ratios

Total OPEB Liability 2018 Service cost 875,523$ Interest 665,125 Changes of benefit terms 0 Differences between expected and actual experience 0 Changes of assumptions (150,786) Benefit payments, including refunds of member contributions (902,303) Net change in Total OPEB Liability 487,559

Total OPEB Liability - beginning 19,138,143 Total OPEB Liability - ending (a) 19,625,702$

Plan fiduciary net positionContributions - employer 902,303$ Contributions - member 0 Contributions - nonemployer contributing member 0 Net investment income 0 Benefit payments, including refunds of member contributions (902,303) Administrative expenses 0 Other 0 Net change in plan fiduciary net position 0$

Plan fiduciary net position - beginning 0 Plan fiduciary net position - ending (b) 0$

Net OPEB Liability - ending (a) - (b) 19,625,702$

Plan fiduciary net position as a percentage of the total 0.0%OPEB liability

Covered - employee payroll N/A

Net OPEB Liability as percentage of covered-employee payroll N/A

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Retiree Health Plan


OPEB Expense

Service cost 875,523$

Interest on Total OPEB Liability 665,125

Projected earnings on OPEB plan investments 0

Reduction for contributions from active employees 0

OPEB plan administrative expense 0

Changes of benefit terms 0

Other changes 0

Current period recognition of deferred outflows/(inflows) of resourcesDifferences between Expected & Actual Experiencein measurement of the Total OPEB Liability 0

Changes of assumptions (25,131)

Differences between Projected & Actual Earnings on OPEB Plan Investments 0

Annual OPEB Expense 1,515,517$

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Retiree Health Plan

GASB 75 Report Fiscal Year Ending June 30, 2018 (Measured at June 30, 2018)Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB

InitialDifferences between expected and actuarial experience in Initial Amortization Annual 06/30/2018measurement of the Total OPEB Liability for the period ending: Balance Period Recognition Balance

June 30, 2018 0$ 6 0$ 0$

Total 0$ 0$

InitialInitial Amortization Annual 06/30/2018

Changes of assumptions for the period ending: Balance Period Recognition BalanceJune 30, 2018 (150,786)$ 6 (25,131)$ (125,655)$

Total (25,131)$ (125,655)$

Initial

Differences between projected and actual earnings on OPEB Initial Amortization Annual 06/30/2018

plan investments for the period ending: Balance Period Recognition Balance

June 30, 2018 0$ 5 0$ 0$

Total 0$ 0$

The balances as of June 30, 2018 of the deferred outflows/(inflows) of resources will be recognized in OPEB expense for the

measurement period ending June 30,

2019 (25,131)$

2020 (25,131)$

2021 (25,131)$

2022 (25,131)$

2023 (25,131)$

Thereafter 0$

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Retiree Health Plan


Net OPEB Liability Sensitivity

Discount rateThe discount rate used to measure the Total OPEB Liability is 3.50%.

Sensitivity of the Net OPEB Liability to changes in the discount rateThe following presents the Net OPEB Liability, calculated using the discount rate of 3.50%, as well as what the Net OPEB Liabilitywould be if it were calculated using a discount rate that is 1-percentage-point lower (2.50%) or 1-percentage-point higher (4.50%)than the current rate:

Net OPEB Liability 21,191,394$ 19,625,702$ 18,187,742$

Sensitivity of the Net OPEB Liability to changes in healthcare cost trend rates

1% DecreaseCurrent Healthcare

Cost Trend Rates1% Increase

Net OPEB Liability 17,605,071$ 19,625,702$ 21,948,699$

1% Decrease (2.50%)

Current Discount Rate (3.50%)

1% Increase (4.50%)

(5.00%HMO/5.50%PPO decreasing to

4.00%HMO/4.00%PPO)


5.00%HMO/5.00%PPO)


6.00%HMO/6.00%PPO)

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Retiree Health Plan


Schedule of Contributions

This schedule is not required for unfunded OPEB plans.

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Retiree Health Benefits GASB 75 Report Fiscal Year Ending June 30, 2018 (Measured at June 30, 2018)

Valuation Data

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The valuation was based on the census furnished to us by the District. The following tables display the age distribution for retirees and the age/service distribution for active employees as of the Valuation Date. Age Distribution of Eligible Retired Participants & Beneficiaries*

Age Total


Benefit Plan Provisions

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This study analyzes the postretirement health benefit plans provided by the District. The retiree health plans provided to retirees prior to age 65 (Medicare eligibility) are basically a continuation of the medical plans for active employees. Employees who retire at age 55 or older with at least 15 years of District benefit eligible service are eligible to receive District-paid retiree medical benefits until the retiree’s attainment of age 65. The District contribution shall be limited to the single-party premium in the HMO plan in which the retiree enrolls. An eligible retiree can elect additional dependent coverage but will be required to pay the full cost of the additional coverage. Retirees outside the HMO service areas may receive a cash reimbursement from the District for equivalent insurance coverage based on an average of the HMO premiums offered by the District. For retirements after June 30, 2014, retirees must pay a monthly contribution equal to the currently negotiated contribution in effect for active employees (currently $60/month for Anthem Blue Cross HMO and $30/month for Kaiser HMO). For non-mangement Classified employees, the Golden Handshake provisions are not applicable, and Classified retirees may not exceed 13% of total unit members receiving District-paid health benefits. Premium Rates

Premium rates may vary by coverage tier. The following tables summarize the current 2018-2019 monthly premiums paid by the District on behalf of retirees for the primary plans in which the retirees are enrolled.

Medical Anthem Blue Cross HMO Kaiser HMO Single $ 612.83 $ 491.22 Two-Party $1,257.41 $ 982.42


Actuarial Assumptions and Methods

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The liabilities set forth in this report are based on the actuarial assumptions described in this section. Fiscal Year: July 1st to June 30th Valuation Date: June 30, 2018 Measurement Date: June 30, 2018 for FYE2018 Funding Policy: Pay-as-you-go funding Discount Rate: 3.50% per annum. This discount rate is the average, rounded to 5 basis points, of the range of 3-20 year municipal bond rate

indices: S&P Municipal Bond 20 Year High Grade Rate Index, Bond Buyer 20-Bond GO index, Fidelity GO AA 20 Year Bond Index.

[The discount rate as of the June 30, 2017 measurement date was 3.40%.]

Inflation: 2.75% per annum Salary Increases: 3.0% per annum, in aggregate Pre-retirement Turnover: According to the Crocker-Sarason T-5 turnover table less mortality, increased by 60% at all ages. Sample rates are as follows:

Age Males Females 25 12.4% 12.4% 30 11.6 11.6 35 10.0 10.0 40 8.2 8.2 45 6.4 6.4 50 4.1 4.1 55 1.5 1.5

Mortality Rates: RPH 2014 mortality table with generational improvements using scale MP2017



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Retirement Rates: Age Percent Retiring* 55 5.0% 56 6.0% 57 7.0% 58 8.0% 59 9.0% 60 15.0% 61 20.0% 62 22.0% 63 25.0% 64 35.0% 65 100.0%

* Of those having met eligibility to receive District paid benefits. The percentage refers to the probability that an active employee who has reached the stated age will retire within the following year.

Participation Rates: 100% of future active employees are assumed to elect retiree health coverage at retirement. Future retirees are assumed to

elect medical plans based on current retiree elections. Spouse Coverage: 30% of future retirees are assumed to elect coverage for their spouse. Male spouses are assumed to be 3 years older than

female spouses. Actual spouse coverage and spouse ages are used for current retirees if available. Claim Cost Development: The valuation claim costs are based on the premiums paid for medical insurance coverage. The District participates in a

community rated plan. An implicit rate subsidy can exist when the non-Medicare rates for retirees are the same as for active employees. Since non-Medicare eligible retirees are typically much older than active employees, their actual medical costs are typically higher than for active employees. The current valuation contains an estimate of the implicit rate subsidy.

Healthcare Trend Rates: Year HMO PPO 2019 6.0% 6.5% 2020 5.5% 6.0% 2021 5.0% 5.5%

2022+ 5.0% 5.0% Retiree Contributions: The retiree contributions are assumed to increase by $10 per month for each future year.



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Actuarial Cost Method: The actuarial cost method used to determine the allocation of the retiree health actuarial liability to the past (accrued), current and future periods is the Entry Age Normal (EAN) cost method. The EAN cost method is a projected benefit cost method which means the “cost” is based on the projected benefit expected to be paid at retirement.

The EAN normal cost equals the level annual amount of contribution from the employee’s date of hire (entry date) to their retirement date that is sufficient to fund the projected benefit. As required by GASB 75, the normal cost is calculated to remain level as a percentage of pay. The EAN actuarial accrued liability equals the present value of all future benefits for retired and current employees and their beneficiaries less the portion expected to be funded by future normal costs. All employees eligible as of the Valuation Date in accordance with the provisions of the Plan listed in the data provided by the District were included in the valuation.

Market Value of Assets: As of the valuation date, there were no reported GASB eligible assets.


Glossary

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GASB 75 defines several unique terms not commonly employed in the funding of pension and retiree health plans. The definitions of the terms used in the GASB actuarial valuations are noted below. 1. Actuarial Assumptions – Assumptions as to the occurrence of future events affecting health care costs, such as: mortality, withdrawal, disablement

and retirement; changes in compensation and Government provided health care 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.

2. Actuarial Cost Method – A procedure for determining the Actuarial Present Value of Future Benefits and expenses and for developing an actuarially

equivalent allocation of such value to time periods, usually in the form of a Service Cost and a Total OPEB Liability. 3. Actuarially Determined Contribution - A target or recommended contribution to a defined benefit OPEB plan for the reporting period, determined in

accordance with the parameters and in conformity with Actuarial Standards of Practice. 4. Actuarial Present Value – The value of an amount or series of amounts payable or receivable at various times, determined as of a given date by the

application of a particular set of Actuarial Assumptions. For purposes of this standard, each such amount or series of amounts is: a. adjusted for the probable financial effect of certain intervening events (such as changes in compensation levels, Social Security, marital status,

etc.); b. multiplied by the probability of the occurrence of an event (such as survival, death, disability, termination of employment, etc.) on which the

payment is conditioned; and c. discounted according to an assumed rate (or rates) of return to reflect the time value of money.

5. Deferred Outflow / (Inflow) of Resources – represents the following items that have not been recognized in the OPEB Expense:

a. Differences between expected and actual experience of the OPEB plan b. Changes in assumptions c. Differences between projected and actual earnings in OPEB plan investments (for funded plans only)

6. Explicit Subsidy – The difference between (a) the amounts required to be contributed by the retirees based on the premium rates and (b) actual cash

contribution made by the employer. 7. Funded Ratio – The actuarial value of assets expressed as a percentage of the Total OPEB Liability.


Glossary

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8. Healthcare Cost Trend Rate – The rate of change in the per capita health claims costs over time as a result of factors such as medical inflation, utilization of healthcare services, plan design, and technological developments.

9. Implicit Subsidy – In an experience-rated healthcare plan that includes both active employees and retirees with blended premium rates for all plan

members, the difference between (a) the age-adjusted premiums approximating claim costs for retirees in the group (which, because of the effect of age on claim costs, generally will be higher than the blended premium rates for all group members) and (b) the amounts required to be contributed by the retirees.

10. OPEB – Benefits (such as death benefits, life insurance, disability, and long-term care) that are paid in the period after employment and that are provided

separately from a pension plan, as well as healthcare benefits paid in the period after employment, regardless of the manner in which they are provided. OPEB does not include termination benefits or termination payments for sick leave.

11. OPEB Expense – Changes in the Net OPEB Liability in the current reporting period, which includes Service Cost, interest cost, changes of benefit terms,

expected earnings on OPEB Plan investments, reduction of active employees’ contributions, OPEB plan administrative expenses, and current period recognition of Deferred Outflows / (Inflows) of Resources.

12. Pay-as-you-go – A method of financing a benefit 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. 13. Per Capita Costs – The current cost of providing postretirement health care benefits for one year at each age from the youngest age to the oldest age at

which plan participants are expected to receive benefits under the plan. 14. Present Value of Future Benefits – Total projected benefits include all benefits estimated to be payable to plan members (retirees and beneficiaries,

terminated employees entitled to benefits but not yet receiving them, and current active members) as a result of their service through the valuation date and their expected future service. The actuarial present value of total projected benefits as of the valuation date is the present value of the cost to finance benefits payable in the future, discounted to reflect the expected effects of the time value (present value) of money and the probabilities of payment. Expressed another way, it is the amount that would have to be invested on the valuation date so that the amount invested plus investment earnings will provide sufficient assets to pay total projected benefits when due.

15. Real Rate of Return – the rate of return on an investment after adjustment to eliminate inflation.


Glossary

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16. 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% for year 20W0, then 7.5% for 20W1, and 7% for 20W2 and thereafter, then 8% and 7.5% are the select rates, and 7% is the ultimate rate.

17. Service Cost – The portion of the Actuarial Present Value of projected benefit payments that is attributed to a valuation year by the Actuarial Cost Method. 18. Substantive Plan – The terms of an OPEB plan as understood by the employer(s) and plan members. 19. Total OPEB Liability – That portion, as determined by a particular Actuarial Cost Method, of the Actuarial Present Value of Future Benefits, which is

attributed to past periods of employee service (or not provided for by the future Service Costs).

Documents

Conejo Valley Unified School District · 2019. 6. 19. · Mr. Victor Hayek, Dty. Supt., Business Services Conejo Valley Unified School District 12/5/2018 1400 East Janss Road Thousand