HomeMy WebLinkAbout2007-232 < a
AGREEMENTFOR
ACTUARIAL VALUATION SERVICES FOR OTHER
POST EMPLOYMENT BENEFITS
This Agreement for Actuarial Valuatio Services for Other Post Employment
Benefits ("Agreement" ) is entered into thimay of September, 2007 , by and between
Indian River County , a political subdivision of the State of Florida , 1801 27`h Street,
Vero Beach , FL 32960 (" County" ) and Gabriel Roeder Smith & Company , a Michigan
corporation , 301 E . Las Olas Boulevard , Suite 200 , Fort Lauderdale , FL 33301 -2254
( "Actuary") .
BACKGROUND RECITALS
A . Pursuant to current Governmental Accounting Standards Board (" GASB")
Statements 43 and 45 that establishes standards for the measurement ,
recognition , and display of Other Post Employment Benefits (" OPEB") expense
and related liabilities , the County issued a Request for Proposals for independent
actuarial valuation services .
B . Pursuant to applicable Florida law and the Request for Proposals , the County ' s
duly-constituted Actuarial Selection Committee received proposals and ranked
the firms that responded to the Request for Proposals based on the evaluative
criteria set forth in the Request for Proposals .
C . Actuary was the highest ranked respondent to the Request for Proposals and on
July 24 , 2007 , the County approved the Actuarial Selection Committee
recommendation to appoint Actuary to provide the independent actuarial
valuation services set forth in the Request for Proposals and this Agreement.
D . Actuary is willing and able to perform the independent actuarial valuation
services as set forth in this Agreement on the terms and conditions set forth
below.
E . The County and the Actuary wish to enter into this Agreement for independent
actuarial valuation services as set forth below .
NOW THEREFORE , for good and valuable consideration , the receipt and
sufficiency of which is hereby acknowledged , and intending to be legally bound hereby ,
the parties hereby agree as follows :
1 . DESCRIPTION OF COUNTY PLAN The plan descriptions are set forth in
Exhibit "A" attached hereto and incorporated herein by this reference in its entirety
("County Plan
1 . 2 . COUNTY PLAN DATA. The County agrees to provide complete , accurate , and
internally consistent County Plan data and information ("County Data ") promptly upon
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request by Actuary as necessary for performance by Actuary under this Agreement.
The Actuary may rely upon the County Data with no duty to audit; however, Actuary
shall perform certain reasonableness tests on the County Data . The County agrees to
provide a representation letter to Actuary upon transmittal of all such County Data .
2 . SCOPE OF INDEPENDENT ACTUARIAL VALUATION SERVICES . The scope
of OPEB independent actuarial valuation services provided under this Agreement are as
more specifically set forth in Exhibit " B" attached hereto and incorporated herein by this
reference in its entirety (" Services") . The Services shall be performed in accordance
with the provisions of GASB Statements 43 and 45 , as may be amended from time to
time and in accordance with generally accepted actuarial standards . Actuary agrees
that each independent actuarial valuation prepared under this Agreement shall conform
to the requirements set forth in this Agreement. County and Actuary acknowledge and
agree that a 20 (twenty) year projection using the " Closed Group" valuation method will
be performed for County under this Agreement.
3 . ACTUARIAL RESPONSIBILITIES .
3 . 1 . The Services under this Agreement shall be performed in accordance with the
framework in tab 3 , " Process , " consisting of pages 30 through and including 40 of the
Actuary' s Proposal for Independent Actuarial Services , set forth in Exhibit " C" attached
hereto and incorporated herein by this reference in its entirety . Actuary shall complete
the year 1 and year 3 Services within five (5) weeks after receipt by Actuary of all
requested County Data and the required representation letter as to same . Actuary
shall complete the year 2 and year 4 Services within two (2) weeks after receipt of the
County Data . .
3 . 2 . Actuary acknowledges and agrees that it possesses the ability to store all working
papers and reports at the Actuary' s expense for a minimum of five years , unless
Actuary is notified by the County to extend the retention period . The Actuary will be
required to make working papers available , upon request, to the following parties or
their designees : the County . In addition , Actuary shall respond to the reasonable
inquiries of successor actuaries and provide actuarial assumptions in table format to
successor actuaries .
3 . 3 . Actuary agrees to comply with all applicable federal , state , and local laws and
regulations applicable to the furnishing of the Services set forth in this Agreement, and
any provisions required thereby to be included herein shall be deemed to be
incorporated herein by reference .
4 . ADDITIONAL SERVICES . If services in addition to the Services provided
hereunder are required or desired by the County, the County may , at the sole option of
County, either separately obtain same outside of this Agreement, or request Actuary to
provide such additional services . The County and Actuary acknowledge and agree that
any such additional services will be negotiated based on pricing that is consistent with ,
and comparable to , the compensation for similar Services covered under this
Agreement.
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5 . ACTUARY PROJECT TEAM . The Actuary shall assign members of its staff as the
Actuary's Actuarial Team , as contained in Tab 2 , Part 4 , page 11 "Your OPEB Team"
of the Actuary's Proposal for Independent Actuarial Services , attached hereto as
Exhibit " D" and incorporated herein by this reference in its entirety . The Actuary agrees
that the County shall have the right to approve the Actuary's Actuarial Team , and that
the Actuary shall not change any manager of its Actuary Team without prior written
notice to the County. Furthermore , if any manager of the Actuary's Actuarial Team is
removed from providing Services under this Agreement, or employment is otherwise
terminated or curtailed by the Actuary , or if any manager of the Actuary's Actuarial
Team terminates employment with the Actuary, then the Actuary shall promptly
replace its Actuarial Team manager with a person of comparable experience and
expertise , who shall also be subject to the County's approval . The County
acknowledges and agrees that its approval shall not be unreasonably withheld .
6 . COMPENSATION .
6 . 1 . The County shall pay to the Actuary a mutually agreed upon not-to-exceed
aggregate fee of $31 , 200 . 00 (Thirty-One Thousand and Two Hundred Dollars) for
Services performed under this Agreement during the Initial Term , payable as follows :
(a ) $ 12 , 600 in each of years 1 and 3 , payable pursuant to monthly Proper Invoices duly
submitted by Actuary , and ( b) $3 , 000 in each of years 2 and 4 , payable as a lump sum
upon completion of the valuation report by Actuary and submittal of the report and a
Proper Invoice to County . Actuary acknowledges and agrees that final payment for
Services performed in each of years 1 and 3 will be made by the County only after the
Indian River County Board of County Commissioners has received and approved the
final valuation report at the next scheduled meeting after receipt of such report. Actuary
further acknowledges and agrees that future additional OPEB actuarial requirements ,
imposed on the County by applicable national and state entities , including , without
limitation , GASB and FASB , shall be provided by the Actuary and are included in the
Initial Term negotiated fee between the County and the Actuary . County and Actuary
acknowledge and agree that the Initial Term fee includes : ( i) one ( 1 ) on-site meeting in
each of years 1 and 3 ; and ( ii) telephone conferences with the same or other audiences
as the on-site meeting in each year of the Initial Term . In addition , in year 1 only, the
County shall pay the Actuary the amount of $ 1 , 500 . 00 (One Thousand and Five
Hundred Dollars) [" Recalculation Fee" ] for Actuary to recalculate the County' s OPEB at
a different interest rate assuming the plan will be fully funded and provide the County
with an actuarially determined valuation of such recalculated OPEB ( herein
" Recalculation " ) . Recalculation Fee shall be payable as a lump sum to Actuary upon
completion of the final valuation report by Actuary that includes the Recalculation and
submittal of such report, together with a Proper Invoice for the Recalculation Fee , to
County .
6 . 2 . Proper Invoices , phased as set forth herein , shall be submitted to the County's
Finance Department in detail sufficient for proper prepayment and post payment audit.
All payments for services shall be made to the Actuary by the County in accordance
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with the Local Government Prompt Payment Act (2007) , Section 218 . 70 , Florida
Statutes, et seq .
7 . INSURANCE.
7 . 1 . The Actuary shall not commence to perform the Services under this Agreement
until it has obtained all the insurance required under this Agreement , and such
certificates of insurance have been approved by the County's Risk Manager. A
certificate of insurance shall be provided to the County' s Risk Manager for review and
approval ten ( 10) days prior to commencement of any Services under this Agreement .
The insurance company must have a rating by A. M . Best Company of no less than "A" :
Excellent. All such certificates of insurance or an endorsement provided by the Actuary
must state that, , should any of the required insurance policies be cancelled before the
expiration date thereof, the issuing insurer will endeavor to mail thirty (30) days written
notice to Indian River County as the certificate holder, but failure to do so shall impose
no obligation or liability of any kind upon the insurer, its agents or representatives . .
7 . 2 . Actuary shall procure and maintain , for the duration of this Agreement , the
minimum insurance coverage as set forth herein . The cost of such insurance shall be
included in the Actuary's fee :
7 . 2 . 1 . Workers' compensation to meet statutory limits in the State of Florida and
Employer's Liability with limits of not less than $ 100 , 000 per employee per accident ; $ 500 , 000
disease aggregate ; and $ 100 ,000 em ployee per disease .
7 . 2 . 2 . Commercial General Liability with a minimum combined single limit of
$500 , 000 per occurrence for bodily injury and property damage . This is to include
premises/operations , products/completed operations , contractual liability and
independent contractors coverage .
7 . 2 . 3 . Business Auto Liability with a minimum combined single limit of $500 , 000
per occurrence for bodily injury and property damage . This is to include owned , hired ,
and non-owned autos .
7 .2 . 4 . Professional liability with a minimum limit of $500 , 000 per occurrence .
7 . 3 . The County is to be an additional insured on the commercial general liability and
business automobile liability policies .
7 . 4 . The County , by and through its Risk Manager, reserves the right periodically to
review any and all policies of insurance and reasonably to adjust the limits of coverage
required hereunder, from time to time throughout the term of this Agreement. In such
event , the County shall provide the Actuary with separate written notice of such
adjusted limits and Actuary shall comply within thirty (30) days of receipt thereof. The
failure by Actuary to provide such additional coverage may constitute a default by
Actuary and may be grounds for termination of this Agreement by the County .
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8 . TERM ; TERMINATION .
8 . 1 . This Agreement shall remain in effect for a term of four (4) years (" Initial Term" ) ,
subject to sooner termination as provided herein . Provided that the Actuary is not in
default under any of the terms and conditions hereof, this Agreement may be renewed
for a maximum of two (2) Renewal Terms of two (2) years each , for a maximum
aggregate of eight (8) years combined Initial Term and Renewal Terms . Each Renewal
Term is subject to all of the provisions set forth in this Agreement. Notwithstanding the
foregoing , the County may extend or renew this Agreement beyond the eight ( 8) years if
deemed to be in the best interest of Indian River County .
8 . 2 . This Agreement may be terminated : ( a) by the County , for any reason , upon at
least ninety (90) days' prior written notice to the Actuary ; or (b ) by the Actuary , for any
reason , upon at least ninety (90) days' prior written notice to the County ; or (c) by the
mutual agreement of the parties , or d ) as may otherwise be provided below. In the
event of the termination of this Agreement, any liability of one party to the other arising
out of any Services rendered , or for any act or event occurring prior to the termination ,
shall not be terminated or released .
8 . 3 . In the event of termination by the County, the County's sole obligation to the
Actuary shall be payment for those portions of satisfactorily completed work under this
Agreement. Such payment shall be determined on the basis of percentage of work
complete as estimated by the Actuary and agreed upon by the County up to the time of
termination . In the event of such termination , the County may , without penalty or other
obligation to the Actuary , elect to employ other persons to perform the same or similar
Services .
8 . 4 The obligation to provide Services under this Agreement may be terminated by
either party upon seven (7) days prior written notice in the event of substantial failure by
the other party to perform in accordance with the terms of this Agreement through no
fault of the terminating party.
8 . 5 . In the event that the Actuary merges with another company , becomes a subsidiary
of, or makes any other substantial change in structure , the County reserves the right to
terminate this Agreement in accordance with its terms .
8 . 6 . In the event of termination of this Agreement, the Actuary agrees to provide copies
of any and all documents prepared by the Actuary for the County in connection with this
Agreement, with the exception of proprietary workpapers , software , and spreadsheets .
9 . INDEPENDENT CONTRACTOR . It is specifically acknowledged and agreed by
the parties hereto that the Actuary is and shall be , in the performance of all Services
under this Agreement, an independent contractor, and not an employee , agent , or
servant of the County . All persons engaged in any of the Services performed pursuant
to this Agreement shall at all times , and in all places , be subject to the Actuary's sole
direction , supervision , and control , The Actuary shall exercise control over the means
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and manner in which Actuary and its employees perform the Services , and in all
respects the Actuary's relationship and the relationship of its employees to the County
shall be that of an independent contractor performing solely under the terms of the
Agreement and not as employees , agents , or servants of the County .
10 . MERGER ; MODIFICATION . This Agreement incorporates and includes all prior
and contemporaneous negotiations , correspondence , conversations , agreements or
understandings applicable to the matters contained herein and the parties agree that
there are no commitments , agreements , or understandings of any nature whatsoever
concerning the subject matter hereof that are not contained in this document.
Accordingly, it is agreed that no deviation from the terms hereof shall be predicated
upon any prior or contemporaneous representations or agreements , whether oral or
written . No alteration , change , or modification of the terms of this Agreement shall be
valid unless made in writing and signed by the Actuary and the County .
11 . GOVERNING LAW; VENUE . This Agreement, including all attachments hereto ,
shall be construed according to the laws of the State of Florida . Venue for any lawsuit
brought by either party against the other party or otherwise arising out of this Agreement
shall be in Indian River County, Florida , or, in the event of federal jurisdiction , in the
United States District Court for the Southern District of Florida .
12 . REMEDIES : NO WAIVER . All remedies provided in this Agreement shall be
deemed cumulative and additional , and not in lieu or exclusive of each other or of any
other remedy available to either party , at law or in equity . Each right, power and
remedy of the parties provided in this Agreement shall be cumulative and concurrent
and shall be in addition to every other right, power or remedy provided for in this
Agreement or now or hereafter existing at law or in equity or by statute or otherwise .
The failure of either party to insist upon compliance by the other party with any
obligation , or exercise any remedy , does not waive the right to do so in the event of a
continuing or subsequent delinquency or default. A party's waiver of one or more
defaults does not constitute a waver of any other delinquency or default. If any legal
action or other proceeding is brought for the enforcement of this Agreement or because
of an alleged dispute , breach , default, or misrepresentation in connection with any
provisions of this Agreement, each party shall bear its own costs .
13 . SEVERABILITY. If any term or provision of this Agreement, or the application
thereof to any person or circumstance shall , to any extent, be held invalid or
unenforceable for the remainder of this Agreement, then the application of such term or
provision to persons or circumstances other than those as to which it is held invalid or
unenforceable shall not be affected , and every other term and provision of this
Agreement shall be deemed valid and enforceable to the extent permitted by law.
14 . AVAILABILITY OF FUNDS . The obligations of the County under this Agreement
are subject to the availability of funds lawfully appropriated for its purpose by the Board
of County Commissioners of Indian River County.
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15 . NO PLEDGE OF CREDIT. The Actuary shall not pledge the County' s credit or
make it a guarantor of payment or surety for any contract, debt , obligation , judgment,
lien , or any form of indebtedness .
16 . PUBLIC RECORDS . The Actuary shall comply with the provisions of Chapter 119 ,
Florida Statutes ( Public Records Law) in connection with this Agreement.
17 . NOTICES . Any notice , request, demand , consent, approval , or other
communication required or permitted by this Agreement shall be given or made in
writing and shall be served , as elected by the party giving such notice , by any of the
following methods : (a ) Hand delivery to the other party ; (b) Delivery by commercial
overnight courier service , or (c) Mailed by registered or certified mail ( postage prepaid ) ,
return receipt requested at the addresses of the parties shown below:
County : Indian River County
Attn : Diane Bernardo , Finance Director, Project Manager
1801 27`h Street, Vero Beach , FL 32960-3365
Phone : (772) 226- 1205 ; Facsimile : (772) 770-5331
Actuary: Gabriel Roeder Smith & Company
Attn : James J . Rizzo
301 E . Las Olas Boulevard , Suite 200
Fort Lauderdale , FL 33301 -2254
Phone : 954-527 - 1616 , Facsimile : 954-525-0083
Notices shall be effective when received at the address as specified above . Facsimile
transmission is acceptable notice effective when received , provided , however, that
facsimile transmissions received (i . e . , printed) after 5 : 00 p . m . or on weekends or
holidays , will be deemed received on the next day that is not a weekend day or a
holiday . The original of the notice must additionally be mailed . Either party may change
its address , for the purposes of this section , by written notice to the other party given in
accordance with the provisions of this section .
18 . SURVIVAL . Except as otherwise expressly provided herein , each obligation in this
Agreement to be performed by Actuary shall survive the termination or expiration of this
Agreement .
19 . CONSTRUCTION . The headings of the sections of this Agreement are for the
purpose of convenience only , and shall not be deemed to expand , limit, or modify the
provisions contained in such Sections . All pronouns and any variations thereof shall be
deemed to refer to the masculine , feminine or neuter, singular or plural , as the identity
of the party or parties may require . The parties hereby acknowledge and agree that
each was properly represented by counsel and this Agreement was negotiated and
drafted at arm's- length so that the judicial rule of construction to the effect that a legal
document shall be construed against the draftsperson shall be inapplicable to this
Agreement.
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20 . COUNTERPARTS . This Agreement may be executed in one or more counterparts ,
each of which shall be deemed to be an original copy and all of which shall constitute
but one and the same instrument.
21 . GENERAL . The Background Recitals are true and correct and form a material part
of this Agreement.
IN WITNESS WHEREOF , the County and the Actuary have caused this
Agreement to be executed in their respective names as of the date first set forth above .
Actuary : Gabriel Roeder Smith INDIAN RIVER COUNTY
n &/Company Board of County Commissioners
ByrX I V' .
top . Bird , County Administrator,
Title : () hA, t Lc' t 21i^k . f ee under delegation of
in consent agenda item 7M
Board of County Commissioners
Meeting of July 24 , 2007
Attest: Appr ved as to form and legal
By `j �� _ / suffi en `
/� ✓
Title : Corpora Secretary B
Marian E . Fell , ssista t
County Attorney
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LFgal
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Budye ! kV idmIal
Dept 1
Risk Vg:'.
APPPOVEn
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EXHIBIT A
1. Plan Description
A. The County currently finances its OPEB on a pay-as-you-go basis in a self-
insurance fund . The financial statements of the County do not report the
financial effects of OPEB until the benefits are paid .
B . All participants are current or former employees of the County with the
exception of retired firefighters from the City of Vero Beach . The County
administers the retired City firefighters health insurance in the same manner
as other County employees . The exception is that Salem Trust pays the
premium for these individuals monthly from the City firefighters' pension .
C . The County provides current employees with medical and life insurance
coverage through a self-insured health plan . Dental coverage is optional to
active employees for the full premium amount (no County subsidy) . Retirees
are eligible to participate in the life insurance program but the County does
not contribute to the premium .
D . The County consists of the Board of County Commissioners and five
constitutional officers : Clerk of the Circuit, Property Appraiser, Sheriff,
Supervisor of Elections , and Tax Collector. All offices are covered by the
same health insurance plan and administered by the Human Resource
Department of the Board of County Commissioners .
E . The County's current monthly contribution for health insurance for active
employees and retirees is as follows.
Active :
• County 's portion of active employee single premium paid to self-
insurance fund $525/month .
• County 's portion of active employee married premium paid to self-
insurance fund $765/month .
• Employee's portion of married premium of $217 . 50/month .
• Basic life insurance is subsidized by the County for the employee 's annual
salary at a rate of $0 . 35/$ 1 , 000/month .
• Optional life insurance is available for additional coverage for the employee
at $0.47/$ 1 , 000/month .
• Optional life insurance is available for the spouse at $0.49/$ 1 , 000/month .
• Optional life insurance for dependants is $0 . 60 for $ 10, 000 of coverage ,
regardless of the number of dependants .
Retirees:
• Retiree portion of single coverage is $525/month without longevity subsidy.
• Retiree portion of married coverage is $765/month without longevity
subsidy .
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• Retiree over 65 years of age, single , transferred to a BCBS supplement
(Medicare is primary) is $525 (County reduces premium by 60% and
retiree pays 40% or $210) .
• Retirees over 65 years of age , married , transferred to BCBS supplement is
$765 (County reduces premium by 60% , and retirees pays 40% or $306) .
Subsidies for retirees :
• Hired after 2/1 /06 , no County subsidy .
• Retired prior to 10/1104, County reduces premium charged to retirees
under 65 years of age 2% per year of service , after 15 years or more of
service , with a maximum 40% subsidy . Upon the retiree or the retiree 's
spouse becoming Medicare eligible , the retiree will also be entitled to
receive an additional 20% reduction in the County' s health insurance rate ,
for an overall maximum subsidy of 60 % .
• Retired on or after 10/1 /04 with less than 15 years of service, County
reduces premium charged to retirees 20% when either the retiree or the
retiree' s spouse becomes Medicare eligible .
• Retired prior to 1011104 with less than 15 years of service when either
the retiree or the retiree's spouse becomes eligible for Medicare
supplement, the county reduces the premium charged to retirees 60% .
• Retired prior to 1011 /04 , not eligible for Medicare , with less than 15
years of service when either the retiree or the retiree's spouse becomes
eligible for Medicare , the County reduces the premium 20%
• When a retiree is deceased and has a spouse covered by the group
health insurance, the spouse shall be entitled to continue coverage at the
current subsidized rate until such time the spouse remarries . The spouse
will have 60 days upon the death of the retiree to apply for coverage .
Cobra :
• Participants pay the full premium of $982 . 50 for family and $525 for single
coverage .
Life Insurance:
• Retirees with retirement dates prior to 10/1 /99 are eligible to carry $ 10 , 000
in life insurance up to age 70 . At 70 , the amount is reduced to $ 5 , 000 .
• Retirees subsequent to 10/ 1 /99 are eligible to carry $20 , 000 of insurance
up to age 70. At 70 , the amount is reduced to $ 10 , 000 . Premiums of
$0 . 31 /$ 1000 are paid monthly by the retiree .
Census of Plan Members as of 4/30/07 (total of 1 , 719 participants) : Active employees
is 1 , 514; Retired employees is 185 ; Retired City of Vero Beach Firefighters is 10 ; and
Cobra is 10 . Total single plans is 721 . Total family plans is 998 . The details for the 195
retirees regarding single and married coverage , county subsidies , and Medicare participants
will be provided to the Actuary . The County shall provide updated Census of Plan Members
information to Actuary.
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EXHIBIT B
II. Scope of Services
The Actuary will provide the County with an actuarial determined valuation of
the County's OPEB for compliance with GASB 45 . At a minimum , this
valuation should :
• Determine health care and life insurance cost of benefits
• Recognize OPEB expense on the accrual basis of accounting
• Project future benefit payments
• Determine actuarial present value of projected benefit (ARC)
• Determine accrued liability
• Determine value of assets
• Determine unfunded actuarial accrued liability
• Determine normal cost
• Determine required contribution of the employer —as a level dollar amount
and as a level percentage of covered payroll
• Determine Net OPEB obligation (for employer disclosure under GASB
statement 45 if necessary)
• Provide the actuarial accrued liability for OPEB associated with past
service costs
• Determine the implicit rate subsidy , if any, and the impact it would have
on the OPEB liability
• Use an acceptable actuarial cost allocation method to assign costs to
specific accounting periods
• Review the data to assess any inconsistencies and furnish the results to
County. .
• Prepare a summarized annual gain/loss analysis to determine reasons
for changes in the unfunded actuarial accrued liability, whenever a prior
actuarial valuation is available to support this
• Provide information useful in assessing future funding requirements on the
County's cash flows
• Recommend alternatives for reducing the cost of benefits and/or
recommendations on managing the OPEB liability (this may include
changes in plan design)
• Assist the Finance Department in the information required for their
Comprehensive Annual Financial Report (CAFR)
• Prepare an analysis to determine how establishing a trust or equivalent
arrangement would affect the interest rate assumption . Timing
considerations of establishing the trust should also be considered
• Prepare an allocation plan for funding liabilities and assigning cost to
appropriate cost centers [stratification performed only for an additional
fee]
1
as
s s
PROCESS �OR1OA
Part 1
State the overall approach of the valuation, including objectives, scope of the work to be
performed and methodologies to be used.
APPROACH
Obiective
The first objective is to meet the reporting requirements under GASB Statement No. 45 ,
"Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than
Pensions. " If applicable, provide services to meet the reporting requirements under GASB
Statement No . 43 , "Financial Reporting for Postemployment Benefit Plans Other Than Pension
Plans. " Surrounding that objective is the larger goal of managing the OPEB liabilities.
Work Plan
Having performed over 180 OPEB actuarial valuations under GASB 43/45 , we have a well-
established track for the process .
Prior to completing Step 1 , the process starts with a detailed meeting with the Benefits
Manager, Benefits Consultant, and a member from the Financial Reporting department, which
results in a detailed data request letter to the client.
Step 1 — Draft and Approve Substantive Plan Provisions
GASB Statement No. 45 requires the actuarial valuation of the employer-provided other post
employment benefits as constituted in the "substantive plan" — the plan terms as understood
by the parties (the employer and the members) . This may be the most important step of the
whole process . It requires us to obtain memoranda, documents, etc. which describes all the
benefits provided. We must identify those benefits that qualify as employer-provided other
post employment benefits and the eligibilities and conditions under which they are made
available. We will draft a written version of the substantive plan and ask the employer to sign
off on it before proceeding.
Step 2 — Collect Employee and Retiree Census Data
Census data will be requested from the Employer, who will in turn need to request certain
data from FRS and the respective insurance companies . The Employer will need to massage
or supplement the data obtained from these sources (if necessary) to provide us with clean
data files (consolidated), and certify the data as to completeness and accuracy.
Gig Gabriel Roeder Smith & Company 30
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PROCESS "
Part 1
Step 3 — Collect Benefit Plan Data
Information on the Benefit Plans , loss ratios , renewal reports , experience-rating, worksheets,
rate charts , etc . , will be required from the respective insurance companies in order to develop
the initial per capita cost for the benefit types .
Step 4 — Develop Initial Per Capita Costs
Each relevant benefit type needs an initial per capita cost for the group. This is the baseline
starting point for the project, and requires short-term health actuarial expertise. We call it
"short-term" , because the initial per capita costs for each benefit type are the total underlying
costs (not necessarily the premium) expected for the year following the valuation date for all
employees and retirees for the respective benefit types . The initial composite per capita costs
then are converted to a whole table of age-sex-specific initial per capita costs for each benefit
type (including before and after age 65 ) .
Step 5 — Calculate all Projected Benefits and Present Values
The future years ' expected costs for all currently covered retirees and dependents is projected
based on select and ultimate healthcare trend assumptions for each benefit type . We will set
up our long-term actuarial modeling system based upon the Summary of Substantive Plan
Provisions . Part of this step is recognition of how the Florida Retirement System (FRS) plays
such an integral part in the OPEB obligation of the Employer. Naturally, we will use all the
retirement eligibility requirements of FRS for normal, early, duty and non-duty disability and
death, as applicable. We require the Employer to collect the service credits from an FRS
download because that determines when each employee will become eligible to retire
(recognizing reciprocal service with other FRS employers) . Initially, we use all of the
demographic actuarial assumptions (such as turnover, retirement, disability and mortality
rates ) used by FRS because it is not proper to simply pull such rate tables off the shelf when
FRS performs actuarial experience studies to set the rate tables based on actual State
experience. These three FRS connections should be considered minimum requirements for a
proper actuarial valuation of the Employer' s OPEB costs and liabilities .
GRS is on retainer by the State of Florida Auditor' s Department (and OPPAGA) to perform
actuarial audits of the FRS actuarial work. This has put GRS into a unique position of
understanding all the nuances of FRS (definitions , benefits provisions and retirement
eligibilities by classification codes, demographic actuarial assumptions , etc .)
In the end, the assumptions and methods employed are the Employer' s assumptions and
methods . They are to be adopted by the Employer because they are the basis for entries in the
Employer' s financial statements . We will advise the Employer' s Staff concerning the
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assumptions and methods . To that end, we will conduct conferences with key Staff regarding
these actuarial assumptions and methods to be used in the valuation .
All future years ' benefit costs are projected and taken back to today' s dollars in a present
value. These actuarial present values of expected benefits payable form the basis for the
accounting entries and disclosures required under GASB Statement No . 45 .
We will advise officials (particularly those in finance and treasury) concerning how they
would be setting the discount rate. Ultimately, all actuarial assumptions and methods are
chosen or adopted by the County. Part of our role is to advise the officials on such matters .
Step 6 — Calculate Expense and Liabilities
GASB Statement No. 45 permits the use of several actuarial cost methods to apply in deriving
the final expense and disclosure numbers . We will calculate these expense and liability
disclosures under a few relevant cost methods and discuss client objectives for final selection
of the actuarial cost method to use.
Step 7 — Prepare Draft Report for Review
GRS will prepare a draft version of our Actuarial Valuation Report and submit it to the client
for initial review and comments . The results will be aggregated with totals .
The draft report will include an Executive Summary, tables or charts presenting the
development of the results , a description of all primary actuarial assumptions and methods ,
and a summary of the plan benefits . Our report will include the issuance of a Public
Statement of Actuarial Opinion (PSAO) in accordance with the Qualification Standards of the
American Academy of Actuaries . In addition, GRS will be available to meet with County
officials as necessary for education, presentation of results, planning and other purposes .
Step 8 — Finalize Report
After discussion regarding the draft report, we will make changes and issue our formal bound
Report to the client. (Please refer to Appendix B "Sample OPEB Report, " for a sample report. )
Various telephone conferences may be required or advisable as the project proceeds, for the
purposes of clarification, education ( of GRS and County personnel), and decisions by the
County as to certain assumptions and methods to use.
Finally, we will present the results to Staff and/or Committees and/or Board by telephone
conference to explain the GASB requirements and implications and to review our Report and
any recommendations or options there may be.
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Scope of Work
GRS will provide the County with an actuarial determined valuation of the County' s OPEBs for
compliance with GASB 45 . This actuarial summary will :
• Determine health care and life insurance cost of benefits .
• Recognize OPEB expense on the accrual basis of accounting.
• Project future benefit payments.
• Determine actuarial present value of projected benefit (ARC) .
• Determine accrued liability.
• Determine value of assets .
• Determine unfunded actuarial accrued liability.
• Determine normal cost.
• Determine required contribution of the employer —as a level dollar amount and as a level
percentage of covered payroll.
• Determine Net OPEB obligation (for employer disclosure under GASB statement 45 if
necessary) .
• Provide the actuarial accrued liability for OPEB associated with past service costs .
• Determine the implicit rate subsidy, if any, and the impact it would have on the OPEB
liability.
• Use an acceptable actuarial cost allocation method to assign costs to specific accounting
periods .
• Analyze the data to assess any inconsistencies and make recommendations for enhancing
data quality.
• Prepare the annual gain/loss analysis to determine reasons for changes in the unfunded
actuarial accrued liability, whenever a prior actuarial valuation is available to support this .
The level of detail required for this item can be discussed and negotiated at a later time.
• Review and update plan documents and design. Make recommendations as to formalizing
informal plans.
• Provide information useful in assessing future funding requirements on the County' s cash
flows .
• Recommend alternatives for reducing the cost of benefits and/or recommendations on
managing the OPEB liability (this may include changes in plan design) .
• Assist the Finance Department in the information required for their Comprehensive Annual
Financial Report (CAFR) .
• Prepare an analysis to determine how establishing a trust or equivalent arrangement would
affect the interest rate assumption. Timing considerations of establishing the trust should
also be considered.
• Prepare an allocation plan for funding liabilities and assigning cost to appropriate cost
centers.
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MethodoIoAies
Please refer to page 37 , "Analysis of Methods" for information on methodologies.
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Describe how the firm will work with the government to determine the proper actuarial cost
method, actuarial valuation method, amortization method and key assumptions to the
valuation based on relevant accounting and actuarial standards. Some key assumptions (not
all of them applicable) to consider as part of this discussion are:
• Turnover
• Retirement Age
• Disability retirement age
• Mortality
• Projected salary increase
• Inflation rate
• Healthcare cost trend data for appropriate region
• Amortization timeframe
• Investment return
• Post retirement benefit changes
• Actuarial assumptions associated with the method (projected unit credit, entry age
normal, etc.)
• Provide an analysis of allowed actuarial and amortization methods with the pros and
cons of each method and recommend the most appropriate or commonly used one or
two methods for this type of study.
• Describe how the firm would assist in the interpretation of the plan and value the
associated costs in situations where there is ambiguity related to the substantive plan.
• Timeline - The firm will identify the major tasks in the valuation engagement and the
suggested timeline for completion.
• Data Requirements - The actuarial firm should list all data requirements, other than
what has been identified in the RFP, that they require to complete the valuation and in
what type of format that data must be provided.
• Support - Provide the support that is required of the County 's staff.
• Sample Report - Include in the Appendix of the firm 's response a copy of a sample
report.
Describe how the firm will work with the government to determine the proper actuarial cost
method, actuarial valuation method, amortization method and key assumptions to the
valuation based on relevant accounting and actuarial standards.
The results of an OPEB actuarial valuation are entered into the employer' s financial statement
and published as such. Technically speaking, all assumptions and methods used in an OPEB
actuarial valuation are the employer' s. All employers presenting a financial statement should
understand that, essentially, they have adopted the assumptions as their own for the purpose of
the financials . Nevertheless, each assumption and method needs to be within the Actuary' s
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range of reasonableness. As a practical matter, the Actuary should discuss key assumptions and
methods with the employer, including recommendations . The employer should communicate the
chosen assumptions and methods to the Actuary for use in the valuation.
This is the approach GRS will follow in its engagement with Indian River County. Please see
"Analysis of Methods" on page 37 of this section for a further discussion of the determination of
actuarial and amortization methods .
KEY ASSUMPTIONS
Demographic and Economic Assumptions
( Turnover , Retirement Age , Disability Retirement Age , Mortality ,
Projected Salary Increases , Inflation Rate , etc . )
Assumptions that relate to the population should match those used in any related pension
valuation, especially when actuarial experience studies have been performed to set the
demographic assumptions . There are times however, when certain demographic assumptions
used in the pension valuations are not appropriate for an OPEB valuation . For most OPEB plan
structures, salary levels are not relevant to the benefits or member contributions required.
However, the pattern of future salary increases can be used to develop the expected pattern of the
County' s Normal Cost and its amortization payment. Again, it is generally best to follow the
pension assumptions for salary increases, when performing the OPEB valuation.
The assumed rate of general price inflation will also generally match those in the related pension
valuation.
Health Care Trend Data
GRS has national and regional data that will be used in setting the health care trend rate. This
rate starts higher (generally in the 9% to 11 % range for medical and higher for prescription
drugs) and then ratchets down to about 4% to 5 % in perpetuity. We will look at the experience
and history in Indian River County region and discuss the usage of this assumption with the
County in the course of this valuation. There are several other health-related assumptions which
must be developed and adopted. These include participation or acceptance rates , lapse rates ,
Medicare offsets , and others .
Amortization Timeframe
This assumption is at the discretion of the County. GRS will provide guidance and suggestions
to ensure that the timeframe is within the Actuary' s range of reasonableness .
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Investment Discount Rate
GASB Statement No. 45 sets forth standards for determining the interest discount rate. It states
that the rate selected by the employer to value the costs and liabilities of such an OPEB plan
"should be the estimated long-term investment yield on the investments that are expected to be
used to finance the payment of benefits, with consideration given to the nature and mix of
current and expected investments . . . "
For an unfunded OPEB plan, the pool of assets used to determine the discount rate is usually all
unrestricted assets of the employer, except for unusual circumstances .
Post Retirement Benefit Changes
Changes in the underlying benefits will be reflected in the valuation . The OPEB liabilities will
be changed (either reduced or increased) to reflect changes in the underlying benefit design of
the plan.
Actuarial Assumptions Associated with the Method
Whether the amortization is level dollar or percent of pay and whether it is open or closed, are
decisions ultimately made by the County. GRS will discuss the issues generally with County
officials and provide results according to their decisions .
ANALYSIS OF METHODS
Provide an analysis of allowed actuarial and amortization methods with the pros and cons of each
method and recommend the most appropriate or commonly used one or two methods for this type of
study.
Determination of Cost Method
Entry Age Normal Cost Method is the most commonly used cost method in pensions and
OPEBs . But, the true cost of any plan is the ultimate benefits paid. A cost method merely
creates the pattern for the contributions that will accumulate to ultimately pay for those benefits.
Thus, the most desired actuarial cost method is the one that most closely matches the funding
policy of Indian River County. For contributions to be most stable as a dollar amount, we would
look at entry age normal, level dollar cost. If Indian River County is looking for contributions
that are stable as a percent-of-pay, we would look at entry-age normal, level-percent-of-pay.
Perhaps Indian River County would like contributions to be low in these early years and then
grow more quickly later. Each cost method develops costs differently and can be chosen to suit
the financial objectives of Indian River County.
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Asset Valuation Method
In the retiree health setting, the first issue to be determined is whether the assets will be set aside
in an irrevocable trust. If assets are not in an irrevocable trust, then they will not be valued as
part of the OPEB valuation and this particular point is moot. However, if assets are in an
irrevocable trust, then they can be considered in the calculations and accounting the same as in a
pension trust. We will work with Indian River County to discuss the pros and cons of using a
straight market value or a smoothed asset method (a method that takes the gains and losses and
"smoothes" those results over a certain number of years). Smoothing makes contribution rates
more stable than using market value. Similar to the discussion above, the outcome of this issue
will depend on the funding policy of Indian River County.
Amortization Method
There are different methods that can be used to amortize the unfunded accrued liability. Again,
the final determination of the method will depend on the funding policy of Indian River County,
and our discussion with Indian River County on amortization will include the different methods
available as well as the risks associated with each method. There are flat dollar and level
percent-of-pay methods. There are open and closed methods (open is where the "years to pay
off' stay the same each year, and closed means the years decline each year) .
AMBIGUITY RELATED TO THE SUBSTANTIVE PLAN
Describe how the,firm would assist in the interpretation of the plan and value the associated costs in
situations where there is ambiguity related to the substantive plan.
We recognize the utmost importance of the clarity of the substantive plan and we are aware of
the potential ambiguities . This is why crafting the substantive plan is the first step of our
valuation. (Please refer to our Work Plan starting on page 30 .) The valuation will not proceed
until the substantive plan is completely clear to all parties . Once the Plan Summary document is
approved and signed by the County, we will begin the programming and actuarial valuation.
The process of crafting the substantive plan begins with a conference call which includes all
parties that have a part in the benefit plan structure. This includes finance, HR, benefits and/or
risk management, and IT staff. This meeting will ensure that all parties are "on the same page."
Our team will thoroughly question the County' s personnel on all aspects of the benefit plan
structures, helping the County' s personnel to work out issues that they may not have considered.
This process will be aided by our experience with many other counties and government entities ,
as well as our thorough knowledge of FRS procedures. (Please see page 5 for more information
on our unique experience with FRS .)
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TIMELINE
The firm will identify the major tasks in the valuation engagement and the suggested timeline
for completion.
Our timeline is based upon the aforementioned steps of our Work Plan . Please refer to page
30 for more details of the Work Plan.
Step 1 — Draft and Approve Substantive Plan Provisions
Step 2 — Collect Employee and Retiree Census Data
Step 3 — Collect Benefit Plan Data
Step 4 — Develop Initial Per Capita Costs
Step 5 — Calculate all Projected Benefits and Present Values
Step 6 — Calculate Expense and Liabilities
Step 7 — Prepare Draft Report for Review
Step S — Finalize Report
The completion of Steps 1 , 2, 3 , and 8 depend on the response time and scheduling of the
County and its vendors . The County will be required to collect data from various sources ,
pension boards and insurance carries. (Please see the Sample Data Request in Appendix A.)
This process usually takes our clients between two (2) and ten ( 10) weeks .
However, we anticipate that Steps 4, 5 , 6, and 7 (which are generally under our control) would
be completed within four (4) weeks from the time we have all the data collected and verified as
to completeness and accuracy.
As long as the complete and accurate data is delivered by August 29 , 2007 , GRS will have no
problem presenting the draft report to the County by September 26, 2007 . A final report will
follow a few days after the County agrees to the draft report and any changes requested.
DATA REQUIREMENTS
The actuarial firm should list all data requirements, other than what has been identified in the
RFP, that they require to complete the valuation and in what type of format that data must be
provided.
Please refer to Appendix A, "Sample Data Request, " to see an example of the data format and
requirements . The County ' s actual Data Request will probably be somewhat different from
this sample. Once GRS has been provided more information about the County' s healthcare
and other OPEB plans we can create an official list of required data.
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SUPPORT
Provide the support that is required of the County 's staff.
The County will be responsible for the collection of data and other elements, as detailed in the
Data Request. (Please refer to Appendix A "Sample Data Request. ") The County staff will also
need to ensure that data is in the format requested, which may require compiling, cleaning, and
then merging data into the specified files . This work is generally completed by IT personnel.
Please refer to the "Work Plan" starting on page 30, for further information on County
involvement in the valuation process .
SAMPLE REPORT
Include in the Appendix of the firm 's response a copy of a sample report.
Please refer to the Appendix B , "Sample OBEP Report. "
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Other actuaries and other personnel who will have key roles in the work should also be
identified.
YOUR OPEB TEAM
The following individuals are responsible for delivering services outlined in our proposal.
Primary Consulting Actuary: James J . Rizzo
Peer Review Actuary: Alex Rivera
Senior Actuarial Analyst: Lorraine Bhawanie
Actuarial Analyst: Piotr Krekora
Back-up actuaries and analysts are available in the Fort Lauderdale and other offices in
Michigan, Illinois and Texas.
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