OPEB Actuarial Valuation Report as of 6-30-15 for DISTRICT
San Dieguito Water District
GASB Actuarial Valuation
Retiree Health Program
As of June 30, 2015
March 2016
Prepared By:
Nyhart
530 B Street, Suite 900
San Diego, CA 92101-4404
(619) 239-0831
Diego
www.nyhart.com
An Alliance Benefit Group Licensee
San Dieguito Water District
GASB Actuarial Valuation
Retiree Health Program
As of June 30, 2015
Table of Contents
Page
Section I. Executive Summary ............................................................................................... 1
Section II. Financial Results .................................................................................................... 4
Section III. Projected Cash Flows ............................................................................................. 8
Section IV. Benefit Plan Provisions ........................................................................................... 10
Section V. Valuation Data ....................................................................................................... 12
Section VI. Actuarial Assumptions and Methods........................................................................ 13
Section VII. Actuarial Certification.............................................................................................. 17
Section VIII. Definitions .............................................................................................................. 18
SECTION I. EXECUTIVE SUMMARY
Background
The San Dieguito Water District Districtto perform an updated actuarial
valuation of its retiree health program. The purpose of the actuarial valuation is to measure the District
liability for retiree health benefits and to determine the District-
employment benefits (OPEB) under Governmental Accounting Standards Board Statements No. 43 &
45 (GASB 43 and GASB 45). GASB 45 requires accrual accounting for the expensing of OPEB. The
expense is generally accrued over the working career of employees. GASB 43 requires additional
financial disclosure requirements for funded OPEB Plans.
To be eligible for retiree health benefits, an employee must retire from the District and commence
pension benefits under PERS (typically on or after age 50 with at least 5 years of PERS eligible
service). The District
contribution ($122 per month in 2015, $125 per month in 2016, and in future years, indexed to medical
CPI increases). The District currently has 23 active employees who are working and earning service
credit for eligibility of retiree health benefits. The District currently provides a contribution towards
retiree medical benefits which are provided through the CalPERS Health Program for 14 retirees. This
information can be found on page 12 in the Valuation Data section.
The District participates in the CalPERS Health Program for its retiree medical coverage. In general,
the premium rates charged to participating employers are the same for each medical plan within each
same medical 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. GASB 45 requires
that implicit rate subsidies be considered in the valuation of medical costs. In past valuations the liability
for the implicit rate subsidy was excluded from the valuation as the GASB had provided for an
exemption for community-rated plans. This valuation includes an estimate of the liability for inclusion of
the implicit rate subsidy.
Results of the Retiree Health Valuation
The amount of the actuarial liability for the District's retiree health benefits program as of June 30,
2015, the measurement date, is $609,669 (including $452,491
$157,178 for the implicit rate subsidy). This amount is based on a discount rate of 7.28% which
assumes the District continues to pre-
the present value of all contributions for retiree health benefits projected to be paid by the District for
current and future retirees. If the District were to place this amount in a fund earning interest at the rate
of 7.28% per year, and all other actuarial assumptions were met, the fund would have enough to pay all
expected benefits. This includes contributions for retiree health benefits for the current retirees as well
as the current active employees expected to retire in the future. The valuation does not consider
employees not yet hired as of the valuation date.
If the amount of the actuarial liability is apportioned into past service, current service and future service
components, the past service component (actuarial accrued liability) is $484,247 (including $374,078
$110,169 for the implicit rate subsidy), the current service
component (normal cost or current year accrual) is $14,807 (including $9,498
contribution and $5,309 for the implicit rate subsidy) and the future service component (not yet accrued
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liability) is $110,615 (including $68,915 $41,700 for the implicit
rate subsidy).
Funding
The District
under GASB 45 through the CERBT. The market value of assets in the CERBT as of June 30, 2015 is
$113,485. The actuarial value of assets at June 30, 2015 is $111,363. The actuarial value of asset
method phases gains and losses in over five years subject to a 20% corridor around the market value
of assets. Using the actuarial value of assets, the unfunded actuarial accrued liability at June 30, 2015
is $372,884 (including $262,715 for the explicit District contribution)funded ratio is 23%
(30% for the explicit District contribution).
The CERBT provides participating employers with the choice of three investment allocation strategies.
The expected rate of return of assets is dependent on the funding strategy of a participating employer
and which investment allocation strategy is selected. For employers fully funding their annual required
contribution, strategy 1 has a CERBT published median yield of 7.28%, strategy 2 has a published
median yield of 6.73% and strategy 3 has a published median yield of 6.12%. The valuation was
performed using a 7.28% discount rate assuming the District remains in strategy 1 for the 2016/2017
and 2017/2018 fiscal yearsand assumes no additional margin for adverse deviation applied to the
CERBT stated median discount rate. The results for alternative allocation strategies using a 6.73% and
6.12% discount rate are provided in Section II-I of the report
Annual Required Contribution
The District7 is $52,780
(including $36,111 $16,669 for the implicit rate subsidy). The
annual required contribution is comprised of the present value of benefits accruing in the current fiscal
year (normal cost with interest) plus a 24-year amortization (on a level-dollar basis) of the unfunded
actuarial accrued liability. Thus, it represents a means to expense the plan's liabilities in an orderly
manner. The change in the net OPEB obligation/(asset) at the end of the fiscal year will reflect any
actual contributions made by the Districtduring the period for retiree health benefits including any pre-
funding and implicit rate subsidy amounts.
Changes from Prior Valuation
The valuation reflects updated plan, premiums and census information since the prior valuation. In
addition, the valuation reflects several assumption changes as outlined in Section VI. A reconciliation of
the approximate change in the actuarial accrued liability (AAL) and the annual required contribution
(ARC) from the prior valuation is provided below:
AAL ARC
June 30, 2013 Valuation @7.61% $322,000 $29,000
Increase due to passage oftime (includes interest and normal 20,000
costs less expected payments since June 30, 2013)
Decrease due to net experience gain ( 3,000)
Increase due to method and program changes 2,000
Increase due to demographic assumption and method changes 19,000
Increase due to lowering the discount rate to 7.28% 14,000
June 30, 2015 Valuation @7.28% $374,000 $36,000
Increase due to implied subsidy $110,000 $17,000
June 30, 2015 Valuation @7.28% $484,000 $52,000
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Actuarial Basis
The actuarial valuation is based on the assumptions and methods outlined in Section VI of the report.
To the extent that a single or a combination of assumptions is not met the future liability may fluctuate
significantly from its current measurement. As an example, the healthcare cost increase anticipates that
the rate of increase in medical cost will be at moderate levels and decline over several years. Increases
higher than assumed would bring larger liabilities and expensing requirements. A 1% increase in the
healthcare trend rate for each future year would increase the annual required contribution by 16%.
Another key assumption used in the valuation is the discount (interest) rate which is based on the
expected rate of return of plan assets. The valuation is based on a discount rate of 7.28%. A 0.5%
decrease in the discount rate would increase the annual required contribution by 4%. A 0.5% increase
in the discountrate would decrease the annual required contribution by 4%.
GASB 45 requires that implicit rate subsidies be considered in the valuation of medical costs. An
implicit rate subsidy occurs when the rates for retirees are the same as for active employees. Since
pre-Medicare retirees are typically much older than active employees, their actual medical costs are
almost always higher than for active employees. The valuation results were determined using the
higher expected costs associated with retired employees.
Scheduled to take effect in 2020, the "Cadillac Tax" is a 40% non-deductible excise tax on employer-
sponsored health coverage that provides high-cost benefits. For insured plans, the insurance company
is responsible for payment of the excise tax. For self-funded plans, the employer is responsible for
payment of the excise tax. The valuation does not include any additional liability for the Cadillac Tax.
The valuation is based on the census, plan and rate information provided by the District. To the extent
that the data provided lacks clarity in interpretation or is missing relevant information, this can result in
liabilities different than those presented in the report. Often missing or unclear information is not
identified until future valuations.
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SECTION II. FINANCIAL RESULTS
A. Valuation Results
The table below presents the employer liabilities associated with the District
program determined in accordance with GASB 43 & 45. The actuarial liability (AL) is the present
value of all the Districtions projected to be paid under the program. The actuarial
accrued liability (AAL) reflects the amount attributable to the past service of current employees and
retirees. The normal cost reflects the accrual attributable for the current period.
Explicit Implicit Total
1. Actuarial Liability (AL)
Actives $168,207 $106,193 $274,400
Retirees284,28450,985335,269
Total AL $452,491 $157,178 $609,669
2. Actuarial Accrued Liability (AAL)
Actives $ 89,794 $ 59,184 $148,978
Retirees 284,284 50,985 335,269
Total AAL $374,078 $110,169 $484,247
No. of Active Employees 23
Average Age 44.2
Average Past Service 9.7
No. of Retired Employees 14
Average Age 69.6
Average Retirement Age 58.8
B. Reconciliation of Market Value of Plan Assets
The reconciliation of Plan Assets for the last two fiscal years is presented below:
6/30/2014 6/30/2015
1. Beginning Market Value of Assets $73,398 $103,315
2. Contribution 31,268 28,597
3. Fund Earnings (gross) 18,214 ( 22)
4. Benefit Payments ( 19,409) ( 18,273)
5. Administrative Expenses ( 156) ( 132)
6. Ending Market Value of Assets $103,315 $113,485
7. Estimated Rate of Return 23% 0%
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C. Development of Actuarial Value of Assets
The actuarial value of assets is based on the expected market value appreciation. The actual
market appreciation or depreciation, both realized and unrealized, is phased in over five years as
the expected growth isphased out. The table below presents the development of the actuarial value
of assets.
6/30/2012 6/30/2013 6/30/2014 6/30/2015
1. Market value of assets $113,485
2. Actual gross rate of return 0.08% 17.08% 22.98% (0.02%)
3. Expected rate of return7.61% 7.61% 7.61% 7.61%
4. Actual fund earnings36 9,859 18,214 ( 22) 28,087
5. Expected fund earnings
3,591 4,393 6,031 8,307 22,322
6. Gain(loss) [(4) - (5)] (3,555) 5,466 12,183 (8,329)
7. Percent of gain/(loss) recognized
6/30/2015 80% 60% 40% 20%
8. Recognized gain/(loss)
[(6) x (7)] (2,844) 3,280 4,873 (1,666) 3,643
9. Blended value of assets at 6/30/2015 [(1) - (4) + (5) + (8)] $111,363
10. Percent increase/(decrease) of (9) over (1) (2%)
11. Actuarial value of assets, not more than 120% nor less than 80% of market value $111,363
D. Unfunded Actuarial Accrued Liability (UAAL) at June 30, 2015
The table below presents the development of the unfunded actuarial accrued liability. The unfunded
actuarial accrued liability is the excess of the actuarial accrued liability (AAL) over the actuarial
value of eligible plan assets.
ExplicitImplicit Total
1. Actuarial Accrued Liability (AAL) $374,078 $110,169 $484,247
2. Actuarial Value of Assets ( 111,363) ( 0) ( 111,363)
3. Unfunded AAL $262,715 $110,169 $372,884
E. Amortization of Unfunded Actuarial Accrued Liability
The amortization of the unfunded actuarial accrued liability component of the annual contribution
(ARC) is being amortized over a period of 24 years on a level-dollar method.Under the level-dollar
method, the amortization payment is scheduled to remain constant in future years.
1. Unfunded AAL (UAAL) $262,715 $110,169 $372,884
2. Amortization Factor 10.43353 10.43353 10.43353
3. Amortization of UAAL $ 25,180 $ 10,559 $ 35,739
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F. Annual Required Contribution (ARC) or Actuarially Determined Contribution*
The table below presents the development of the annual required contribution (ARC) under GASB
45 for the fiscal year ending June 30, 2017 and an estimate of an actuarially determined
contribution for the fiscal year ending June 30, 2018.
FY2016/2017 Explicit Implicit Total
1. Normal Cost at End of Fiscal Year $ 10,931 $ 6,110 $ 17,041
2. Amortization of Surplus 25,180 10,559 35,739
3. Annual Required Contribution (ARC) $ 36,111 $ 16,669 $ 52,780
4. Estimated Payroll $1,835,000 $1,835,000 $1,835,000
5. ARC as % of Payroll1.97%0.91%2.88%
FY2017/2018
1. Normal Cost at End of Fiscal Year $ 11,259 $ 6,293 $ 17,552
2. Amortization of Surplus 25,180 10,559 35,739
3. Actuarially Determined Contribution $ 36,439 $ 16,852 $ 53,291
*GASB 74 will be effective for the fiscal year ending June 30, 2018
G. Required Supplementary Information (Funding Progress @6/30/2015)
The table below presents a sample disclosure of the funding progress as of the beginning of the
fiscal year.
1. Actuarial Accrued Liability (AAL) $ 374,078 $ 110,169 $ 484,247
2. Actuarial Valuation of Assets ( 111,363) ( 0) ( 111,363)
3. Unfunded AAL $ 262,715 $ 110,169 $ 372,884
4. Funded Ratio 30% 0% 23%
5. Current Payroll $1,781,000 $1,781,000 $1,781,000
6. UAAL as % of Payroll 15% 6% 21%
H. Sensitivity Analysis:
The impact of a 0.5% decrease or increase in the discount (interest) rate and the impact of a 1%
increase in future healthcare trend rates on the District
unfunded actuarial accrued liability and the annual required contribution is provided below:
Dollar Percentage
($) Increase/ (%) Increase/
0.5% Decrease in Discount Rate (Decrease) (Decrease)
- Actuarial Liability $ 43,606 7%
- Actuarial Accrued Liability $ 26,480 5%
- Unfunded Actuarial Accrued Liability $ 26,480 7%
- Annual Required Contribution $ 2,120 4%
0.5% Increase in Discount Rate
- Actuarial Liability ($ 38,931) (6%)
- Actuarial Accrued Liability($ 24,259) (5%)
- Unfunded Actuarial Accrued Liability ($ 24,259) (7%)
- Annual Required Contribution ($ 1,956) (4%)
1% Increase in Future Healthcare Trend Rates
- Actuarial Liability $ 83,044 14%
- Actuarial Accrued Liability $ 54,551 11%
- Unfunded Actuarial Accrued Liability $ 54,551 15%
- Annual Required Contribution $ 8,345 16%
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I. Liabilities - Alternative Discount Rate
The results below present the impact of the liability and annual required contribution using a
discount rate to reflect pre-
Retiree Benefit Trust (CERBT) alternative allocation strategies 2 and 3 with discount rates of 6.73%
and 6.12%, respectively.
Investment Strategy 2
Liabilities Explicit Implicit Total
1. Actuarial Liability (AL)
Actives $189,658 $114,620 $304,278
Retirees301,50452,027353,531
Total AL $491,162 $166,647 $657,809
2. Actuarial Accrued Liability (AAL)
Actives$98,270$61,663$159,933
Retirees 301,504 52,027 353,531
Total AAL $399,774 $113,690 $513,464
3. Actuarial Value of Assets ( 111,363)( 0)( 111,363)
4. Unfunded AAL (UAAL) $288,411 $113,690 $ 402,101
5. Amortization Factor11.00561 11.00561 11.00561
6. Amortization of UAAL$ 26,206 $ 10,330 $ 36,536
FY2016/2017 Annual Required Contribution
1. Normal Cost at End of Year$ 12,086 $ 6,492 $ 18,578
2. Amortization of UAAL at End of Year 26,206 10,330 36,536
3. Annual Required Contribution $ 38,292 $ 16,822 $ 55,114
FY2017/2018 Actuarially Determined Contribution
1. Normal Cost at End of Year$ 12,449 $ 6,687 $ 19,136
2. Amortization of UAAL at End of Year 26,206 10,330 36,536
3. Actuarially Determined Contribution $ 38,655 $ 17,017 $ 55,672
Investment Strategy 3
Liabilities Explicit Implicit Total
1. Actuarial Liability (AL)
Actives $217,968 $125,359 $343,327
Retirees 322,731 53,233 375,964
Total AL $540,699 $178,592 $719,291
2. Actuarial Accrued Liability (AAL)
Actives $108,971 $ 64,616 $173,587
Retirees 322,731 53,233 375,964
Total AAL $431,702 $117,849 $549,551
3. Actuarial Value of Assets ( 111,363)( 0)( 111,363)
4. Unfunded AAL (UAAL) $320,339 $117,849 $438,188
5. Amortization Factor11.69655 11.69655 11.69655
6. Amortization of UAAL$ 27,387 $ 10,076 $ 37,463
FY2016/2017 Annual Required Contribution
1. Normal Cost at End of Year$ 13,569 $ 6,960 $ 20,529
2. Amortization of UAAL at End of Year 27,387 10,076 37,463
3. Annual Required Contribution (ARC) $ 40,956 $ 17,036 $ 57,992
FY2017/2018 Actuarially Determined Contribution
1. Normal Cost at End of Year$ 13,976 $ 7,169 $ 21,145
2. Amortization of UAAL at End of Year 27,387 10,076 37,463
3. Actuarially Determined Contribution $ 41,363 $ 17,245 $ 58,608
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SECTION III. PROJECTED CASH FLOWS
The valuation process includes the projection of the expected retiree benefits/contributions to be paid
by the District under the Plan. This expected cash flow takes into account the likelihood of each
employee reaching age for eligibility to retire and receive health benefits. The projection is performed
by applying the turnover assumption to each active employee for the period between the valuation date
and retirement date. Once the employees reach their retirement date, a certain percent are assumed to
enter the retiree group each year. Employees already over the latest assumed retirement age as of the
valuation date are assumed to retire immediately. The per capita cost as of the valuation date is
projected to increase at the applicable healthcare trend rates both before and after the employee's
assumed retirement. The projected per capita costs are multiplied by the number of expected future
retirees in a given future year to arrive at the cash flow for that year. Also, a certain number of retirees
will leave the group each year due to expected deaths and this group will cease to be included in the
cash flow from that point forward. Because this is a closed-groupvaluation, the number of retirees
dying each year will eventually exceed the number of new retirees, and the size of the cash flow will
begin to decrease and eventually go to zero.
The expected employer cash flows for selected future years are provided in the following table:
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Projected Employer Cash Flows: All District Retirees Representative Years
Fiscal Year Explicit Implicit District Total
2015/16 $ 19,925 $ 13,699 $ 33,624
2016/17 $ 21,060 $ 10,552 $ 31,612
2017/18 $ 22,238 $ 8,715 $ 30,953
2018/19 $ 23,538 $ 10,168 $ 33,706
2019/20 $ 24,846 $ 7,855 $ 32,701
2020/21 $ 26,128 $ 10,086 $ 36,214
2021/22 $ 27,465 $ 14,117 $ 41,582
2022/23$ 28,864 $ 16,438 $ 45,302
2023/24 $ 30,227 $ 19,470 $ 49,697
2024/25$ 31,547 $ 20,630 $ 52,177
2025/26 $ 32,816 $ 18,056 $ 50,872
2026/27 $ 34,352 $ 8,112 $ 42,464
2027/28 $ 35,493 $ 9,728 $ 45,221
2028/29 $ 36,658 $ 8,315 $ 44,973
2029/30 $ 37,903 $ 6,617 $ 44,520
2030/31 $ 39,065 $ 7,640 $ 46,705
2031/32 $ 40,232 $ 9,243 $ 49,475
2032/33 $ 41,465 $ 7,449 $ 48,914
2033/34 $ 42,706 $ 5,620 $ 48,326
2034/35 $ 43,834 $ 8,347 $ 52,181
2035/36 $ 44,902 $ 10,011 $ 54,913
2036/37 $ 45,947 $ 12,513 $ 58,460
2037/38 $ 47,013 $ 16,861 $ 63,874
2038/39 $ 47,881 $ 21,029 $ 68,910
2039/40 $ 48,444 $ 16,087 $ 64,531
2040/41 $ 48,744 $ 18,530 $ 67,274
2041/42 $ 48,795 $ 16,398 $ 65,193
2042/43 $ 48,619 $ 17,094 $ 65,713
2043/44 $ 48,242 $ 16,769 $ 65,011
2044/45 $ 47,682 $ 18,158 $ 65,840
2045/46 $ 46,949 $ 16,746 $ 63,695
2050/51 $ 41,915 $ 588 $ 42,503
2055/56 $ 36,266 $ 1,917 $ 38,183
2060/61 $ 30,291 $ 0 $ 30,291
2065/66 $ 24,826 $ 0 $ 24,826
2070/71 $ 19,187 $ 0 $ 19,187
2075/76 $ 12,250 $ 0 $ 12,250
2080/81 $ 5,571 $ 0 $ 5,571
2085/86 $ 1,710 $ 0 $ 1,710
2090/91 $ 391 $ 0 $ 391
2095/96 $ 0 $ 0 $ 0
2100/01 $ 0 $ 0 $ 0
All Years $2,118,304 $435,419 $2,553,723
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SECTION IV. BENEFIT PLAN PROVISIONS
This study analyzes the postretirement health benefit plan provided by the District. The District
contributes to the retiree health coverage of eligible retirees and eligible surviving spouses. The
District
Except for former Encinitas Fire Protection District employees hired on or before March 15, 1995, the
District provides the minimum required employer contribution under the CalPERS Health Plan for
eligible retirees and surviving spouses in receipt of a pension benefit from PERS. An employee is
eligible for this employer contribution provided they are vested in their PERS pension benefit and
commence payment of their pension benefit when retiring from the District. The surviving spouse of an
eligible retiree who elected spouse coverage under CalPERS is eligible for the employer contribution
upon the death of the retiree.
The minimum required employer contributions is statutorily set under PEMHCA and is scheduled to
increase in the future based on the medical portion of CPI. A history of the increases in past years and
current amounts are as follows:
Calendar Year Minimum Required Employer Contribution
2006 $64.60
2007 $80.80
2008 $97.00
2009 $101.00
2010 $105.00
2011 $108.00
2012 $112.00
2013 $115.00
2014 $119.00
2015 $122.00
2016 $125.00
2017+ Adjusted Annually to reflect Medical Portion of CPI
Premium Rates
The District participates in the CalPERS Health Program, a community-rated program, for medical
coverage. The tables below summarize the calendar 2015 and 2016monthly medical premiums for the
primary medical plans in which the retirees are enrolled.
PERS
BS BS NVP PERS PERS Choice
2015 Other So. Cal. Region Kaiser HMO HMO Care Choice OOS
Retiree Only $ 579.80 $ 598.66 $ 561.09 $ 657.32 $ 594.40 $ 653.58
Retiree Plus Spouse $1,159.60 $1,197.32 $1,122.18 $1,314.64 $1,188.80 $1,307.16
Retiree Plus Family $1,507.48 $1,556.52 $1,458.83 $1,709.03 $1,545.44 $1,699.31
Retiree Only- Medicare $ 295.51 $ 352.63 $ 352.63 $ 368.76 $ 339.47 $ 339.47
Retiree Plus Spouse $ 591.02 $ 705.26 $ 705.26 $ 737.52 $ 678.94 $ 678.94
Medicare
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Anthem Anthem Health Health Net
2015 Other So. Cal. Region Sharp UHC HMO HMO Net Salud Smart
(Continued) HMO HMO Select Traditional y Mas Care
Retiree Only $ 564.57 $ 449.10 $ 653.97 $ 743.12 $ 520.59 $ 579.88
Retiree Plus Spouse $1,129.14 $ 898.20 $1,307.94 $1,486.24 $1,041.18 $1,159.76
Retiree Plus Family $1,467.88 $1,167.66 $1,700.32 $1,932.11 $1,353.53 $1,507.69
Retiree Only- Medicare $ 327.66 $ 267.41 $ 445.38 $ 445.38 $ 276.85 $ 276.85
Retiree Plus Spouse $ 655.32 $ 534.82 $ 890.76 $ 890.76 $ 553.70 $ 553.70
Medicare
BS BS NVP PERS PERS PERS
2016 Other So. Cal. Region Kaiser HMO HMO Care Choice Select
Retiree Only $ 605.05 $ 654.87 $ 666.35 $761.50 $ 683.71 $ 625.20
Retiree Plus Spouse $1,210.10 $1,309.74 $1,332.70 $1,523.00 $1,367.42 $1,250.40
Retiree Plus Family $1,573.13 $1,702.66 $1,732.51 $1,979.90 $1,777.65 $1,625.52
Retiree Only- Medicare $ 297.23 N/A N/A $408.04 $ 366.38 $ 366.38
Retiree Plus Spouse $ 594.46 N/A N/A $816.08 $ 732.76 $ 732.76
Medicare
Anthem Anthem Health Health Net
2016 Other So. Cal. Sharp UHC HMO HMO Net Smart
Region (Continued) HMO HMO Select Traditional Salud Care
Retiree Only $ 561.34 $ 493.99 $ 634.75 $710.79 $ 535.98 $ 596.98
Retiree Plus Spouse $1,122.68 $ 987.98 $1,269.50 $1,421.58 $1,071.96 $1,193.96
Retiree Plus Family $1,459.48 $1,284.37 $1,650.35 $1,848.05 $1,393.55 $1,552.15
Retiree Only- Medicare N/A $320.98 N/A N/A N/A N/A
Retiree Plus Spouse N/A $641.96 N/A N/A N/A N/A
Medicare
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SECTION V. VALUATION DATA
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
Measurement Date.
Age Distribution of Eligible Retired Participants & Beneficiaries
Age Total
<55 1
55-59
0
60-64 5
65-69 2
70-74 2
75-79 2
80-84 1
85+ 1
Total:
14
Average Age: 69.6
Average Retirement Age: 58.6
Age/Service Distribution of Active Benefit Eligible District Employees
Service
Age 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 Total
20-24 1 1
25-29 0 0
30-34 4 1 5
35-39 1 3 4
40-44 0 1 1 2
45-49
001012
50-54 0 2 1 1 0 1 5
55-59 1 0 0 0 0 0 1 2
60-64 1 1 0 0 0 0 0 2
65-69 0 0 0 0 0 0 0 0 0
70+ 0 0 0 0 0 0 0 0 0 0
Total: 8 8 3 1 1 1 1 0 0 23
Average Age:
44.2
Average Service: 9.7
Average Pay: $77,451
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SECTION VI. ACTUARIAL ASSUMPTIONS AND METHODS
The liabilities set forth in this report are based on the actuarial assumptions described in this section.
stth
Fiscal Year: July 1 to June 30
Measurement Date: June 30, 2015
Fiscal Years Covered: FY2016/2017 and FY2017/2018 (funding only)
Discount Rate:7.28% per annum. This discount rate assumes the Districtcontinues to
Retiree Benefit Trust (CERBT) under its investment allocation strategy 1.
The 7.28% reflects the CERBT published median interest rate for strategy
1 without any additional margin for adverse deviation.
Sensitivity analysis showing a 0.5% increase or decrease in the discount
rate is also provided.
Inflation: 2.8% per annum consistent with the most recent CalPERS pension plan
study.
Payroll Increases: 3.0% per annum, in aggregate with the most recent CalPERS pension
plan study.
Salary Increases: Merit increases from the most recent CalPERS pension plan study. The
benefits are not payroll related but each
allocated over their lifetime as a level-percentage of pay.
[The prior valuation used average pay increases based on the prior
CalPERS pension plan study]
Pre-retirement Turnover: According to the termination rates under the CalPERS pension plan
updated to reflect the most recent experience study. Sample rates for
Miscellaneous employees are as follows:
Entry Age
Service 20 30 40 50
0 17.42% 16.06% 14.68% 13.32%
5 8.68% 7.11% 5.54% 0.97%
10 6.68% 5.07% 0.71% 0.38%
15 5.03% 3.47% 0.23% 0.04%
20 3.70% 0.21% 0.05% 0.01%
25 2.29% 0.05% 0.01% 0.01%
30 0.05% 0.01% 0.01% 0.01%
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Pre-retirement Mortality: According to the pre-retirement mortality rates under the CalPERS
pension plan updated to reflect the most recent experience study. Sample
deaths per 1,000 employees applicable to employees are as follows:
Age Males Females
25 0.4 0.2
0.5 0.3
30
35 0.6 0.4
40 0.8 0.5
45 1.1 0.7
50 1.6 1.0
2.3 1.4
55
603.11.8
[The PERS mortality rates have been updated to reflect mortality
improvements reported in the 2014 CalPERS Experience Study]
Post-retirement Mortality: According to the post-retirement mortality rates under the CalPERS
pension plan updated to reflect the most recent experience study. Sample
deaths per 1,000 employees applicable to Miscellaneous and Safety
retirees are as follows:
Age Males Females
55 6.0 4.2
60
7.1 4.4
65 8.3 5.9
70 13.1 9.9
75 22.1 17.2
80 39.0 29.0
85 69.7 52.4
90 129.7 98.9
[The PERS mortality rates have been updated to reflect mortality
improvements reported in the 2014 CalPERS Experience Study]
Retirement Age: According to the retirement rates under the most recent CalPERS
pension plan experience study. According to the following retirement
tables:
Miscellaneous Tier 1: 2.7% @ 55
Miscellaneous Tier 2: 2.0% @ 60
Miscellaneous Tier 3: 2.0% @ 62
[The PERS retirement rates have been updated to reflect the 2014
CalPERS Experience Study.]
Participation Rates: 50% of future retirees under age 65 at retirement are assumed to elect
coverage at retirement.
Actual medical plan coverage is used for current retirees and for current
active employees not waiving coverage. For active employees waiving
coverage, a weighted average premium is assumed.
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Spouse Coverage: 50% of future retirees are assumed to elect coverage for their spouse.
Actual spousal coverage is used for current retirees. Male spouses are
assumed to be 3 years older than female spouses. Actual spouse age is
used for current retirees.
Dependent Coverage: Not explicitly valued.
Claim Cost Development: The valuation claim costs are based on the premiums paid for medical
insurance coverage. The District participates in CalPERS, a community
rated plan. Past valuations assumed the District was exempt from the
valuation of any medical plan implicit rate subsidy. 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.
Medical Trend Rates: Medical costs are adjusted in future years by the following trends:
Year PPO HMO
2016 Actual Actual
2017 7.0% 6.5%
2018 6.5% 6.0%
2019 6.0% 5.5%
2020 5.5% 5.0%
2021+ 5.0% 5.0%
[The prior valuation assumed 0.5% lower initial trend rates]
Medicare Participation: 100%
Minimum Contribution:The CalPERS minimum required contribution is assumed to increase 4%
per year.
CalPERS Service: Actual CalPERS Service as reported by CERBT was included for
purposes of applying the CalPERS demographic tables and determining
eligibility for benefits.
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 expected to be paid at retirement.
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The EAN normal cost equals the level annual amount of contribution from
the empl
sufficient to fund the projected benefit. For plans unrelated to pay, the
normal cost is calculated to remain level in dollars; for pay-related plans
the normal cost is calculated to remain level as a percentage of pay. The
District has elected to determine the EAN normal cost as a level
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 measurement date in accordance with the
provisions of the Plan listed in the data provided by the District were
included in the valuation.
Actuarial Value of Assets: Asset gains and losses are recognized over 5 years subject to an 80%
and 120% of market value corridor.
Amortization of UAAL: The unfunded actuarial accrued liability is being amortized over 24 years
using the level-dollar method on a closed-basis.
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SECTION VII. ACTUARIAL CERTIFICATION
This report summarizes the GASB actuarial valuation for the San Dieguito Water District District
as of June 30, 2015. To the best of our knowledge, the report presents a fair position of the funded
status of the plan in accordance with GASB Statements No. 43 (Financial Reporting for Post-
Employment Benefit Plans Other Than Pension Plans) and No. 45 (Accounting and Financial Reporting
by Employers for Post-Employment Benefits Other Than Pensions). The valuation is also based upon
our understanding of the plan provisions as summarized within the report.
The information presented herein is based on the actuarial assumptions and substantive plan
provisions summarized in this report and participant information and asset 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 and other economic assumptions have been selected by the Plan Sponsor.
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
changes in plan provisions or applicable law.
While some sensitivity analysis was provided in the report, 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.
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
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 me.
Certified by:
Marilyn K. Jones, ASA, EA, MAAA, FCA Date:March 20, 2016
Consulting Actuary
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SECTION VIII. DEFINITIONS
The definitions of the terms used in GASB actuarial valuations are noted below.
Actuarial Liability (also referred to as 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.
Actuarial Accrued Liability
That portion, as determined by a particular Actuarial Cost Method, of the
Actuarial Present Value of plan benefits and expenses which is not provided for by the future Normal
Costs.
Actuarial Assumptions
Assumptions as to the occurrence of future events affecting health care
costs, such as: mortality, turnover, 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.
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 Normal Cost and an Actuarial Accrued Liability.
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.
Annual OPEB Cost
An accrual-ation in a
defined benefit OPEB plan.
Annual Required Contribution (ARC)
benefit OPEB plan, calculated in accordance with the parameters.
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.
Funded Ratio
The actuarial value of assets expressed as a percentage of the actuarial accrued
liability.
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.
Implicit Rate 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
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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.
Net OPEB Obligation
The cumulative difference since the effective date of this Statement between
transition, if any, and excluding (a) short-term differences and (b) unpaid contributions that have been
converted to OPEB-related debt.
Normal Cost
The portion of the Actuarial Present Value of plan benefits and expenses which is
allocated to a valuation year by the Actuarial Cost Method.
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.
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.
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 healthcare trend rate
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 healthcare trend rate of 6.5% for
year 20W0, 6.0% for 20W1, 5.5% for 20W2, then 5.0% for 20W3 and thereafter, then 6.5%, 6% and
5.5% are select rates, and 5% is the ultimate rate.
Substantive Plan
The terms of an OPEB plan as understood by the employer(s) and plan
participant.
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