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OPEB Actuarial Valuation Report as of 6-30-21 for DistrictGASB 74/75 INTERIM ACTUARIAL VALUATION Fiscal Year Ending June 30, 2021 SAN DIEGUITO WATER DISTRICT CONTACT Suraj M. Datta, ASA, MAAA suraj.datta@nyhart.com ADDRESS Nyhart 530 B Street Suite 900 San Diego, CA 92101 PHONE General (619) 239-0831 Toll-Free (800) 428-7106 Fax (317) 845-3654 Table of Contents Page Certification 1 Executive Summary 3 GASB Disclosures Schedule of Changes in Net OPEB Liability and Related Ratios 4 OPEB Expense 5 Deferred Outflows / (Inflows) of Resources 6 Sensitivity Results 8 Asset Information 9 Discussion of Discount Rates 11 Summary of Key Actuarial Assumptions 12 Actuary's Notes 13 Valuation Results Summary 15 March 19, 2021 Ms. Stella Huang San Dieguito Water District 505 South Vulcan Avenue Encinitas, CA 92024 This report summarizes the interim GASB actuarial valuation for the San Dieguito Water District 2020/21 fiscal year . To the best of our knowledge, the report presents a fair position of the funded status of the plan in accordance with GASB Statement No . 74 (Financial Reporting for Post-Employment Benefit Plans Other Than Pension Plans) and GASB Statement No . 75 (Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions). The information presented herein is based on the actuarial assumptions and substantive plan provisions summarized in this report and participant information furnished to us by the Plan Sponsor. We have reviewed the employee census provided by the Plan Sponsor for reasonableness when compared to the prior information provided but have not audited the information at the source, and therefore do not accept responsibility for the accuracy or the completeness of the data on which the information is based. When relevant data may be missing, we may have made assumptions we feel are neutral or conservative to the purpose of the measurement. We are not aware of any significant issues with and have relied on the data provided . The discount rate, other economic assumptions, and demographic assumptions have been selected by the Plan Sponsor with the concurrence of Nyhart . In our opinion, the actuarial assumptions are individually reasonable and in combination represent our estimate of anticipated experience of the Plan . All calculations have been made in accordance with generally accepted actuarial principles and practice . Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following : · plan experience differing from that anticipated by the economic or demographic assumptions; · changes in economic or demographic assumptions; · increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period); and · changes in plan provisions or applicable law. We did not perform an analysis of the potential range of future measurements due to the limited scope of our engagement . To our knowledge, there have been no significant events prior to the current year's measurement date or as of the date of this report that could materially affect the results contained herein. Page 1 Neither Nyhart nor any of its employees has any relationship with the plan or its sponsor that could impair or appear to impair the objectivity of this report. Our professional work is in full compliance with the American Academy of Actuaries “Code of Professional Conduct” Precept 7 regarding conflict of interest. The undersigned meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein . Should you have any questions please do not hesitate to contact us. David Murciano, ASA, MAAA, EA Valuation Actuary Suraj M. Datta, ASA, MAAA Consulting Actuary Page 2 Executive Summary San Dieguito Water District Interim GASB 74/75 Valuation for Fiscal Year Ending June 30, 2021 Summary of Results Presented below is the summary of GASB 75 results for the fiscal year ending June 30, 2021 compared to the prior fiscal year as shown in the District's Notes to Financial Statement. FYE June 30, 2020 FYE June 30, 2021 Total OPEB Liability 500,683 528,995 $$ Actuarial Value of Assets (315,799)(275,664)$$ Net OPEB Liability 225,019 213,196 $$ Funded Ratio 59.7% 55.1% FY 2019/20 FY 2020/21 OPEB Expense 25,305 29,428 $$ Annual Employer Contributions 55,068 53,542 $$ As of June 30, 2020 As of June 30, 2021 7.00%Discount Rate 7.00% 7.00%Expected Return on Assets 7.00% Page 3 GASB Disclosures San Dieguito Water District Interim GASB 74/75 Valuation for Fiscal Year Ending June 30, 2021 Schedule of Changes in Net OPEB Liability and Related Ratios OPEB Liability FY 2020/21 FY 2019/20 FY 2018/19 FY 2017/18 Total OPEB Liability Total OPEB Liability - beginning of year 500,683 516,772 493,240 475,974 $$$$ Service cost 21,235 14,633 14,241 13,309 Interest 35,691 36,301 34,637 33,225 Change of benefit terms 0 0 0 0 Changes in assumptions 0 1,843 0 0 Differences between expected and actual experience (4,100)(43,215) 0 0 (24,514)Benefit payments (25,651)(25,346)(29,268) Net change in total OPEB liability 28,312 (16,089) 23,532 17,266 $$$$ Total OPEB Liability - end of year 528,995 500,683 516,772 493,240 $$$$ Plan Fiduciary Net Position Plan fiduciary net position - beginning of year 275,664 229,666 177,575 124,836 $$$$ Contributions - employer 53,542 55,068 59,205 63,332 Contributions - active employees 0 0 0 0 Net investment income 11,264 16,640 18,590 18,770 Benefit payments (24,514)(25,651)(25,346)(29,268) Trust administrative expenses (157)(59)(358)(95) Net change in plan fiduciary net position 40,135 45,998 52,091 52,739 $$$$ Plan fiduciary net position - end of year 315,799 275,664 229,666 177,575 $$$$ Net OPEB Liability - end of year 213,196 225,019 287,106 315,665 $$$$ Plan fiduciary net position as % of total OPEB liability 59.7% 55.1% 44.4% 36.0% Covered employee payroll 2,046,974 2,156,584 1,802,043 1,802,043 $$$$ Net OPEB liability as % of covered payroll 10.4% 10.4% 15.9% 17.5% * Employer Contributions are determined from the June 30, 2020 CERBT Statement of Fiduciary Net Position and includes contributions outside the Trust . Page 4 GASB Disclosures San Dieguito Water District Interim GASB 74/75 Valuation for Fiscal Year Ending June 30, 2021 OPEB Expense OPEB Expense FY 2020/21 FY 2019/20 Discount Rate Beginning of year 7.00% 7.00% End of year 7.00% 7.00% Service cost 21,235 14,633 $$ Interest 35,691 36,301 Change of benefit terms 0 0 Projected earnings on OPEB plan investments (20,290)(17,104) Reduction for contributions from active employees 0 0 OPEB plan administrative expenses 157 59 Current period recognition of deferred outflows / (inflows) of resources Differences between expected and actual experience (6,760)(6,174)$$ Changes in assumptions 263 263 Net difference between projected and actual earnings on OPEB plan investments (868)(2,673) Total current period recognition (8,584)(7,365)$$ Total OPEB expense 25,305 29,428 $$ Page 5 GASB Disclosures San Dieguito Water District Interim GASB 74/75 Valuation for Fiscal Year Ending June 30, 2021 Deferred Outflows / (Inflows) of Resources Deferred Outflows / (Inflows ) of Resources represents the following items that have not been recognized in the OPEB Expense : 1.Differences between expected and actual experience of the OPEB plan 2.Changes of assumptions 3.Differences between projected and actual earnings in OPEB plan investments (for funded plans only) The initial amortization period for the first two items noted above is based on expected future service lives while the difference between the projected and actual earnings in OPEB plan investment is amortized over five years . All balances are amortized linearly on a principal only basis and new bases will be created annually for each of the items above . Differences between expected and actual experience for FYE Initial Balance Initial Amortization Period Annual Recognition Unamortized Balance as of June 30, 2021 June 30, 2018 0 0 0 N/A$$$ June 30, 2019 0 0 0 N/A$$$ June 30, 2020 (43,215) 7 (6,174)(30,867)$$$ June 30, 2021 (4,100) 7 (586)(3,514)$$$ Changes in assumptions for FYE Initial Balance Initial Amortization Period Annual Recognition Unamortized Balance as of June 30, 2021 June 30, 2018 0 0 0 N/A$$$ June 30, 2019 0 0 0 N/A$$$ June 30, 2020 1,843 7 263 1,317 $$$ June 30, 2021 0 0 0 N/A$$$ Page 6 GASB Disclosures San Dieguito Water District Interim GASB 74/75 Valuation for Fiscal Year Ending June 30, 2021 Deferred Outflows / (Inflows) of Resources (Continued) Unamortized Balance as of June 30, 2021 Annual Recognition Initial Amortization PeriodInitial BalanceNet Difference between projected and actual earnings in OPEB plan investments for FYE June 30, 2018 (8,843) 5 (1,769)(1,767)$$$ June 30, 2019 (4,987) 5 (997)(1,996)$$$ June 30, 2020 464 5 93 278 $$$ June 30, 2021 9,026 5 1,805 7,221 $$$ Deferred Outflows Deferred InflowsAs of fiscal year ending June 30, 2021 Differences between expected and actual experience 0 (34,381)$$ Changes in assumptions 1,317 0 Net difference between projected and actual earnings in OPEB plan investments 3,736 0 N/A 29,001 Contributions subsequent to the measurement date 34,054 (34,381)Total $$ Annual Amortization of Deferred Outflows / (Inflows) The balances as of June 30 , 2021 of the deferred outflows / (inflows ) of resources will be recognized in OPEB expense in the future fiscal years as noted below. Balances shown below do not include the recognition of any deferred outflows for contributions subsequent to the measurement date . FYE Balance (7,363)$ 2022 (5,598)$ 2023 (4,600)$ 2024 (4,691)$ 2025 (6,492)$ 2026 (584)Thereafter $ Page 7 GASB Disclosures San Dieguito Water District Interim GASB 74/75 Valuation for Fiscal Year Ending June 30, 2021 Sensitivity Results The following presents the Net OPEB Liability as of June 30, 2021, calculated using the discount rate assumed and what it would be using a 1% higher and 1% lower discount rate. · The current discount rate is 7.00%. · The 1% decrease in discount rate would be 6.00%. · The 1% increase in discount rate would be 8.00%. The following presents the Net OPEB Liability as of June 30, 2021, using the health care trend rates assumed and what it would be using 1% higher and 1% lower health care trend rates. · The current health care trend rate starts at an initial rate of 6.00%, decreasing to an ultimate rate of 5.00%. · The 1% decrease in health care trend rates would assume an initial rate of 5.00%, decreasing to an ultimate rate of 4.00%. · The 1% increase in health care trend rates would assume an initial rate of 7.00%, decreasing to an ultimate rate of 6.00%.As of June 30, 2021 Net OPEB Liability 1% Decrease Current Discount Rate 1% Increase As of June 30, 2021 Net OPEB Liability 1% Increase 1% Decrease Current Trend Rates 213,196 162,977 273,049 153,171 213,196 285,905 $ $ $$ $ $ Page 8 GASB Disclosures San Dieguito Water District Interim GASB 74/75 Valuation for Fiscal Year Ending June 30, 2021 Asset Information Asset Breakdown FY 2020/21 FY 2019/20 Assets 0 0 $$Cash and deposits 0 0 Securities lending cash collateral Total cash 0 0 $$ Receivables 0 0 $$Contributions 0 0 Accrued interest 0 0 $$Total receivables Investments 78,950 68,916 $$Fixed income 236,849 206,748 Equities 0 0 Mutual Funds Total investments 315,799 275,664 $$ Total Assets 315,799 275,664 $$ Liabilities Payables 0 0 $$Investment management fees 0 0 Securities lending expense Total liabilities 0 0 $$ Net Position Restricted to OPEB 315,799 275,664 $$ Page 9 GASB Disclosures San Dieguito Water District Interim GASB 74/75 Valuation for Fiscal Year Ending June 30, 2021 Asset Information (Continued) Asset Reconciliation FY 2020/21 FY 2019/20 Additions Contributions Received 53,542 55,068 $$Employer 0 0 Active employees Total contributions 53,542 55,068 $$ Investment Income 11,264 16,640 $$Net increase in fair value of investments 0 0 Interest and dividends 0 0 Investment expense, other than from securities lending 0 0 Securities lending income Securities lending expense 0 0 Net investment income 16,640 $$ 11,264 Total additions 64,806 71,708 $$ Deductions 25,651 $$ 24,514 Benefit payments 157 59 Administrative expenses 0 0 Other Total deductions 24,671 25,710 $$ Net increase in net position 40,135 45,998 $$ Net position restricted to OPEB Beginning of year 275,664 229,666 $$ End of year 315,799 275,664 $$ Page 10 Page 11 Discussion of Discount Rates San Dieguito Water District Interim GASB 74/75 Valuation for Fiscal Year Ending June 30, 2021 Under GASB 74, the discount rate used in valuing OPEB liabilities for funded plans as of the Measurement Date must be based on the long-term expected rate of return on OPEB plan investments that are expected to be used to finance future benefit payments to the extent that (a) they are sufficient to pay for the projected benefit payments and (b) the OPEB plan assets are invested using a strategy that will achieve that return. When the OPEB plan investments are insufficient to cover future benefit payments, a yield for 20-year tax-exempt general obligation municipal bonds with an average rating of AA /Aa or higher (or equivalent quality on another rating scale) must be used. For the current valuation: 1. The long-term expected rate of return on OPEB plan investment is assumed to be 7.00%. This was determined using a building block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These expected future real rates of return are then combined to produce the long-term expected rate of return by weighting them based on the target asset allocation percentage and adding in expected inflation (2.75%). The best estimates of arithmetic real rates of return for each major asset class included in the OPEB Plan’s target asset allocation as of June 30, 2020 are summarized in the following table. Asset Class Target Allocation L/T Expected Real ROR Global Equity 59.0% 5.50% Global Debt Securities 25.0% 2.35% Inflation Assets 5.0% 1.50% Commodities 3.0% 1.75% REITs 8.0% 3.65% Total 100.00% 4.25% 2. The discount rate used when the OPEB plan investments are insufficient to pay for future benefit payments are selected from the range of indices as shown in the table below, where the range is given as the spread between the lowest and highest rate shown. Yield as of July 1, 2019 June 30, 2020 Bond Buyer Go 20-Bond Municipal Bond Index 3.51% 2.21% S&P Municipal Bond 20-Year High Grade Rate Index 2.79% 2.66% Fidelity 20-Year Go Municipal Bond Index 3.13% 2.45% Bond Index Range 2.79% - 3.51% 2.21% - 2.66% 3. The District’s funding policy is to fund the recommended actuarially determined contribution (ADC) to fully fund the benefits over a reasonable period of time. The final equivalent single discount rate used for this year’s valuation is 7.00% with the assumption that the District will eventually pay the pay-go costs out of the OPEB trust when the Trust is expected to be able to pay all future projected benefit payments. Page 12 Actuarial Methods and Assumptions San Dieguito Water District Interim GASB 74/75 Valuation for Fiscal Year Ending June 30, 2021 For a complete summary of actuarial methods and assumptions, refer to the GASB 75 actuarial valuation report for the fiscal year ending June 30, 2020. Measurement Date For fiscal year ending June 30, 2021, a June 30, 2020 measurement date was used. Actuarial Valuation Date July 1, 2019 with results actuarially projected on a “no gain / no loss” basis to get to the June 30, 2020 measurement date. Liabilities as of July 1, 2019 are based on an actuarial valuation date of July 1, 2019 with no adjustments. Benefit Payments OPEB plan benefit payments made subsequent the measurement date of June 30, 2020 are recognized as a deferred outflow of resources in the fiscal year ending June 30, 2019 financial reporting period. An offsetting cash credit adjustment for benefits paid during the fiscal year is made in the Plan Sponsor’s journal entries. This adjustment is not explicitly shown in the GASB 75 report. The OPEB benefit payments subsequent the measurement date of June 30, 2020 will be reflected in the Plan Sponsor’s Schedule of Changes in Net OPEB Liability disclosure in the FY 2021/22 reporting period. Discount Rate 7.00% as of June 30, 2020 and 7.00% as of July 1, 2019 for accounting disclosure purposes. Refer to the Discussion of Discount Rates section for more information on selection of the discount rate. Payroll Growth 2.75% per year, plus merit increases based on Miscellaneous rates from the CalPERS 2017 Pension Plan Experience Study Inflation Rate 2.50% per year Cost Method Allocation of Actuarial Present Value of Future Benefits for services prior and after the Measurement Date was determined using Entry Age Normal Level % of Salary method where:  Service Cost for each individual participant, payable from date of employment to date of retirement, is sufficient to pay for the participant’s benefit at retirement; and  Annual Service Cost is a constant percentage of the participant’s salary that is assumed to increase according to the Payroll Growth. Medical Trend Rates FYE Medical/Rx 2021 Actual 2022 6.00% 2023 5.50% 2024+ 5.00% Page 13 Actuary’s Notes San Dieguito Water District Interim GASB 74/75 Valuation for Fiscal Year Ending June 30, 2021 Interim year valuation results have been projected from the prior year’s valuation with adjustments for actual premium increases from 2019/20 to 2020/21. Making this change resulted in a decrease in liabilities. Medical Benefits 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. 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 Contribution 2011 $ 108.00 2012 $ 112.00 2013 $ 115.00 2014 $ 119.00 2015 $ 122.00 2016 $ 125.00 2017 $ 128.00 2018 $ 133.00 2019 $ 136.00 2020 $ 139.00 2021 $ 143.00 2022+ Adjusted Annually to reflect Medical Portion of CPI Page 14 Actuary’s Notes San Dieguito Water District Interim GASB 74/75 Valuation for Fiscal Year Ending June 30, 2021 Premium Rates The City participates in the CalPERS Health Program, a community-rated program, for its medical coverage. The tables below summarize the 2020/2021 monthly medical premiums for the CalPERS medical plans. All premiums are effective for the calendar year. 2020 CalPERS Premiums – Region 2 PERS Choice PERS Select PERS Care Anthem HMO Select Anthem HMO Traditional Blue Shield Access+ Retiree Only $ 736.28 $ 451.54 $ 986.66 $ 654.04 $ 934.95 $ 909.87 Retiree plus Spouse $ 1,472.56 $ 903.08 $ 1,973.32 $ 1,308.08 $ 1,869.90 $ 1,819.74 Retiree plus Family $ 1,914.33 $ 1,174.00 $ 2,565.32 $ 1,700.50 $ 2,430.87 $ 2,365.66 2020 CalPERS Premiums -Region 2 Blue Shield NetValue Kaiser CA United Healthcare Health Net Salud y Mas Health Net Smartcare Sharp Retiree Only $ 909.87 $ 645.24 $ 671.60 $ 435.14 $ 719.26 $ 606.02 Retiree plus Spouse $ 1,819.74 $ 1,290.48 $ 1,343.20$ 870.28 $ 1,438.52 $ 1,212.04 Retiree plus Family $ 2,365.66 $ 1,677.62 $ 1,746.16 $ 1,131.36 $ 1,870.08 $ 1,575.65 2021 CalPERS Premiums - Region 2 PERS Choice PERS Select PERS Care Anthem HMO Select Anthem HMO Traditional Blue Shield Access+ Retiree Only $ 783.19 $ 476.92 $ 1,115.68 $ 674.69 $ 1,046.04 $ 938.96 Retiree plus Spouse $ 1,566.38 $ 953.84 $ 2,231.36 $ 1,349.38 $ 2,092.08 $ 1,877.92 Retiree plus Family $ 2,036.29 $ 1,239.99 $ 2,900.77 $ 1,754.19 $ 2,719.70 $ 2,441.30 2021 CalPERS Premiums - Region 2 Blue Shield NetValue Kaiser CA United Healthcare Health Net Salud y Mas Health Net Smartcare Sharp Retiree Only $ 938.96 $ 669.77 $ 723.84 $ 458.66 $ 769.11 $ 632.27 Retiree plus Spouse $ 1,877.92 $ 1,339.54 $ 1,447.68 $ 917.32 $ 1,538.22 $ 1,447.68 Retiree plus Family $ 2,441.30 $ 1,741.40 $ 1,881.98 $ 1,192.52 $ 1,999.69 $ 1,881.98 Page 15 Appendix San Dieguito Water District Interim GASB 74/75 Valuation for Fiscal Year Ending June 30, 2021 Valuation Results Summary Below is the summary of the GASB results as of the June 30, 2019 valuation date based on the Entry Age Normal Level % of Pay cost method with a discount rate of 7.00%. Present Value of Employer Contributions Explicit Implicit Total Active $ 205,120 $ 135,627 $ 340,747 Retirees $ 285,166 $ 35,796 $ 320,962 Total $ 490,286 $ 171,423 $ 661,709 Total (Accrued) OPEB Liability Explicit Implicit Total Active $ 105,287 $ 74,434 $ 179,721 Retirees $ 285,166 $ 35,796 $ 320,962 Total $ 390,453 $ 110,230 $ 500,683 Projected Employer Contributions Fiscal Period Ending June 30, Explicit Implicit Total 2020 $ 20,715 $ 4,853 $ 25,568 2021 $ 22,221 $ 6,872 $ 29,093 2022 $ 23,684 $ 12,587 $ 36,271 2023 $ 25,099 $ 14,730 $ 39,829 2024 $ 26,526 $ 18,313 $ 44,839 2025 $ 27,917 $ 20,544 $ 48,461 2026 $ 29,256 $ 21,223 $ 50,479 2027 $ 30,767 $ 10,897 $ 41,664 2028 $ 31,871 $ 12,107 $ 43,978