Mt. San Jacinto College Board of Trustees Meeting November 9, 2017 Retiree Benefits Liability Actuarial Study and GASB 74/75 Update
GASB 75 Key Takeaways Basic accounting and reporting will be similar to pensions Employers will need to be much more involved with selecting the actuary, approving assumptions, documenting the plan and providing the census data Info will need to be retained to show 10 year history Audit procedures are likely to be expanded 2 Board of Trustees Meeting – November 9, 2017
3 New OPEB Standards: Summary Unfunded liability goes on balance sheet Discount rate based on how long dedicated assets will cover current plan members’ future benefits Shorter time horizons for recognizing asset and liability changes in OPEB expense Standardized method for determining OPEB liability (as opposed to choice of 6) Actuarial valuation every 2 years
MSJC Actuarial Study MSJC selected Total Compensation Systems, Inc. (TCS) to analyze liabilities associated with its current retiree health program as of June 30, 2017(the valuation date). 4 Board of Trustees Meeting – November 9, 2017
MSJC Actuarial Study TCS actuarial study is intended to serve the following purposes: To provide information to manage the costs and liabilities associated with retiree health benefits. To provide information to communicate the financial implications of retiree health benefits To provide information needed to comply with GASB Accounting Standards 74 and 75 related OPEB. 5 Board of Trustees Meeting – November 9, 2017
MSJC Actuarial Study All cost and liability figures contained in this study are estimates of future results. Future results can vary dramatically and the accuracy of estimates contained in this report depends on the actuarial assumptions used. Service costs and liabilities figures could easily vary by 10 - 20% or more from estimates contained in this report. 6 Board of Trustees Meeting – November 9, 2017
General Findings/Summary For current employees, the value of benefits "accrued" in the year beginning July 1, 2017 (the service cost) is $683,856. Service Cost would increase each year based on covered payroll. Total OPEB Liability (TOL): $11,590,212 The amount of the actuarial present value of projected benefit payments attributable to employees’ past service. Irrevocable Trust: $4,611,072 Also know as the Fiduciary Net Position (FNP) Net OPEB Liability: $6,979,140 The Total OPEB Liability minus the Fiduciary Net Position. 7 Board of Trustees Meeting – November 9, 2017
Total OPEB Liability (TOL) & Net OPEB Liability (NOL) Irrevocable Trust Remaining Liability Board of Trustees Meeting – November 9, 2017 8
Changes in Net OPEB Liability Board of Trustees Meeting – November 9, 2017 9
10 OPEB Expense Under GASB 74 and 75, OPEB expense includes service cost, interest cost, change in TOL due to plan changes. Board of Trustees Meeting – November 9, 2017
MSJC Actuarial Study The District’s Irrevocable Trust is held with the California Employers Retiree Benefit Trust (CERBT); a not for profit organization The District budgeted $500,000 in the 2017/18 Adopted Budget to contribute to the Irrevocable Trust 11 Board of Trustees Meeting – November 9, 2017
Questions? Board of Trustees Meeting November 9, 2017 Source: Total Compensation Systems, Inc. Actuarial Study of Retiree Health Liabilities, dated October 26, 2017
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