OPEB Valuation 2019
Gallagher Benefit Services, Inc. p: 952.356.3840
3600 American Blvd. West, Suite 500 f: 866.743.5313
Bloomington, MN 55431 ajg.com
March 19, 2020
CONFIDENTIAL
Shari Rains
City of New Hope
srains@ci.new-hope.mn.us
Re: City of New Hope – GASB 74/75 Alternative Measurement Method
Dear Shari:
The attached exhibits provide the information needed for the City’s OPEB Notes to the Financial
Statements and Required Supplementary Information as of December 31, 2019.
These calculations have been performed under the Alternative Measurement Method as allowed by
GASB 74/75 for employers with fewer than one hundred plan participants. The biggest difference
between this method and an actuarial valuation are the simplification of assumptions used to value the
OPEB liabilities, which reduces the time and cost to complete the calculations.
If you have any questions, please call me at (952) 356-0720.
Sincerely,
Jennifer Turk, EA, FSA, MAAA
Actuarial Consultant
City of New Hope - GASB 74/75
Schedule of Changes in Net OPEB Liablity
FYE 2017 FYE 2018 FYE 2019
Total OPEB Liability
Service Cost N/A 64,269$ 72,745$
Interest N/A 31,335 38,452
Changes of benefit terms N/A - -
Differences between expected and actual experience N/A 0 81,871
Changes of assumptions N/A (53,393) 74,709
Benefit payments N/A (25,947) (16,942)
Net change in total OPEB liability N/A 16,264$ 250,835$
Total OPEB Liability--Beginning N/A 859,607 875,871
Total OPEB Liability--Ending (a)859,607 875,871 1,126,706
Plan fiduciary net position
Contributions - Employer N/A 25,947$ 16,942$
Net investment income N/A - -
Benefit payments N/A (25,947) (16,942)
Administrative expense N/A - -
Other N/A - -
Net change in plan fiduciary net position N/A -$ -$
Plan fiduciary net position--beginning N/A - -
Plan fiduciary net position--ending (b)-$ -$ -$
Net OPEB Liability (asset)--ending (a) - (b)859,607$ 875,871$ 1,126,706$
Discount Rate--ending (20-year municipal bond index)3.44%4.09%2.74%
City of New Hope - GASB 74/75
Schedule of Net OPEB Liablity
FYE 2017 FYE 2018 FYE 2019
Total OPEB Liability 859,607$ 875,871$ 1,126,706$
Plan fiduciary net position - - -
Net OPEB liability (asset)859,607$ 875,871$ 1,126,706$
Plan fiduciary net position as a percentage of the total OPEB liability 0.0%0.0%0.0%
Covered-employee Payroll 6,200,000$ 6,400,000$ 7,100,000$
Net OPEB liability (asset) as a percentage of covered-employee payroll 13.9%13.7%15.9%
Sensitivity of the Net OPEB Liability to changes in the Discount Rate
1% Increase
Current
Discount Rate 1% Decrease
Total OPEB Liability 1,030,715$ 1,126,706$ 1,231,659$
Plan fiduciary net position - - -
Net OPEB Liability 1,030,715$ 1,126,706$ 1,231,659$
Sensitivity of the Net OPEB Liability to changes in the Healthcare Trend Rates
1% Increase
Current
Trend Rates 1% Decrease
Total OPEB Liability 1,289,047$ 1,126,706$ 989,191$
Plan fiduciary net position - - -
Net OPEB Liability 1,289,047$ 1,126,706$ 989,191$
City of New Hope - GASB 74/75
Schedule of Investment Returns
FYE 2017 FYE 2018 FYE 2019
Annual money-weighted rate of return, net of investment expenses N/A N/A N/A
City of New Hope - GASB 74/75
Schedule of Contributions
FYE 2017 FYE 2018 FYE 2019
Actuarially determined contribution N/A 25,947$ 16,942$
Contributions in relation to the actuarially determined contribution N/A 25,947 16,942
Contribution deficiency (excess)N/A -$ -$
Covered-employee Payroll N/A 6,400,000 7,100,000
Contributions as a percentage of covered-employee payroll N/A 0.4%0.2%
City of New Hope - GASB 74/75
Components of OPEB Expense for the Fiscal Year Ended December 31
FYE 2019
Service Cost 72,745$
Interest on the total OPEB liability 38,452
Differences between expected and actual experience 6,711
Changes of assumptions 1,270
Projected earnings on OPEB plan investments -
Differences between projected and actual earnings on plan investments -
OPEB plan administrative expenses -
Other changes in fiduciary net position -
119,178$
Amount for Portion of Projected Projected
Period Period Rate of Return Earnings
Projected earnings on OPEB plan investments (a)(b)(c)(a) x (b) x (c)
Beginning plan fiduciary net position -$ 100%4.09%-$
Employer contributions 16,942 50%4.09%346
Benefit payments (16,942) 50%4.09%(346)
Administrative expense and other - 50%4.09%-
Total projected earnings -$
Interest on the
Amount for Portion of Total OPEB
Period Period Interest Rate Liability
Interest cost on total OPEB liability (a)(b)(c)(a) x (b) x (c)
Beginning total OPEB liability 875,871$ 100%4.09%35,823$
Service cost 72,745 100%4.09%2,975
Benefit payments (16,942) 50%4.09%(346)
Total interest on the total OPEB liability 38,452$
City of New Hope - GASB 74/75
Increase (Decrease) in OPEB Expense Arising from the Recognition of the Effects of Differences between Expected and Actual Experience
Differences
Between Expected Recognition
and Actual Period
Year Experience (Years)2017 2018 2019 2020 2021 2022 2023 2024 2025
2017 N/A N/A - - - - - - - - -
2018 - 11.0 - - - - - - - - -
2019 81,871 12.2 - - 6,711 6,711 6,711 6,711 6,711 6,711 6,711
Net Increase (decrease) in OPEB expense -$ -$ 6,711$ 6,711$ 6,711$ 6,711$ 6,711$ 6,711$ 6,711$
Deferred outlflows of resources and deferred inflows of resources arising from differences between expected and actual experience
Amounts Recognized in
OPEB Expense Deferred Deferred
Experience Experience through Outflows of Inflows of
Losses Gains December 31, 2019 Resources Resources
Year (a)(b)(c)(a) - (c)(b) - (c)
2017 N/A - - - -
2018 - - - - -
2019 81,871 - 6,711 75,160 -
75,160$ -$
Balances at
December 31, 2019
City of New Hope - GASB 74/75
Increase (Decrease) in OPEB Expense Arising from the Recognition of the Effects of Changes of Assumptions
Recognition
Changes of Period
Year Assumptions (Years)2017 2018 2019 2020 2021 2022 2023 2024 2025
2017 N/A N/A - - - - - - - - -
2018 (53,393) 11.0 - (4,854) (4,854) (4,854) (4,854) (4,854) (4,854) (4,854) (4,854)
2019 74,709 12.2 - - 6,124 6,124 6,124 6,124 6,124 6,124 6,124
Net Increase (decrease) in OPEB expense -$ (4,854)$ 1,270$ 1,270$ 1,270$ 1,270$ 1,270$ 1,270$ 1,270$
Deferred outlflows of resources and deferred inflows of resources arising from changes of assumptions
Amounts Recognized in
OPEB Expense Deferred Deferred
Experience Experience through Outflows of Inflows of
Losses Gains December 31, 2019 Resources Resources
Year (a)(b)(c)(a) - (c)(b) - (c)
2017 N/A - - - -
2018 - (53,393) (9,708) - (43,685)
2019 74,709 - 6,124 68,585 -
68,585$ (43,685)$
Balances at
December 31, 2019
City of New Hope - GASB 74/75
Increase (Decrease) in OPEB Expense Arising from the Recognition of Differences between Projected and Actual Earnings on OPEB Plan Investments
Differences
Between Projected
and Actual
Earnings on Recognition
OPEB Plan Period
Year Investments (Years)2017 2018 2019 2020 2021 2022 2023
2017 N/A 5.0 - - - - - - -
2018 - 5.0 - - - - - - -
2019 - 5.0 - - - - - - -
Net Increase (decrease) in OPEB expense -$ -$ -$ -$ -$ -$ -$
Deferred outlflows of resources and deferred inflows of resources arising from differences between expected and actual experience
Amounts Recognized in
OPEB Expense Deferred Deferred
Experience Experience through Outflows of Inflows of
Losses Gains December 31, 2019 Resources Resources
Year (a)(b)(c)(a) - (c)(b) - (c)
2017 N/A - - - -
2018 - - - - -
2019 - - - - -
-$ -$
Balances at
December 31, 2019
City of New Hope - GASB 74/75
Deferred Outflows of Resources and Deferred Inflows of Resources
Deferred Outflows Deferred Inflows
Source of Resources of Resources
Differences between expected and actual experience 75,160$ -$
Changes of assumptions 68,585 (43,685)
Net difference between projected and actual earnings on investments - -
Total 143,745 (43,685)
Deferred outlflows of resources and deferred inflows of resources will be recognized in OPEB expense as follows:
Year Ending
2020 7,981
2021 7,981
2022 7,981
2023 7,981
2024 7,981
Thereafter 60,155
Balances at
December 31, 2019
INPUT INFORMATION - Summary of Assumptions and Methods
The following simplified assumptions were used for the Alternative Measurement Method:
Valuation Date
January 1, 2019
Measurement Date
December 31, 2019
Retirement Age
Age 56 for Police & Fire, Age 63 for all others (based on PERA average rates)
Marital Status
Coverage at calculation date assumed to continue through retirement
Mortality
RP-2014 with MP-2018 generational improvements
Turnover
Non-group-specific age-based turnover data from GASB
Inflation Rate
2.75%
Discount rate
2.74% (20-year municipal bond index)
Healthcare Trend
8.00% in 2019 decreasing 0.50% per year to an ultimate rate of 5.00%
Payroll Growth Rate
3.50%
Coverage Election
55% of future retirees are assumed to elect health coverage at retirement
Healthcare Claims Costs
Average group premium increased for age differences at 4.00% per year
Actuarial Cost Method
Entry Age Normal level percent of pay. Investment gains/losses are amortized over 5
years, liability gains/losses are amortized over Average Working Lifetime, and Plan
changes are recognized immediately.
Actuarial Value of Assets
The plan is not funded
City of New Hope - GASB 74/75
INPUT INFORMATION - Summary of Plan Participants
Participant Counts
Active 91
Inactive 3
Total 94
Average Age
Active 45
Inactive 58
Average Service 11
INPUT INFORMATION - Summary of Plan Provisions
These provisions are the minimum allowed under Minnesota Statutes 471.61 and 299A.465 for local
government entities.At retirement,employees receiving a retirement or disability benefit,or eligible to
receive a benefit,from a Minnesota public pension plan (other than a volunteer firefighter plan)may
continue to participate in the employer group health insurance plan that the employee was a participant of
immediately prior to retirement.Employees may obtain dependent coverage at retirement only if the
employee was receiving dependent coverage immediately prior to retirement.For Officers or Firefighters
disabled in the line-of-duty,the Officer’s or Firefighter’s employer must continue payment of the
employer’s contribution toward health coverage for the Officer or Firefighter and their spouse,if the
spouse was covered at the time of disability, until age 65.
City of New Hope - GASB 74/75