OPEB Valuation 2021
2022 Arthur J. Gallagher & Co. All rights reserved
City of New Hope
GASB No. 75 Alternative Measurement Method Valuation
December 31, 2021
City of New Hope
2022 Arthur J. Gallagher & Co. All rights reserved.
Table of Contents
City of New Hope
Actuarial Certification ......................................................................................................................................... 1
Executive Summary ........................................................................................................................................... 2
Governmental Accounting Standard No. 75 Background.................................................................................. 3
Exhibits
▌Liabilities and Annual Costs
Schedule of Net OPEB Liability ......................................................................................................................... 4
Schedule of Changes in Net OPEB Liability ...................................................................................................... 5
Schedule of Contributions ................................................................................................................................. 6
Schedule of Investment Returns ....................................................................................................................... 7
OPEB Expense .................................................................................................................................................. 8
Investment Gain/Loss Amortization ................................................................................................................... 9
Deferred Outflows and Inflows ........................................................................................................................10
▌Input Information
Summary of Plan Participants .........................................................................................................................11
Summary of Plan Provisions ...........................................................................................................................12
Summary of Assumptions and Methods ..........................................................................................................13
▌Governmental Accounting Standard No. 75 Terminology ........................................................................15
City of New Hope — GASB No. 75
1
Actuarial Certification
In our opinion, the following report presents fairly the December 31, 2021 Alternative Measurement Method Valuation
of City of New Hope (the City) postemployment benefits other than pensions (OPEB) and has been prepared in
accordance with Statement No. 75 of the Governmental Accounting Standards Board (GASB) and with generally
accepted actuarial principles and practices. Actuarial computations under GASB No. 75 are for plan and employer
accounting and financial reporting requirements. Determinations for other purposes may be significantly different from
those contained in this report; the results in this report should not be used for other purposes.
This valuation has been conducted with reliance upon participant, financial and plan provision information provided to
us by the City. We have reviewed the information provided to us for general reasonableness but did not audit the data.
The accuracy of the information in this valuation is dependent on the quality and completeness of the information
provided to us. This valuation was performed on the basis of the participant data, plan provisions, assumptions, and
methods stated in this report.
The assumptions and methods used in this valuation were selected by the City in consultation with Gallagher Benefit
Services, Inc. In our opinion, the assumptions used (a) each, and in the aggregate, are reasonably related to the
experience of the plan and to reasonable expectations, and (b) in the aggregate, represent our best estimate of
anticipated experience under the plan.
The discount rate was updated as of December 31, 2021 as prescribed by GASB No. 75. All other assumption changes
can be found in Exhibit 10. Updates to plan provisions can be found in Exhibit 9. There were no other changes in Plan
provisions, cost allocation procedures, contribution allocation procedures, or methods from the previous measurement.
There were no adjustments of prior measurements or use of approximations which would materially impact the results.
Future 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 or additional cost or
contribution requirements based on the Plan’s funded status); and changes in Plan provisions or applicable law. Due
to the limited scope of this engagement, we did not complete an analysis of the potential range of such future
measurements.
The results in this report should only be used for the stated purposes since determinations for other purposes may be
significantly different from those contained in this report. If this report is shared with parties other than the Client, it must
be shared in its entirety.
To the best of our knowledge, the information contained in this report is complete, accurate and in accordance with
generally accepted actuarial principles as recommended by the American Academy of Actuaries. The actuary indicated
below is a fellow of the Society of Actuaries and meets the Qualification Standards of the American Academy of
Actuaries to render the actuarial opinion contained in this report.
Laura K. Pistotnik, FSA, MAAA
Senior Client Actuarial Consultant
April 2022
City of New Hope — GASB No. 75
2
Executive Summary
The tables below highlight the December 31, 2020 and December 31, 2021 assets and liabilities and the fiscal year
ending 2020 and 2021 annual costs for the City's Other Postemployment Benefits (OPEB) as prescribed under GASB
No. 75.
Assets and Liabilities
December 31, 2020 December 31, 2021
Actuarial Present Value of Benefits (PVB) $ 2,463,916 $ 1,930,922
Total OPEB Liability (TOL) 1,298,682 903,533
Plan Fiduciary Net Position (FNP) - -
Net OPEB Liability (NOL) 1,298,682 903,533
The Actuarial Present Value of Benefits is the present value of all expected future benefits, claims and administration
costs for participants less contributions paid by participants after employment. The Total OPEB Liability is the portion
of the Actuarial Present Value of Benefits attributed to an employee’s past service, based on the Entry Age Normal
cost method.
The Plan Fiduciary Net Position is the value of assets irrevocably dedicated to the plan for providing future benefits to
participants after employment. The Net OPEB Liability is the unfunded portion of the Total OPEB Liability.
Annual Costs
Fiscal Year Ending
December 31, 2020
Fiscal Year Ending
December 31, 2021
Service Cost $ 89,655 $ 102,913
OPEB Expense 136,461 (209,986)
Actuarially Determined Contribution (ADC) N/A N/A
Annual Pay-As-You-Go Cost 22,038 27,550
Measurement Date 12/31/2020 12/31/2021
The OPEB Expense is the amount the employer charges as the cost of the postemployment healthcare benefits on its
income statement each fiscal year. It includes the value of benefits earned during the year (Service Costs), amortization
of unrecognized gains and losses, and interest on the Net OPEB Liability. There is no requirement to contribute the
OPEB Expense.
The Actuarially Determined Contribution (ADC) is not applicable unless the employer is funded and calculates an ADC.
The Annual Expected Pay-As-You-Go Cost is the expected claims and administration costs less deductibles,
coinsurance and contributions for inactive participants during the fiscal year. It includes the actual explicit subsidy costs
paid by the City.
City of New Hope — GASB No. 75
3
Governmental Accounting Standard No. 75 Background
Background
The Governmental Accounting Standards Board (GASB) approved Statement No. 75 in June 2015. GASB No. 75
replaces the requirements of Statement No. 45 and address the liabilities associated with Other Postemployment
Benefits (OPEB) that are not pensions.
GASB No. 75 addresses the accounting and financial reporting by employers for postemployment benefits other than
pensions and is effective for employer fiscal years beginning after June 15, 2017.
GASB Statement No. 75 includes many significant changes from Statement No. 45, including: new discount rate
methodology, requirement to use Entry Age Normal cost method, more rapid recognition of actuarial gains and losses
and changes in actuarial assumptions in OPEB Expense, immediate recognition of plan changes in OPEB expense,
two year valuation requirement and additional sensitivity measurements regarding discount rate and trend rate
sensitivity. Alternative Measurement Method requires experience and assumption gains and losses to be recognized
immediately.
Participant Data
Participant census data and claims experience for the City is summarized in the Summary of Plan Participants and the
Summary of Assumptions and Methods sections of this report.
Plan Provisions
Plan provisions describe the arrangement that an employer has undertaken to provide its employees with benefits after
they retire. Provisions of the plan may be written, spoken, or implied by a well-defined practice of paying
postemployment benefits. The plan provisions for the City's OPEB Plan are summarized in the Summary of Plan
Provisions section of this report.
Assumptions and Methods
Assumptions and methods used in determining GASB No. 75 liabilities are selected in accordance with established
actuarial standards. Each assumption, such as turnover, retirement, disability, mortality, dependency status, spouse
age differential, participant election, per capita claims costs, healthcare cost trend rates and discount rate, is used to
estimate the occurrence of future events affecting postemployment benefit costs. Assumptions and methods used in
this valuation are described in the Summary of Assumptions and Methods sections of this report.
City of New Hope
2022 Arthur J. Gallagher & Co. All rights reserved.
Liabilities and Annual Costs
City of New Hope — GASB No. 75
4
Exhibit 1
Schedule of Net OPEB Liability
FYE 2020 FYE 2021
Total OPEB Liability $ 1,298,682 $ 903,533
Plan fiduciary net position - -
Net OPEB liability (asset) $ 1,298,682 $ 903,533
Plan fiduciary net position as a percentage of the total OPEB liability 0.0% 0.0%
Covered-employee Payroll $ 7,400,000 $ 9,400,000
Net OPEB liability (asset) as a percentage of covered-employee payroll 17.5% 9.6%
Sensitivity of the Net OPEB Liability to changes in the Discount
Rate
1% Increase Current
Discount Rate
1% Decrease
Total OPEB Liability $ 831,201 $ 903,533 $ 982,313
Plan fiduciary net position - - -
Net OPEB Liability $ 831,201 $ 903,533 $ 982,313
Sensitivity of the Net OPEB Liability to changes in the Healthcare Trend Rates
1% Increase Current
Trend Rates
1% Decrease
Total OPEB Liability $ 1,029,868 $ 903,533 $ 796,939
Plan fiduciary net position - - -
Net OPEB Liability $ 1,029,868 $ 903,533 $ 796,939
City of New Hope — GASB No. 75
5
Exhibit 2
Schedule of Changes in Net OPEB Liability
FYE 2020 FYE 2021
Total OPEB Liability
Service Cost $ 89,655 $ 102,913
Interest 33,026 29,422
Changes of benefit terms - -
Differences between expected and actual experience 27 (479,230)
Changes of assumptions 71,306 (20,704)
Benefit payments (22,038) (27,550)
Net change in total OPEB liability $ 171,976 $ (395,149)
Total OPEB Liability--Beginning 1,126,706 1,298,682
Total OPEB Liability--Ending (a) 1,298,682 903,533
Plan fiduciary net position
Contributions - Employer $ 22,038 $ 27,550
Net investment income - -
Benefit payments (22,038) (27,550)
Administrative expense - -
Other - -
Net change in plan fiduciary net position $ - $ -
Plan fiduciary net position--beginning - -
Plan fiduciary net position--ending (b) $ - $ -
Net OPEB Liability (asset)--ending (a) - (b) $ 1,298,682 $ 903,533
Discount Rate--ending (20-year municipal bond index) 2.12% 2.06%
Measurement Date 12/31/2020 12/31/2021
City of New Hope — GASB No. 75
6
Exhibit 3
Schedule of Contributions
FYE 2020 FYE 2021
Actuarially determined contribution* N/A N/A
Contributions in relation to the actuarially determined contribution N/A N/A
Contribution deficiency (excess) N/A N/A
Covered-employee Payroll $ 7,400,000 $ 9,400,000
Contributions as a percentage of covered-employee payroll N/A N/A
*An Actuarially Determined Contribution (ADC) is not applicable unless the employer is funded and calculates an ADC.
City of New Hope — GASB No. 75
7
Exhibit 4
Schedule of Investment Returns
FYE 2020 FYE 2021
Annual money-weighted rate of return, net of investment expenses N/A N/A
City of New Hope — GASB No. 75
8
Exhibit 5
OPEB Expense for Fiscal Year Ended December 31
FYE 2020 FYE 2021
Service Cost $ 89,655 $ 102,913
Interest on the total OPEB liability 33,026 29,422
Differences between expected and actual experience* 6,713 (410,756)
Changes of assumptions* 7,067 68,435
Changes of benefit terms - -
Projected earnings on OPEB plan investments - -
- -
OPEB plan administrative expenses - -
Other changes in fiduciary net position --
$ 136,461 $ (209,986)
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% 2.12% $ -
Employer contributions 27,550 50% 2.12% 292
Benefit payments (27,550) 50% 2.12% (292)
Administrative expense and other -50%2.12%-
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 $ 1,298,682 100% 2.12% $ 27,532
Service cost 102,913 100% 2.12% 2,182
Benefit payments (27,550)50%2.12%(292)
Total interest on the total OPEB liability $ 29,422
Differences between projected and actual earnings on plan investments
*FYE 2021 expense includes remaining FYE 2020 experience and assumption deferred outflows and inflows of resources in order to recognize all liability
gains/losses immediately per GASB 75 Alternative Measurement Method valuation requirements.
City of New Hope — GASB No. 75
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Exhibit 6
Investment Gain/Loss Amortization
Differences
Between Projected .
and Actual
Earnings on Recognition .
OPEB Plan Period
Year Investments (Years) 2018 2019 2020 2021 2022 2023 2024 2025
2017 N/A 5.0 - - - - - - - -
2018 - 5.0 - - - - - - - -
2019 - 5.0 - - - - - - - -
2020 - 5.0 - - - - - - - -
2021 - 5.0 - - - - - - - -
Net Increase (decrease) in OPEB expense $ - $ - $ - $ - $ - $ - $ - $ -
Deferred outflows of resources and deferred inflows of resources arising from differences between expected and actual experience
Balances at
December 31, 2021
Amounts Recognized in .
OPEB Expense Deferred Deferred
Experience Experience through Outflows of Inflows of
Losses Gains December 31, 2021 Resources Resources
Year (a) (b) (c) (a) - (c) (b) - (c)
2017 N/A - - - -
2018 - - - - -
2019 - - - - -
2020 - - - - -
2021 - - - - -
$
-
$
-
City of New Hope — GASB No. 75
10
Exhibit 7
Deferred Outflows and Inflows
Balances at
December 31, 2021
Deferred Outflows Deferred Inflows
Source of Resources of Resources
Differences between expected and actual experience $ N/A $ N/A
Changes of assumptions N/A N/A
Net difference between projected and actual earnings on investments - -
Contributions made between Measurement Date and Reporting Date N/A N/A
Total - -
Deferred outflows of resources and deferred inflows of resources will be recognized in OPEB expense as follows:
Year Ending
2022 -
2023 -
2024 -
2025 -
2026 -
Thereafter -
City of New Hope
2022 Arthur J. Gallagher & Co. All rights reserved.
Input Information
City of New Hope — GASB No. 75
11
Exhibit 8
Summary of Plan Participants
The following table summarizes participant counts by status, medical plan and coverage elections, average age, and
average service of benefits eligible employees as of the December 31, 2020 valuation date.
Active Employee Data
Medical Plan Single Single + Sp Family Total
HSA $1,500 19 6 9 34
HSA $2,800 8 1 6 15
HSA $4,000 15 3 6 24
Total electing medical coverage 42 10 21 73
Waived medical coverage 18
Total active employees included in valuation 91
Average age of active employees 46.2
Average service of active employees 11.9
Inactive Participant Data
Medical Plan Single Single + Sp Family Total
HSA $1,500 0 0 0 0
HSA $2,800 0 0 0 0
HSA $4,000 3 0 0 3
Total electing medical coverage 3 0 0 3
Waived medical coverage 0
Total inactive employees included in valuation 3
Average age of inactive participants 60.3
City of New Hope — GASB No. 75
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Exhibit 9
Summary of Plan Provisions
This summary of plan provisions has been prepared for valuation purposes only. It outlines the plan provisions
necessary to perform the Alternative Measurement Method Valuation.
Eligibility
Requirements
The following eligibility requirements are the minimum allowed under Minnesota Statutes
471.61 and 299A.465 for local government entities:
At retirement, employees of the City receiving a retirement or disability benefit, or eligible
to receive a benefit (age 55 with at least 5 years of service) from a Minnesota public
pension plan (other than a volunteer Firefighter plan) may continue to participate in the
City’s group health insurance plan that the employee was a participant of 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.
Length of Coverage Retirees and spouses are eligible to remain in the City-sponsored group health insurance
plan until they attain age 65, provided the applicable premiums are paid.
Health Insurance
Plan Premiums
The monthly group premiums for the City’s group health insurance plan effective January
1, 2021 are as follows:
Rates Single Single + 1 Family
HSA $1,500 $ 651.20 $ 1,465.16 $ 1,699.27
HSA $2,800 $ 526.92 $ 1,185.53 $ 1,374.96
HSA $4,000 $ 580.02 $ 1,304.99 $ 1,513.50
Retiree Contributions Retirees, other than Officers or Firefighters disabled in the line-of-duty, are required to pay
the entire premium (group blended) for the City-sponsored group health insurance plan of
which they are a participant until age 65, unless otherwise provided for in a collective
bargaining agreement or personnel policy.
For Officers or Firefighters disabled in the line-of-duty, Minnesota Statute 299A.465
requires the Officer’s or Firefighter’s employer to 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.
Changes in Plan
Provisions Medical premiums and retiree contributions were updated to current levels.
City of New Hope — GASB No. 75
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Exhibit 10
Summary of Assumptions and Methods
The assumptions used in this Alternative Measurement Method Valuation are as follows:
Valuation Date December 31, 2020
Measurement Date December 31, 2021
Benefits Valued Pre-65 medical benefits
Discount Rate 2.06% (municipal bond rate)
Payroll Growth Rate N/A
General Inflation Rate 2.50%
Cost Methods Entry Age Normal level percent of pay. Investment gains/losses are amortized over 5
years. Liability gains/losses and Plan changes are recognized immediately, per
Alternative Measurement Method requirements.
FYE2020 liability gains/losses that had been amortized in prior years were fully
recognized during FYE2021 in order to recognize all liability gains/losses immediately
per GASB 75 Alternative Measurement Method requirements.
Health Insurance
Participation at Retirement
55% of all benefits eligible employees as of the valuation date and are eligible for
coverage at retirement are assumed to elect coverage at retirement.
100% of all disabled in the line of duty members are assumed to elect coverage at
retirement.
Spouse Participation Actual spouse elections used for current and future retirees.
Spouse Age Husbands assumed to be three years older than wives.
Medicare Eligibility All retirees are assumed to become Medicare eligible at age 65.
Withdrawal, Mortality Rates
and Salary Scale
Rates from the July 1, 2014 through June 30, 2018 PERA and TRA Experience
Studies.
Retirement Age 56 for Police & Fire. Age 63 for all others (based on PERA average rates).
Disability Rates None assumed
Per Capita Claims
and Administrative Costs
$14,031.48 for the HSA $1,500 plan, $12,805.32 for the HSA $2,800 plan, and
$11,660.40 for the HSA $4,000 plan, for all ages. Single average rate for all retirees
based on premiums and population ages per GASB 75 Alternative Measurement
Method calculation guidelines.
City of New Hope — GASB No. 75
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Exhibit 10
Summary of Assumptions and Methods
Healthcare Cost
Trend Rates
Trend rates are used to project health insurance claims and administration costs and retiree
premiums into the future. If healthcare inflation were to continue at its current rate, eventually
100% of the Gross National Product (GNP) would be allocated for healthcare services. Since
this is unrealistic, healthcare cost trend rates are assumed to decrease in future years. The
following table provides the healthcare cost trend rates for future years.
Fiscal Year
Beginning
Trend
2021 6.5%
2022 6.2%
2023 5.9%
2024 5.5%
2025 5.2%
2026-2075 Transition to
ultimate rate
2076+ 3.9%
Actuarial Valuation
Modeling Method
Liabilities shown in this report were determined using actuarial valuation software designed by
Winklevoss Technologies. This software is designed for the specific purpose of modeling
pension plan liabilities and costs and is the standard pension valuation software used by
Gallagher Benefit Services, Inc. The results in this report are based on various inputs into the
software model, including the plan provisions and assumptions shown in this report, and
demographic and financial information provided by the School. While the results have been
tested and reviewed for overall accuracy and consistency, we have relied upon the validity of
the underlying software coding in preparing this report.
Trend Model Medical trend rates were developed based on the Society of Actuaries (SOA) Getzen Model of
Long-Run Medical Cost Trends. The model is reviewed by the SOA project oversight group
composed of experts in the field to estimate average long run medical trends. Short-term rates
were updated based on recently published trend surveys and varying by pre-Medicare and post-
Medicare plans. Short-term trend updates have no impact on the mid-term or long-term rates
developed by the model. We have otherwise used the model’s default inputs. While the model’s
results have been reviewed for reasonableness, we have relied upon the validity of the model
in developing the mid-term and long-term trend rates.
Changes in
Assumptions
Medical trend was updated based on recently published trend model and trend surveys to
better reflect future anticipated experience.
Medical per capita claims tables were updated based on recent experience and
demographics.
The discount rate was updated from 2.12% to 2.06% based on recent muni bond index
rates.
Withdrawal, mortality and salary scale assumptions were updated to those included in the
recently published PERA General and Police & Fire actuarial valuations.
City of New Hope
2022 Arthur J. Gallagher & Co. All rights reserved.
Governmental Accounting Standards
No. 75 Definitions
City of New Hope — GASB No. 75
15
Governmental Accounting Standard No. 75 Definitions
Actuarially Determined Contribution (ADC)
A target or recommended contribution to a defined benefit OPEB plan for the reporting period, determined in conformity
with Actuarial Standards of Practice based on the most recent measurement available when the contribution for the
reporting period was adopted.
Actuarial Present Value of Benefits (PVB)
Projected benefit payments discounted to reflect the expected effects of the time value (present value) of money and
the probabilities of payment.
Average Working Lifetime
Headcount weighted average expected future service, including inactive participants (0 years).
Group Premium Cost-Sharing
An amount the employer pays towards the Group Premium that is charged to a Retiree to participate in the employer-
sponsored plan.
Implicit Rate Subsidy
The benefit a retiree receives equal to the difference between the medical and prescription drug expected claims costs
for retirees and the Group Premium.
Net OPEB Liability (NOL)
The excess of the Total OPEB Liability over the Plan Fiduciary Net Position (unfunded Total OPEB Liability).
OPEB Expense
The amount the employer charges as the cost of the postemployment healthcare benefits on its income statement each
fiscal year.
Plan Fiduciary Net Position
The value of assets irrevocably dedicated to the plan for providing future benefits to participants after employment.
Service Cost
The portion of the Actuarial Present Value of Benefits expected to be earned during the year, and allocated to the year,
pursuant to the actuarial assumptions and methods used.
Total OPEB Liability (TOL)
As of a particular date, the Total OPEB Liability is the portion of the Actuarial Present Value of Benefits attributed to an
employee’s past service.