AgdaPkt 2017-12-18 Special Joint SA PFA

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City of Redwood City Notes to the Basic Financial Statements For the fiscal year ended June 30, 2017 NOTE 9 – EMPLOYEE BENEFITS (CONTINUED) GASB 45 requires the interest rate to represent the underlying expected return for the source of funds used to pay benefits. The actuarial methods and assumptions included a 6.75% interest rate, annual inflation at 3% per annum, aggregate payroll assumed to increase at 3.00% per annum, and an annual healthcare trend rate of 7.5% ‐ 7.8% for 2017, reduced gradually each year with an ultimate rate of 5% for 2021 and thereafter. The study also used assumptions for the salary merit and longevity increases, and demographic assumptions such as mortality, withdrawal, and disability based on CalPERS 1997‐ 2011 Experience Study. Retirement assumption was also based on CalPERS 1997‐2011 Experience Study. For employees hired before October 24, 2011 it was assumed Miscellaneous Plan 2.7% at 55 years, with expected retirement age of approximately 57.8, and Public Safety 3% at 50 years, with expected retirement age of approximately 54 for Police and 55.4 for Fire. For employees hired on or after October 24, 2011 it was assumed Miscellaneous Plan 2% at 60 years, with expected retirement age of approximately 61 years, and Public Safety 3% at 55 years, with expected retirement age of approximately 59.9 for Police and 56.2 for Fire. Port of Redwood City: Plan Description The other post‐employment benefits (other than pension) offered by the Port are limited to reimbursement of medical premiums only. Eligibility extends to those employees hired before January 1, 2011 who, prior to retirement, have (a) worked ten or more consecutive years at the Port on a full time basis, and (b) are enrolled in the Port’s medical plan, and (c) age 55 or older, and (d) have not been voluntarily or involuntarily terminated from employment at the Port. Spouses and/or dependents are ineligible. The reimbursement of medical premiums is limited to the lesser of (a) the medical insurance premium paid by the eligible retiree, or (b) the Port’s cost to provide medical coverage for an active employee of the same age as the retiree, or (c) the insurance premium for a Medicare supplement plan at the retiree’s earliest Medicare eligibility age, whether or not the retiree enrolls in Medicare. Funding Policy, Status and Progress The accounting rules governing other post‐employment benefits (OPEB) do not require mandatory funding of the actuarial accrued liability or annual required contribution. During the fiscal year ended June 30, 2011, the Port adopted a comprehensive funding policy for post‐employment benefits other than pension. The policy addresses the selection of a Section 115 Trust, prefunding strategy, valuation frequency, valuation methodology, disbursements, and administrative matters. The Section 115 Trust selected was the CalPERS California Employer’s Retiree Benefit Trust Program (CERBT). 72 6.1.E. - Page 95