AgdaPkt 2006-09-25 - Laserfiche WebLink

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7C Page 1 September 25, 2006 Subject Funding Strategy for Governmental Accounting Standards Board (GAS B) Statement Number 45 - Other Post Employment Benefits (OPEB) Recommendation Staff recommends that the City Council adopt the proposed OPEB funding plan as presented below. Background GASS Statement Number 45 provides new requirements for the accounting and financial reporting by employers for post employment benefits other than pensions (OPES). The City currently provides one post employment benefit in the form of health insurance for retirees. This new statement is similar to previous GASS guidance for pensions in that it requires the recognition of the cost of post employment benefits during the years of an employee's active years of service to the City rather than the City's current practice of "pay- as-you-go" in which costs are recognized only as payments are made for retirees. Under GASS 45, an actuarial valuation is performed to determine the total cost of the benefrt, and from this valuation the Annual Required Contribution (ARC) is calculated. The ARC consists of the value of benefits earned during the year (the normal cost) plus amortization of the unfunded liability. At the City Council meeting of May 22, 2006, staff presented a financial update to the City Council which included information on OPES along with a preliminary funding strategy (see Attachment I for OPES). At that meeting, City Council recognized the potential impact of OPEB on the City's bond rating, and given the City's plans for issuing future debt, directed staff to bring back in the fall of 2006 a comprehensive plan, including several options for implementing OPE8 to consider incorporating into the FY 2007/08 budget year. Subsequent to the May 22, 2006 staff report, at the request of the SEIU bargaining unit, City staff met with representatives from SEIU on July 12, 2006 to review the OPE8 actuarial valuation report and to provide them with the City's OPES information previously provided to the City Council, including staffs recommended phased-in approach for funding the requisite annual contribution amounts. The SEIU representatives appeared satisfied with the information provided and the preliminary recommended funding approach. Compensated Absences Liability Separately and in addition to the above events, the City was recently notified that the City's FY 2004/05 Comprehensive Annual Financial Report (CAFR) has received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association. This awards program entails review of the CAFR with resultant recommendations for improvement which must be addressed or resolved in the