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Other Post Employment Benefits FY17
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Source page 1
Town of Canton Other
Postemployment Benefits Plan
GASB 45 Actuarial Valuation
as of
July 1, 2016
For the fiscal year ending
June 30, 2017
Delivered August 2017Source page 2
TABLE OF CONTENTS
LETTER
SECTION PAGE
I PRINCIPAL RESULTS OF THE VALUATION 1
II SUMMARY OF PLAN PROVISIONS 13
III ACTUARIAL COST METHOD, ASSET VALUATION
METHOD AND ACTUARIAL ASSUMPTIONS 14
EXHIBITS
A FINANCIAL STATEMENT DISCLOSURES 25
B RECONCILIATION OF PLAN PARTICIPANTS 36
C PROJECTED CASH FLOWS (OPEN GROUP) 37
D PROJECTED CASH FLOWS (OPEN GROUP) – FUNDING 38
E GLOSSARY OF TERMS 42Source page 3
August 4, 2017 Personal and Confidential Mr. James Murgia Finance Director Town of Canton 801 Washington St Canton, MA 02021 Dear Mr. Murgia: We have performed an actuarial valuation of the Town of Canton Other Postemployment Benefits Plan for the fiscal year ending June 30, 2017. The figures presented in this report reflect the adoption, by the Town of Canton, of Statement No. 45 of the Governmental Accounting Standards Board (“GASB 45”) effective January 1, 2009. The financial results of the actuarial valuation are summarized in the report. The Executive Summaries highlight the results of the valuation. Additional information summarizing census data, actuarial assumptions, claim rates and the methodology for developing them, as well as a glossary of selected terms used in this study, is also included in the report. All costs, liabilities and other factors under the plan were determined in accordance with generally accepted actuarial principles and procedures. In our opinion, the actuarial assumptions used are reasonable, reflecting the experience of the plan and reasonable expectations and, in combination, represent our best estimate of the anticipated experience under the plan. We refer you to Section I of this report for a detailed summary and commentary on the results of the valuation and a comparison with the prior valuation. Section II is a summary of the plan provisions, and Section III describes the actuarial cost method and assumptions. Details for cost calculations, supporting data, and disclosures are provided in Exhibits A through C.
Source page 4
We will be pleased to answer any questions that you may have regarding this actuarial valuation report. Very truly yours, Parker E. Elmore, ASA, EA, FCA, MAAA President, CEO & Actuary
Source page 5
August 4, 2017
ACTUARIAL CERTIFICATION
This is to certify that Odyssey Advisors has conducted an actuarial valuation of certain benefit
obligations of the Town of Canton other postemployment benefit programs as of July 1, 2016
for the fiscal year ending June 30, 2017 in accordance with generally accepted actuarial
principles and practices. The actuarial calculations presented in this report have been made
on a basis consistent with our understanding of GASB Statements Number 43 and 45 for the
determination of the liability for postemployment benefits other than pensions.
The actuarial data is based on the plan of benefits verified by the Town and on participant
claims or premium data provided by the Town and/or vendors employed by the Town.
The actuarial computations made are for purposes of fulfilling plan accounting requirements.
Determinations for purposes other than meeting financial accounting requirements may yield
results significantly different than those reported here. As such, additional determinations
may be needed for other purposes including determining the benefit security at termination
and/or adequacy of the funding of an ongoing plan.
To the best of our knowledge, this report is complete and accurate and in our opinion
represents the information necessary to comply with GASB Statements Number 43 and 45
with respect to the benefit obligations addressed. The signing actuaries are members of the
Society of Actuaries, the American Academy of Actuaries and other professional actuarial
organizations and meet their “General Qualification Standards for Statements of Actuarial
Opinion” to render the actuarial opinion contained herein. Further, in our opinion, the
assumptions as approved by the Town are reasonably related to the experience and
expectations of the postemployment benefits programs.
Parker E. Elmore, ASA, EA, FCA, MAAA
President, CEO & ActuarySource page 6
SECTION I
PRINCIPAL RESULTS OF THE VALUATION
Town of Canton
Assuming Partial - 5.25% discount rate
Comparison of Plan Liabilities to Prior Valuation
July 1, 2016 July 1, 2014
I. Present Value of Future Benefits
A. Actives 67,573,345 69,194,113
B. Retirees/Disabled 42,101,471 44,597,108
C. Total 109,674,816 113,791,221
II. Present Value of Future Normal Cost 23,261,767 23,587,490
III. Actuarial Accrued Liability (Individual Entry Age Normal)
A. Actives 44,311,578 45,606,623
B. Retirees/Disabled 42,101,471 44,597,108
C. Total 86,413,049 90,203,731
IV. Plan Assets 2,008,350 580,000
V. Unfunded Actuarial Accrued Liability ("UAAL") [III. - IV.] 84,404,699 89,623,731
VI. Funded Ratio [IV. / III.] 2.32% 0.64%
VII. Annual Covered Payroll 44,161,613 N/A
VIII. UAAL as % of Covered Payroll 191.10% N/A
IX. Net OPEB Obligation (Asset) @ Beginning of Fiscal Year 45,696,091 43,748,569
X. Number of Eligible Participants
A. Actives 706 671
B. Retirees/Disabled 579 453
C. Total 1,285 1,124
For Fiscal Year Ending June 30, 2017 June 30, 2017 June 30, 2015
XI. Normal Cost 2,515,861 3,000,780
XII. Amortization of UAAL - 30 year flat dollar 8,836,118 5,188,548
XIII. Annual Required Contribution ('ARC') [ XI. + XII.] 11,351,979 8,189,328
XIV. Interest on Net OPEB Obligation (Asset) 2,399,043 1,837,440
XV. Adjustment to Annual Required Contribution (2,905,314) (5,051,744)
XVI. Amortization of Actuarial (Gains) / Losses (2,050,532) 0
XVII. Annual OPEB Expense [XIII. + XIV. + XV. + XVI.] 8,795,176 4,975,024
XVIII. Employer Share of Costs 3,013,880 3,795,287
XIX. Employer Payments (Withdrawals) to/from OPEB Trust 770,000 551,000
XX. Total Employer Contribution [XVIII. + XIX.] 3,783,880 4,346,287
XXI. Percentage of Annual OPEB Expense Contributed 43.0% 87.4%
XXII. Net OPEB Obligation (Asset) at Beginning of Year [IX.] 45,696,091 43,748,569
XXIII. Increase (Decrease) in Net OPEB Obligations (Asset) [XVII. - XX.] 5,011,296 628,737
XXIV. Net OPEB Obligation (Asset) at End of Year [XXII. + XXIII.] 50,707,387 44,377,306
XXV. Discount Rate 5.25% 4.20%
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 1Source page 7
SECTION I
PRINCIPAL RESULTS OF THE VALUATION
(continued)
Town of Canton
Comparison of Plan Funding vs. Partial
Partial - 5.25% discount Plan Funding -7.00%
rate discount rate
I. Present Value of Future Benefits
A. Actives 67,573,345 46,092,081
B. Retirees/Disabled 42,101,471 35,513,589
C. Total 109,674,816 81,605,670
II. Present Value of Future Normal Cost 23,261,767 13,146,530
III. Actuarial Accrued Liability (Individual Entry Age Normal)
A. Actives 44,311,578 32,945,551
B. Retirees/Disabled 42,101,471 35,513,589
C. Total 86,413,049 68,459,140
IV. Plan Assets 2,008,350 2,008,350
V. Unfunded Actuarial Accrued Liability ("UAAL") [III. - IV.] 84,404,699 66,450,790
VI. Funded Ratio [IV. / III.] 2.32% 2.93%
VII. Annual Covered Payroll 44,161,613 44,161,613
VIII. UAAL as % of Covered Payroll 191.10% 150.50%
IX. Net OPEB Obligation (Asset) @ Beginning of Fiscal Year 45,696,091 45,696,091
X. Number of Eligible Participants
A. Actives 706 706
B. Retirees/Disabled 579 579
C. Total 1,285 1,285
For Fiscal Year Ending June 30, 2017
XI. Normal Cost 2,515,861 1,610,983
XII. Amortization of UAAL - 30 year flat dollar 8,836,118 10,061,778
XIII. Annual Required Contribution ('ARC') [ XI. + XII.] 11,351,979 11,672,761
XIV. Interest on Net OPEB Obligation (Asset) 2,399,043 3,198,727
XV. Adjustment to Annual Required Contribution (2,905,314) (3,441,573)
XVI. Amortization of Actuarial (Gains) / Losses (2,050,532) (3,781,205)
XVII. Annual OPEB Expense [XIII. + XIV. + XV. + XVI.] 8,795,176 7,648,710
XVIII. Employer Share of Costs 3,013,880 3,013,880
XIX. Employer Payments (Withdrawals) to/from OPEB Trust 770,000 770,000
XX. Total Employer Contribution [XVIII. + XIX.] 3,783,880 3,783,880
XXI. Percentage of Annual OPEB Expense Contributed 43.0% 49.5%
XXII. Net OPEB Obligation (Asset) at Beginning of Year [IX.] 45,696,091 45,696,091
XXIII. Increase (Decrease) in Net OPEB Obligations (Asset) [XVII. - XX.] 5,011,296 3,864,830
XXIV. Net OPEB Obligation (Asset) at End of Year [XXII. + XXIII.] 50,707,387 49,560,921
XXV. Discount Rate 5.25% 7.00%
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 2Source page 8
SECTION I
PRINCIPAL RESULTS OF THE VALUATION
(continued)
Town of Canton
Assuming Partial - 5.25% discount rate
Plan Liabilities as of July 1, 2016
Medical Dental Life Excise Tax Total
I. Present Value of Future Benefits
A. Actives 60,837,361 4,798,707 242,519 1,694,758 67,573,345
B. Retirees/Disabled 38,095,219 2,913,158 723,089 370,005 42,101,471
C. Total 98,932,580 7,711,865 965,608 2,064,763 109,674,816
II. Present Value of Future Normal Cost 20,739,594 1,668,361 64,097 789,715 23,261,767
III. Actuarial Accrued Liability (Individual Entry Age Normal)
A. Actives 40,097,767 3,130,346 178,422 905,043 44,311,578
B. Retirees/Disabled 38,095,219 2,913,158 723,089 370,005 42,101,471
C. Total 78,192,986 6,043,504 901,511 1,275,048 86,413,049
IV. Plan Assets 1,817,374 140,456 20,944 29,576 2,008,350
V. Unfunded Actuarial Accrued Liability ("UAAL") [III. - IV.] 76,375,612 5,903,048 880,567 1,245,472 84,404,699
VI. Annual Covered Payroll 44,161,613 44,161,613 44,161,613 44,161,613 44,161,613
VII. UAAL as % of Covered Payroll 172.9% 13.4% 2.0% 2.8% 191.1%
VIII. Net OPEB Obligation (Asset) @ Beginning of Fiscal Year 41,349,239 3,195,866 476,728 674,258 45,696,091
IX. Number of Eligible Participants
A. Actives 706 706 706 706
B. Retirees/Disabled 579 421 364 579
C. Total 1,285 1,127 1,070 1,285
For Fiscal Year Ending June 30, 2017
X. Normal Cost 2,251,766 183,457 8,249 72,389 2,515,861
XI. Amortization of UAAL - 30 year flat dollar 7,995,580 617,975 92,184 130,379 8,836,118
XII. Annual Required Contribution ('ARC') [ X. + XI.] 10,247,346 801,432 100,433 202,768 11,351,979
XIII. Interest on Net OPEB Obligation (Asset) 2,170,834 167,783 25,028 35,398 2,399,043
XIV. Adjustment to Annual Required Contribution (2,628,946) (203,190) (30,310) (42,868) (2,905,314)
XV. Amortization of Actuarial (Gains) / Losses (1,855,475) (143,409) (21,392) (30,256) (2,050,532)
XVI. Annual OPEB Expense [XII. + XIII. + XIV. + XV.] 7,933,759 622,616 73,759 165,042 8,795,176
XVII. Employer Share of Costs 2,774,732 190,295 48,853 0 3,013,880
XVIII. Employer Payments (Withdrawals) to/from OPEB Trust 696,753 53,852 8,033 11,362 770,000
XIX. Total Employer Contribution [XVII. + XVIII.] 3,471,485 244,147 56,886 11,362 3,783,880
XX. Percentage of Annual OPEB Expense Contributed 43.8% 39.2% 77.1% 6.9% 43.0%
XXI. Net OPEB Obligation (Asset) at Beginning of Year [VIII.] 41,349,239 3,195,866 476,728 674,258 45,696,091
XXII. Increase (Decrease) in Net OPEB Obligations (Asset) [XVI. - XIX.] 4,462,274 378,469 16,873 153,680 5,011,296
XXIII. Net OPEB Obligation (Asset) at End of Year [XXI. + XXII.] 45,811,513 3,574,335 493,601 827,938 50,707,387
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 3Source page 9
SECTION I
PRINCIPAL RESULTS OF THE VALUATION
(continued)
Town of Canton
Assuming Partial - 5.25% discount rate
Plan Liabilities as of July 1, 2016
Food Service Water Enterprise Sewer Enterprise
Town Employees and School Employees and Public Safety Employees and Employees and Employees and
Retirees Retirees Employees Retirees Retirees Retirees Total
I. Present Value of Future Benefits
A. Actives 9,646,018 39,652,880 15,514,122 1,310,907 1,159,848 289,570 67,573,345
B. Retirees/Disabled 14,096,208 26,145,400 0 62,410 1,221,218 576,235 42,101,471
C. Total 23,742,226 65,798,280 15,514,122 1,373,317 2,381,066 865,805 109,674,816
II. Present Value of Future Normal Cost 2,863,355 14,565,341 5,238,350 228,979 308,300 57,442 23,261,767
III. Actuarial Accrued Liability (Individual Entry Age Normal)
A. Actives 6,782,663 25,087,539 10,275,772 1,081,928 851,548 232,128 44,311,578
B. Retirees/Disabled 14,096,208 26,145,400 0 62,410 1,221,218 576,235 42,101,471
C. Total 20,878,871 51,232,939 10,275,772 1,144,338 2,072,766 808,363 86,413,049
IV. Plan Assets 488,984 1,185,228 239,428 26,688 48,787 19,235 2,008,350
V. Unfunded Actuarial Accrued Liability ("UAAL") [III. - IV.] 20,389,887 50,047,711 10,036,344 1,117,650 2,023,979 789,128 84,404,699
VI. Annual Covered Payroll 6,055,753 30,512,925 6,525,975 335,112 609,045 122,803 44,161,613
VII. UAAL as % of Covered Payroll 336.7% 164.0% 153.8% 333.5% 332.3% 642.6% 191.1%
VIII. Net OPEB Obligation (Asset) @ Beginning of Fiscal Year 11,097,435 27,206,638 5,456,540 607,923 915,767 411,788 45,696,091
IX. Number of Eligible Participants
A. Actives 105 478 97 14 10 2 706
B. Retirees/Disabled 205 356 0 1 14 3 579
C. Total 310 834 97 15 24 5 1,285
For Fiscal Year Ending June 30, 2017
X. Normal Cost 347,553 1,641,649 457,671 31,515 32,640 4,833 2,515,861
XI. Amortization of UAAL - 30 year flat dollar 2,354,672 5,065,318 1,018,609 111,971 205,092 80,456 8,836,118
XII. Annual Required Contribution ('ARC') [ X. + XI.] 2,702,225 6,706,967 1,476,280 143,486 237,732 85,289 11,351,979
XIII. Interest on Net OPEB Obligation (Asset) 582,615 1,428,349 286,468 31,915 48,077 21,619 2,399,043
XIV. Adjustment to Annual Required Contribution (705,564) (1,729,772) (346,922) (38,652) (58,223) (26,181) (2,905,314)
XV. Amortization of Actuarial (Gains) / Losses (495,444) (1,215,728) (243,838) (27,154) (49,186) (19,182) (2,050,532)
XVI. Annual OPEB Expense [XII. + XIII. + XIV. + XV.] 2,083,832 5,189,816 1,171,988 109,595 178,400 61,545 8,795,176
XVII. Employer Share of Costs 987,473 1,896,574 15,953 15,106 64,172 34,602 3,013,880
XVIII. Employer Payments (Withdrawals) to/from OPEB Trust 186,045 456,521 91,564 10,197 18,470 7,203 770,000
XIX. Total Employer Contribution [XVII. + XVIII.] 1,173,518 2,353,095 107,517 25,303 82,642 41,805 3,783,880
XX. Percentage of Annual OPEB Expense Contributed 47.4% 36.5% 1.4% 13.8% 36.0% 56.2% 34.3%
XXI. Net OPEB Obligation (Asset) at Beginning of Year [VIII.] 11,097,435 27,206,638 5,456,540 607,923 915,767 411,788 45,696,091
XXII. Increase (Decrease) in Net OPEB Obligations (Asset) [XVI. - XIX.] 910,314 2,836,721 1,064,471 84,292 95,758 19,740 5,011,296
XXIII. Net OPEB Obligation (Asset) at End of Year [XXI. + XXII.] 12,007,749 30,043,359 6,521,011 692,215 1,011,525 431,528 50,707,387
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 4Source page 10
SECTION I
PRINCIPAL RESULTS OF THE VALUATION
(continued)
Town of Canton
Detail of Plan Liabilities by Group and Dependency Status
Assuming Partial - 5.25% discount rate
Plan Liabilities as of July 1, 2016
Actuarial Accrued
Present Value of Liability (Individual
Future Benefits Entry Age Normal) Normal Cost
Actives
Under Age 65
A. Participants 15,993,271 10,628,669 552,931
B. Spouses 11,108,325 7,459,223 363,636
C. Total 27,101,596 18,087,892 916,567
Age 65 and Over
A. Participants 22,708,836 14,695,860 901,186
B. Spouses 17,762,913 11,527,826 698,108
C. Total 40,471,749 26,223,686 1,599,294
Actives Total
A. Participants 38,702,107 25,324,529 1,454,117
B. Spouses 28,871,238 18,987,049 1,061,744
C. Total 67,573,345 44,311,578 2,515,861
Retirees/Disabled
Under Age 65
A. Participants 3,318,616 3,318,616 0
B. Spouses 2,515,082 2,515,082 0
C. Total 5,833,698 5,833,698 0
Age 65 and Over
A. Participants 26,282,719 26,282,719 0
B. Spouses 9,985,054 9,985,054 0
C. Total 36,267,773 36,267,773 0
Retirees/Disabled Total
A. Participants 29,601,335 29,601,335 0
B. Spouses 12,500,136 12,500,136 0
C. Total 42,101,471 42,101,471 0
Total Population
A. Participants 68,303,442 54,925,864 1,454,117
B. Spouses 41,371,374 31,487,185 1,061,744
C. Total 109,674,816 86,413,049 2,515,861
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 5Source page 11
SECTION I
PRINCIPAL RESULTS OF THE VALUATION
(continued)
Town of Canton
Assuming Funding over 30 years at 7.00% discount rate
Plan Liabilities as of July 1, 2016
Medical Dental Life Excise Tax Total
I. Present Value of Future Benefits
A. Actives 41,614,878 3,147,731 158,771 1,170,701 46,092,081
B. Retirees/Disabled 32,160,642 2,456,655 615,570 280,722 35,513,589
C. Total 73,775,520 5,604,386 774,341 1,451,423 81,605,670
II. Present Value of Future Normal Cost 11,727,247 912,165 34,718 472,400 13,146,530
III. Actuarial Accrued Liability (Individual Entry Age Normal)
A. Actives 29,887,631 2,235,566 124,053 698,301 32,945,551
B. Retirees/Disabled 32,160,642 2,456,655 615,570 280,722 35,513,589
C. Total 62,048,273 4,692,221 739,623 979,023 68,459,140
IV. Plan Assets 1,820,278 137,653 21,698 28,721 2,008,350
V. Unfunded Actuarial Accrued Liability ("UAAL") [III. - IV.] 60,227,995 4,554,568 717,925 950,302 66,450,790
VI. Annual Covered Payroll 44,161,613 44,161,613 44,161,613 44,161,613 44,161,613
VII. UAAL as % of Covered Payroll 136.4% 10.3% 1.6% 2.2% 150.5%
VIII. Net OPEB Obligation (Asset) @ Beginning of Fiscal Year 41,349,239 3,195,866 476,728 674,258 45,696,091
IX. Number of Eligible Participants
A. Actives 706 706 706 706
B. Retirees/Disabled 579 421 364 579
C. Total 1,285 1,127 1,070 1,285
For Fiscal Year Ending June 30, 2017
X. Normal Cost 1,442,520 113,923 4,992 49,548 1,610,983
XI. Amortization of UAAL - 30 year flat dollar 9,119,541 689,639 108,706 143,892 10,061,778
XII. Annual Required Contribution ('ARC') [ X. + XI.] 10,562,061 803,562 113,698 193,440 11,672,761
XIII. Interest on Net OPEB Obligation (Asset) 2,894,447 223,711 33,371 47,198 3,198,727
XIV. Adjustment to Annual Required Contribution (3,114,193) (240,695) (35,904) (50,781) (3,441,573)
XV. Amortization of Actuarial (Gains) / Losses (3,427,113) (259,166) (40,852) (54,074) (3,781,205)
XVI. Annual OPEB Expense [XII. + XIII. + XIV. + XV.] 6,915,202 527,412 70,313 135,783 7,648,710
XVII. Employer Share of Costs 2,774,732 190,295 48,853 0 3,013,880
XVIII. Employer Payments (Withdrawals) to/from OPEB Trust 697,893 52,776 8,319 11,012 770,000
XIX. Total Employer Contribution [XVII. + XVIII.] 3,472,625 243,071 57,172 11,012 3,783,880
XX. Percentage of Annual OPEB Expense Contributed 50.2% 46.1% 81.3% 8.1% 49.5%
XXI. Net OPEB Obligation (Asset) at Beginning of Year [VIII.] 41,349,239 3,195,866 476,728 674,258 45,696,091
XXII. Increase (Decrease) in Net OPEB Obligations (Asset) [XVI. - XIX.] 3,442,577 284,341 13,141 124,771 3,864,830
XXIII. Net OPEB Obligation (Asset) at End of Year [XXI. + XXII.] 44,791,816 3,480,207 489,869 799,029 49,560,921
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 6Source page 12
SECTION I
PRINCIPAL RESULTS OF THE VALUATION
(continued)
Town of Canton
Assuming Funding over 30 years at 7.00% discount rate
Plan Liabilities as of July 1, 2016
Food Service Water Enterprise Sewer Enterprise
Town Employees and School Employees and Public Safety Employees and Employees and Employees and
Retirees Retirees Employees Retirees Retirees Retirees Total
I. Present Value of Future Benefits
A. Actives 6,579,591 27,047,407 10,582,252 894,176 791,138 197,517 46,092,081
B. Retirees/Disabled 11,890,486 22,054,265 0 52,644 1,030,126 486,068 35,513,589
C. Total 18,470,077 49,101,672 10,582,252 946,820 1,821,264 683,585 81,605,670
II. Present Value of Future Normal Cost 1,618,241 8,231,692 2,960,486 129,409 174,238 32,464 13,146,530
III. Actuarial Accrued Liability (Individual Entry Age Normal)
A. Actives 5,042,892 18,652,525 7,640,012 804,411 633,124 172,587 32,945,551
B. Retirees/Disabled 11,890,486 22,054,265 0 52,644 1,030,126 486,068 35,513,589
C. Total 16,933,378 40,706,790 7,640,012 857,055 1,663,250 658,655 68,459,140
IV. Plan Assets 488,984 1,185,228 239,428 26,688 48,787 19,235 2,008,350
V. Unfunded Actuarial Accrued Liability ("UAAL") [III. - IV.] 16,444,394 39,521,562 7,400,584 830,367 1,614,463 639,420 66,450,790
VI. Annual Covered Payroll 6,055,753 30,512,925 6,525,975 335,112 609,045 122,803 44,161,613
VII. UAAL as % of Covered Payroll 271.5% 129.5% 113.4% 247.8% 265.1% 520.7% 150.5%
VIII. Net OPEB Obligation (Asset) @ Beginning of Fiscal Year 11,097,435 27,206,638 5,456,540 607,923 915,767 411,788 45,696,091
IX. Number of Eligible Participants
A. Actives 105 478 97 14 10 2 706
B. Retirees/Disabled 205 356 0 1 14 3 579
C. Total 310 834 97 15 24 5 1,285
For Fiscal Year Ending June 30, 2017
X. Normal Cost 222,549 1,051,198 293,061 20,180 20,900 3,095 1,610,983
XI. Amortization of UAAL - 30 year flat dollar 2,681,290 5,767,929 1,159,900 127,503 233,540 91,616 10,061,778
XII. Annual Required Contribution ('ARC') [ X. + XI.] 2,903,839 6,819,127 1,452,961 147,683 254,440 94,711 11,672,761
XIII. Interest on Net OPEB Obligation (Asset) 776,821 1,904,467 381,958 42,553 64,103 28,825 3,198,727
XIV. Adjustment to Annual Required Contribution (835,797) (2,049,051) (410,956) (45,786) (68,970) (31,013) (3,441,573)
XV. Amortization of Actuarial (Gains) / Losses (913,604) (2,241,817) (449,640) (50,072) (90,700) (35,372) (3,781,205)
XVI. Annual OPEB Expense [XII. + XIII. + XIV. + XV.] 1,931,259 4,432,726 974,323 94,378 158,873 57,151 7,648,710
XVII. Employer Share of Costs 987,473 1,896,574 15,953 15,106 64,172 34,602 3,013,880
XVIII. Employer Payments (Withdrawals) to/from OPEB Trust 190,459 457,853 85,932 9,640 18,708 7,408 770,000
XIX. Total Employer Contribution [XVII. + XVIII.] 1,177,932 2,354,427 101,885 24,746 82,880 42,010 3,783,880
XX. Percentage of Annual OPEB Expense Contributed 61.0% 53.1% 10.5% 26.2% 52.2% 73.5% 49.5%
XXI. Net OPEB Obligation (Asset) at Beginning of Year [VIII.] 11,097,435 27,206,638 5,456,540 607,923 915,767 411,788 45,696,091
XXII. Increase (Decrease) in Net OPEB Obligations (Asset) [XVI. - XIX.] 753,327 2,078,299 872,438 69,632 75,993 15,141 3,864,830
XXIII. Net OPEB Obligation (Asset) at End of Year [XXI. + XXII.] 11,850,762 29,284,937 6,328,978 677,555 991,760 426,929 49,560,921
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 7Source page 13
Overview of GASB 43 and 45 GASB 43 requires retiree medical plans to disclose information about asset and liability levels and show historical contribution information. GASB 43 only applies in situations where a separate trust is established to prefund these benefits. GASB 45 requires employers to perform periodic actuarial valuations to determine annual accounting costs, and to keep a running tally of the extent to which these amounts are over or under funded. GASB 43 and 45 apply to those benefits provided after retirement except for pension benefits such as medical insurance, dental and life insurance. The philosophy behind the accounting standard is that these post-employment benefits are part of the compensation earned by employees in return for their services, and the cost of these benefits should be recognized while employees are providing those services, rather than after they have retired. This philosophy has already been applied for years to defined benefit pensions; GASB 43 and 45 extend this practice to all other post-employment benefits. Town of Canton Other Postemployment Benefits Plan Actuarial Valuation as of July 1, 2016 August 2017 Page 8
Source page 14
Overview of GASB 43 and 45
(continued)
The process of determining the liability for OPEB benefits is based on many assumptions
about future events. The key actuarial assumptions are:
Turnover and retirement rates: How likely is it that an employee will qualify for post-
employment benefits and when will they start?
Medical inflation and claims cost assumptions: When an employee starts receiving
post-employment benefits many years from now, how much will be paid each year for the
benefits and how rapidly will the costs grow?
Mortality assumption: How long is a retiree likely to receive benefits?
Discount rate assumption: What is the present value of those future benefit payments in
terms of today’s dollars?
Since the liability is being recognized over the employee’s whole career with the Town,
the present value is divided into three pieces: the part that is attributed to past years (the
“Accrued Liability” or “Past Service Liability”), the part that is being earned this year (the
“Normal Cost”), and the part that will be earned in future years (the “Future Service
Liability”).
Once the Accrued Liability and the Normal Cost have been calculated, the next step is to
determine an annual contribution. This consists of two pieces:
✓ Normal Cost – because the benefits earned each year should be paid for each year
✓ Past Service Cost – a catch-up payment to fund the Accrued Liability over the next
10-30 years
The final step is to keep track going forward of how much of the contribution is actually
paid. There is no requirement to actually fund these benefits, but the cumulative
deficiency must be disclosed on the Town’s financial statements as the Net OPEB
Obligation. If you decide to fully fund the OPEB obligation this will appear in the
financial statement as a Net OPEB Asset. In addition, the Discount Rate used to calculate
the liabilities must reflect the expected investment income of whatever funds are set aside
to prefund the benefits; if there is no prefunding then the Discount Rate will be much
lower and the liabilities significantly higher than if the benefits are prefunded.
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 9Source page 15
Commentary on Plan Experience and Contribution Amounts
1. GASB 45 – How we got here:
The Plan adopted and implemented GASB 45 (“Accounting and Financial Reporting
by Employers for Postemployment Benefits other than Pensions”) effective for the
fiscal year ending December 31, 2009. GASB 45 is designed to recognize the Other
Postemployment Benefits (“OPEB”) earned by employees throughout their working
career vs. when they are actually paid in retirement – accrual accounting vs. “pay-as-
you-go” accounting. When GASB 45 was adopted, there was an Unfunded Actuarial
Accrued Liability (“UAAL”) or “past service liability” which reflected all benefits
earned until the date of such adoption. To smooth the impact of transitioning to GASB
45 on your financial statement, the UAAL was amortized over a 30 year period using a
flat dollar amortization. Additionally, each eligible active employee earns benefits
each year representing benefits to be paid in retirement or a “Normal Cost”. These
amounts are reflected in your financial statement each year so that OPEB benefits for
an eligible employee shall be fully charged to the financial statement when that
eligible employee terminates employment.
2. Summary of Results:
During the fiscal year ending June 30, 2017, the Plan saw an experience gain of
$11,037,563 or 11.56%. Plan experience was more favorable than expected. This was
mainly due to premiums increasing less than the expected 18% increase. The actuarial
experience gain is amortized into the annual OPEB costs over a 30-year period. The net
impact of plan experience is an increase in the annual OPEB cost.
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 10Source page 16
Commentary on Plan Experience and Contribution Amounts
(continued)
3. Balance Sheet Items
July 1, 2016 July 1, 2014
Actuarial Accrued Liability $86,413,049 $90,203,731
Plan Assets $2,008,350 $580,000
Unfunded Actuarial
$84,404,699 $89,623,731
Accrued Liability
Funded % 2.32% 0.64%
Net OPEB Obligation $45,696,091 $43,748,569
4. Income Statement Items
June 30, 2017 June 30, 2015
Normal Cost $2,515,861 $3,000,780
Amortization of UAAL $8,836,118 $5,188,548
Interest on Net OPEB
$2,399,043 $1,837,440
Obligation
Adjustment to Annual
$(2,905,314) $(5,051,744)
Required Contribution
Amortization of Actuarial
$(2,050,532) $0
(Gains)/Losses
Annual OPEB Expense $8,795,176 $4,975,024
Employer Share of Costs $3,013,880 $3,795,287
Employer
Contributions/(Withdrawals) $770,000 $551,000
to/from OPEB Trust
Total Employer Contribution $3,783,880 $4,346,287
Discount Rate 5.25% 4.20%
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 11Source page 17
Commentary on Plan Experience and Contribution Amounts
(continued)
5. Implicit Subsidy:
The implicit subsidy arises because pre-Medicare retirees are charged the same premium as
active employees, even though their actual medical costs are higher on average.
Consequently, a portion of the premiums being paid for active employees are actually
being used to “subsidize” the premiums of retirees. Actuarial Standards of Practice and
GASB standards require the liability associated with this implicit subsidy to be valued. The
chart below shows a breakdown of how implicit cost impacts reported cash flows and
liabilities.
Valuation Date July 1, 2016 July 1, 2014
Liability
I. Actuarial Accrued Liability 86,413,049 N/A
II. Actuarial Accrued Liability (Excluding Implicit Subsidy) 77,102,508 N/A
III. Liability from Implicit Subsidy [I. - II.] 9,310,541 N/A
For Fiscal Year Ending June 30, 2017 June 30, 2015
Payments
IV. Employer Payments (Including Implicit Subsidy) 3,013,880 N/A
V. Actual Employer Payments 2,689,421 N/A
VI. Implicit Subsidy [IV. - V.] 324,459 N/A
6. GASB 75 – Where we’re going:
The Governmental Accounting Standards Board (“GASB”) issued GASB 75 “Accounting
and Financial Reporting for Postemployment Benefits Other Than Pensions” on June 2, 2015
which will become effective for your 2018 fiscal year. This standard largely mirrors the
GASB 68 standard for pension plans. The new standards require increased disclosures
and will tie interest rates used in the valuation to the plan’s underlying investment and
funding policy. This may increase the pressure on many entities to begin funding their
OPEB liabilities. For more information, please review our white papers at
www.GASB75.com or on our website.
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 12Source page 18
SECTION II
SUMMARY OF PLAN PROVISIONS
Effective Date January 1, 2009; GASB 45 is adopted.
Plan Year July 1 through June 30.
Eligibility An employee hired before April 2, 2012 shall
become eligible to retire under this plan upon
attainment of age 55 as an active member and
completion of 10 years of service or an employee
shall be able to retire with 20 years of service
regardless of age. Those hired on or after April 2,
2012 shall be eligible to retire upon attainment of
age 60 with 10 years of creditable service.
Creditable Service Elapsed time from date of hire to termination of
service date.
Participant Contributions Retirees will pay 25% of premiums for Medical and
Life Insurance. The Town pays 75% of the basic
plan premiums for Dental; retirees will pay the
remainder of plan costs.
Benefits Offered Comprehensive Medical Insurance offered through
Blue Cross Blue Shield of Massachusetts as well as
Dental and group term Life Insurance.
Normal Retirement Date The normal retirement date is the first day of the
month following a participant's 65th birthday.
Early Retirement Early retirement is available for any participant
who has attained benefit eligibility.
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 13Source page 19
SECTION III
ACTUARIAL COST METHOD, ASSET VALUATION METHOD
AND ACTUARIAL ASSUMPTIONS
A. ACTUARIAL COST METHOD
The actuarial cost method used to calculate the costs and liabilities of the plan is the
Individual Entry Age Normal Actuarial Cost Method. Under this method, the annual
normal cost for each individual active member, payable from the date of employment
to the date of retirement, is sufficient to accumulate the value of the member’s benefit
at the time of retirement. The annual normal cost for each active member is a level
percent of payroll. The actuarial accrued liability is the actuarial present value of the
projected benefit times the ratio of past service to expected total service at
retirement/termination.
Actuarial gains and losses are calculated each year and amortized over a 30 year
period.
All employees who are plan participants on the valuation date are included in the
actuarial valuation.
B. ASSET VALUATION METHOD
The actuarial value of assets is equal to the Market Value of the Plan’s assets as of the
valuation date.
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 14Source page 20
SECTION III
ACTUARIAL COST METHOD, ASSET VALUATION METHOD
AND ACTUARIAL ASSUMPTIONS
(continued)
C. ACTUARIAL ASSUMPTIONS
We used the following assumptions in this year’s actuarial valuation:
Pre-Retirement Mortality It is assumed that pre-retirement mortality
is represented by the RP-2000 Employees
Mortality Table projected generationally
with scale BB and a base year 2009 for
males and females.
Post-Retirement Mortality It is assumed that post-retirement
mortality is represented by the RP-2000
Healthy Annuitant Mortality Table
projected generationally with scale BB and
a base year 2009 for males and females.
Disabled Mortality It is assumed that disabled mortality is
represented by the RP-2000 Healthy
Annuitant Table projected generationally
with Scale BB and a base year 2012 for
males and females.
Discount Rate 5.25% per annum (previously 4.20%)
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 15Source page 21
SECTION III
ACTUARIAL COST METHOD, ASSET VALUATION METHOD
AND ACTUARIAL ASSUMPTIONS
(continued)
C. ACTUARIAL ASSUMPTIONS (continued)
Employee Termination It was assumed that employees would
terminate employment in accordance with
the sample rates shown in the following
table:
Non-Public Safety Employees
0-4 Years of 0-4 Years of 5-9 Years of
Service Service Service 5-9 Years of 10+ Years of 10+ Years of
Age (Males) (Females) (Males) Service (Females) Service (Males) Service (Females)
20 27.00% 27.00% 12.00% 12.00% 6.00% 6.00%
30 23.00% 23.00% 10.00% 10.00% 5.50% 5.50%
40 16.00% 16.00% 8.00% 8.00% 3.50% 3.50%
50 18.00% 18.00% 6.00% 6.00% 3.00% 3.00%
60 18.00% 18.00% 5.00% 5.00% 3.50% 3.50%
Public Safety Employees
Service Male Female
0 9.00% 9.00%
5 6.00% 6.00%
10 3.50% 3.50%
15 2.00% 2.00%
20 1.50% 1.50%
25 1.50% 1.50%
30 1.50% 1.50%
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 16Source page 22
SECTION III
ACTUARIAL COST METHOD, ASSET VALUATION METHOD
AND ACTUARIAL ASSUMPTIONS
(continued)
C. ACTUARIAL ASSUMPTIONS (continued)
Retirement Rates for non-teachers It was assumed that the following
percentage of eligible employees would
retire each year:
Male Non Female Non
Public Public Public
Age Safety Safety Safety
45 0.00% 0.00% 1.00%
46 0.00% 0.00% 1.00%
47 0.00% 0.00% 1.00%
48 0.00% 0.00% 1.00%
49 0.00% 0.00% 1.00%
50 1.00% 1.50% 2.00%
51 1.00% 1.50% 2.00%
52 1.00% 2.50% 2.00%
53 1.00% 2.50% 5.00%
54 2.00% 2.50% 7.50%
55 2.00% 5.50% 15.00%
56 2.50% 6.50% 10.00%
57 2.50% 6.50% 10.00%
58 5.00% 6.50% 10.00%
59 6.50% 6.50% 15.00%
60 12.00% 5.00% 20.00%
61 20.00% 13.00% 20.00%
62 30.00% 15.00% 25.00%
63 25.00% 12.50% 25.00%
64 22.00% 18.00% 30.00%
65 40.00% 15.00% 100.00%
66 25.00% 20.00% 100.00%
67 25.00% 20.00% 100.00%
68 30.00% 25.00% 100.00%
69 30.00% 20.00% 100.00%
70 100.00% 100.00% 100.00%
71 100.00% 100.00% 100.00%
72 100.00% 100.00% 100.00%
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 17Source page 23
SECTION III
ACTUARIAL COST METHOD, ASSET VALUATION METHOD
AND ACTUARIAL ASSUMPTIONS
(continued)
C. ACTUARIAL ASSUMPTIONS (continued)
Retirement Rates for teachers It was assumed that the following
percentage of eligible employees would
retire each year:
Age Male Teachers Female Teachers
45 0.00% 0.00%
46 0.00% 0.00%
47 0.00% 0.00%
48 0.00% 0.00%
49 0.00% 0.00%
50 2.00% 1.50%
51 2.00% 1.50%
52 2.00% 1.50%
53 2.00% 1.50%
54 2.00% 2.00%
55 6.00% 5.00%
56 20.00% 15.00%
57 40.00% 35.00%
58 50.00% 35.00%
59 50.00% 35.00%
60 40.00% 35.00%
61 40.00% 35.00%
62 35.00% 35.00%
63 35.00% 35.00%
64 35.00% 35.00%
65 35.00% 35.00%
66 40.00% 35.00%
67 40.00% 30.00%
68 40.00% 30.00%
69 40.00% 30.00%
70 100.00% 100.00%
71 100.00% 100.00%
72 100.00% 100.00%
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 18Source page 24
SECTION III
ACTUARIAL COST METHOD, ASSET VALUATION METHOD
AND ACTUARIAL ASSUMPTIONS
(continued)
C. ACTUARIAL ASSUMPTIONS (continued)
Disability rates It was assumed that the following
percentage of eligible employees would
become permanently disabled each year:
Age Standard Teachers Public Safety
20 0.01% 0.05% 0.20%
25 0.01% 0.06% 0.20%
30 0.01% 0.07% 0.21%
35 0.03% 0.10% 0.40%
40 0.07% 0.21% 0.71%
45 0.10% 0.30% 1.00%
50 0.13% 0.42% 1.10%
55 0.14% 0.50% 0.80%
60 0.12% 0.50% 0.80%
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 19Source page 25
SECTION III
ACTUARIAL COST METHOD, ASSET VALUATION METHOD
AND ACTUARIAL ASSUMPTIONS
(continued)
C. ACTUARIAL ASSUMPTIONS (continued)
Healthcare Trend It was assumed that healthcare costs
would increase in accordance with the
trend rates in the following table:
Year Medical Dental
FY 2013 6.0% 5.5%
FY 2014 5.0% 5.0%
FY 2015 5.0% 5.0%
FY 2016 5.0% 5.0%
FY 2017 5.0% 5.0%
FY 2018 5.0% 5.0%
FY 2019 5.0% 5.0%
FY 2020+ 5.0% 5.0%
Participation Rate It was assumed that 80% of employees
eligible to receive retirement benefits
would enroll in the retiree medical and
dental plans upon retirement. For life
insurance plans, it was assumed that 80%
of eligible employees would elect coverage
upon retirement.
Percent Married It was assumed that 80% of male
participants and 70% of female
participants who elect retiree healthcare
coverage for themselves would also elect
coverage for a spouse upon retirement. It
was further assumed that a male spouse is
three years older than a female spouse and
same sex spouses are assumed to be the
same age. For current retirees, the actual
census information was used.
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 20Source page 26
SECTION III
ACTUARIAL COST METHOD, ASSET VALUATION METHOD
AND ACTUARIAL ASSUMPTIONS
(continued)
C. ACTUARIAL ASSUMPTIONS (continued)
Compensation Increases 3.00% per year.
Open Group Forecast It was assumed for projecting plan
liabilities in future years that the active
population would remain unchanged and
that those who terminate employment or
retire will be replace with new employees
with the demographics below:
Open Group Forecast Population Demographics
Age Male Female
20 8.0% 5.0%
30 7.0% 14.0%
40 20.0% 19.0%
50 10.0% 10.0%
60 3.0% 4.0%
Total 48.0% 52.0%
Additional Comments The values in this report reflect a closed
group and do not reflect any new entrants
after the valuation date.
For purposes of this valuation, retiree
contributions were assumed to increase
with the same trend rate as health care
claims.
Medicare Part B Penalties are not reflected
Medicare Part B Reimbursement is not
reflected
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 21Source page 27
SECTION III
ACTUARIAL COST METHOD, ASSET VALUATION METHOD
AND ACTUARIAL ASSUMPTIONS
(continued)
D. DEVELOPMENT OF REPRESENTATIVE MEDICAL PER CAPITA CLAIMS COSTS
As part of the Other Post-Employment Benefits Program, there are situations where the
cost is borne partly or entirely on the retirees. In most cases, the premium that is used to
split the cost is lower than the true cost of providing the medical benefits, for two reasons:
✓ The cost sharing program is usually a fixed amount such as a COBRA premium that
does not take into account the age of the retiree and his/her dependents. Since
medical costs generally increase with age, the cost sharing premium is often lower
than the true cost of the medical benefits:
✓ The cost sharing premium is usually a blended rate that takes into account the cost of
medical benefits for active employees as well as retirees. Medical costs are generally
higher for retirees than for active employees of the same age. This means that, again,
the cost sharing premium is often lower than the true cost of the medical benefits.
Because of these two factors, a retiree who is paying 100% of the cost sharing premium is
most likely not paying 100% of the true cost of the medical benefits. This situation is
known as an “implicit subsidy”. GASB 43 and 45 require the plan sponsor to measure the
liability for this subsidy; that is, the difference between the true cost of the medical
benefits and the cost sharing premiums paid by the retiree. To do this, our valuation
consists of several steps:
First, we calculate the liability for the true cost of medical benefits expected to be received
by retirees and their dependents. This liability is based factors developed by actuaries
that reflect how the cost of medical benefits varies by age and gender, as well as the other
assumptions discussed on the prior page.
Next, we calculate the liability for the future premiums expected to be paid by the retiree
for their own and their dependents’ coverage. This liability is based on the current
premium rates without adjustment for age or gender. It also is based on the terms of the
retiree medical program – different retirees pay different percentages based on their
union, date of retirement, age at retirement, and other factors.
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 22Source page 28
SECTION III
ACTUARIAL COST METHOD, ASSET VALUATION METHOD
AND ACTUARIAL ASSUMPTIONS
(continued)
D. DEVELOPMENT OF REPRESENTATIVE MEDICAL PER CAPITA CLAIMS COSTS
I. CLAIMS COSTS DEVELOPMENT - Based on Active & Retiree Incurred Claims & Premiums
Number of Participants
Single Two-Person Family Total
BCBS HMO Blue New England 161 298 459
BCBS PPO (Blue Care Elect) 61 68 129
BCBS Medex II 185 146 331
Total 407 146 366 919
Per Contract Costs (monthly) - FY 2018
Single Two-Person Family
BCBS HMO Blue New England 827.66 0.00 2,175.41
BCBS PPO (Blue Care Elect) 1,135.21 0.00 2,693.01
BCBS Medex II 325.45 650.90
Gross Expected FY 2018 Incurred Premiums 14,269,651
Adjustment to reflect children's claims (2,204,675)
Total Expected FY 2018 Incurred Premiums (adults only) 12,064,976
II. PRE-65 AND POST-65 PER CAPITA RETIREE ANNUAL CLAIM COSTS
Employer Medicare
Primary Primary
Age 65 15,076 3,247
Average Age 14,187 3,906
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 23Source page 29
SECTION III
ACTUARIAL COST METHOD, ASSET VALUATION METHOD
AND ACTUARIAL ASSUMPTIONS
(continued)
D. DEVELOPMENT OF REPRESENTATIVE MEDICAL PER CAPITA CLAIMS COSTS
III. BREAKDOWN OF CLAIM COSTS
12,064,976 Active and Retired Claims (No Children)
ALL ACTIVE EMPLOYEES AND SPOUSES
Female Male Aged (F) Aged (M)
Aging Aging Average Average Age Related
Age Bracket Factor Factor Claims Claims Claims
24 & Under 1.312 0.549 9,250 3,870 40,870
25 to 29 1.312 0.591 9,250 4,167 368,671
30 to 34 1.312 0.712 9,250 5,020 675,990
35 to 39 1.312 0.850 9,250 5,993 716,290
40 to 44 1.312 1.000 9,250 7,050 977,550
45 to 49 1.456 1.193 10,265 8,411 1,371,623
50 to 54 1.599 1.441 11,273 10,159 1,362,736
55 to 59 1.740 1.753 12,267 12,359 1,391,231
60 to 64 1.968 2.102 13,874 14,819 1,057,861
65 to 69 2.168 2.316 15,284 16,328 575,280
70 & Over 2.396 2.557 16,892 18,027 123,919
Total 8,662,021
ALL RETIREES AND SPOUSES - NOT MEDICARE ELIGIBLE
Female Male Aged (F) Aged (M)
Aging Aging Average Average Age Related
Age Bracket Factor Factor Claims Claims Claims
44 & Under 1.312 1.000 9,250 7,050 9,250
45 to 49 1.456 1.193 10,265 8,411 18,676
50 to 54 1.599 1.441 11,273 10,159 162,411
55 to 59 1.740 1.753 12,267 12,359 234,085
60 to 64 1.968 2.102 13,874 14,819 653,324
65 to 69 2.168 2.316 15,284 16,328 124,360
70 to 74 2.396 2.557 16,892 18,027 139,676
75 to 79 2.593 2.769 18,281 19,521 113,406
80 to 84 2.724 2.910 19,204 20,516 57,612
85 to 89 2.864 3.059 20,191 21,566 61,948
90 & Over 3.010 3.215 21,221 22,666 0
Total 1,574,748
ALL RETIREES AND SPOUSES - MEDICARE ELIGIBLE
Female Male Aged (F) Aged (M)
Aging Aging Average Average Age Related
Age Bracket Factor Factor Claims Claims Claims
65 to 69 2.168 2.316 3,292 3,517 407,640
70 to 74 2.396 2.557 3,638 3,883 452,448
75 to 79 2.593 2.769 3,938 4,205 415,827
80 to 84 2.724 2.910 4,137 4,419 287,331
85 to 89 2.864 3.059 4,349 4,645 120,383
90 & Over 3.010 3.215 4,571 4,882 144,189
Total 1,827,818
Grand Totals 12,064,587
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 24Source page 30
SECTION III
ACTUARIAL COST METHOD, ASSET VALUATION METHOD
AND ACTUARIAL ASSUMPTIONS
(continued)
E. DEVELOPMENT OF REPRESENTATIVE DENTAL PER CAPITA CLAIMS COSTS
I. CLAIMS COSTS DEVELOPMENT - with Active & Retiree Incurred Premiums
Per Contract Costs (monthly) - FY 2018
Single Two-Person Family
Delta Dental Plan (Basic Plan) 23.10 78.54
Delta Dental Plan (Enhanced Plan) 35.30 127.34
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 25Source page 31
EXHIBIT A
Financial Statement Disclosure
(As of July 1, 2016)
The GASB Standards for accounting and financial reporting for postemployment benefits
other than pensions require the following disclosures in the financial statements with
regard to the retiree medical and life insurance benefits;
1. A DESCRIPTION OF THE RETIREE MEDICAL INSURANCE PROGRAM:
a. Plan Type: Comprehensive Medical Insurance offered through Blue
Cross Blue Shield of Massachusetts.
b. Administrator: Town of Canton
c. Eligibility: An employee hired before April 2, 2012 shall become
eligible to retire under this plan upon attainment of age 55
as an active member and completion of 10 years of service or
an employee shall be able to retire with 20 years of service
regardless of age. Those hired on or after April 2, 2012 shall
be eligible to retire upon attainment of age 60 with 10 years
of creditable service.
d. Cost Sharing: Retirees pay 25% of Premiums.
2. A DESCRIPTION OF THE RETIREE DENTAL INSURANCE PROGRAM:
a. Plan Type: Comprehensive Dental Insurance
b. Administrator: Town of Canton
c. Eligibility: Same as above
d. Cost sharing: The Town pays 75% of the basic plan premiums with the
retirees paying the remainder of plan costs.
3. A DESCRIPTION OF THE RETIREE LIFE INSURANCE PROGRAM:
a. Plan Type: Group Term Life Insurance - $5,000
b. Administrator: Town of Canton
c. Eligibility: Same as above
d. Cost sharing: Retirees pay 25% of Premiums.
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 26Source page 32
EXHIBIT A
Financial Statement Disclosure
(As of July 1, 2016)
(continued)
4. RETIREE MEDICAL AND LIFE INSURANCE CONTRIBUTIONS:
Group Individual Family
Medical Retirees pay 25% of Retirees pay 25% of
Premiums Premiums
Dental The Town pays 75% of The Town pays 75% of
the basic plan the basic plan premiums
premiums
Life Retirees pay 25% of N/A
Premiums
5. FUNDING POLICY
The contribution requirements of plan members and the Town are established and
may be amended through Town ordinances. For the 2017 fiscal year, total Town
premiums plus implicit costs for the retiree medical program are $3,013,880. The
Town is also projected to make a contribution to an OPEB Trust of $770,000 for the
2017 fiscal year for a total contribution of $3,783,880 .
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 27Source page 33
EXHIBIT A
Financial Statement Disclosure
(As of July 1, 2016)
(continued)
6. ANNUAL OPEB COST AND NET OPEB OBLIGATION
The Town’s annual other postemployment benefit (“OPEB”) cost (expense) is
calculated based on the annual required contribution of the employer (“ARC”), an
amount actuarially determined in accordance with the parameters of GASB
Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing
basis, is projected to cover normal cost each year and amortize any unfunded
actuarial liabilities (or funding excess) over a period not to exceed thirty (30) years.
The following table shows the components of the Town’s annual OPEB costs for the
fiscal year, the amount actually contributed to the plan and changes in the Town’s
net OPEB obligation to the plan:
Annual Required Contribution $11,351,979
Interest on Net OPEB Obligation (Asset) $2,399,043
Adjustment to annual required contribution ($2,905,314)
Amortization of Actuarial (Gains) / Losses ($2,050,532)
Annual OPEB expense $8,795,176
Contributions made to pay benefits $3,013,880
Contributions made to OPEB Trust $770,000
Increase (Decrease) in net OPEB Obligation (Asset) $5,011,296
Net OPEB Obligation (Asset) – beginning of year $45,696,091
Net OPEB Obligation (Asset) – end of year $50,707,387
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 28Source page 34
EXHIBIT A
Financial Statement Disclosure
(As of July 1, 2016)
(continued)
The Town’s annual OPEB cost, the percentage of the annual OPEB cost contributed
to the plan, and the net OPEB obligation for the 2017 fiscal year and the three
preceding years were as follows:
Increase
Expected Percentage of (Decrease) in Net
Fiscal Year Annual OPEB Employer OPEB Cost OPEB Obligation Net OPEB
Ended Cost Payments Contributed (Asset) Obligation (Asset)
06/30/2019
$9,635,890 $4,374,392 45.4% $5,261,498 $61,007,480
(est.)
06/30/2018
$9,218,151 $4,179,556 45.3% $5,038,595 $55,745,982
(est.)
06/30/2017 $8,795,176 $3,783,880 43.0% $5,011,296 $50,707,387
06/30/2016 $5,161,825 $3,843,040 74.5% $1,318,785 $45,696,091
06/30/2015 $4,975,024 $4,346,287 87.4% $628,737 $44,377,306
06/30/2014 $12,935,961 $5,179,872 40.0% $7,756,089 $43,748,569
Schedule of Funding Progress:
Actuarial Actuarial Unfunded
Valuation Actuarial Value Accrued Actuarial Accrued UAAL as a % of
Date of Assets Liability Liability Funded Ratio Covered Payroll Covered Payroll
07/01/2018
$4,162,756 $94,642,651 $90,479,895 4.4% $46,851,055 193.1%
(est.)
07/01/2017
$2,980,372 $90,505,696 $87,525,324 3.3% $45,486,461 192.4%
(est.)
07/01/2016 $2,008,350 $86,413,049 $84,404,699 2.3% $44,161,613 191.1%
07/01/2015 $1,190,793 $93,118,080 $91,927,287 1.3% N/A N/A
07/01/2014 $580,000 $90,203,731 $89,623,731 0.6% N/A N/A
1/1/2013 $100,000 $142,752,366 $142,652,366 0.1% $36,479,000 391.1%
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 29Source page 35
EXHIBIT A
Financial Statement Disclosure
(As of July 1, 2016)
(continued)
Fiscal Year Ending June 30, 2017
Food Service Water Enterprise Sewer Enterprise
Town Employees School Employees Public Safety Employees and Employees and Employees and
and Retirees and Retirees Employees Retirees Retirees Retirees Total
OPEB Obligation (Asset) at beginning of year 11,097,435 27,206,638 5,456,540 607,923 915,767 411,788 45,696,091
Annual Required Contribution 2,702,225 6,706,967 1,476,280 143,486 237,732 85,289 11,351,979
Interest on Net OPEB Obligation 582,615 1,428,349 286,468 31,915 48,077 21,619 2,399,043
Adjustment to the ARC (705,564) (1,729,772) (346,922) (38,652) (58,223) (26,181) (2,905,314)
Amortization of Actuarial (Gains)/Losses (495,444) (1,215,728) (243,838) (27,154) (49,186) (19,182) (2,050,532)
Annual OPEB Cost 2,083,832 5,189,816 1,171,988 109,595 178,400 61,545 8,795,176
Expected Employer Contribution 987,473 1,896,574 15,953 15,106 64,172 34,602 3,013,880
Contribution (Withdrawal) to/from Trust Fund over 30 Years 186,045 456,521 91,564 10,197 18,470 7,203 770,000
Total Expected Employer Payments 1,173,518 2,353,095 107,517 25,303 82,642 41,805 3,783,880
Increase (Decrease) in OPEB Obligation (Asset) 910,314 2,836,721 1,064,471 84,292 95,758 19,740 5,011,296
OPEB Obligation (Asset) at end of year 12,007,749 30,043,359 6,521,011 692,215 1,011,525 431,528 50,707,387
AAL as of July 1, 2016 20,878,871 51,232,939 10,275,772 1,144,338 2,072,766 808,363 86,413,049
Plan Assets as of July 1, 2016 488,984 1,185,228 239,428 26,688 48,787 19,235 2,008,350
Unfunded Actuarial Liability as of July 1, 2016 20,389,887 50,047,711 10,036,344 1,117,650 2,023,979 789,128 84,404,699
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 30Source page 36
EXHIBIT A
Financial Statement Disclosure
(As of July 1, 2016)
(continued)
7. FUNDED STATUS AND FUNDING PROGRESS
As of July 1, 2016, the most recent valuation date, the plan was 2.32% funded. The
actuarial liability for benefits was $86,413,049, and the actuarial value of assets
was $2,008,350, resulting in an unfunded actuarial accrued liability (UAAL) of
$84,404,699. The covered payroll (annual payroll of active employees covered by
the plan) was $ 44,161,613 and the ratio of the UAAL to the covered payroll was
191.1%.
Actuarial valuations of an ongoing plan involve estimates of the value of reported
amounts and assumptions about the probability of occurrence of events far into
the future. Examples include assumptions about future employment, mortality,
and the healthcare cost trend. Amounts determined regarding the funded status
of the plan and the annual required contribution of the employer are subject to
continual revision as actual results are compared with past expectations and new
estimates are made about the future. The schedule of funding progress, presented
in the required supplementary information following the financial statements,
presents multiyear trend information about whether the actuarial value of plan
assets is increasing or decreasing over time relative to the actuarial accrued
liabilities for benefits.
8. EFFECT OF 1% CHANGE IN HEALTHCARE TREND RATES
In the event that healthcare trend rates were 1% higher than forecast and
employee contributions were to increase at the forecast rates, the Actuarial
Accrued Liability would increase to $108,148,862 or by 25.2% and the
corresponding Normal Cost would increase to $3,672,195 or by 46.0%. If such
healthcare trend rates were 1% less than forecast and employee contributions were
to increase at the forecast rate, the Actuarial Accrued Liability would decrease to
$69,831,785 or by 19.2% and the corresponding Normal Cost would decrease to
$1,730,758 or by 31.2%.
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 31Source page 37
EXHIBIT A
Financial Statement Disclosure
(As of July 1, 2016)
(continued)
9. ACTUARIAL METHODS AND ASSUMPTIONS
Projections of benefits for financial reporting purposes are based on the
substantive plan (the plan as understood by the employer and plan members) and
include the types of benefits provided at the time of each valuation and the
historical pattern of sharing of benefit costs between the employer and plan
members to that point. The actuarial methods and assumptions used include
techniques that are designed to reduce the effects of short-term volatility in
actuarial accrued liabilities and the actuarial value of assets, consistent with the
long-term perspective of the calculations.
Actuarial Cost Method: Individual Entry Age Normal
Investment Rate of Return: 5.25% per annum (previously 4.20%)
Healthcare Trend Rates
Year Medical Dental
FY 2013 6.0% 5.5%
FY 2014 5.0% 5.0%
FY 2015 5.0% 5.0%
FY 2016 5.0% 5.0%
FY 2017 5.0% 5.0%
FY 2018 5.0% 5.0%
FY 2019 5.0% 5.0%
FY 2020+ 5.0% 5.0%
General Inflation Assumption: 2.75% per annum
Annual Compensation Increases: 3.00% per annum
Actuarial Value of Assets: Market Value
Amortization of UAAL: Level dollar amortization over 30 years
Remaining Amortization Period: 21 years at July 1, 2016
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 32Source page 38
EXHIBIT A
Financial Statement Disclosure
(As of July 1, 2016)
(continued)
10. Remaining Amortization Bases
The initial Actuarial Accrued Liability as of the date GASB 45 was adopted is
amortized as a component of the Annual Required Contribution (“ARC”). The
Unfunded Actuarial Accrued Liability at transition was amortized over a 30 year
period and a flat dollar amortization of the Unfunded Actuarial Accrued
Liability at transition. For years subsequent to the initial adoption of GASB 45,
cumulative gains/losses are amortized on a level dollar basis over a 30 year
period. Gains and losses arise from experience and contribution deficiencies and
excess contributions in relation to each year’s ARC under GASB 45.
Changes in Unfunded Actuarial Liability Since Prior Valuation
Expected Unfunded Actuarial Liability
1. Actuarial Accrued Liability at prior valuation date 90,203,731
2. Actuarial Value of Assets at prior valuation date 580,000
3. Unfunded Actuarial Accrued Liability at prior valuation date [1. - 2.] 89,623,731
4. Normal Cost for prior periods 6,001,560
5. Employer Contributions for prior periods (8,189,327)
6. Interest to current valuation date 7,713,337
7. Expected Unfunded Actuarial Accrued Liability before assumption changes [3. + 4. + 5. + 6.] 95,149,301
Net Actuarial (Gain) / Loss due to assumption changes
8. Actuarial Cost Method Change 8,422,798
9. Interest Rate Change (14,542,634)
10. Mortality Assumption Change 6,412,797
11. Expected Unfunded Actuarial Accrued Liability including assumption changes [7. + 8. + 9. + 10.] 95,442,262
Actual Unfunded Actuarial Liability
12. Actuarial Accrued Liability at current valuation date 86,413,049
13. Actuarial Value of Assets at current valuation date 2,008,350
14. Unfunded Actuarial Accrued Liability at current valuation date [12. - 13.] 84,404,699
Net Actuarial (Gain) / Loss from Plan Experience [14. - 11.] (11,037,563)
15. Unfunded Actuarial Accrued Liability at current valuation date [14.] 84,404,699
16. Remaining Initial Unfunded to be amortized 116,656,397
17. Actuarial (Gain) / Loss to be amortized: [15. - 16.] (32,251,698)
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 33Source page 39
EXHIBIT A
Financial Statement Disclosure
(As of July 1, 2016)
(continued)
10. Remaining Amortization Bases (Continued)
Amortization of Initial Unfunded and Plan Experience under GASB 45
Initial Remaining Remaining Annual
Amortization Balance at Amortization Amortization
Date Established Description Initial Amount Period Valuation Date Period Payment
January 1, 2009 GASB 45 Liability 138,978,486 30 116,656,397 21 8,836,118
July 1, 2016 Cumulative (Gain) / Loss (32,251,698) 30 (32,251,698) 30 (2,050,532)
July 1, 2016 Adjustment to ARC (45,696,091) 30 (45,696,091) 30 (2,905,313)
11. Recognition of OPEB trust assets
The State of Massachusetts has recently passed legislation allowing municipal
entities to establish a trust for Other Postemployment Benefits (“OPEB”) under
M.G.L. Chapter 32B, Section 20 for purposes of accumulating assets to pre-fund
the liabilities under GASB 45. To the best of our knowledge, Town of Canton
has established an irrevocable trust for the purposes of prefunding liabilities
under GASB 45.
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 34Source page 40
EXHIBIT A
Financial Statement Disclosure
(As of July 1, 2016)
(continued)
12. Impact of Patient Protection and Affordable Care Act (“PPACA”) Excise Tax
Under the Patient Protection and Affordable Care Act ("PPACA"), an excise tax
will be imposed for tax years beginning after December 31, 2019 (formerly
December 31, 2017, but amended by Consolidated Appropriations Act) for high
cost employer sponsored health coverage. The law specifies a 40% excise tax, to
be paid by the provider of such coverage, of the excess value beyond a basic
dollar amount plus an additional "kicker" for qualified retirees or those engaged
in a high risk profession. The projected 2020 threshold amounts are $11,850 for
single coverage and $30,950 for family coverage and a "kicker" amount of $1,650
for single coverage and $3,450 for family coverage.
The excise tax liability will vary significantly over time as it is highly leveraged
with the basic threshold amount increased with general CPI and medical costs
increasing with medical trend (generally higher). For purposes of the fiscal year
ending June 30, 2017, the AAL for the excise tax is $1,275,048 and the increase in
annual OPEB Cost is $165,042. Given your premiums through the 2018 fiscal
year and the excise tax threshold, your average single premiums are $4,104
below the excise tax threshold and your average family premiums are $3,691
below the excise tax threshold. As more regulatory guidance becomes available,
the calculation of the excise tax liability will evolve.
Town of Canton Other Postemployment Benefits Plan
Actuarial Valuation as of July 1, 2016
August 2017
Page 35