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Other Post Employment Benefits FY15
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Source page 1
TOWN OF CANTON
OTHER POSTEMPLOYMENT BENEFITS (OPEB)
REPORTING IN ACCORDANCE WITH GASB 45
FISCAL YEAR
JULY 1, 2014 TO JUNE 30, 2015
Prepared by: AQUARIUS CAPITAL SOLUTIONS GROUP LLC
Date: June 2, 2015
AQUARIUS CAPITAL 110 Betsy Brown Road · Port Chester, NY 10573 Tel: 914-933-0063 · Fax: 914-933-0064Source page 2
AQUARIUS
CAPITAL
June 2, 2015
Ms. Ellen Jones
Finance Department
Town of Canton
801 Washington St.
Canton, MA 02021
Re: Report - GASB 43 & 45 for Fiscal Year July 1, 2014 to June 30, 2015
Dear Ms. Jones:
Enclosed is an analysis of estimated costs for post-employment benefits valuation under Government
Accounting Standards Board (GASB) No. 43 & 45 for the Town of Canton (the “Town”). The valuation
was done for fiscal year July 1, 2014 to June 30, 2015 for the Town. The attached report was completed in
accordance with generally accepted actuarial principles and practices.
Financial Results
Included in the analysis is a Table of Contents. Sections I-IV of the report includes the financial forecast
for GASB 45 for the Town. The table below highlights the accrued liability (AL), OPEB trust assets,
unfunded accrued liability (UAL), which is the accrued liability less assets, the annual postemployment
benefits (OPEB) cost, the projected net OPEB obligation, and the projected pay-as-you-go (PAYGO) cost
for retiree medical benefits for the fiscal year ending June 30, 2015.
Accrued OPEB Trust Unfunded Net OPEB
Annual Projected
Group Liability at Asset Balance Accrued Liability Obligation
OPEB Cost PAYGO
7/1/14 at 7/1/14 at 7/1/14 at 6/30/15
Total $90,203,731 $580,000 $89,623,731 $4,975,024 $44,377,306 $3,795,287
Pages 1-2 of the report illustrate the financial projections for the plan as of fiscal year-end June 30, 2015 to
assist your auditors with accounting for the respective plan year. Although the auditors may only require
pages 1-2, we recommend forwarding the report in its entirety.
The Town set up an irrevocable trust to fund retirement benefits. Asset are reflected in the OPEB for the
expense calculation and assets are illustrated in a separate trust with current benefit payments paid out of the
Town’s general funds and not the trust for the current year. The Unfunded Accrued Liability as of 7/1/2014
of $89.6 million above is reflective of an asset balance of $0.580 million. During FY 2014/2015 an actual
$551,000 contribution was made to the OPEB trust bringing the asset balance, including accrued interest, to
approximately $1.185 million as of 6/30/2015. These figures are reflected in the Net OPEB Obligation as
of 6/30/15 of $44.4 million above.
AQUARIUS CAPITAL 110 Betsy Brown Road · Port Chester, NY 10573 Tel: 914-933-0063 · Fax: 914-933-0064Source page 3
Ms. Ellen Jones June 2, 2015 Page 2 Results for this valuation are based on census information provided by your organization in March 2015. This is based on a total of 1,124 active employees and retirees, reflecting the sum of 671 active employees (488 currently electing coverage and 183 waiving coverage), and 453 retirees (356 retirees electing coverage, and 97 waiving coverage). For this valuation, it is assumed that 100% of those waiving coverage will elect coverage in the future. Since spousal information was not provided for those waiving coverage, it is assumed that approximately 50% will elect single coverage which is consistent with the distribution of current pre- 65 and post-65 retirees electing coverage. Those waiving coverage are assumed to have a cost equivalent to the enrollment weighted average of the plan options available to pre-65 and post-65 retirees. Covered Benefits and Claim Cost Assumptions Medical coverage, including prescription drugs as part of the medical plan, is offered to retirees on a self- funded basis administered by Blue Cross Blue Shield of Massachusetts. Pre-65 retiree medical plans include HMO Blue New England and PPO Blue Care Elect. The post-65 plan is the BCBS Medex plan which requires enrollment in Medicare Parts A & B. The Town has also implemented a Medicare Part D Employer Group Waiver Plan (EGWP) for retirees enrolled in the Medex plan. Dental coverage is also subsidized by the Town and offered on a self-funded basis administered by Delta Dental. Two dental plans are offered to retirees including the Basic and Enhanced plans. A group life insurance benefit for $5,000 is also provided to retirees. The Town contributes 75% toward these benefits. Base plan costs effective July 1, 2014 and July 1, 2015 for pre-65 and post-65 retirees for both medical and dental self-funded plans are outlined in Section VIII, page 14 of this report. These fully-insured equivalency rates are provided by the Town and are based on 100% before retiree contributions and assumed to include all administrative expenses and stop loss premiums. For valuation purposes, it is assumed that the provided rates are inclusive of all required PPACA fees due at this time. The Town does not reimburse retirees or their dependent spouses for Medicare Part B premiums, only penalties should they occur. Sensitivity Analysis Section II of the report includes a sensitivity analysis based on varying the discount interest rate and the healthcare cost inflation rate (trend). The initial discount rate used was 4.2%, which is consistent with the prior valuation discount rate. We have not performed a review of the Town’s investments. If a different discount rate is preferred, then please contact us. Increasing the discount rate by 1% (a discount rate of 5.2%) would lower the Accrued Liability by approximately 15.1% to $76.6 million. Conversely, lowering the discount rate by 1% (a discount rate of 3.2%) would increase the AL by approximately 19.8% to $108.1 million. See page 3 of the report for details of both scenarios. Section II of the report also includes a sensitivity analysis based on varying the healthcare cost inflation rate (trend). A 1% trend factor increase would increase the AL by approximately 20.9% to $109.1 million. Our forecast applied the 1% increase beginning in plan year beginning July 1, 2016 and later, treating the July 1, 2015 costs as fixed (known) cost. Details of these scenarios are illustrated on page 3 of the attached report. Please contact us if you desire additional scenarios. AQUARIUS CAPITAL 110 Betsy Brown Road · Port Chester, NY 10573 Tel: 914-933-0063 · Fax: 914-933-0064
Source page 4
Ms. Ellen Jones
June 2, 2015
Page 3
Healthcare Reform
The Patient Protection and Affordable Care Act (PPACA) enacted in March 2010 (Healthcare Reform)
includes several fees and/or taxes levied on employer groups either directly (e.g., self-funded employer
groups which calculates and pays the fees directly) or indirectly (e.g., fully insured groups in which the
health insurer pays and passes on to the group in their premium rates.) The fees included in this valuation
are 1) Comparative Effectiveness Research fee, 2) Health Insurance Industry fee, 3) Reinsurance
Assessment, and 4) High Cost Plans Excise Tax ("Cadillac tax").
The Comparative Effectiveness Research fee runs through 2019 and is tax deductible. The initial fee is $1
per participant per year increasing to $2 in the next year. Subsequent years are increased based on medical
inflation. The fee applies to post-65 retirees where Medicare is the primary payer.
The Health Insurance Industry fee is based on targeted fixed fees to be paid by the health insurance industry
and is not tax deductible. The total fee amount to be paid by health insurers starts at $8 billion in 2014 and
increases to $14.3 billion in 2018. After 2018, the fee increases annually based on premium growth. Starting
in 2014, the fee is estimated to be approximately 2.0% to 2.5% of premium increasing to approximately
3.0% to 4.0% in future years. The fee applies to fully insured plans including Medicare Advantage plans
and excludes self-funded employer sponsored group health plans.
The Reinsurance Assessment is a short term fee levied on fully insured and self-funded employer groups
between 2014 and 2016 and is tax deductible. The 2014 fee is $63 per member per year. The 2015 fee is
estimated to be between $40 and $45 PMPY and the 2016 fee is estimated at $25 to $30 PMPY. The fee
applies to pre-65 group retiree plans and post-65 plans where Medicare is the secondary payer. Post-65
retirees where Medicare is the primary payer are excluded from this fee.
The High Cost Plans Excise tax includes a 40% tax (“Cadillac tax”) on high cost health plans that will be
levied on insurers and third party administrators (TPAs) beginning 2018 and will not be tax deductible. It
is to be calculated separately for single and family coverage and will be equal to 40% of the excess of per
employee plan costs, net of patient cost sharing, over the 2018 stated cost limits of:
$10,200 single / $27,500 family
$11,850 single / $30,950 family for retirees age 55-64
The 2018 limits may be increased if higher than expected trends are realized from 2010 through 2018 in the
benchmark plan. The benchmark plan is the Federal Employees Health Benefits Plan (FEHBP) Blue
Cross/Blue Shield standard option. The limits will be adjusted to the extent per employee costs in the
benchmark plan increase by more than 55% from 2010 to 2018 (for example, if the benchmark plan increase
is 60% between 2010 and 2018, the cost limits will increase by the excess over 55% or 5%.) The final 2018
limits will be increased by CPI + 1% for 2019 and by CPI thereafter. For this valuation, it is assumed that
CPI will be 3% for 2019 and beyond.
For valuation purposes, it is assumed the trend adjustments to the cost limits in the benchmark plan (FEHBP)
are equal to actual premium increases in the FEHBP plan for 2010 through 2015 and projected increases in
costs from 2016 through 2018 as listed in the "Health Care Cost Trend Assumption" in Section VI, page 9
of the report.
AQUARIUS CAPITAL 110 Betsy Brown Road · Port Chester, NY 10573 Tel: 914-933-0063 · Fax: 914-933-0064Source page 5
Ms. Ellen Jones June 2, 2015 Page 4 For each year from 2018 and beyond, the excess of projected future premiums over future adjusted cost limits are multiplied by 40% and then adjusted (grossed up) for the assumed marginal tax rate of 35%. It is assumed that any excise tax payable by an insurer/TPA will be passed on to the entity through increased premiums/costs (whether billed separately or not.) As previously stated, it is assumed the provided rates by the Town are inclusive of the applicable PPACA fees due at this time for the 2014 and 2015 plan years with the exception of the Cadillac tax which becomes effective January 1, 2018. This valuation includes the Cadillac tax as necessary as described above Reporting of Experience by Group Section III on page 4 of the report illustrates a summary of reporting by group as delineated in the census listing provided by the Town. The groups include Town, Police/Fire, School, Water, Sewer, Rink, and Food Service. These classifications are based on the values in the “Location” field in the active census provided by the Town. There are forty (40) different values in the Location field being mapped to these seven (7) categories. As can be seen on page 4 of the report, the seven categories listed above are reported on for the active employees only as this information was not provided for retirees. Retirees listed in the Norfolk County Retirement System (NCRS) are classified as Town, and retirees listed in the Massachusetts Teachers Retirement System (MTRS) are classified as School. Overview of Actuarial Gain/Loss On page 5 (Section IV) of the valuation report, we illustrate an actuarial gain of $59.9 million (or 40% decrease in the June 30, 2014 UAL), which is part of the calculation of OPEB costs. This reflects the decrease in the UAL as of July 1, 2014 as compared to the UAL as reported on page 23 of the prior January 1, 2013 valuation report rolled forward to June 30, 2014. There are two primary drivers contributing to the actuarial gain. The reduction in retiree headcount of 116 retirees or 20.4% reduction from the prior valuation of 569 produced an $11.4 million actuarial gain. The second driver is a reduction in actual starting claim costs and trends for this valuation as compared to the previous valuation on 1/1/2013, primarily in the post-65 plan, produced an actuarial gain of approximately $50.2 million. Partially offsetting this large gain is an actuarial loss due to fees related to the estimated “Cadillac” tax imposed PPACA/Healthcare Reform discussed earlier of approximately $2.0 million. The remaining $0.3 million actuarial gain is due to changes in demographics and other valuation assumptions including updated decrement tables. AQUARIUS CAPITAL 110 Betsy Brown Road · Port Chester, NY 10573 Tel: 914-933-0063 · Fax: 914-933-0064
Source page 6
Ms. Ellen Jones
June 2, 2015
Page 5
Demographic Information
Section V of the report illustrates additional information pertaining to the underlying census information
including age and sex analysis for active and retired employees along with summaries of the active
population by age and years of service. Census analysis is illustrated separately for actives and retirees. As
part of the report, we also included a comparison of census demographic information to the prior valuation
report. This is highlighted on pages 6 through 8 of the report.
Some highlights of census demographic information as of the July 1, 204 valuation date are as follows:
For retirees, the overall average age is 72.3 years, which reflects an average age of 59.7 for pre-65
retirees and 75.1 for post-65 retirees.
For actives, the average age is 44.7 years and average years of service of 10.4.
Of the active population, 24.1% of the population (162 employees) is eligible to retire.
62.0% actives and 49.4% retirees valued were female.
Assumptions & Definitions
As part of this report, we included supporting documentation such as a summary of assumptions and key
definitions (glossary), which are provided in Sections VI and VII, respectively. This includes assumptions
for health care costs, contribution rates, healthcare inflation, decrement tables (e.g., probability of death,
turnover, disability and retirement) and other provisions.
Employees of the Town participate in the Norfolk County Retirement System (NCRS) or the Commonwealth
of Massachusetts Teachers' Retirement System (MTRS). The decrement tables used throughout this
valuation are based on the most recent Commonwealth Actuarial Valuation Report for the Public Employees
Retirement Administration Commission (PERAC) dated January 1, 2014.
Information Reviewed
We based our analysis on reviewing electronic census information (record-by-record review), retiree plan
information, cost information, the prior actuarial valuation report, year-end audited financial statements, and
other summary information of retiree benefits and eligibility. We also gathered additional information from
the Town through emails and other correspondence in order to confirm retiree benefit information, census
confirmations, and assumptions.
Census information was provided in March 2015.
AQUARIUS CAPITAL 110 Betsy Brown Road · Port Chester, NY 10573 Tel: 914-933-0063 · Fax: 914-933-0064Source page 7
Ms. Ellen Jones June 2, 2015 Page 6 Data Reliance & Limitations In our review, we have relied on the information provided by the Town. We have not audited or verified the accuracy of the information provided. If the underlying data or information is inaccurate or incomplete, the results of our analysis may likewise be inaccurate or incomplete. This report and all attachments contained herein are for the internal use of the Town. It may not be provided to other parties without prior consent. If consent is granted, the report must be provided in its entirety. We understand the Town intends to distribute this letter and attachments to its auditor and fee accountant in connection with the reporting of results of this report for the sole use of preparation of audited financial statements. Aquarius consents to this distribution as long as the report is provided in its entirety and the auditor is advised to have an actuary review the work. This report is provided to the Town for the purpose of calculation results under GASB 45. Information in this report may not be appropriate to use for other purposes. Aquarius does not intend to benefit from the overall results of the report and we assume no duty, liability or obligation to parties that use this work for other reasons other than its intention, i.e., reporting of GASB 45 for financial statements. Actuarial Opinion I, Michael L. Frank, ASA, FCA, MAAA, am President and Actuary of Aquarius Capital Solutions Group LLC. I am an Associate of the Society of Actuaries, Fellow of Conference of Consulting Actuaries, and Member of the American Academy of Actuaries and I meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. The attached report was completed in accordance with generally accepted actuarial principles and practices. We hope that this report is beneficial. When convenient, please contact me so that we can schedule a call or meeting to review report in more detail. In addition, please extend thanks to you and your team for assistance in the gathering of information to help us complete this analysis. Their assistance was much appreciated. We look forward to working with you in the future. Sincerely, Michael L. Frank, A.S.A., M.A.A.A., F.C.A. President & Actuary Cc: Donald Rusconi – Aquarius Capital Enclosure AQUARIUS CAPITAL 110 Betsy Brown Road · Port Chester, NY 10573 Tel: 914-933-0063 · Fax: 914-933-0064
Source page 8
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
TOWN OF CANTON
GASB NO. 43 & 45
VALUATION AS OF JULY 1, 2014
Prepared by: Aquarius Capital Solutions Group LLC
Date: June 2, 2015
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: 914-933-0063 • Fax: 914-933-0064Source page 9
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
TABLE OF CONTENTS
Pages
Sections I - IV Summary of Financial Information including Sensitivity Analysis 1-5
Section I: Financial Results for June 30, 2015 Disclosure 1-2
Section II: Sensitivity Analysis for Discount Rate and Healthcare Cost Inflation 3
Section III: Summary of Results by Employee Group 4
Section IV: Summary of Gain/Loss Analysis from Prior Valuation 5
Section V Summary of Census Information for Active & Retired Employees 6-8
Section VI Summary of Assumptions 9 - 12
Section VII Summary of Definitions & Glossary 12 - 13
Section VIII Summary Claim of Cost Assumptions 14
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: 914-933-0063 • Fax: 914-933-0064Source page 10
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
Page 1
SECTION I: FINANCIAL RESULTS AS OF JULY 1, 2014 VALUATION FOR YEAR END DISCLOSURE
(First Year of Implementation is Fiscal Year July 1, 2008 to June 30, 2009)
Total
1 Discount Rate 4.20%
Section 1: Development of Service Cost
2 Service Cost at Beginning of Year as of July 1, 2014 $ 2,879,827
3 Interest on Service Cost $ 120,953
(1) x (2)
4 Service Cost with Interest to Year End - Period July 1, 2014 to June 30, 2015 $ 3,000,780
(2) + (3)
Section 2: Projected Unfunded Accrued Liability to Year End June 30, 2015
5 Accrued Liability (AL) as of July 1, 2014 $ 90,203,731
6 Asset Balance as of July 1, 2014 $ 580,000
(Per client email dated 4/23/15)
7 Unfunded Accrued Liability (UAL) as of July 1, 2014 $ 89,623,731
(5) - (6)
8 Service Cost with Interest to Year End $ 3,000,780
(4)
9 Pay-As-You-Go Benefits - Projected July 1, 2014 to June 30, 2015 $ 3,795,287
10 Interest on Accrued Liability $ 3,708,856
(5) x (1) - (9) x (1) / 2
11 Projected AL & UAL as of June 30, 2015
a. Projected AL as of June 30, 2015: (5) + (8) - (9) + (10) $ 93,118,080
b. Asset Balance as of June 30, 2015: (Per client email dated 4/23/15) $ 1,185,000
c. Projected UAL as of June 30, 2015: (11a) - (11b) $ 91,933,080
Section 3: Amortization of Initial Unfunded Accrued Liability
12 Initial Unfunded Accrued Liability at Implementation - 7/1/14 Valuation $ 89,623,731
(7), (Open Amortization Basis)
13 30 Year Amortization Factor 17.5887
(PV Amortization Factor, 30 yrs at 4.2%, Beginning of Period)
14 Amortization of Unfunded Accrued Liability as of July 1, 2014 $ 4,979,413
(12) / (13), (Open Amortization Basis)
15 Interest on Amortization of Unfunded Accrued Liability $ 209,135
(1) x (14)
16 Total Amortization of Unfunded Accrued Liability w/ Interest $ 5,188,548
(14) + (15)
17 # of Years of Amortization of Initial UAL, including Current Valuation 7
(First Year of Implementation - July 1, 2008 to June 30, 2009)
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: 914-933-0063 • Fax: 914-933-0064Source page 11
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
Page 2
SECTION I: FINANCIAL RESULTS AS OF JULY 1, 2014 VALUATION FOR YEAR END DISCLOSURE (CONTINUED)
Section 4: Adjustments to Annual Required Contribution (ARC) Total
18 Unfunded Accrued Liability (UAL) as of July 1, 2014 $ 89,623,731
(7)
19 Projected Unfunded Accrued Liability as of June 30, 2014 $ 149,480,047
(Section IV, Page 5, Line 12 of report)
20 Experience (Gain)/Loss on Unfunded Accrued Liability as of July 1, 2014 $ (59,856,316)
(18) - (19)
21 Net OPEB Obligation as of June 30, 2014 $ 43,748,569
(Audited Financial Statements as of year-end 6/30/2014, Page 69)
22 Total (Gain)/Loss since Prior Valuation
a. Calculation of Experience (Gain)/Loss on UAL as of July 1, 2014: (20) $ (59,856,316)
b. Amortization of (Gain)/Loss (PV 30 year amortization factor) 17.5887
c. Amortization for (Gain)/Loss for Current Period: (22a) / (22b) $ (3,403,112)
23 Amortization for (Gain)/Loss based on Prior Valuation $ (1,648,632)
(Audited Financial Statements as of year-end 6/30/2014, Page 69)
24 Adjustment to ARC - Amortization of (Gain)/Loss $ (5,051,744)
(22c) + (23)
Section 5: Summary of Annual OPEB Cost & Net OPEB Obligation as of June 30, 2015
25 Unfunded Accrued Liability (UAL) as of July 1, 2014 $ 89,623,731
(7)
26 Total Service Cost with Interest - July 1, 2014 to June 30, 2015 $ 3,000,780
(4)
27 Total Amortization of Unfunded Accrued Liability w/ Interest $ 5,188,548
(16)
28 Annual Required Contribution (ARC) $ 8,189,328
(26) + (27)
29 Interest on Net OPEB Obligation as of July 1, 2014 $ 1,837,440
(1) x (21)
30 Adjustment to ARC $ (5,051,744)
(24)
31 Annual OPEB Cost - July 1, 2014 to June 30, 2015 $ 4,975,024
(28) + (29) + (30)
32 Contributions Made - July 1, 2014 to June 30, 2015
a. Pay-As-You-Go Expected Costs - Projected: (9) $ 3,795,287
b. Contribution to OPEB Trust: (Per client email 4/23/15) $ 551,000
c. Total Contributions Made - July 1, 2014 - June 30, 2015: (32a) + (32b) $ 4,346,287
33 Net OPEB Expense Cost at June 30, 2015 $ 628,737
(31) - (32c)
34 Net OPEB Obligation as of June 30, 2014 $ 43,748,569
(21)
35 Net OPEB Obligation as of June 30, 2015 $ 44,377,306
(33) + (34)
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: 914-933-0063 • Fax: 914-933-0064Source page 12
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
Page 3
SECTION II - SUMMARY OF FINANCIAL INFORMATION INCLUDING SENSITIVITY ANALYSIS
Summary of Financial Results with Sensitivity Analysis Base Scenario Sensitivity Analysis Sensitivity Analysis Healthcare Cost
(July 1, 2014 Valuation Date) Val. Discount Val. Discount Val. Discount Trend Rate
Rate of Rate of Rate of Assumptions
4.20% 5.20% 3.20% Increased 1%
Total Total Total Total
1 Total Employee Lives
a. Actives 671 671 671 671
b. Retirees 453 453 453 453
c. Subtotal 1,124 1,124 1,124 1,124
2 Present Value of Future Benefits (PVFB) as of July 1, 2014
a. Actives $ 69,194,113 $ 53,262,222 $ 91,689,412 $ 95,094,936
b. Retirees $ 44,597,108 $ 40,472,294 $ 49,526,272 $ 49,214,336
c. Subtotal $ 113,791,221 $ 93,734,516 $ 141,215,684 $ 144,309,272
d. % Actives as ratio of Subtotal 60.8% 56.8% 64.9% 65.9%
e. Sensitivity Analysis of Subtotal: Ratio to Base Scenario for PVFB -- 82.4% 124.1% 126.8%
3 Accrued Liability (AL) as of July 1, 2014
a. Actives $ 45,606,623 $ 36,130,564 $ 58,562,651 $ 59,874,583
b. Retirees $ 44,597,108 $ 40,472,294 $ 49,526,272 $ 49,214,336
c. Subtotal $ 90,203,731 $ 76,602,858 $ 108,088,923 $ 109,088,919
d. % Actives as ratio of Subtotal 50.6% 47.2% 54.2% 54.9%
e. Sensitivity Analysis of Subtotal: Ratio to Base Scenario for AL -- 84.9% 119.8% 120.9%
4 Assets as of July 1, 2014 $ 580,000 $ 580,000 $ 580,000 $ 580,000
5 Unfunded Accrued Liability (UAL) $ 89,623,731 $ 76,022,858 $ 107,508,923 $ 108,508,919
(3c) - (4)
6 Service Cost with Interest
a. Service Cost at Year End $ 3,000,780 $ 2,291,171 $ 4,002,735 $ 4,210,932
b. Ratio to Valuation Results for Service Cost 76.4% 133.4% 140.3%
7 Pay-As-You-Go Benefits - Illustrate as Projected $ 3,795,287 $ 3,795,287 $ 3,795,287 $ 3,795,287
8 Ratio of AL to Pay-As-You-Go: (3c) / (7) 23.77 20.18 28.48 28.74
9 Ratio of Service to Pay-As-You-Go: (6a) / (7) 0.79 0.60 1.05 1.11
10 Average Annual Pay-As-You-Go Benefit per Retiree $ 8,378 $ 8,378 $ 8,378 $ 8,378
(7) / (1b)
11 Three Year Projection of Pay-As-You-Go Costs
a. Year 1: July 1, 2014 to June 30, 2015 $ 3,795,287 $ 3,795,287 $ 3,795,287 $ 3,795,287
b. Year 2: July 1, 2015 to June 29, 2016 $ 3,093,040 $ 3,093,040 $ 3,093,040 $ 3,093,040
c. Year 3: June 30, 2016 to June 30, 2017 $ 3,017,382 $ 3,017,382 $ 3,017,382 $ 3,045,039
Note: All costs are net of retiree contributions. See pages 1-2 for financial statement information.
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: 914-933-0063 • Fax: 914-933-0064Source page 13
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
Page 4
SECTION III - SUMMARY OF FINANCIAL INFORMATION BY EMPLOYEE GROUP
Summary of Financial Results as of Valuation Date (7/1/14) by Contract Group
1 Number of Employees Actives Retired Total
a. Town 137 226 363
b. Police/Fire 97 - 97
c. School 403 227 630
d. Water 13 - 13
e. Sewer 4 - 4
f. Rink 2 - 2
g. Food Service 15 - 15
h. Subtotal: (a) + … + (g) 671 453 1,124
2 Present Value of Future Benefits (PVFB) Actives Retired Total
a. Town $ 14,121,105 $ 23,985,053 $ 38,106,158
b. Police/Fire 11,449,565 - 11,449,565
c. School 39,736,179 20,612,055 60,348,234
d. Water 1,429,129 - 1,429,129
e. Sewer 538,531 - 538,531
f. Rink 235,800 - 235,800
g. Food Service 1,683,804 - 1,683,804
h. Subtotal: (a) + … + (g) $ 69,194,113 $ 44,597,108 $ 113,791,221
3 Actuarial Accrued Liability (AL) Actives Retired Total
a. Town $ 10,159,667 $ 23,985,053 $ 34,144,720
b. Police/Fire 8,747,333 - 8,747,333
c. School 23,559,103 20,612,055 44,171,158
d. Water 1,098,200 - 1,098,200
e. Sewer 499,287 - 499,287
f. Rink 193,799 - 193,799
g. Food Service 1,349,234 - 1,349,234
h. Subtotal: (a) + … + (g) $ 45,606,623 $ 44,597,108 $ 90,203,731
Service Cost PAYGO
4 Service Cost with Interest and Pay-As-You- Go w/ Interest Projected
a. Town $ 585,425 $ 1,898,737
b. Police/Fire 385,074 30,617
c. School 1,916,374 1,831,034
d. Water 34,268 9,335
e. Sewer 12,367 7,553
f. Rink 3,647 1,074
g. Food Service 63,625 16,937
h. Subtotal: (a) + … + (g) $ 3,000,780 $ 3,795,287
Note: All costs are net of employee contributions.
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: 914-933-0063 • Fax: 914-933-0064Source page 14
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
Page 5
SECTION IV - SUMMARY OF FINANCIAL INFORMATION INCLUDING GAIN/LOSS ANALYSIS
Summary of Experienced (Gain)/Loss as of July 1, 2014
1 Calculation of Experience (Gain)/Loss on Unfunded Accrued Liability as of July 1, 2014 $ (59,856,316)
(See Page 2, Line 20 of Report)
2 Projected Unfunded Accrued Liability as of June 30, 2014 $ 149,480,047
(See Line 12 below)
3 Ratio of (Gain)/Loss to Prior Valuation Unfunded Accrued Liability -40.0%
(1) / (2)
4 Distribution of Experience (Gain)/Loss as of July 1, 2014
a. Impact due to changes employee headcount from prior valuation $ (11,418,335)
b. Impact due to changes in starting claim costs (e.g., favorable rate increases since the past valuation) $ (50,219,486)
c. Impact due to fees related to healthcare reform/PPACA (e.g., Cadillac tax, etc.) $ 2,012,857
d. Impact due to changes in demographics and other valuation assumptions $ (231,352)
e. Subtotal: (a) + (b) + (c) + (d) $ (59,856,316)
Calculation of Prior Year UAL rolled forward to June 30, 2014
5 Assumed Discount Rate 4.20%
(Same a prior valuation)
6 Accrued Liability as of July 1, 2013 $ 142,752,366
(Prior January 1, 2013 valuation report, Page 23)
7 Service Cost (with interest) for Period July 1, 2013 to June 30, 2014 $ 6,192,331
(Prior January 1, 2013 valuation report, Page 23)
8 Pay-As-You-Go for Period July 1, 2013 to June 30, 2014 - PROJECTED PAYGO $ 4,779,872
(Prior January 1, 2013 valuation report, Page 23)
9 Interest Cost for Period July 1, 2013 to June 30, 2014 $ 5,895,222
(5) x [ (6) - 50% x (8) ]
10 Accrued Liability as of June 30, 2014 $ 150,060,047
(6) + (7) - (8) + (9)
11 Assets as of June 30, 2014 $ 580,000
(Per client email dated 4/23/15)
12 Unfunded Accrued Liability as of June 30, 2014 $ 149,480,047
(10) - (11)
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: 914-933-0063 • Fax: 914-933-0064Source page 15
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
Page 6
SECTION V - SUMMARY OF CENSUS INFORMATION
Summary of Retiree Enrollment by Gender and Age Band, calculated as of July 1, 2014
Age Band Female Male Subtotal % Subtotal
Under 50 1 3 4 0.9%
50 to 54 - 9 9 2.0%
55 to 59 6 7 13 2.9%
60 to 64 34 25 59 13.0%
65 to 69 51 50 101 22.3%
70 to 74 49 52 101 22.3%
75 to 79 30 38 68 15.0%
80 to 84 31 21 52 11.5%
85 to 89 11 11 22 4.9%
90 to 94 7 9 16 3.5%
95 + 4 4 8 1.8%
Subtotal 224 229 453 100.0%
% Subtotal 49.4% 50.6% 100.0%
Female Male Subtotal % Subtotal
Pre 65 41 44 85 18.8%
Post 65 183 185 368 81.2%
Subtotal 224 229 453 100.0%
Female Male Subtotal
Average Age - Pre 65 61.2 58.4 59.7
Average Age - Post 65 75.2 75.1 75.1
Average Age - Total 72.6 71.9 72.3
Note: Retiree counts above include ninety-seven (97) retirees opting out of coverage. For valuation purposes,
it is assumed that 100% of these individuals elect coverage in future.
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: 914-933-0063 • Fax: 914-933-0064Source page 16
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
Page 7
SECTION V - SUMMARY OF CENSUS INFORMATION (CONTINUED)
Summary of Census for Actives by Age Band and Years of Service, calculated as of July 1, 2014
Years of Service
0 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 + Subtotal % Subtotal
Age Band
Under 25 23 1 - - - - - - 24 3.6%
25 to 29 48 8 1 - - - - - 57 8.5%
30 to 34 37 28 7 2 - - - - 74 11.0%
35 to 39 19 28 21 6 - - - - 74 11.0%
40 to 44 20 30 21 23 5 1 - - 100 14.9%
45 to 49 17 23 17 19 13 5 - - 94 14.0%
50 to 54 18 18 22 18 13 13 3 - 105 15.6%
55 to 59 8 8 18 17 6 14 1 1 73 10.9%
60 to 64 5 8 12 6 3 8 1 5 48 7.2%
Age 65 + 1 4 2 7 1 5 1 1 22 3.3%
Subtotal 196 156 121 98 41 46 6 7 671 100.0%
% Subtotal 29.2% 23.2% 18.0% 14.6% 6.1% 6.9% 0.9% 1.0% 100.0%
Actives
Average Age: 44.7
Average Years of Service: 10.4
Actives % by Gender % Total
Female 416 62.0%
Male 255 38.0%
Total 671 100.0%
Actives by Service Category % Total
Actives Not Yet Eligible for Benefits 509 75.9%
Actives Eligible for Benefits 162 24.1%
Total 671 100.0%
Note: Active counts above include 183 employees opting out of medical coverage. For valuation purposes,
it is assumed that 100% of these individuals elect coverage in retirement.
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: 914-933-0063 • Fax: 914-933-0064Source page 17
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
Page 8
SECTION V - SUMMARY OF CENSUS INFORMATION (CONTINUED)
Comparison of Census Information with Prior Valuation Report (January 1, 2013)
July 1, 2014 January 1, 2013 Difference % Difference
Summary of Counts
Actives 671 (1) 630 41 6.5%
(2)
Retirees & Beneficiaries 453 569 (116) -20.4%
Total 1,124 1,199 (75) -6.3%
Retiree Counts - % Pre-65 18.8% 17.2% 1.6% 9.3%
Average Age
Actives 44.7
Retirees
o Pre-65 59.7
o Post-65 75.1
o Total 72.3
Average Years of Service
Information not available in prior report
Actives - Average Years of Service 10.4
Actives Eligible for Benefits 162
% Actives Eligible for Benefits 24.1%
Gender
% Female - Actives 62.0%
% Female - Retirees 49.4%
Notes:
(1)
Active counts above include 183 employees opting out of medical coverage. For valuation purposes,
it is assumed that 100% of these individuals elect coverage in retirement.
(2)
Retiree counts above include ninety-seven (97) retirees opting out of coverage. For valuation purposes,
it is assumed that 100% of these individuals elect coverage in future.
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: 914-933-0063 • Fax: 914-933-0064Source page 18
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
Page 9
SECTION VI - SUMMARY OF ASSUMPTIONS
Valuation Date July 1, 2014
Initial Implementation Year July 1, 2008 to June 30, 2009
Discount Rate 4.20%
Purpose of Work This report is provided to the Town for the purpose of calculation results under GASB 45. Information
in this report may not be appropriate to use for other purposes. Aquarius does not intend to benefit
from the overall results of the report and we assume no duty, liability or obligation to parties that use
this work for other reasons other than its intention, i.e., reporting of GASB 45 for financial statements.
Covered Benefits Medical coverage, including prescription drugs as part of the medical plan, is offered to retirees on a
self-funded basis administered by Blue Cross Blue Shield of Massachusetts. Pre-65 retiree medical
plans include HMO Blue New England and PPO Blue Care Elect. The post-65 plan is the BCBS Medex
plan which requires enrollment in Medicare Parts A & B. The Town has also implemented a Medicare
Part D Employer Group Waiver Plan (EGWP) for retirees enrolled in the Medex plan.
Dental coverage is also subsidized by the Town and offered on a self-funded basis administered by
Delta Dental. Two dental plans are offered to retirees including the Basic and Enhanced plans.
The Town also subsidizes the premium for a $5,000 group life insurance policy to retirees.
Retirement Assumptions Valuation of Active and Retired Population
Retirement Benefits Coverage for pre-65 and post-65 coverage
Insurance Coverage Funding Basis Medical, including prescription drugs, is self-funded and administered by BCBS of MA. Dental
is also self-funded and administered by Delta Dental.
Assets The Town set up an irrevocable trust to fund retirement benefits. Assets are reflected in the OPEB
for the expense calculation and assets are illustrated in a separate trust with current benefit payments
paid out of the Town's general funds and not the trust for the current year.
Actuarial Cost Method Projected Unit Credit.
Health Care Cost Trend Assumption The following assumptions are used for annual healthcare cost inflation (trend):
Year Pre-65 Post 65
Initial Trend 7/1/2016 9.0% 9.0%
Ultimate Trend 7/1/2024 & Later 5.0% 5.0%
Grading Per Year 0.5% 0.5%
Starting Claim Cost Base plan costs effective July 1, 2014 and July 1, 2015 for pre-65 and post-65 retirees for both medical
and dental self-funded plans are outlined in Section VIII, page 14 of this report. These fully-insured
equivalency rates are provided by the Town and are based on 100% before retiree contributions and
assumed to include all administrative expenses and stop loss premiums. For valuation purposes, it is
assumed that the provided rates are inclusive of all required PPACA fees due at this time.
Plan costs for 7/1/2016 and beyond are trended forward assuming the trend rates illustrated above.
Projected Benefit Costs Base plan costs provided by the Town are self-funded and experience rated, therefore adjusted for aging.
This treatment is consistent with Actuarial Standards of Practice No. 6.
Retiree Contribution Rates For pre-65 and post-65 retirees, the Town contributes 75% of the cost of medical benefits for the retiree
and their surviving spouse. For dental, the Town contributes up to 75% of the cost of the Basic dental
plan. The retiree is responsible for the balance if they elect the Enhanced dental plan. The Town also
contributes 75% of the cost of the life insurance premium.
Medicare Part B Reimbursements The Town does not reimburse retirees or their dependent spouses for the Medicare B premium.
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: (914) 933-0063 • Fax: (914) 933-0064Source page 19
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
Page 10
SECTION VI - SUMMARY OF ASSUMPTIONS (CONTINUED)
Impact of Healthcare Reform The Patient Protection and Affordable Care Act (PPACA) enacted in March 2010 (Healthcare Reform)
includes several fees and/or taxes levied on employer groups either directly (e.g., self-funded employer
groups which calculates and pays the fees directly) or indirectly (e.g., fully insured employer groups in
which the health insurer pays and passes on to the group in their premium rates.) The fees included in
this valuation are 1) Comparative Effectiveness Research fee, 2) Health Insurance Industry fee,
3) Reinsurance Assessment, and 4) High Cost Plans Excise Tax ("Cadillac tax").
The Comparative Effectiveness Research fee runs through 2019 and is tax deductible. The initial fee
is $1 per participant per year increasing to $2 in the next year. Subsequent years are increased based
on medical inflation. The fee applies to post-65 retirees where Medicare is the primary payer.
The Health Insurance Industry fee is based on targeted fixed fees to be paid by the health insurance
industry and is not tax deductible. The total fee amount to be paid by health insurers starts at $8 billion
in 2014 and increases to $14.3 billion in 2018. After 2018, the fee increases annually based on premium
growth. Starting in 2014, the fee is estimated to be approximately 2.0% to 2.5% of premium increasing
to approximately 3.0% to 4.0% in future years. The fee applies to fully insured plans including Medicare
Advantage plans and excludes self-funded employer sponsored group health plans.
The Reinsurance Assessment is a short term fee levied on fully insured and self-funded employer groups
between 2014 and 2016 and is tax deductible. The 2014 fee is $63 per member per year. The 2015 fee
is estimated to be between $40 and $45 PMPY and the 2016 fee is estimated at $25 to $30 PMPY. The
fee applies to pre-65 group retiree plans and post-65 plans where Medicare is the secondary payer.
Post-65 retirees where Medicare is the primary payer are excluded from this fee.
The High Cost Plans Excise tax includes a 40% tax ("Cadillac tax") on high cost plans that will be levied
on insurers and third party administrators (TPA) beginning in 2018 and will not be tax deductible. It will
be calculated separately for single and family coverage and will be equal to 40% of the excess of per
employee plan costs, net of patient cost sharing, over the 2018 stated cost limits of:
o - $10,200 single / $27,500 family
o - $11,850 single / $30,950 family for retirees age 55-64
The 2018 limits above may be increased if higher than expected trends are realized from 2010 through 2018
in the benchmark plan. The benchmark plan is the Federal Employees Health Benefits Plan (FEHBP) Blue
Blue Cross/Blue Shield standard option. The limits will be adjusted to the extent per employee costs in the
benchmark plan increase by more than 55% from 2010 to 2018 (for example, if the benchmark plan increase
is 60% between 2010 and 2018, the cost limits will increase by the excess over 55% or 5%.) The final 2018
limits will be increased by CPI + 1% for 2019 and by CPI thereafter. For this valuation, it is assumed that
CPI will be 3% in 2019 and beyond.
For valuation purposes, it is assumed the trend adjustments to the cost limits in the benchmark plan
(FEHBP) are equal to actual premium increases in the FEHBP plan for 2010 through 2015 and projected
increases in costs from 2016 through 2018 as listed in the "Health Care Cost Trend Assumption" above.
For each year from 2018 and beyond, the excess of projected future premiums over future adjusted cost
limits are multiplied by 40% and then adjusted (grossed up) for the assumed marginal tax rate of 35%.
It is assumed that any excise tax payable by an insurer/TPA will be passed on to the entity through
increased premiums (whether billed separately or not.)
As stated previously, it is assumed the provided rates are inclusive of the applicable PPACA fees due at
this time with the exception of the High Cost Plans Excise Tax ("Cadillac tax") which becomes effective
January , 2018. This valuation includes the Cadillac tax as necessary as described above.
Plan Design Changes Valuation assumes no changes in future plan designs (e.g., deductibles, coinsurance, etc.) from current
benefits offered for the current plan year. It is assumed that the current level of benefits will remain,
with no modifications to avoid the potential excise "Cadillac" tax imposed by the Patient Protection
and Affordable Care Act (PPACA) described in detail above.
Future Contributions for Medical Retiree contributions as a percentage of premium remain constant over the valuation. No benefit
cost cap changes other than increases due to inflation and the PPACA fees and taxes as projected
in the valuation.
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: (914) 933-0063 • Fax: (914) 933-0064Source page 20
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
Page 11
SECTION VI - SUMMARY OF ASSUMPTIONS (CONTINUED)
Retirement System Employees of the Town participate in the Norfolk County Retirement System (NCRS) or the
Commonwealth of Massachusetts Teachers' Retirement System (MTRS).
The decrement tables used throughout this valuation are based on the most recent Commonwealth
Actuarial Valuation Report for the Public Employees Retirement Administration Commission
(PERAC) dated January 1, 2014.
Retirement Eligibility Assumptions Eligibility for retirement is based on meeting a criteria of minimum age and/or years of service (YOS)
requirement. Retirees hired prior to April 2, 2012 are eligible for benefits based on reaching the
earlier of minimum age of 55 with 10 YOS or no minimum age with 20 YOS. Retirees hired on or
after April 2, 2012 are eligible for benefits based on reaching a minimum age of 60 with 10 YOS
for Group 1 (general employees) and attainment of age 55 for Group 4 (police/fire).
% Future Retirees Opting Out None, assume 100% participation for those covered as actives. All eligible active and retiree
employee records provided by client were valued.
Mortality RP 2000 Healthy Male and Female Tables are based on the Combined Healthy Table for both pre and
post-retirement projected with mortality improvements using Projection Scale AA for fourteen and
one-half (14.5) years, i.e., from date of table to valuation date.
Turnover Assumptions This reflects rate of separation from the active plan and excludes retirement and disability. Turnover
table varies by age, gender and years of service with rates of turnover based on PERAC and MTRS.
Disability Assumptions This reflects disability assumptions from the active plan and is based on age. This is the assumption
used for the PERAC and MTRS.
Retirement Assumptions This reflects rate of retirement from the active plan and is based on age, gender and years of service.
This is the assumption used for the PERAC and MTRS.
Medicare Tax Subsidy The Medicare tax subsidy is not reflected in valuation. There is no offset in premium rates charged
to employer and post-65 costs are illustrated gross of subsidy.
Census Information Participant data provided by Town dated March 2015. We relied on information provided by client
as being accurate and we have not conducted any data audits.
Payroll Information Payroll information was not reflected or valued for this analysis. Benefit and retiree contribution
rates are not based on payroll so this information was not necessary for this valuation.
Amortization of Initial UAL Initial unfunded accrued liability (UAL) was amortized as a level percentage of payroll on a closed
basis over thirty (30) years. Due to funding of OPEB trust and material reduction in UAL as a result
of favorable rate changes from prior valuation, the amortization was changed to a level dollar open
basis over thirty (30) years.
Valuation of Spouses & Marital Spouses are valued for benefits similar to retired employees. Employees with spouses are assumed
Status to be married to those spouses at and throughout retirement. Employees that are without spouses (or
not covering a spouse) are assumed to be single at and throughout retirement.
Spouse Age Assumptions For missing date of births, we are assuming that female spouses are three years younger than male
employees and male spouses are three years old than female employees. This was assumed since
spouse dates of birth were not provided.
Surviving Spouses & Dependents Surviving dependents who elect coverage pay the same as retirees as outlined above.
% Dependent Participation It is assumed that 100% of actives with family coverage will elect family coverage at retirement.
at Retirement
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: (914) 933-0063 • Fax: (914) 933-0064Source page 21
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
Page 12
SECTION VI - SUMMARY OF ASSUMPTIONS (CONTINUED)
New Hires This valuation is based on a closed group and does not reflect the impact of future new entrants
(e.g., new hires after date of data collection, i.e., March 2015) into the plan.
Waivers (Opt Outs) 183 actives and 97 retirees currently opt-out of medical coverage. For valuation purposes, it is
assumed that 100% of these individuals will elect coverage in retirement. Since spousal information
information was not provided for these individuals, it is assumed that approximately 50% will
elect single coverage and 50% will elect family coverage in retirement which is consistent with
the distribution of current pre-65 and post-65 retirees electing coverage.
All opt-outs are assumed to have a cost equivalent to the enrollment weighted average of the plan
options available to pre-65 and post-65 retirees.
Vesteds & Leave of Absence There were no individuals listed as vested or on leave of absence.
Cobra Participants There were no individuals listed on Cobra
Missing Census Information
o Dates of Birth No employees were missing date of birth, so no special adjustments were needed.
o Dates of Hire No employees were missing date of hire, so no special adjustments were needed.
o Gender No employees were missing gender, so no special adjustments were needed.
o Coverage Tier For individuals opting out of coverage, it is assumed that 100% elect coverage with approximately
50% electing single coverage based on current retiree enrollment distribution.
Special Adjustments No other special adjustments were provided since client data was complete for purposes of completing
the valuation. All active and retired employees provided were valued.
Rounding of Results Results are illustrated to the nearest dollar. In using unrounded results (exact dollars), no implication
is made as to the degree of precision in those results. Clients and their auditors should apply their own
judgment as to the desirability of rounding when transferring results from this valuation report to the
client's financial statements.
Initial Year of Recognition of GASB We have not reviewed the audited financials of client so are not providing an opinion on when client
43 & 45 should recognize and comply with GASB 43 & 45. We rely on the opinion of the client and its auditor
for this determination.
Employee Contracts & Collective Employee contracts and collective bargaining agreements specific to retiree benefits were not
Bargaining Agreements reviewed. Results based on information as provided by Town.
Other Comments Actuarial methods, considerations, and analyses used in forming this certification conform to the
appropriate Standards of Practice and guidelines of the Actuarial Standards Board (ASB).
SECTION VII - DEFINITIONS & GLOSSARY
Actuarial Present Value of Future Present value of all benefits expected to be paid by the employer, net of expected retiree contributions,
Benefits (PVFB) based on actuarial assumptions used in the valuation. Assumption are illustrated in Section II of this
report.
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: (914) 933-0063 • Fax: (914) 933-0064Source page 22
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
Page 13
SECTION VII - DEFINITIONS & GLOSSARY (CONTINUED)
Accrued Liability (AL) This is the past service liability or present value of all benefits earned to date. Since retiree medical
benefits are not accrued based on a specific formula like a pension plan, the accounting standard
(GASB 45) requires the benefits to be earned ratably from date of hire to date of full eligibility for
benefits. For retirees and actives that are immediately eligible to retire and receive full benefits, the
AL equals the PVFB. For actives not yet eligible to retire, it equals a pro-rata portion of the PVFB
based on past services to total service for that employee.
Unfunded Accrued Liability (UAL) This is the excess of the AL over assets.
Annual Required Contribution The employer's periodic required contribution to a defined benefit OPEB plan. The portion, as
(ARC) determined by a particular Actuarial Method, of the Actuarial Present Value of the benefit and
expenses, which is provided for by future Normal Costs.
Normal Cost The proportion of the PVFB of a plan's benefits and expenses which is allocated to a valuation
year by the Actuarial Cost Method used in the valuation. This is the cost of OPEB attributed to
the current year of service.
Amortization Payment The portion of the pension plan contribution (ARC) which is designated to pay interest on and
to amortize the Actuarial Unfunded Accrued Liability (UAL).
Adjustment to ARC For this valuation, the adjustment to ARC reflects the gain/loss from the prior valuations.
Cumulative gain/losses are amortized on a level dollar open basis over thirty (30) years.
Closed Group Valuation This means that it does not consider the Actuarial PVFB associated with future entrants.
Pay-As-You-Go This is a method of financing a postretirement benefit plan under which the contributions to the
plan are generally made at about the same time and amount as benefits and expenses become due.
Decrement Rates Refers to mortality, turnover, disability and retirement rate assumptions. This is used to determine
the likelihood of employee qualifying for OPEB and when benefits will commence. Mortality is
also used to determine probability of individuals to live and continue to receive benefits.
Discount Rate Assumption used for converting present value of future benefits less future contributions into
today's dollar amounts.
Service Cost Accounting terminology, which is the same as the Normal Cost.
Projected Unit Credit This is an actuarial cost method whereby the costs of benefits earned is funded each year and the
value of the accrued liability reflects the benefits earned to date.
Plan Members The individuals covered by the terms of an OPEB plan. The plan membership generally includes
employees in active service, terminated employees who have accumulated benefits but are not
yet receiving them, and retired employees and beneficiaries currently receiving benefits.
Other Post Employment Benefits Medical, dental, vision, life and other health benefits provided to terminated or retired employees
(OPEB) including their dependents and beneficiaries.
Substantive Plan The terms of the OPEB plan as understood by the employer and its plan members.
Recognition Year for GASB No. 2007-08 Fiscal Year: This impacts public agencies with total annual revenue of $100 million
43 & 45 or more must comply in the fiscal year after December 15, 2006.
2008-09 Fiscal Year: This impacts public agencies with total annual revenue between $10 million
and $100 million must comply in the fiscal year after December 15, 2007.
2009-10 Fiscal Year: This impacts public agencies with total annual revenue less than $10 million
must comply in the fiscal year after December 15, 2008.
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: (914) 933-0063 • Fax: (914) 933-0064Source page 23
Client: Town of Canton
Valuation Estimates under GASB No. 43 & 45 valued as of July 1, 2014
Page 14
SECTION VIII - SUMMARY OF CLAIM COST ASSUMPTIONS
Summary of Plan Costs by Year - Monthly Self-Funded Fully Insured Equivalency Rates
Plan Year Plan Year Plan Year 7/14 - over - 7/15 - over -
Retiree Group Tier 7/13 to 6/14 7/14 to 6/15 7/15 to 6/16 7/13 % Change 7/14 % Change
Pre-65 Medical/Rx Plans:
BCBS HMO Blue New England Single $ 695.10 $ 750.71 $ 750.71 8.0% 0.0%
Family 1,827.00 1,973.16 1,973.16 8.0% 0.0%
BCBS PPO Blue Care Elect Single $ 953.40 $ 1,029.67 $ 1,029.67 8.0% 0.0%
Family 2,261.70 2,442.64 2,442.64 8.0% 0.0%
Post-65 Medical/Rx Plans:
BCBS Medex Member $ 373.00 $ 387.92 $ 290.06 4.0% -25.2%
Pre-65 & Post-65 Dental Premium:
Delta Dental - Basic Single $ 23.10 $ 23.10 $ 23.10 0.0% 0.0%
Family 78.54 78.54 78.54 0.0% 0.0%
Delta Dental - Enhanced Single $ 35.30 $ 35.30 $ 35.30 0.0% 0.0%
Family 127.34 127.34 127.34 0.0% 0.0%
Pre-65 & Post-65 Life Premium:
Life Insurance - $5,000 Member $ 8.15 $ 8.15 $ 8.15 0.0% 0.0%
NOTE:
All 2014 and 2015 pre-65 and post-65 retiree rates above are provided by the Town. The fully insured equivalent BCBS medical
and Delta dental plan rates above are self-funded and are assumed to include all administrative expenses and stop loss premiums.
In addition, it is assumed that the above rate are inclusive of all required PPACA fees due at this time.
AQUARIUS CAPITAL 110 Betsy Brown Road • Port Chester, NY 10573 Tel: 914-933-0063 • Fax: 914-933-0064