HomeMy WebLinkAboutOPEB Valuation Date 06-30-2022GASB 74/75 ACTUARIAL VALUATION
Fiscal Year Ending June 30, 2022
CITY OF NEWPORT BEACH
CONTACT
Sandy DeKalb ASA, EA, MAAA
sandy.dekalb@nyhart.com
ADDRESS
Nyhart
530 B Street Suite 900
San Diego, CA 92101
PHONE
General (619) 239-0831
Toll-Free (800) 428-7106
Fax (317) 845-3654
Table of Contents
Page
Certification 1
Executive Summary 3
GASB Disclosures
Schedule of Changes in Net OPEB Liability and Related Ratios 5
Schedule of Employer Contributions 6
OPEB Expense 7
Deferred Outflows / (Inflows) of Resources 8
Sensitivity Results 10
Asset Information 11
Actuarially Determined Contributions 13
Projection of GASB Disclosures 14
Cash Flow Projections 15
Discussion of Discount Rates 16
Summary of Plan Participants 17
Substantive Plan Provisions 20
Actuarial Methods and Assumptions 24
Appendix 29
Comparison of Participant Demographic Information 30
Detailed Actuary's Notes 31
Valuation Results Summary 32
Glossary 33
Decrements Exhibit 34
Retirement Rates Exhibit 35
Definitions 36
April 6, 2022
Scott Catlett
City of Newport Beach
100 Civic Center Drive
Newport Beach, CA 92660
This report summarizes the GASB actuarial valuation for the City of Newport Beach 2021/22 fiscal year. To the best of our knowledge, the report presents a
fair position of the funded status of the plan in accordance with GASB Statement No. 74 (Financial Reporting for Post-Employment Benefit Plans Other
Than Pension Plans) and GASB Statement No. 75 (Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions).
This report may not be appropriate for other purposes. Please contact Nyhart prior to disclosing this report to any other party or relying on its content for
any purpose other than that explained above. Failure to do so may result in misrepresentation or misinterpretation of this report.
The information presented herein is based on the actuarial assumptions and substantive plan provisions summarized in this report and participant
information furnished to us by the Plan Sponsor. We have reviewed the employee census provided by the Plan Sponsor for reasonableness when
compared to the prior information provided but have not audited the information at the source, and therefore do not accept responsibility for the
accuracy or the completeness of the data on which the information is based. When relevant data may be missing, we may have made assumptions we feel
are neutral or conservative to the purpose of the measurement. We are not aware of any significant issues with and have relied on the data provided.
The discount rate, other economic assumptions, and demographic assumptions have been selected by the Plan Sponsor with the concurrence of Nyhart.
In our opinion, the actuarial assumptions are individually reasonable and in combination represent our estimate of anticipated experience of the Plan. All
calculations have been made in accordance with generally accepted actuarial principles and practice.
Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following:
·plan experience differing from that anticipated by the economic or demographic assumptions;
·changes in economic or demographic assumptions;
·increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an
amortization period); and
·changes in plan provisions or applicable law.
We did not perform an analysis of the potential range of future measurements due to the limited scope of our engagement.
To our knowledge, there have been no significant events prior to the current year's measurement date or as of the date of this report that could materially
affect the results contained herein.
Page 1
Neither Nyhart nor any of its employees has any relationship with the plan or its sponsor that could impair or appear to impair the objectivity of this
report. Our professional work is in full compliance with the American Academy of Actuaries “Code of Professional Conduct” Precept 7 regarding conflict of
interest. The undersigned meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein.
Should you have any questions please do not hesitate to contact us.
John Mallows, FSA, MAAA
Actuary
Sandy DeKalb ASA, EA, MAAA
Actuary
Page 2
Executive Summary
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Summary of Results
Presented below is the summary of GASB 75 results for the fiscal year ending June 30, 2022 compared to the prior fiscal year as shown in the City's Notes
to Financial Statement.
FYE June 30, 2022 FYE June 30, 2021
Total OPEB Liability 51,603,833 46,093,712 $$
Actuarial Value of Assets (25,796,272)(34,969,715)$$
Net OPEB Liability 16,634,118 20,297,440 $$
Funded Ratio 56.0% 67.8%
FY 2021/22 FY 2020/21
OPEB Expense 1,588,845 2,206,286 $$
Annual Employer Contributions 5,785,342 4,674,814 $$
Actuarially Determined Contribution 4,124,923 4,108,719 $$
FYE June 30, 2022 FYE June 30, 2021
6.50%Discount Rate 6.50%
6.50%Expected Return on Assets 6.50%
FYE June 30, 2022
821 Total Active Participants
Total Retiree Participants 777
The active participants’ number above may include active employees who currently have no health care coverage. Refer to Summary of Participants
section for an accurate breakdown of active employees with and without coverage.
Page 3
Executive Summary
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Summary of Results
Below is a breakdown of total GASB 75 liabilities allocated to past and current service compared to
the prior year. The table below also provides a breakdown of the Total OPEB Liability allocated to
pre- and post- Medicare eligibility. The liability shown below includes explicit (if any) and implicit
subsidies. Refer to the Substantive Plan Provisions section for complete information on the Plan
Sponsor’s GASB subsidies.
0M
10M
20M
30M
40M
50M
60M
6/30/2021 6/30/2022
11.0M 9.7M
35.0M 41.9M
Retirees Active
Changes In Total OPEB Liability
Mi
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s
FYE June 30, 2022Present Value of Future Benefits FYE June 30, 2021
Active Employees 16,204,487 14,788,083 $$
Retired Employees 35,048,585 41,919,817
Total Present Value of Future Benefits 56,707,900 51,253,072 $$
FYE June 30, 2022Total OPEB Liability FYE June 30, 2021
Active Pre-Medicare 6,035,416 6,581,220 $$
Active Post-Medicare 4,463,907 3,648,600
Active Liability 9,684,016 11,045,127 $$
Retiree Pre-Medicare 10,974,637 7,978,541 Present Value of Future Benefits (PVFB) is the
amount needed as of June 30, 2022 and June 30, 2021,
to fully fund the City’s retiree health care subsidies for
existing and future retirees and their dependents
assuming all actuarial assumptions are met.
Total OPEB Liability is the portion of PVFB considered
to be accrued or earned as of June 30, 2022 and June
30, 2021. This amount is a required disclosure in the
Required Supplementary Information section.
$$
Retiree Post-Medicare 30,945,180 27,070,044
Retiree Liability 41,919,817 35,048,585 $$
Total OPEB Liability 51,603,833 46,093,712 $$
FYE June 30, 2022FYE June 30, 2021
Discount Rate 6.50% 6.50%
Page 4
GASB Disclosures
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Schedule of Changes in Net OPEB Liability and Related Ratios
OPEB Liability FY 2021/22 FY 2020/21 FY 2019/20 FY 2018/19 FY 2017/18
Total OPEB Liability
Total OPEB Liability - beginning of year 46,093,712 46,635,812 44,296,670 44,614,266 44,819,178 $$$$$
Service cost 529,600 521,285 524,717 509,434 478,341
Interest 2,909,400 2,944,050 2,795,490 2,814,685 2,830,153
Change of benefit terms 0 0 0 0 0
Changes in assumptions (302,512) 0 114,311 0 0
Differences between expected and actual experience 6,159,865 (219,772) 2,532,319 0 0
(3,786,232)Benefit payments (3,787,663)(3,627,695)(3,641,715)(3,513,406)
Net change in total OPEB liability 5,510,121 (542,100) 2,339,142 (317,596)(204,912)$$$$$
Total OPEB Liability - end of year 51,603,833 46,093,712 46,635,812 44,296,670 44,614,266 $$$$$
Plan Fiduciary Net Position
Plan fiduciary net position - beginning of year 25,796,272 24,021,071 21,696,948 19,094,690 16,147,240 $$$$$
Contributions - employer 5,785,342 4,674,814 4,460,937 4,675,193 4,594,772
Contributions - active employees 0 0 0 0 0
Net investment income 7,184,241 900,087 1,495,861 1,605,114 1,875,536
Benefit payments (3,786,232)(3,787,663)(3,627,695)(3,641,715)(3,513,406)
Trust administrative expenses (9,908)(12,037)(4,980)(36,334)(9,452)
Net change in plan fiduciary net position 9,173,443 1,775,201 2,324,123 2,602,258 2,947,450 $$$$$
Plan fiduciary net position - end of year 34,969,715 25,796,272 24,021,071 21,696,948 19,094,690 $$$$$
Net OPEB Liability - end of year 16,634,118 20,297,440 22,614,741 22,599,722 25,519,576 $$$$$
Plan fiduciary net position as % of total OPEB liability 67.8% 56.0% 51.5% 49.0% 42.8%
Covered employee payroll 79,484,098 74,023,505 72,042,341 74,484,613 74,484,613 $$$$$
Net OPEB liability as % of covered payroll 20.9% 27.4% 31.4% 30.3% 34.3%
Page 5
GASB Disclosures
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Schedule of Employer Contributions
The Actuarially Determined Contributions (ADC) shown below are based on the Annual Required Contribution (ARC) calculated in prior GASB 45 actuarial
valuations as shown in the City's financial statements.
FY 2021/22 FY 2020/21 FY 2019/20 FY 2018/19 FY 2017/18
Actuarially Determined Contribution (ADC) 4,124,923 4,108,719 3,834,916 3,827,337 4,497,835 $$$$$
Contributions in relation to the ADC 5,785,342 4,674,814 4,460,937 4,675,193 4,594,772
Contribution deficiency/(excess)(1,660,419)(566,095)(626,021)(847,856)(96,937)$$$$$
Covered employee payroll 79,484,098 72,042,341 74,484,613 74,484,613 74,023,505 $$$$$
Contribution as a % of covered payroll 7.3% 6.3% 6.2% 6.3% 6.2%
Page 6
GASB Disclosures
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
OPEB Expense
OPEB Expense FY 2021/22 FY 2020/21
Discount Rate
Beginning of year 6.50% 6.50%
End of year 6.50% 6.50%
Service cost 529,600 521,285 $$
Interest 2,909,400 2,944,050
Change of benefit terms 0 0
Projected earnings on OPEB plan investments (1,740,389)(1,589,363)
Reduction for contributions from active employees 0 0
OPEB plan administrative expenses 9,908 12,037
Current period recognition of deferred outflows / (inflows) of resources
Differences between expected and actual experience 1,082,063 397,634 $$
Changes in assumptions (14,560) 19,052
Net difference between projected and actual earnings on OPEB plan investments (1,187,177)(98,409)
Total current period recognition 318,277 (119,674)$$
Total OPEB expense 2,206,286 1,588,845 $$
Page 7
GASB Disclosures
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Deferred Outflows / (Inflows) of Resources
Deferred Outflows / (Inflows) of Resources represents the following items that have not been recognized in the OPEB Expense:
1.Differences between expected and actual experience of the OPEB plan
2.Changes of assumptions
3.Differences between projected and actual earnings in OPEB plan investments (for funded plans only)
The initial amortization period for the first two items noted above is based on expected future service lives while the difference between the projected and
actual earnings in OPEB plan investment is amortized over five years. All balances are amortized linearly on a principal only basis and new bases will be
created annually for each of the items above.
Differences between expected and actual experience for FYE Initial Balance Initial Amortization
Period
Annual
Recognition
Unamortized Balance as
of June 30, 2022
June 30, 2018 0 0 0 N/A$$$
June 30, 2019 0 0 0 N/A$$$
June 30, 2020 2,532,319 6 422,053 1,266,160 $$$
June 30, 2021 (219,772) 9 (24,419)(170,934)$$$
June 30, 2022 6,159,865 9 684,429 5,475,436 $$$
Changes in assumptions for FYE Initial Balance Initial Amortization
Period
Annual
Recognition
Unamortized Balance as
of June 30, 2022
June 30, 2018 0 0 0 N/A$$$
June 30, 2019 0 0 0 N/A$$$
June 30, 2020 114,311 6 19,052 57,155 $$$
June 30, 2021 0 0 0 N/A$$$
June 30, 2022 (302,512) 9 (33,612)(268,900)$$$
Page 8
GASB Disclosures
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Deferred Outflows / (Inflows) of Resources (Continued)
Unamortized Balance as
of June 30, 2022
Annual
Recognition
Initial Amortization
PeriodInitial BalanceNet Difference between projected and actual earnings in
OPEB plan investments for FYE
June 30, 2018 (791,128) 5 (158,224) 0 $$$
June 30, 2019 (331,552) 5 (66,310)(66,312)$$$
June 30, 2020 (58,641) 5 (11,728)(23,457)$$$
June 30, 2021 689,276 5 137,855 413,566 $$$
June 30, 2022 (5,443,852) 5 (1,088,770)(4,355,082)$$$
Deferred Outflows Deferred InflowsAs of fiscal year ending June 30, 2022
Differences between expected and actual experience 6,741,596 (170,934)$$
Changes in assumptions 57,155 (268,900)
Net difference between projected and actual earnings in OPEB plan investments 0 (4,031,285)
N/A 4,359,593 Contributions subsequent to the measurement date
11,158,344 (4,471,119)Total $$
Annual Amortization of Deferred Outflows / (Inflows)
The balances as of fiscal year ending June 30, 2022 of the deferred outflows / (inflows) of resources will be recognized in OPEB expense in the future fiscal
years as noted below. Balances shown below do not include the recognition of any deferred outflows for contributions subsequent to the measurement date.
FYE Balance
38,548 $ 2023
104,859 $ 2024
116,589 $ 2025
(462,374)$ 2026
626,398 $ 2027
1,903,612 Thereafter $
Page 9
GASB Disclosures
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Sensitivity Results
The following presents the Net OPEB Liability as of June 30, 2022,
calculated using the discount rate assumed and what it would be
using a 1% higher and 1% lower discount rate.
·The current discount rate is 6.50%.
·The 1% decrease in discount rate would be 5.50%.
·The 1% increase in discount rate would be 7.50%.
The following presents the Net OPEB Liability as of June 30, 2022, using the
health care trend rates assumed and what it would be using 1% higher and 1%
lower health care trend rates.
·The current health care trend rate starts at an initial rate of 6.00%,
decreasing to an ultimate rate of 4.50%.
·The 1% decrease in health care trend rates would assume an initial rate
of 5.00%, decreasing to an ultimate rate of 3.50%.
·The 1% increase in health care trend rates would assume an initial rate
of 7.00%, decreasing to an ultimate rate of 5.50%.As of June 30, 2022 Net OPEB Liability
1% Decrease
Current Discount Rate
1% Increase As of June 30, 2022 Net OPEB Liability
1% Increase
1% Decrease
Current Trend Rates
16,634,118
12,247,235
21,822,821
14,440,203
16,634,118
19,707,865
$
$
$$
$
$
Page 10
GASB Disclosures
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Asset Information
Asset Breakdown FY 2020/21 FY 2021/22
Assets
0 0 $$Cash and deposits
0 0 Securities lending cash collateral
Total cash 0 0 $$
Receivables
0 0 $$Contributions
0 0 Accrued interest
0 0 $$Total receivables
Investments
0 0 $$Fixed income
0 0 Equities
25,796,272 34,969,715 Mutual Funds
Total investments 25,796,272 34,969,715 $$
Total Assets 25,796,272 34,969,715 $$
Liabilities
Payables
0 0 $$Investment management fees
0 0 Securities lending expense
Total liabilities 0 0 $$
Net Position Restricted to OPEB 25,796,272 34,969,715 $$
Page 11
GASB Disclosures
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Asset Information (Continued)
Asset Reconciliation FY 2020/21 FY 2021/22
Additions
Contributions Received
4,674,814 5,785,342 $$Employer
0 0 Active employees
Total contributions 4,674,814 5,785,342 $$
Investment Income
900,087 7,184,241 $$Net increase in fair value of investments
0 0 Interest and dividends
0 0 Investment expense, other than from securities lending
0 0 Securities lending income
Securities lending expense 0 0
Net investment income 7,184,241 $$ 900,087
Total additions 5,574,901 12,969,583 $$
Deductions
3,786,232 $$ 3,787,663 Benefit payments
12,037 9,908 Administrative expenses
0 0 Other
Total deductions 3,799,700 3,796,140 $$
Net increase in net position 1,775,201 9,173,443 $$
Net position restricted to OPEB
Beginning of year 24,021,071 25,796,272 $$
End of year 25,796,272 34,969,715 $$
Page 12
Actuarially Determined Contributions
City of Newport Beach GASB 74/75 Valuation For Fiscal Year Ending June 30, 2022
FY 2022/23 Cash Vs Accrual AccountingFY 2021/22
Discount rate (Funding) 6.50% 6.50%
0.0M
0.5M
1.0M
1.5M
2.0M
2.5M
3.0M
3.5M
4.0M
4.5M
2021/22 2022/23
3.8M 4.4M4.1M 4.4M
Sum ofCommand.PayGo Sum ofCommand.ADCFinal
Mi
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Payroll growth factor used for amortization 3.00% 3.00%
Actuarial cost method Entry Age Normal
Level % of Salary
Entry Age Normal
Level % of Salary
Amortization type Level DollarLevel Dollar
Amortization period (years) 10 10
Actuarial Accrued Liability (AAL) - beginning of year 46,093,712 51,603,833 $$
Actuarial Value of Assets (AVA) - beginning of year (25,796,272)(34,969,715)
Unfunded AAL - beginning of year 20,297,440 16,634,118 $$
Normal Cost 568,478 584,111 $$
Amortization of Unfunded AAL 3,304,689 2,676,984
Actuarially Determined Contribution (ADC) is the target
or recommended contribution to a defined benefit OPEB
plan, which if paid on an ongoing basis, will provide
sufficient resources to fund future costs for services to be
earned and liabilities attributed to past services. This is
typically higher than the pay-as-you-go cost because it
includes recognition of employer costs expected to be
paid in future accounting periods.
Total normal cost plus amortization 3,873,167 3,261,095 $$
Interest to end of year 251,756 211,971
Actuarially Determined Contribution - Preliminary 3,473,066 4,124,923 $$
Expected Benefit Payments 3,786,232 4,359,593
Actuarially Determined Contribution - Final 4,124,923 4,359,593 $$
* The ADC for FY 2021/22 is consistent with the June 30, 20219 Actuarial Valuation.
Page 13
Projection of GASB Disclosures
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
The Total OPEB Liability (TOL) is expected to change on an annual basis as a result of expected and unexpected events. Under normal circumstances, it is
generally expected to have a net increase each year. Below is a list of the most common events affecting the total OPEB liability and whether they increase
or decrease the liability.
Expected Events
· Increases in TOL due to additional benefit accruals as
employees continue to earn service each year
· Increases in TOL due to interest as the employees and
retirees age
· Decreases in TOL due to benefit payments
Unexpected Events
· Increases in TOL when actual premium rates increase more than expected. A liability
decrease occurs when the reverse happens.
· Increases in TOL when more new retirements occur than expected or fewer terminations
occur than anticipated. Liability decreases occur when the opposite outcomes happen.
· Increases or decreases in TOL depending on whether benefits are improved or reduced.
Projection of Total OPEB Liability
(TOL)FY 2021/22 FY 2022/23 Projection of Actuarial Value of Assets (AVA)FY 2021/22 FY 2022/23
TOL as of beginning of year 46,093,712 51,603,833 AVA as of beginning of year 25,796,272 34,969,715 $$$$
Normal cost as of beginning of year 529,600 530,843 Exp. employer contributions during the year 3,786,232 4,359,593
Exp. benefit payments during the year (3,786,232)(4,359,593)Exp. benefit payments during the year (3,786,232)(4,359,593)
Interest adjustment to end of year 2,909,400 3,249,298 Expected investment income 1,676,441 2,272,715
Exp. TOL as of end of year 45,746,480 51,024,381 Exp. Trust administrative expenses (9,908)(9,908)$$
Actuarial Loss / (Gain) 5,857,353 TBD Exp. AVA as of end of year 37,232,522 27,462,805 $$
Actual TOL as of end of year 51,603,833 TBD Differences between expected and actual
experience 7,506,910 TBD$$
AVA as of end of year 34,969,715 TBD$$
Discount rate as of beginning of year Expected asset return as of beginning of year 6.50% 6.50% 6.50% 6.50%
Discount rate as of end of year Expected asset return as of end of yearTBD 6.50% 6.50%TBD
Page 14
Cash Flow Projections
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
The below projections show the actuarially estimated employer-paid contributions for retiree health benefits for the next thirty years. Results are shown
separately for a closed group of current/future retirees. These projections include explicit and implicit subsidies.
FYE Current
Retirees
Future
Retirees*Total FYE Current
Retirees
Future
Retirees*Total FYE Current
Retirees
Future
Retirees*Total
2022 2032 2042 4,271,213 2,965,309 1,833,653 88,380 832,736 1,738,641 4,359,593 3,798,045 3,572,294 $$$$$$$$$
2023 2033 2043 4,156,293 2,836,850 1,739,910 175,330 900,427 1,851,420 4,331,623 3,737,277 3,591,330 $$$$$$$$$
2024 2034 2044 4,035,811 2,706,347 1,636,099 263,542 966,684 1,881,975 4,299,353 3,673,031 3,518,074 $$$$$$$$$
2025 2035 2045 3,934,256 2,585,502 1,527,446 342,596 1,053,235 1,873,192 4,276,852 3,638,737 3,400,638 $$$$$$$$$
2026 2036 2046 3,790,414 2,458,093 1,434,205 437,617 1,167,179 1,934,175 4,228,031 3,625,272 3,368,380 $$$$$$$$$
2027 2037 2047 3,681,126 2,324,321 1,324,614 522,773 1,238,570 1,944,532 4,203,899 3,562,891 3,269,146 $$$$$$$$$
2028 2038 2048 3,551,974 2,205,464 1,242,018 592,669 1,328,666 1,893,672 4,144,643 3,534,130 3,135,690 $$$$$$$$$
2029 2039 2049 3,439,786 2,107,121 1,178,042 665,627 1,445,571 1,937,468 4,105,413 3,552,692 3,115,510 $$$$$$$$$
2030 2040 2050 3,278,395 2,021,517 1,111,985 737,660 1,563,802 1,935,705 4,016,055 3,585,319 3,047,690 $$$$$$$$$
2031 2041 2051 3,078,852 1,919,958 1,046,157 779,190 1,627,862 1,908,561 3,858,042 3,547,820 2,954,718 $$$$$$$$$
Projected Employer Pay-go Cost
0.0M
0.5M
1.0M
1.5M
2.0M
2.5M
3.0M
3.5M
4.0M
4.5M
2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050
Current Retirees Future Retirees
Mi
l
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s
* Projections for future retirees do not take into account future new hires.
Page 15
Page 16
Discussion of Discount Rates
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Under GASB 74, the discount rate used in valuing OPEB liabilities for funded plans as of the Measurement Date must be based on the long-term expected
rate of return on OPEB plan investments that are expected to be used to finance future benefit payments to the extent that (a) they are sufficient to pay
for the projected benefit payments and (b) the OPEB plan assets are invested using a strategy that will achieve that return. When the OPEB plan
investments are insufficient to cover future benefit payments, a yield for 20-year tax-exempt general obligation municipal bonds with an average rating of
AA /Aa or higher (or equivalent quality on another rating scale) must be used.
For the current valuation:
1. The City participates in the CERBT investment strategy 3. The long-
term expected rate of return on OPEB plan investment is assumed
to be 6.50%. This was determined using a building block method in
which expected future real rates of return (expected returns, net of
OPEB plan investment expense and inflation) are developed for
each major asset class. These expected future real rates of return
are then combined to produce the long-term expected rate of
return by weighting them based on the target asset allocation
percentage and adding in expected inflation (2.75%). The best
estimates of arithmetic real rates of return for each major asset
class included in the OPEB Plan’s target asset allocation as of June
30, 2021 are summarized in the following table.
Asset Class -
CERBT Strategy 1
Target
Allocation
L/T Expected Real
ROR
Global Equities 59.00% N/A
Fixed Income 25.00% N/A
TIPS 5.00% N/A
REITS 8.00% N/A
Commodities 3.00% N/A
Total 100.00% 6.50%
2. The discount rate used when the OPEB plan investments are
insufficient to pay for future benefit payments are selected from
the range of indices as shown in the table below, where the range
is given as the spread between the lowest and highest rate shown.
Yield as of July 1, 2020 June 30, 2021
Bond Buyer Go 20-Bond
Municipal Bond Index 2.21% 2.16%
S&P Municipal Bond 20-Year
High Grade Rate Index 2.66% 2.19%
Fidelity 20-Year Go Municipal
Bond Index 2.45% 1.94%
Bond Index Range 2.21% – 2.66% 1.94% – 2.19%
3. The final equivalent single discount rate used for this year’s
valuation is 6.50%. This discount rate assumes the City continues
to fund for its retiree health benefits through the California
Employers’ Retiree Benefits Trust (CERBT) under its investment
allocation strategy 1.
Page 17
Summary of Plan Participants
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Active Employees
Actives Employees Total Avg. Age Avg. Svc Salary
Hybrid Plan 37 59.2 30.4 $ 3,893,973
RHS Plan 630 42.0 11.9 $ 66,533,228
Part Time 154 39.0 7.9 $ 9,056,897
Total 821 42.2 11.9 $ 79,484,098
70% of part-time active employees meeting eligibility requirements are assumed to elect retiree health coverage at retirement.
Enrollment information above is for full-time employees who are eligible for retiree health care benefits only.
Page 18
Summary of Plan Participants
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Active Age-Service Distribution
Years of Service
Age < 1 1 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 & up Total
Under 25 5 20 3 28
25 to 29 9 51 24 4 88
30 to 34 11 54 34 18 4 121
35 to 39 8 18 36 38 23 5 128
40 to 44 5 12 17 33 58 13 5 143
45 to 49 3 13 13 14 32 21 6 2 104
50 to 54 4 12 9 14 18 22 8 8 1 96
55 to 59 3 10 5 4 12 12 12 9 6 73
60 to 64 1 1 1 3 6 2 4 4 1 23
65 to 69 3 3 2 1 3 1 13
70 & up 1 1 1 1 4
Total 49 195 146 131 155 78 36 23 8 0 821
Page 19
Summary of Plan Participants
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Retirees
Retirees with coverage Single Non-Single Total Avg. Age
Miscellaneous 135 93 228 71.9
Safety 59 119 178 68.9
MRC Only 44 61.9
Waives 327 68.1
Total retirees with coverage 194 212 777 69.1
Retiree Age Distribution
Age Retirees
< 45 10
45 to 49 8
50 to 54 38
55 to 59 88
60 to 64 129
65 to 69 149
70 to 74 154
75 to 79 85
80 to 84 62
85 to 89 31
90 & up 23
Total 777
Page 20
Substantive Plan Provisions
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
This study analyzes the post-retirement health benefits provided by the City. Currently, eligible active employees are offered a choice of medical (including
prescription drug coverage) plans through the CalPERS Health Program under the Public Employees’ Medical and Hospital Care Act (PEMHCA). The City offers the
same medical plans to eligible retirees except once a retiree is eligible for Medicare, the retiree must join a Medicare HMO or Supplement Plan with Medicare being
the primary payer.
Prior to January 1, 2006, the City sponsored a defined benefit healthcare plan which provided a fixed dollar contribution towards the cost of medical coverage for
eligible employees continuing medical coverage through PEMHCA at retirement. The City’s contribution varied by employee group (up to a maximum of $450 per
month for Police employees and $400 for all other employees).
Effective January 1, 2006, the City implemented a Retiree Health Savings program (RHS) for all new full-time employees (Category 1) and for full-time employees
whose age plus service as of January 1, 2006 was less than 46 for public safety employees and 50 for all other employees (Category 2). Full-time active employees
whose age plus service as of January 1, 2006 was 46 or more for public safety employees and 50 or more for all other employees (Category 3) continued to be eligible
to receive the City’s fixed dollar contribution under the prior defined benefit plan at retirement but the contribution is paid into the employee’s RHS account.
Employees already retired and eligible for a City contribution at January 1, 2006 (Category 4) continued to receive the City’s contribution under the prior defined
benefit plan but instead of being applied towards medical coverage, the fixed dollar contribution amount less the minimum required employer PEMHCA contribution
for those continuing coverage through PEMHCA is made to an RHS account established for the retiree. Employees in Category 3 could make a one-time election to
be treated similarly to Category 2 employee with those not electing remaining in a Hybrid Plan (includes both the City’s fixed dollar contribution but also some
components of the RHS Plan). A description of the funding components is outlined in the chart on the following page.
The RHS is a Health Reimbursement Arrangement (HRA) sponsored by the City which reimburses a participant for post-employment medical (PEMHCA plan) dental,
vision, long-term care, miscellaneous medical expenses, and the PEMHCA minimum. In general, the RHS is a defined contribution program sponsored by the City
with several funding components as outlined in the table on the following page. Any balance in the employee’s RHS account after the death of the employee and
eligible spouse and dependents will be forfeited.
Part-time employees can continue medical coverage through PEMHCA and receive the PEMHCA minimum required contribution from the City which is scheduled to
increase in the future based on the medical portion of CPI. A 10-year history of the increases and current amounts are as follows.
Calendar Year Minimum Required Employer Contribution
2013 $115.00
2014 $119.00
2015 $122.00
2016 $125.00
2017 $128.00
2018 $133.00
2019 $136.00
2020 $139.00
2021 $143.00
2022
2023+
$149.00
Adjusted Annually to reflect Medical Portion of CPI
Page 21
Substantive Plan Provisions
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
In general, the RHS is a defined contribution program sponsored by the City with the following funding components:
Category 1 Category 2 Category 3* Category 4
Part A – Pre-
Retirement Employee
Contributions
o 1% of base pay mandatory
contribution
o effective immediately upon
employment
o 1% of base pay mandatory
contribution
o effective January 1, 2006
o 1% of base pay mandatory
contribution
o effective January 1, 2006
None
Part B – Pre-
Retirement City
Contributions:
o City contributes $2.50 per month
for each year of age plus service
during employment
o effective upon 5 years of vesting
service; immediate vesting for
industrial disability
o retroactively deposited; biweekly
thereafter
o City contributes $2.50 per month
for each year of age plus service
during employment
o effective upon 5 years of vesting
service; immediate vesting for
industrial disability
o retroactively deposited; biweekly
thereafter
None None
Part C – Leave
Conversion:
o mandatory transfer of a portion of
accumulated leave during any
leave buyout
o amount of leave conversion varies
by bargaining unit & subject to
negotiation
o not payable in cash
o mandatory transfer of a portion of
accumulated leave during any
leave buyout
o amount of leave conversion varies
by bargaining unit & subject to
negotiation
o not payable in cash
o mandatory transfer of a
portion of accumulated leave
during any leave buyout
o amount of leave conversion
varies by bargaining unit &
subject to negotiation
o not payable in cash
Part D – Conversion
Contribution:
None o For fully converted employees who
retire from the plan only
o City will make a one-time
contribution of $100 per month the
employee contributed to the plan
prior to January 1, 2006 with a cap
of $18,000
o City will make a one-time
contribution of $75 per
month the employee
contributed to the plan
January 1, 2006 with a cap of
$13,500
Part E – Post
Retirement
Contribution
o City will provide the PEMHCA
minimum contribution when a
retiree’s RHS account value has
been exhausted
o City will provide the PEMHCA
minimum contribution when a
retiree’s RHS account value has
been exhausted
o City will contribute $400 per
month ($450 for Police
employees retiring prior to
January 1, 2006)
o City will contribute
$400 per month ($450
for Police employees)
to retiree’s or surviving
spouse’s RHS account
Part F – Other Pre-
Retirement Employee
Contributions:
None None o Active full-time employees
are required to make a
contribution of $100 per
month
None
*Employees making a one-time election into the RHS Plan are treated as Category 2 employees.
Page 22
Substantive Plan Provisions
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Premium Rates The City participates in the CalPERS Health Program, a community-rated program, for medical coverage. The
tables below summarize the calendar 2021 and 2022 monthly medical premiums for the primary medical
plans in which the retirees are enrolled and used in this valuation.
2021 CalPERS
Premiums - Region 2 Kaiser BS
Access+
BS
Trio
PERS
Care
PERS
Choice PERS Select
Retiree Only $ 669.77 $ 938.96 $ 722.56 $ 1,115.68 $ 783.19 $ 476.92
Retiree plus Spouse $ 1,339.54 $ 1,877.92 $ 1,445.12 $ 2,231.36 $ 1,566.38 $ 953.84
Retiree Only – Medicare $ 324.48 N/A N/A $ 381.25 $ 349.97 $ 349.97
2021 CalPERS
Premiums - Region 2
UHC
HMO
Anthem
HMO
Select
Anthem
HMO
Traditional
Health Net
SmartCare
Health
Net
Salud
Retiree Only $ 723.84 $ 674.69 $ 1,046.04 $ 769.11 $ 458.66
Retiree plus Spouse $ 1,447.68 $ 1,349.38 $ 2,092.08 $ 1,538.22 $ 917.32
Retiree Only – Medicare $ 311.56 $ 383.37 $ 383.37 N/A N/A
2021 CalPERS
Premiums - Region 3 Kaiser BS
Access+
BS
Trio
PERS
Care
PERS
Choice PERS Select
Retiree Only $ 669.84 $ 834.88 $ 660.49 $ 1,036.07 $ 761.23 $ 459.94
Retiree plus Spouse $ 1,339.68 $ 1,669.76 $ 1,320.98 $ 2,072.14 $ 1,522.46 $ 919.88
Retiree Only – Medicare $ 324.48 N/A N/A $ 381.25 $ 349.97 $ 349.97
2021 CalPERS
Premiums - Region 3
UHC
HMO
Anthem
HMO
Select
Anthem
HMO
Traditional
Health Net
SmartCare
Health
Net
Salud
Retiree Only $ 720.89 $ 639.10 $ 984.21 $ 691.48 $ 412.88
Retiree plus Spouse $ 1,441.78 $ 1,278.20 $ 1,968.42 $ 1,382.96 $ 825.76
Retiree Only – Medicare $ 311.56 $ 383.37 $ 383.37 N/A N/A
Page 23
Substantive Plan Provisions
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Premium Rates Continued
2022 CalPERS
Premiums - Region 3
UHC
Alliance
Anthem
HMO
Select
Anthem
HMO
Traditional
Health Net
SmartCare
Health
Net
Salud
Retiree Only $ 771.85 $ 676.48 $ 935.57 $ 764.96 $ 463.87
Retiree plus Spouse $ 1,543.70 $ 1,352.96 $ 1,871.14 $ 1,529.92 $ 927.74
Retiree Only – Medicare $ 294.65 $ 360.19 $ 360.19 N/A N/A
2022 CalPERS
Premiums - Region 2 Kaiser BS
Access+
BS
Trio
PERS
Gold
PERS
Platinum Sharp
Retiree Only $ 706.02 $ 900.22 $ 742.70 $ 587.78 $ 882.18 $ 699.21
Retiree plus Spouse $ 1,412.04 $ 1,800.44 $ 1,485.40 $ 1,175.56 $ 1,764.36 $ 1,398.42
Retiree Only – Medicare $ 302.53 $ 353.11 $ 353.11 $ 377.41 $ 381.94 $ 263.85
2022 CalPERS
Premiums - Region 2
UHC
Alliance
Anthem
HMO
Select
Anthem
HMO
Traditional
Health Net
SmartCare
Health
Net
Salud
PORAC
Retiree Only $ 775.09 $ 712.43 $ 1,007.13 $ 845.69 $ 548.26 $ 775.00
Retiree plus Spouse $ 1,550.18 $ 1,424.86 $ 2,014.26 $ 1,691.38 $ 1,096.52 $ 1,550.00
Retiree Only – Medicare $ 294.65 $ 360.19 $ 360.19 N/A N/A $ 461.00
2022 CalPERS
Premiums - Region 3 Kaiser BS
Access+
BS
Trio
PERS
Gold
PERS
Platinum PORAC
Retiree Only $ 719.78 $ 779.87 $ 668.13 $ 575.56 $ 863.37 $ 775.00
Retiree plus Spouse $ 1,439.56 $ 1,559.74 $ 1,336.26 $ 1,151.12 $ 1,726.74 $ 1,475.00
Retiree Only – Medicare $ 302.53 $ 353.11 $ 353.11 $ 377.41 $ 349.97 $ 461.00
Page 24
Actuarial Methods and Assumptions
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
The actuarial assumptions used in this report represent a reasonable long-term expectation of future OPEB outcomes. As national economic and City
experience change over time, the assumptions will be tested for ongoing reasonableness and, if necessary, updated.
There are changes to the actuarial methods and assumptions since the last GASB valuation, which was for the fiscal year ending June 30, 2020. Refer to
Actuary’s Notes section for complete information on these changes. For the current year GASB valuation, we have also updated the per capita costs. We
expect to update discount rate, health care trend rates, mortality table, and per capita costs again in the next full GASB valuation, which will be for the
fiscal year ending June 30, 2024.
Measurement Date For the fiscal year ending June 30, 2022, a June 30, 2021 measurement date was used.
Actuarial Valuation Date June 30, 2021 with no adjustments to get to the June 30, 2021 measurement date. Liabilities as of July 1,
2020 are based on an actuarial valuation date of June 30, 2019 projected to June 30, 2020 on a “no loss / no
gain” basis.
Benefit Payments OPEB plan benefit payments made subsequent the measurement date of June 30, 2021 are recognized as a
deferred outflow of resources in the fiscal year ending June 30, 2022 financial reporting period. An offsetting
cash credit adjustment for benefits paid during the fiscal year is made in the Plan Sponsor’s journal entries.
This adjustment is not explicitly shown in the GASB 75 report. The OPEB benefit payments subsequent the
measurement date of June 30, 2021 will be reflected in the Plan Sponsor’s Schedule of Changes in Net OPEB
Liability disclosure in the FY 2022/23 reporting period.
Discount Rate 6.50% as of July 1, 2020 and 6.50% June 30, 2021 for accounting disclosure purposes. Refer to the Discussion
of Discount Rates section for more information on selection of the discount rate.
Merit Increases Merit increases from the most recent CalPERS pension plan experiences study. The benefits are not payroll
related but each individual’s projected cost is allocated over their lifetime as a level-percentage of pay.
Inflation Rate 2.75% per year.
Wage Inflation 3.00% per annum, in aggregate.
Salary Increases For cost method purposes the merit increases from the CalPERS pension plan are used.
Page 25
Actuarial Methods and Assumptions
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Cost Method Allocation of Actuarial Present Value of Future Benefits for services prior and after the Measurement Date
was determined using Entry Age Normal Level % of Salary method where:
Service Cost for each individual participant, payable from date of employment to date of retirement,
is sufficient to pay for the participant’s benefit at retirement; and
Annual Service Cost is a constant percentage of the participant’s salary that is assumed to increase
according to the Payroll Growth.
Employer Funding Policy The actuarially determined contribution (ADC) assuming the City’s funding strategy is to fund the normal
cost (current accrual for benefits being earned) plus an amortization of the net (unfunded accrued) OPEB
liability over 10 years.
Census Data Census information was provided by the City as of June 30, 2021. We have reviewed it for reasonableness
and no material modifications were made to the census data.
Participation Rate 100% of eligible full-time employees under the Hybrid Plan are assumed to participate at retirement with
65% assumed to continue coverage through PEMHCA. 18% of eligible part-time employees are assumed to
elect to continue coverage under PEMHCA at retirement. For employees in the RHS Plan, the City is
responsible for the PEMHCA minimum required contribution but may be eligible for reimbursement by the
retiree from their individual RHS account. For purposes of the valuation, 35% of employees in the RHS Plan
are assumed to continue coverage under PEMHCA at retirement with the City paying the full PEMHCA
minimum required contribution.
Spousal Coverage 60% of future retirees are assumed to cover their spouse. Male spouses are assumed to be 3 years older
than female spouses. Actual spouse coverage and spouse ages are used for current retirees.
Waived Retiree Re-election 20% of the current retiree population currently under 65 re-elect PEMHCA plan at age 65; 0% of those
currently over age 65 re-elect.
Medicare Participation Assume 100% participation.
Mortality Employees and retirees: SOA Pub-2010 General Headcount Weighted Mortality Table fully generational
using Scale MP-2021.
Surviving Spouses: SOA Pub-2010 Continuing Survivor Headcount Weighted Mortality Table fully
generational using Scale MP-2021.
Page 26
Actuarial Methods and Assumptions
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Mortality Continued Disabled Retirees: SOA Pub-2010 Safety Headcount Weighted Mortality Table fully generational using Scale
MP-2021.
Disability According to the disability rates under the 2017 experience study for the CalPERS pension plan.
Turnover Rate According to the termination rates under the 2017 experience study for the CalPERS pension plan.
Retirement Rate According to the retirement rates under the 2017 experience study for the CalPERS pension plan:
Miscellaneous Employees
Tier 1 – 2.5%@ Age 55
Tier 2 – 2.0%@ Age 60
Tier 3 – 2.0%@ Age 62
Fire Employees
Tier 1 – 3.0%@ Age 50
Tier 2 – 2.0%@ Age 50
Tier 3 – 2.7%@ Age 57
Safety Employees
Tier 1 – 3.0%@ Age 50
Tier 2 – 3.0%@ Age 55
Tier 3 – 2.7%@ Age 57
Amortization of Unfunded Actuarial
Liability A new unfunded amortization bases is established each year, reflecting the updated unfunded liability,
reduced by the balances of the prior amortization bases, and then amortized over a 10 year period.
Page 27
Actuarial Methods and Assumptions
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Health Care Trend Rates FYE Medical/Rx FYE Medical/Rx
2023 6.50% 2028 5.25%
2024 6.25% 2029 5.00%
2025 6.00% 2030 4.75%
2026 5.75% 2031+ 4.50%
2027 5.50%
Minimum Contribution The CalPERS minimum required contribution is assumed to increase 4% per year.
Fixed Dollar Contribution Assumed to remain constant in future years.
Per Capita Costs Annual per capita costs were calculated based on the 2021 funding rates, actuarially increased using health
index factors and current enrollment. The costs are assumed to increase with health care trend rates.
Annual per capita costs are as shown below:
Age PERS
Choice
PERS
Select PERSCare
Anthem
HMO
Select
Anthem
HMO
Trad.
Blue
Shield
Access+
<45 $ 6,400 $ 4,500 $ 8,400 $ 5,900 $ 8,700 $ 7,800
45 – 49 $ 8,000 $ 5,600 $10,600 $ 7,300 $10,900 $ 9,700
50 – 54 $ 9,700 $ 6,800 $12,800 $ 8,900 $13,100 $11,800
55 – 59 $11,800 $ 8,300 $15,500 $10,800 $16,000 $14,300
60 – 64 $14,600 $10,200 $19,200 $13,300 $19,900 $17,700
Age Kaiser UHC
Health
Net
Salud
Health Net
SmartCare PORAC
<45 $ 5,800 $ 6,300 $ 4,300 $ 6,800 $ 6,400
45 – 49 $ 7,300 $ 7,900 $ 5,300 $ 8,600 $ 8,100
50 – 54 $ 8,800 $ 9,600 $ 6,400 $10,300 $ 9,700
55 – 59 $10,700 $11,600 $ 7,800 $12,600 $11,800
60 – 64 $13,200 $14,400 $ 9,700 $15,500 $14,700
The initial trend rate was based on a combination of
employer history, national trend surveys, and
professional judgment.
The ultimate trend rate was selected based on
historical medical CPI information.
The per capita costs
represent the cost of
coverage for a retiree-
only population.
Actuarial standards
require the recognition
of higher inherent costs
for a retired population
versus an active
population.
Page 28
All employers that utilize premium rates based on
blended active/retiree claims experience will have
an implicit subsidy. There is an exception for
Medicare plans using a true community-rated
premium rate.
$0
$400
$800
$1,200
Retiree Spouse
$270
$670
$400
$0
$430 $430
GASB Subsidy Breakdown
Retiree contribution Explicit subsidyImplicit subsidy
Actuarial Methods and Assumptions
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Explicit Subsidy The difference between (a) the premium rate and (b) the retiree contribution. Below is an example of the
monthly explicit subsidies for a category 3 retiree who is enrolled in Kaiser Region 2 in 2021.
Premium
Rate
Retiree
Contribution
Explicit
Subsidy
A B C = A – B
Retiree $ 669.77 $ 269.77 $ 400.00
Spouse $ 669.77 $ 669.77 $ 0.00
Implicit Subsidy The difference between (a) the per capita cost and (b) the premium rate. Below is an example of the
monthly implicit subsidies for a category 3 retiree age 60 with a same age spouse enrolled in Kaiser Region 2
in 2021.
Per Capita
Cost
Premium
Rate
Implicit
Subsidy
A B C = A – B
Retiree $ 1,100.00 $ 669.77 $ 430.23
Spouse $ 1,100.00 $ 669.77 $ 430.23
GASB Subsidy Breakdown Below is a breakdown of the GASB 75 monthly total cost for a category 3 retiree age 60 with a same age
spouse enrolled in Kaiser Region 2 in 2021.
Retiree Spouse
Retiree contribution $ 269.77 $ 669.77
Explicit subsidy $ 400.00 $ 0.00
Implicit subsidy $ 430.23 $ 430.23
Total monthly cost $ 1,100.00 $ 1,100.00
Page 16
APPENDIX
Page 30
Appendix
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Comparison of Participant Demographic Information
The active participants’ number below may include active employees who currently have no health care coverage. Refer to Summary of Participants
section for an accurate breakdown of active employees with and without coverage.
As of July 1, 2019 As of July 1, 2021
Active Participants 790 821
Retired Participants 730 777
Averages for Active
Age 42.1 42.2
Service 12.1 11.9
Averages for Inactive
Age 68.1 69.1
Page 31
Appendix
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Detailed Actuary’s Notes
There have been no substantive plan provision changes since the last full valuation, which was for the fiscal year ending June 30, 2020.
The following assumptions have been updated in accordance with GASB 75:
1. The mortality table has been updated from the 2017 CalPERS Public Agency Misc. Mortality to the following:
a. Employees and retirees: SOA Pub-2010 General Headcount Weighted Mortality Table fully generational using Scale MP-2021
b. Surviving Spouses: SOA Pub-2010 Continuing Survivor Headcount Weighted Mortality Table fully generational using Scale MP-2021
c. Disabled Retirees: SOA Pub-2010 Safety Headcount Weighted Mortality Table fully generational using Scale MP-2021
This change caused a decrease in liabilities.
2. Health care trend rates have been reset to an initial rate of 6.50% decreasing by 0.50% annually to an ultimate rate of 4.50% as shown below.
This change caused an increase in liabilities.
FYE Prior Current FYE Prior Current
2023 5.50% 6.50% 2028 5.00% 5.25%
2024 5.00% 6.25% 2029 5.00% 5.00%
2025 5.00% 6.00% 2030 5.00% 4.75%
2026 5.00% 5.75% 2031+ 5.00% 4.50%
2027 5.00% 5.50%
Page 32
Appendix
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
Valuation Results Summary
Below is the summary of the GASB results for fiscal year ending June 30, 2022 based on the Entry Age Normal Level % of Pay cost method with a discount
rate of 6.50%.
Present Value of Employer Contributions Explicit Implicit Total
Active $ 7,466,362 $ 7,321,721 $ 14,788,083
Retirees $ 36,158,023 $ 5,761,794 $ 41,919,817
Total $ 43,624,385 $ 13,083,515 $ 56,707,900
Total (Accrued) OPEB Liability Explicit Implicit Total
Active $ 5,054,852 $ 4,629,164 $ 9,684,016
Retirees $ 36,158,023 $ 5,761,794 $ 41,919,817
Total $ 41,212,875 $ 10,390,958 $ 51,603,833
Projected Employer Contributions Explicit Implicit Total
2022 $ 3,372,124 $ 987,469 $ 4,359,593
2023 $ 3,364,487 $ 967,136 $ 4,331,623
2024 $ 3,348,295 $ 951,059 $ 4,299,354
2025 $ 3,324,617 $ 952,236 $ 4,276,853
2026 $ 3,293,587 $ 934,445 $ 4,228,032
2027 $ 3,259,004 $ 944,895 $ 4,203,899
2028 $ 3,219,964 $ 924,679 $ 4,144,643
2029 $ 3,177,800 $ 927,613 $ 4,105,413
2030 $ 3,133,144 $ 882,911 $ 4,016,055
2031 $ 3,086,501 $ 771,541 $ 3,858,042
Page 16
GLOSSARY
Page 34
Glossary – Decrements Exhibit
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
The table below illustrates how actuarial assumptions can affect a long-term projection of future liabilities. Starting with 100 employees at age 35, the
illustrated actuarial assumptions show that 44.43 employees out of the original 100 are expected to retire and could elect retiree health benefits at age 55.
Age
#
Remaining
Employees
# of
Terminations
per Year1
# of Retirements
per Year
Total
Decrements Age
#
Remaining
Employees
# of
Terminations
per Year
# of Retirements
per Year
Total
Decrements
35 100.000 6.276 0.000 6.276 46 55.938 2.085 0.000 2.085
36 93.724 5.677 0.000 5.677 47 53.853 1.866 0.000 1.866
37 88.047 5.136 0.000 5.136 48 51.987 1.656 0.000 1.656
38 82.911 4.648 0.000 4.648 49 50.331 1.452 0.000 1.452
39 78.262 4.209 0.000 4.209 50 48.880 1.253 0.000 1.253
40 74.053 3.814 0.000 3.814 51 47.627 1.060 0.000 1.060
41 70.239 3.456 0.000 3.456 52 46.567 0.877 0.000 0.877
42 66.783 3.131 0.000 3.131 53 45.690 0.707 0.000 0.707
43 63.652 2.835 0.000 2.835 54 44.983 0.553 0.000 0.553
44 60.817 2.564 0.000 2.564 55 44.430 0.000 44.430 44.430
45 58.253 2.316 0.000 2.316
1 The above rates are illustrative rates and are not used in our GASB calculations.
0
20
40
60
80
100
35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55
Decrements Exhibit
Actives Total Terminations Total Retirements
Page 35
Glossary – Retirement Rates Exhibit
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
The table below illustrates how actuarial assumptions can affect a long-term projection of future liabilities. The illustrated retirement rates show the
number of employees who are assumed to retire annually based on 100 employees age 55 who are eligible for retiree health care coverage. The average
age at retirement is 62.0.
Age
Active
Employees
BOY
Annual
Retirement
Rates*
#
Retirements
per Year
Active
Employees
EOY
55 100.000 5.0% 5.000 95.000
56 95.000 5.0% 4.750 90.250
57 90.250 5.0% 4.513 85.738
58 85.738 5.0% 4.287 81.451
59 81.451 5.0% 4.073 77.378
60 77.378 5.0% 3.869 73.509
61 73.509 5.0% 3.675 69.834
62 69.834 30.0% 20.950 48.884
63 48.884 15.0% 7.333 41.551
64 41.551 15.0% 6.233 35.318
65 35.318 100.0% 35.318 0.000
* The above rates are illustrative rates and are not used in our GASB calculations.
0
20
40
60
80
100
55 56 57 58 59 60 61 62 63 64 65
Retirement Rates Exhibit
Actives Total Retirements
Page 36
Glossary – Definitions
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
GASB 75 defines several unique terms not commonly employed in the funding of pension and retiree health plans. The definitions of the terms used in the
GASB actuarial valuations are noted below.
1. Actuarial Assumptions – Assumptions as to the occurrence of future events affecting health care costs, such as: mortality, withdrawal, disablement
and retirement; changes in compensation and Government provided health care benefits; rates of investment earnings and asset appreciation or
depreciation; procedures used to determine the Actuarial Value of Assets; characteristics of future entrants for Open Group Actuarial Cost Methods;
and other relevant items.
2. Actuarial Cost Method – A procedure for determining the Actuarial Present Value of Future Benefits and expenses and for developing an actuarially
equivalent allocation of such value to time periods, usually in the form of a Service Cost and a Total OPEB Liability.
3. Actuarially Determined Contribution - A target or recommended contribution to a defined benefit OPEB plan for the reporting period, determined
in accordance with the parameters and in conformity with Actuarial Standards of Practice.
4. Actuarial Present Value – The value of an amount or series of amounts payable or receivable at various times, determined as of a given date by the
application of a particular set of Actuarial Assumptions. For purposes of this standard, each such amount or series of amounts is:
a. adjusted for the probable financial effect of certain intervening events (such as changes in compensation levels, Social Security, marital status,
etc.);
b. multiplied by the probability of the occurrence of an event (such as survival, death, disability, termination of employment, etc.) on which the
payment is conditioned; and
c. discounted according to an assumed rate (or rates) of return to reflect the time value of money.
5. Deferred Outflow / (Inflow) of Resources – represents the following items that have not been recognized in the OPEB Expense:
a. Differences between expected and actual experience of the OPEB plan
b. Changes in assumptions
c. Differences between projected and actual earnings in OPEB plan investments (for funded plans only)
6. Explicit Subsidy – The difference between (a) the amounts required to be contributed by the retirees based on the premium rates and (b) actual cash
contribution made by the employer.
7. Funded Ratio – The actuarial value of assets expressed as a percentage of the Total OPEB Liability.
Page 37
Glossary – Definitions
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
8. Healthcare Cost Trend Rate – The rate of change in the per capita health claims costs over time as a result of factors such as medical inflation,
utilization of healthcare services, plan design, and technological developments.
9. Implicit Subsidy – In an experience-rated healthcare plan that includes both active employees and retirees with blended premium rates for all plan
members, the difference between (a) the age-adjusted premiums approximating claim costs for retirees in the group (which, because of the effect of
age on claim costs, generally will be higher than the blended premium rates for all group members) and (b) the amounts required to be contributed by
the retirees.
10. OPEB – Benefits (such as death benefits, life insurance, disability, and long-term care) that are paid in the period after employment and that are
provided separately from a pension plan, as well as healthcare benefits paid in the period after employment, regardless of the manner in which they
are provided. OPEB does not include termination benefits or termination payments for sick leave.
11. OPEB Expense – Changes in the Net OPEB Liability in the current reporting period, which includes Service Cost, interest cost, changes of benefit terms,
expected earnings on OPEB Plan investments, reduction of active employees’ contributions, OPEB plan administrative expenses, and current period
recognition of Deferred Outflows / (Inflows) of Resources.
12. Pay-as-you-go – A method of financing a benefit plan under which the contributions to the plan are generally made at about the same time and in
about the same amount as benefit payments and expenses becoming due.
13. Per Capita Costs – The current cost of providing postretirement health care benefits for one year at each age from the youngest age to the oldest age
at which plan participants are expected to receive benefits under the plan.
14. Present Value of Future Benefits – Total projected benefits include all benefits estimated to be payable to plan members (retirees and beneficiaries,
terminated employees entitled to benefits but not yet receiving them, and current active members) as a result of their service through the valuation
date and their expected future service. The actuarial present value of total projected benefits as of the valuation date is the present value of the cost to
finance benefits payable in the future, discounted to reflect the expected effects of the time value (present value) of money and the probabilities of
payment. Expressed another way, it is the amount that would have to be invested on the valuation date so that the amount invested plus investment
earnings will provide sufficient assets to pay total projected benefits when due.
15. Real Rate of Return – the rate of return on an investment after adjustment to eliminate inflation.
Page 38
Glossary – Definitions
City of Newport Beach GASB 74/75 Valuation for Fiscal Year Ending June 30, 2022
16. Select and Ultimate Rates – Actuarial assumptions that contemplate different rates for successive years. Instead of a single assumed rate with
respect to, for example, the investment return assumption, the actuary may apply different rates for the early years of a projection and a single rate
for all subsequent years. For example, if an actuary applies an assumed investment return of 8% for year 20W0, then 7.5% for 20W1, and 7% for 20W2
and thereafter, then 8% and 7.5% select rates, and 7% is the ultimate rate.
17. Service Cost – The portion of the Actuarial Present Value of projected benefit payments that are attributed to a valuation year by the Actuarial Cost
Method.
18. Substantive Plan – The terms of an OPEB plan as understood by the employer(s) and plan members.
19. Total OPEB Liability – That portion, as determined by a particular Actuarial Cost Method, of the Actuarial Present Value of Future Benefits which is
attributed to past periods of employee service (or not provided for by the future Service Costs).