02-09-09 Regular Meeting of La Porte Fiscal Affairs Committee

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10. Post-Employment Benefits - Continued CITY OF LA PORTE, TEXAS Notes to the Financial Statements September 30, 2008 Employees who are eligible for the post employment benefits are employees who retire after January 1, 2006 and who have a combination of years of service with the City of La Porte plus age totaling 80 and who retire as a qualified annuitant under the Texas Municipal Retirement System; who retire in accordance with the City of La Porte Employee Policies Handbook; who complete at least 20 years of service with the City of La Porte are currently employed by the City of La Porte at the time of their retirement. The total premium cost is the total annual dollar allocated by budget as approved by City Council for the City of La Porte for health insurance for each employee, including employee and employer contributions. The cost allocation shall be as follows: Years of Service with City at least 20 years 21 years 22 years 23 years 24 years 25 years 26 years 27 years 28 years 29 years 30 years Retiree Cost 60% + dependent premiums 55% + dependent premiums 50% + dependent premiums 45% + dependent premiums 40% + dependent premiums 35% + dependent premiums 30% + dependent premiums 25% + dependent premiums 20% + dependent premiums 15% + dependent premiums 10% + dependent premiums City Cost 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% The costs of providing these benefits and number of retired employees are as follows: Total Cost City's Cost $558,703 $475,373 Retiree Cost Number of Retired Emolovees $83,330 61 Retirees who are entitled to receive retirement benefits under the City's retirement plan may purchase continued health benefits for the retiree and the retiree's dependents. The person must inform the City no later than the day on which the person retires that the person elects to continue coverage. If the retiree elects to continue coverage for himself andlor his dependents, once he decides to drop either type of coverage, the person and/or his dependents become eligible for coverage at the next open enrollment period. The level of coverage provided is the same level of coverage provided to current employees. The City's coverage is secondary to Medicare when the person becomes eligible for those benefits. Payment for dependent coverage will be at the same rate as payments for current employees. In June 2004, the GASB issued Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. GASB 45 requires employer governments to account for and report the annual cost of other postemployement benefits in the same manner as they do for pensions. This statement is effective for the city's financial statements for the fiscal year ending September 30, 2009. In fiscal year 2008, the city contracted with an actuarial firm to value the post employment medical plan. Results of the valuation are as follows: Actuarial Accrued Liability (AAL) Annual Required Contribution (ARC) Amortization Period $28 million $2.2 million 30 years 72