Notes to the Financial Statements
June 30, 2015
Note 13 Other Postemployment Benefits (OPEB)
The State sponsors two defined benefit OPEB plans: the State Employee OPEB
Plan (SEOPEBP) and the Retired Teacher Healthcare Plan (RTHP). SEOPEBP is
administered by the State Comptroller (Healthcare Policy and Benefit Division),
and RTHP is administered by the Teachers'
Retirement Board. None of these plans
issues stand-alone financial statements. However, financial statements for these
plans are presented in Note No. 14.
State Employee OPEB Plan
Plan Description
SEOPEBP is a single-employer defined benefit OPEB plan that covers retired
employees of the State who are receiving benefits from any State-sponsored
retirement system, except the Teachers'
Retirement System and the Municipal
Employees'
Retirement System. The plan provides healthcare and life insurance
benefits to eligible retirees and their spouses. Plan benefits, required
contributions of plan participants and the State, and other plan provisions are
described in Sections 5-257 and 5-259 of the General Statutes. As of June 30,
2013 (date of the latest actuarial valuation), the plan had 67,593 retirees and
beneficiaries receiving benefits.
Plan Funding
The contribution requirements of the plan members and the State are
established and may be amended by the State legislature, or by agreement between
the State and employees unions, upon approval by the State legislature. The cost
of providing plan benefits is financed approximately 100 percent by the State on
a pay-as-you-go basis through an annual appropriation in the General fund.
Administrative costs of the plan are financed by the State.
Retired Teacher Healthcare Plan
Plan Description
RTHP is a single-employer defined benefit OPEB plan that covers retired
teachers and administrators of public schools in the State who are receiving
benefits from the Teachers'
Retirement System. The plan provides healthcare
insurance benefits to eligible retirees and their spouses. Plan benefits,
required contributions of plan participants and the State, and other plan
provisions are described in Section 10-183 of the General Statutes. As of June
30, 2014 (date of the latest actuarial valuation), the plan had 37,055 retirees
and beneficiaries receiving benefits.
Plan Funding
The contribution requirements of plan members and the State are
established and may be amended by the State legislature. The cost of providing
plan benefits is financed on a pay-as-you-go basis as follows: active teachers
pay for one third of plan costs through a contribution of 1.25 percent of their
annual salaries, retired teachers pay for one third of plan costs through
monthly premiums, and the State pays for one third of plan costs through an
annual appropriation in the General Fund. Administrative costs of the plan are
financed by the State.
Annual OPEB Cost and Net OPEB Obligation
The State'
s annual OPEB cost and the net OPEB obligation for each plan
for the current fiscal year were as follows (amounts in thousands):
SEOPEBP | RTHP | |
---|---|---|
Annual Required Contribution | $1,513,336 | $125,620 |
Interest on Net OPEB Obligation | 399,381 | 36,881 |
Adjustment to Annual Required Contribution | (371,050) | (44,326) |
Annual OPEB Cost | 1,541,667 | 118,175 |
Contributions Made | 546,284 | 25,145 |
Increase in net OPEB Obligation | 995,383 | 93,030 |
Net OPEB Obligation - Beginning of Year | 7,006,676 | 887,838 |
Net OPEB Obligation - End of Year | $8,002,059 | $980,868 |
In addition, other related information for each plan for the past three fiscal years was as follows (amounts in thousands):
Annual | Percentage of | Net | ||
---|---|---|---|---|
Fiscal | OPEB | Annual OPEB | OPEB | |
Year | Cost | Cost Contributed | Obligation | |
SEOPEBP | ||||
2015 | $1,541,667 | 35.4% | $8,002,059 | |
2014 | $1,560,006 | 33.0% | $7,006,676 | |
2013 | $1,316,612 | 41.2% | $5,961,366 | |
RTHP | ||||
2015 | $118,175 | 21.3% | $980,868 | |
2014 | $192,851 | 13.5% | $887,838 | |
2013 | $179,620 | 15.1% | $720,942 |
Funded Status and Funding Progress
The following is funded status information for the SEOPEBP and the RTHP
as of June 30, 2013 and 2014, respectively, date of the latest actuarial
valuations (amounts in million):
Actuarial | Actuarial | Unfunded | UAAL as a | |||
---|---|---|---|---|---|---|
Value of | Accrued | AAL | Funded | Covered | Percentage of | |
Assets | Liability(AAL) | (UAAL) | Ratio | Payroll | Covered Payroll | |
(a) | (b) | (b-a) | (a/b) | (c) | ((b-a)/c) | |
SEOPEBP | $143.8 | $19,676.3 | $19,532.4 | 0.7% | $3,539.8 | 551.8% |
RTHP | $0 | $2,433.0 | $2,433.0 | 0.0% | $3,831.6 | 63.5% |
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding in progress, presented as required supplementary information following the notes to the financial statements, present multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.
Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on
the substantive plan (the plan as understood by the State and the plan members)
and include the types of benefits provided at the time of each valuation and the
historical pattern of sharing of benefit costs between the State and plan
members to that point. The actuarial methods and assumptions used include
techniques that are designed to reduce the effects of short-term volatility in
actuarial accrued liabilities and the actuarial value of assets, consistent with
the long-term perspective of the calculations.
Significant methods and assumptions were as follows:
SEOPEBP | RTHP | |
---|---|---|
Actuarial Valuation Date | 6-30-13 | 6-30-14 |
Actuarial Cost Method | Projected Unit Credit | Entry Age |
Amortization Method | Level Percent of Pay, Closed, 30 Years | Level Percent of Pay, Open |
Remaining Amortization Period | 23 Years | 25 Years |
Asset Valuation Method | Market Value of Assets | Market Value of Assets |
Actuarial Assumptions: | ||
Investment Rate of Return | 5.70% | 4.5% (includes 3% inflation rate) |
Projected Salary Increases | 3.75% | 3.75%-7.00% (includes 3% inflation rate) |
Healthcare Inflation Rate | 7.00% graded to 5.00% over 5 years | 5.75% Initial, 5% Ultimate |
Other OPEB Plan
The State acts solely as the administrator and custodian of the assets
of the Policemen and Firemen Survivors'
Benefit Fund (PFSBF). The State makes no
contribution to and has only a fiduciary responsibility for this fund. The fund
does not issue stand-alone financial statements. However, financial statements
for this fund are presented in Note No. 14.
Plan Description
PFSBF is a cost-sharing multiple-employer defined benefit OPEB plan that
covers policemen and firemen of participating municipalities in the State. As of
June 30, 2014 there were 9 municipalities participating in the plan with a total
membership of 591 active members. The plan provides survivor benefits upon the
death of an active or retired member of the fund to his spouse and dependent
children. Plan benefits, contribution requirements of plan members and
participant municipalities, and other plan provisions are described in Sections
7-323a to 7-323i of the General Statutes.
Contributions
Plan members are required to contribute one percent of their annual
salary. Participating municipalities are required to contribute at an
actuarially determined rate. Administrative costs of the plan are financed by
participating municipalities.