Comprehensive Annual Financial Report - St. Tammany Parish ...

ST. TAMMANY PARISH GOVERNMENT
Notes to the Financial Statements 2010
Post employment Benefit Plan Eligibility Requirements. Based on past experience, it has been assumed that entitlement
to benefits will commence three years after satisfaction of the eligibility provisions. The three year delay is to
accommodate the D.R.O.P. period. Medical benefits are provided to employees upon actual retirement. The retirement
eligibility (D.R.O.P. entry) provisions are as follows: the earliest of 30 years of service; age 55 and 25 years of service; age
60 and 10 years of service; or, age 65 and 7 years of service. Complete plan provisions are contained in the official plan
documents. Entitlement to benefits continues through Medicare to death.
Investment Return Assumption (Discount Rate). GASB Statement 45 states that the investment return assumption
should be the estimated long-term investment yield on the investments that are expected to be used to finance the payment
of benefits (that is, for a plan which is funded). Based on the assumption that the ARC will not be funded, a 4% annual
investment return has been used in this valuation. This is a conservative estimate of the expected long term return of a
balanced and conservative investment portfolio under professional management.
Health Care Cost Trend Rate. The expected rate of increase in medical cost is based on projections performed by the
Office of the Actuary at the Centers for Medicare & Medicaid Services as published in National Health Care Expenditures
Projections: 2003 to 2013, Table 3: National Health Expenditures, Aggregate and per Capita Amounts, Percent
Distribution and Average Annual Percent Change by Source of Funds: Selected Calendar Years 1990-2013, released in
January, 2004 by the Health Care Financing Administration (www.cms.hhs.gov). "State and Local" rates for 2008 through
2013 from this report were used, with rates beyond 2013 graduated down to an ultimate annual rate of 5.0% for 2016 and
later.
Mortality Rate. The 1994 Group Annuity Reserving (94GAR) table, projected to 2002, based on a fixed blend of 50% of
the unloaded male mortality rate and 50% of the unloaded female mortality rates, was used. This is a published mortality
table which was designed to be used in determining the value of accrued benefits in defined benefit pension plans.
Method of Determining Value of Benefits. The "value of benefits" has been assumed to be the portion of the premium
after the retirement date expected to be paid by the employer for each retiree and has been used as the basis for calculating
the actuarial present value of OPEB benefits to be paid. The medical rates provided are "blended" rates for active and
retired prior to Medicare eligibility. We have, therefore, estimated the total “unblended” rates as required by GASB 45 for
valuation purposes to be 130% of the blended rates prior to Medicare eligibility. The appropriate percentage of the blended
rate paid by the retiree (one minus the percentage paid by the employer) was then deducted from the gross unblended rate
to determine the resulting employer contribution. After Medicare eligibility at age 65, the rates provided are “unblended”
rates, as mandated by GASB 45, and vary by five-year age brackets from $346.64 monthly for ages 66 to 69 up to $512.04
monthly for ages over 85. It has been assumed that 50% of retirees would decline coverage upon Medicare eligibility
(typically at age 65) because of the premium size required of the retiree.
G. Other Post-Employment Benefits
The Parish provides a Post-employment Health Plan (the Plan) for employees hired by the Parish. The Plan provides for
individual employee accounts, in which the funds within these accounts can be used for post-employment medical
premiums and expenses.
Employees with three or more years of service who resign or retire are paid for one-third of their accumulated sick time.
An employee with ten or more years of service who resigns or retirees, the remaining two-thirds of sick leave is deposited
into individual employee accounts for post-employment health costs. At December 31, 2010, the estimated liability
associated with post-employment health benefits is $682,550, and is recognized in the Post-employment Health Plan
internal service fund.
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