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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2015 Note 19 OTHER POSTEMPLOYMENT BENEFIT PLAN At December 31, 2008, the City adopted Governmental Accounting Standards Board (GASB) Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions. The City engaged an actuary to detennine the City's liability for postemployment healthcare benefits other than pensions as of January I, 2014. A. PLAN DESCRIPTION The City provides benefits for retirees as required by M"mnesota Statute §471.61 subdivision 2b. Active employees, who retire from the City when over age 50 and with 20 years of service, may continue coverage with respect to both themselves and their eligible dependent(s) under the City's health benefits program until age 65. Pursuant to the provisions of the plan, retirees are required to pay the total premium cost. As of December 31, 2015 there were approximately 48 active participants and 6 retired participants receiving benefits from the City's health plans. B. FUNDING POLICY The City funds its OPEB obligation on a pay as you go basis. For fiscal year 2015, the City contributed $29,984 to the plan. C. ANNUAL OPED COST AND NET OPED OBLIGATION The City's annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed thirty years. The following table shows the components of the City's annual OPEB cost for the year, the amount actoally paid from the plan, and changes in the City's net OPEB obligation. Annual Required Contribution Interest on Net OPEB Obligation Adjustment to Annual Required Contribution Annual OPEB Cost (Expense) Contributions Made Increase in Net OPEB Obligation Net OPEB Obligation-Beginning of Year Net OPEB Obligation -End ofY ear $ 31,590 972 (3,749) 28,813 (28,984) (171) 91,023 $ 90,852 The City's annual OPEB cost, the percentage of the annual OPEB cost contributed to the plan, and the net OPEB obligation for 2015 and the two preceding years: Percentage Fiscal Annual of Annual Net Year OPEB OPEBCost OPEB Ended Cost Contributed Obliaation 12/3112013 $ 27,437 77.6% $ 83,969 12/31/2014 26,468 73.3% 91,023 12/31/2015 28,814 99.4% 90,852 CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2015 Note 19 OTHER POSTEMPLOYMENT BENEFIT PLAN (CONTINUED> D. FUNDED STATUS AND FUNDING PROGRESS As of January I, 2014, the most recent actuarial valuation date, the City's unfunded actuarial accrued liability (UAAL) was $547,626. The annual payroll for active employees covered by the plan in the actuarial valuation was $5,265,020 for a ratio ofUAAL to covered payroll of 10.4%. 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 healthcare cost trends. 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 progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. E. ACTUARIAL METHODS AND ASSUMPTIONS Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and 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 employer 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. In the January I, 2014 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 1% investment rate ofretorn (net of administrative expenses), which is a blended rate of the expected long-term investment returns on plan assets and on the employer's own investments calculated based on the funded level of the plan at the valuation date. The initial healthcare trend rate was 8%, decreasing to an ultimate rate of 3% after six years. The UAAL is being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization period at December 31,2015 was notto exceed 30 years. Note 20 PRIOR PERIOD ADJUSTMENT DUE TO CHANGE IN ACCOUNT PRINCIPLE During fiscal year ended December 31,2015, the City adopted GASB Statement No. 68, Accounting and Financial Reporting for Pensions, and the related Statement No. 71. As a result, the City's net position as of December 31, 2014 bas been restated to reflect the recognition of the City's proportionate share of the Public Employees' Retirement Association of Minnesota General Employees' Retirement Fund's (GERF) and Public Employees' Police and Fire Fund's (PEPFF) net pension liability and related deferred inflows and outflows of resources. Net Position, December 31, 2014, as Previously Reported Cumulative Effect of Application of GASB 68, Net Pension Liability Net Position, December 31, 2014, as Restated Governmental Business-type Activities Activities $ 48,734,868 $ 41,444,300 (4,376,427) (77,959) $ 44,358,441 $ 41,366,341 IV-33