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1 Introduction City of Lino Lakes Minnesota retained Hanf Actuarial and Richard Johnson, FSA to perform a valuation of its postretirement Medical benefit plans for the purpose of determining its annual cost in accordance with GASB Statement No. 45 - Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions (GASB 45). The City will be required to report information on its financial statements under GASB 45 beginning with the 2008 fiscal year, so the purpose of this report is to provide to the City the items GASB 45 requires on the City's financial statements for 2008. Actuarial valuation results are shown in this report on two bases: (1) assuming the plan is funded with assets that are not specifically dedicated to postretirement medical benefits, and (2) assuming that the plan is funded with assets that are specifically dedicated to postretirement medical benefits. The difference between these two valuation bases is the discount rate to be used to calculate the present value of future cash flows. When the plan is funded with assets that are not dedicated to postretirement medical benefits (identified herein as "Unfunded Plan "), GASB 45 prescribes that the actuary use a discount rate that reflects the rate of return on the City's general funds. We have been instructed by the City that the rate to be used for this purpose is 4.00%. It is our interpretation of GASB 45 that the plan would be considered unfunded under the City's present funding practice because assets in the City's self insured medical plan fund can be used to pay for medical benefits for both active and retired employees. When the plan is funded with assets that are available only for postretirement medical benefits (identified herein as "Funded Plan "), GASB 45 directs the actuary to use a discount rate that reflects the rate of return on the funds that are dedicated to the benefits. We were instructed by the City to use a discount rate of 6.0% for this purpose. This report shows the City's Actuarial Accrued Liability (AAL) for benefits payable under the plan and it shows the City's Annual Required Contribution (ARC) associated with those benefits, both those in pay status and those accruing to future retirees. The report also describes the actuarial assumptions and methods selected by the City for use in the calculation of these figures, and it also contains a glossary of terms used by GASB 45. City of Lino Lakes Minnesota, Retiree Health Benefit Plan - November 2008