HomeMy WebLinkAbout2018 Milliman FP and OPEB UpdateMilliman Financial Reporting Valuation
Issued May 1, 2019
City of Renton
Firefighters’ Pension Fund and Retiree Medical and
Long-Term Care Benefits for LEOFF 1 Employees
GASB 67, 68 and 75 Disclosures
Fiscal Year: January 1, 2018 to December 31, 2018
Prepared by:
Daniel R. Wade
FSA, EA, MAAA
Jessica M. Gardner
ASA, MAAA
Milliman, Inc.
1301 Fifth Avenue, Suite 3800
Seattle WA 98101-2605
Tel +1 206 624 7940
milliman.com
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 i
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Table of Contents
Certification ................................................................................................................................................. 1
Executive Summary .................................................................................................................................... 3
GASB Statement No. 67 Schedule of Employer Contributions .............................................................. 4
GASB Statement No. 67 Money-Weighted Rate of Return .................................................................... 5
GASB Statement No. 67 Long-Term Expected Rate of Return ............................................................. 6
GASB Statement No. 67 Calculation of the Discount Rate .................................................................... 7
GASB Statement No. 67 Net Pension Liability ....................................................................................... 8
GASB Statement No. 67 Changes in Net Pension Liability ................................................................... 9
GASB Statement No. 67 Schedule of Changes in Net Pension Liability and Related Ratios.............. 10
GASB Statement No. 68 Pension Expense ......................................................................................... 11
GASB Statement No. 68 Schedule of Deferred Inflows and Outflows of Resources ........................... 12
Overview of GASB 75 ............................................................................................................................... 13
GASB Statement No. 75 Calculation of the Discount Rate .................................................................. 14
GASB Statement No. 75 Total OPEB Liability ..................................................................................... 15
GASB Statement No. 75 Changes in Total OPEB Liability .................................................................. 16
GASB Statement No. 75 Schedule of Changes in Total OPEB Liability and Related Ratios .............. 17
GASB Statement No. 75 OPEB Expense ............................................................................................ 18
GASB Statement No. 75 Schedule of Deferred Inflows and Outflows of Resources ........................... 19
Glossary ..................................................................................................................................................... 20
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 1
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Certification
Actuarial computations presented in this report under Statements Nos. 67, 68 and 75 of the Governmental
Accounting Standards Board are for purposes of assisting the City in fulfilling its financial accounting
requirements. No attempt is being made to offer any accounting opinion or advice. This report is for fiscal year
January 1, 2018 to December 31, 2018. The reporting date for determining plan assets and obligations is
December 31, 2018. The calculations enclosed in this report have been made on a basis consistent with our
understanding of the plan provisions. Determinations for purposes other than meeting financial reporting
requirements may be significantly different than the results contained in this report. Accordingly, additional
determinations may be needed for other purposes, such as judging benefit security or meeting employer
funding requirements.
In preparing this report, we relied, without audit, on information as of January 1, 2017, December 31, 2017
and December 31, 2018 furnished by the City. This information includes, but is not limited to, statutory
provisions, member census data, and financial information. Please see Milliman's actuarial valuation reports
dated March 31, 2017 (pension) and July 7, 2017 (OPEB) for plan membership and other information on the
plan's participant group as of January 1, 2017 as well as summaries of the plan provisions and summaries of
the actuarial methods and assumptions used for the January 1, 2017 valuations.
We performed a limited review of the census and financial information used directly in our analysis and have
found them to be reasonably consistent and comparable with information used for other purposes. The
valuation results depend on the integrity of this information. If any of this information is inaccurate or
incomplete, our results may be different and our calculations may need to be revised.
We hereby certify that, to the best of our knowledge, this report, including all costs and liabilities based on
actuarial assumptions and methods, is complete and accurate and determined in conformance with generally
recognized and accepted actuarial principles and practices. We believe that this report is consistent with the
Actuarial Standards of Practice promulgated by the Actuarial Standards Board and the applicable Code of
Professional Conduct, and supporting Recommendations of the American Academy of Actuaries.
This report is only an estimate of the Plan's financial condition as of a single date. It can neither predict the
Plan's future condition nor guarantee future financial soundness. Actuarial valuations do not affect the
ultimate cost of Plan benefits, only the timing of Plan contributions. While the valuation is based on an array of
individually reasonable assumptions, other assumption sets may also be reasonable and valuation results
based on those assumptions would be different. No one set of assumptions is uniquely correct. Determining
results using alternative assumptions is outside the scope of our engagement.
Future actuarial measurements may differ significantly from the current measurements presented in this
report due to factors such as, but not limited to, the following: plan experience differing from that anticipated
by the economic or demographic assumptions; changes in economic or demographic assumptions; increases
or decreases expected as part of the natural operation of the methodology used for these measurements
(such as the end of an amortization period or additional cost or contribution requirements based on the Plan’s
funded status); and changes in plan provisions or applicable law. Due to the limited scope of the actuarial
assignment, we did not perform an analysis of the potential range of such future measurements.
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 2
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Milliman’s work is prepared solely for the internal use and benefit of the City of Renton. To the extent that
Milliman's work is not subject to disclosure under applicable public records laws, Milliman’s work may not be
provided to third parties without Milliman’s prior written consent. Milliman does not intend to benefit or create
a legal duty to any third party recipient of its work product. Milliman’s consent to release its work product to
any third party may be conditioned on the third party signing a Release, subject to the following exceptions:
(a) the Plan Sponsor may provide a copy of Milliman’s work, in its entirety, to the Plan Sponsor's professional
service advisors who are subject to a duty of confidentiality and who agree to not use Milliman’s work for any
purpose other than to benefit the Fund; and (b) the Plan Sponsor may provide a copy of Milliman's work, in its
entirety, to other governmental entities, as required by law.
No third party recipient of Milliman's work product should rely upon Milliman's work product. Such recipients
should engage qualified professionals for advice appropriate to their specific needs.
The consultants who worked on this assignment are retirement actuaries. Milliman's advice is not intended to
be a substitute for qualified legal or accounting counsel.
The signing actuaries are independent of the Plan Sponsor. We are not aware of any relationship that would
impair the objectivity of our work.
On the basis of the foregoing, we hereby certify that, to the best of our knowledge and belief, this report is
complete and has been prepared in accordance with generally recognized accepted actuarial principles and
practices. We are members of the American Academy of Actuaries and meet the Qualification Standards to
render the actuarial opinion contained herein.
Daniel R. Wade, FSA, EA, MAAA Jessica M. Gardner, ASA, MAAA
Consulting Actuary Associate Actuary
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 3
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Executive Summary
Relationship Between Valuation Date, Measurement Date, and Reporting Date
The Valuation Date is January 1, 2017. This is the date as of which the actuarial valuation is performed. The
Measurement Date is December 31, 2018. This is the date as of which the net pension liability under GASB
67 and 68 and total OPEB liability under GASB 75 are determined. The Reporting Date is December 31,
2018. This is the Plan's and/or employer's fiscal year ending date.
Actuarially Determined Contribution
For this report, the actuarially determined contribution is equal to zero for all years, as the plan assets have
been significantly greater than the liabilities. It should be noted that for the fiscal years ending 2007-2013, the
reported Annual Required Contribution under GASB 25 and 27 had been negative.
Changes of Net Pension Liability and Total OPEB Liability
GASB Statement 67 requires a schedule of changes in Net Pension Liability from year to year. Similarly,
GASB 75 requires a schedule of changes in the Total OPEB Liability. For this report, both the December 31,
2017 and the December 31, 2018 amounts in this schedule are based on the January 1, 2017 actuarial
valuation. The discount rate used for the December 31, 2017 financial reporting was 3.50%. The discount rate
used for the December 31, 2018 financial reporting was 4.00%.
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 4
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Firefighters’ Pension Fund
GASB Statement No. 67 Schedule of Employer Contributions
* Employer contributions for pensions are total contributions to the Fund net of disbursements from the Fund for medical
expenses under RCW 41.26.150. It includes revenues from fire insurance premium taxes. Prior to 2014, administrative
expenses were also subtracted from employer contributions.
Fiscal Year Actuarially Actual Contribution Contribution
Ending Determined Employer Deficiency Covered as a % of
December 31 Contribution Contribution*(Excess)Payroll Covered Payroll
2009 $0 $70,327 ($70,327)$0 N/A
2010 0 107,068 (107,068)0 N/A
2011 0 102,354 (102,354)0 N/A
2012 0 118,775 (118,775)0 N/A
2013 0 124,391 (124,391)0 N/A
2014 0 142,706 (142,706)0 N/A
2015 0 146,358 (146,358)0 N/A
2016 0 148,034 (148,034)0 N/A
2017 0 150,951 (150,951)0 N/A
2018 0 154,275 (154,275)0 N/A
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 5
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Firefighters’ Pension Fund
GASB Statement No. 67 Money-Weighted Rate of Return
Calculation of Money-Weighted Rate of Return
The money-weighted rate of return considers the changing amounts actually invested during a period and
weights the amount of pension plan investments by the proportion of time they are available to earn a return
during that period. External cash flows are determined on a monthly basis and are assumed to occur at the
beginning of each month. External cash inflows are netted with external cash outflows, resulting in a net
external cash flow in each month. The money-weighted rate of return is calculated net of investment
expenses.
Fiscal Year Net
Ending Money-Weighted
December 31 Rate of Return
2009 N/A
2010 N/A
2011 N/A
2012 N/A
2013 N/A
2014 4.31%
2015 1.42%
2016 1.43%
2017 1.19%
2018 1.26%
Net External
Net External Periods Period Cash Flows
Cash Flows Invested Weight With Interest
Beginning Value - January 1, 2018 $9,619,368 12.00 1.00 $9,740,911
Monthly net external cash flows:
January (19,633)12.00 1.00 (19,881)
February (18,676)11.00 0.92 (18,893)
March (17,181)10.00 0.83 (17,361)
April (14,300)9.00 0.75 (14,435)
May 139,976 8.00 0.67 141,158
June (14,300)7.00 0.58 (14,404)
July (15,706)6.00 0.50 (15,805)
August (15,706)5.00 0.42 (15,789)
September (15,706)4.00 0.33 (15,771)
October (15,706)3.00 0.25 (15,755)
November (15,706)2.00 0.17 (15,739)
December (15,706)1.00 0.08 (15,722)
Ending Value - December 31, 2018 9,702,514 9,702,514
Money-Weighted Rate of Return 1.26%
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 6
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Firefighters’ Pension Fund
GASB Statement No. 67 Long-Term Expected Rate of Return
The long-term expected rate of return is determined by combining expected inflation to expected long-term
real returns and reflecting expected volatility and correlation. The capital market assumptions are per
Milliman's investment consulting practice as of December 31, 2018.
Asset Class
Cash BAML 90-Day T-Bills
Short-Term Bonds Bloomberg Barclays 1-3 Yr Gvt/Credit
Long-Term Bonds Bloomberg Barclays LT Gvt/Credit
Assumed Inflation - Mean
Long-Term Expected Rate of Return
Index
Long-Term Expected
Real Rate of Return
0.33%
1.46%
2.23%
2.25%
4.00%
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 7
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Firefighters’ Pension Fund
GASB Statement No. 67 Calculation of the Discount Rate
GASB 67 generally requires that a blended discount rate be used to measure the Total Pension Liability (the
Actuarial Accrued Liability calculated using the Individual Entry Age Normal Cost Method). The long-term
expected return on plan investments may be used to discount liabilities to the extent that the Plan’s Fiduciary
Net Position (fair market value of assets) is projected to cover benefit payments and administrative expenses.
A 20-year high quality (AA/Aa or higher) municipal bond rate must be used for periods where the Fiduciary
Net Position is not projected to cover benefit payments and administrative expenses.
The Bond Buyer General Obligation 20-bond municipal bond index for bonds that mature in 20 years is 3.44%
as of December 28, 2017. Rounding this to the nearest 1/4% results in a discount rate of 3.50% as of the
December 31, 2017 measurement date.
The Bond Buyer General Obligation 20-bond municipal bond index for bonds that mature in 20 years is 4.10%
as of December 27, 2018. Rounding this to the nearest 1/4% results in a discount rate of 4.00% as of the
December 31, 2018 measurement date. Using 4.00% for both the long-term expected rate of return and the
bond index will mean that 4.00% could be used as the single discount rate.
This will need to be re-evaluated as of later measurement dates.
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 8
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Firefighters’ Pension Fund
GASB Statement No. 67 Net Pension Liability
Net Pension Liability
The total pension liability was determined by an actuarial valuation as of the valuation date, calculated based
on the discount rate and actuarial assumptions below, and was then projected forward to the measurement
date. There were no significant changes during this period. Any significant changes would need to be
reflected as prescribed by GASB 67.
Discount Rate
Other Key Actuarial Assumptions
Valuation Date January 1, 2017 January 1, 2017
Measurement Date December 31, 2017 December 31, 2018
Inflation 2.25% 2.25%
Salary increases
including inflation
3.25% 3.25%
Mortality RP-2000 Mortality Table (combined
healthy) with generational projection
using 100% of Projection Scale BB,
with ages set back one year for males
and forward one year for females (set
forward two years for disabled
members).
RP-2000 Mortality Table (combined
healthy) with generational projection
using 100% of Projection Scale BB,
with ages set back one year for males
and forward one year for females (set
forward two years for disabled
members).
Actuarial cost method Entry Age Normal Entry Age Normal
December 31, 2017 December 31, 2018
Total pension liability $2,784,194 $2,591,902
Fiduciary net position 9,619,368 9,702,514
Net pension liability (6,835,174)(7,110,612)
Fiduciary net position as a % of total pension liability 345.50%374.34%
Covered payroll 0 0
Net pension liability as a % of covered payroll N/A N/A
Discount rate 3.50%4.00%
Long-term expected rate of return, net of investment expense 3.50%4.00%
Municipal bond rate 3.50%4.00%
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 9
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Firefighters’ Pension Fund
GASB Statement No. 67 Changes in Net Pension Liability
Sensitivity Analysis
The following presents the net pension liability of the City, calculated using the discount rate of 4.00%, as well
as what the City's net pension liability would be if it were calculated using a discount rate that is 1 percentage
point lower (3.00%) or 1 percentage point higher (5.00%) than the current rate.
Increase (Decrease)
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
Changes in Net Pension Liability (a)(b)(a) - (b)
Balances as of December 31, 2017 $2,784,194 $9,619,368 ($6,835,174)
Changes for the year:
Service cost 0 0
Interest on total pension liability 94,105 94,105
Effect of plan changes 0 0
Effect of economic/demographic gains or losses 0 0
Effect of assumptions changes or inputs (93,773)(93,773)
Benefit payments (192,624)(192,624)0
Medical payments from fund 0 0
Employer contributions 0 0
Contributions from state fire insurance premium tax 154,275 (154,275)
Net investment income 121,495 (121,495)
Adminstrative expenses 0 0
Balances as of December 31, 2018 2,591,902 9,702,514 (7,110,612)
1%Current 1%
Decrease Discount Rate Increase
3.00%4.00%5.00%
Total pension liability $2,785,622 $2,591,902 $2,420,962
Fiduciary net position 9,702,514 9,702,514 9,702,514
Net pension liability (6,916,892)(7,110,612)(7,281,552)
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 10
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or
liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product.
Firefighters’ Pension Fund
GASB Statement No. 67 Schedule of Changes in Net Pension Liability and Related Ratios
$ Thousands
Fiscal Year Ending December 31
2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
Total Pension Liability
Service cost $0 $0 $0 $0 $0 N/A N/A N/A N/A N/A
Interest on total pension liability 94 103 106 109 112 N/A N/A N/A N/A N/A
Effect of plan changes 0 0 0 0 0 N/A N/A N/A N/A N/A
Effect of economic/demographic (gains) or losses 0 0 (29)0 0 N/A N/A N/A N/A N/A
Effect of assumption changes or inputs (94)52 (125)0 0 N/A N/A N/A N/A N/A
Benefit payments (193)(240)(208)(205)(204)N/A N/A N/A N/A N/A
Net change in total pension liability (192)(84)(256)(96)(92)N/A N/A N/A N/A N/A
Total pension liability, beginning 2,784 2,868 3,125 3,221 3,313 N/A N/A N/A N/A N/A
Total pension liability, ending (a)2,592 2,784 2,868 3,125 3,221 N/A N/A N/A N/A N/A
Fiduciary Net Position
Employer contributions $0 $0 $0 $0 $0 N/A N/A N/A N/A N/A
Contributions from state fire insurance premium tax 154 151 148 146 143 N/A N/A N/A N/A N/A
Investment income net of investment expenses 121 114 136 134 394 N/A N/A N/A N/A N/A
Benefit payments (193)(240)(208)(205)(204)N/A N/A N/A N/A N/A
Medical payments from fund 0 0 0 0 0 N/A N/A N/A N/A N/A
Administrative expenses 0 (12)0 (12)0 N/A N/A N/A N/A N/A
Net change in plan fiduciary net position 83 13 75 63 331 N/A N/A N/A N/A N/A
Fiduciary net position, beginning 9,619 9,607 9,531 9,468 9,136 N/A N/A N/A N/A N/A
Fiduciary net position, ending (b)9,703 9,619 9,607 9,531 9,468 N/A N/A N/A N/A N/A
Net pension liability, ending = (a) - (b)($7,111)($6,835)($6,738)($6,407)($6,247)N/A N/A N/A N/A N/A
Fiduciary net position as a % of total pension liability 374.34%345.50%334.92%305.03%293.97%N/A N/A N/A N/A N/A
Covered payroll $0 $0 $0 $0 $0 N/A N/A N/A N/A N/A
Net pension liability as a % of covered payroll N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
This schedule is presented to illustrate the requirement to show information for 10 years.However,recalculations of prior years are not required,and if prior years are not reported in accordance with
the current GASB standards, they should not be reported.
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 11
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Firefighters’ Pension Fund
GASB Statement No. 68 Pension Expense
Paragraph 33d of GASB Statement 68 states that contributions to the pension plan from non-employer
contributing entities that are not in a special funding situation should be recognized as revenue. Accordingly,
we have treated the contributions from the state fire insurance premium tax as revenue.
As of December 31, 2018, the deferred inflows and outflows of resources are as follows:
January 1, 2017 to January 1, 2018 to
Pension Expense December 31, 2017 December 31, 2018
Service cost $0 $0
Interest on total pension liability 103,111 94,105
Effect of plan changes 0 0
Administrative expenses 12,445 0
Medical payments from fund 0 0
Contributions from state fire insurance premium tax (150,951)(154,275)
Expected investment return net of investment expenses (358,370)(336,013)
Recognition of Deferred Inflows/Outflows of Resources
Recognition of economic/demographic gains or losses 0 0
Recognition of assumption changes or inputs 52,394 (93,773)
Recognition of investment gains or losses 127,426 170,330
Pension Expense (213,945)(319,626)
Deferred Inflows Deferred Outflows
Deferred Inflows / Outflows of Resources of Resources of Resources
Differences between expected and actual experience $0 $0
Changes of assumptions 0 0
Net difference between projected and actual earnings 0 436,137
Contributions made subsequent to measurement date 0 0
Total 0 436,137
Year ended December 31:
2019 $170,332
2020 131,098
2021 91,805
2022 42,902
2023 0
Thereafter 0
Amounts currently reported as deferred outflows of resources and deferred inflows of resources related to
pensions will be recognized in pension expense as follows*:
* Note that additional future deferred inflows and outflows of resources may impact these numbers.
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 12
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Firefighters’ Pension Fund
GASB Statement No. 68 Schedule of Deferred Inflows
and Outflows of Resources
Amount Balance of Balance of
Original Recognized Deferred Deferred
Original Date Recognition in 12/31/2018 Inflows Outflows
Amount Established Period*Expense 12/31/2018 12/31/2018
Investment $214,518 12/31/2018 5.0 $42,904 $0 $171,614
(gains) or losses 244,505 12/31/2017 5.0 48,901 0 146,703
196,469 12/31/2016 5.0 39,294 0 78,587
196,157 12/31/2015 5.0 39,231 0 39,233
Total 170,330 0 436,137
Economic/demographic 0 12/31/2018 0.0 0 0 0
(gains) or losses Total 0 0 0
Assumption (93,773)12/31/2018 1.0 (93,773)0 0
changes or inputs Total (93,773)0 0
* Investment (gains)/losses are recognized in pension expense over a period of five years;
economic/demographic (gains)/losses and assumption changes or inputs are recognized over the average
remaining service life for all active and inactive members; immediate recognition is used when the average
remaining service life is less than one.
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 13
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Overview of GASB 75
The Governmental Accounting Standards Board (GASB) released new accounting standards for public
postemployment benefit plans other than pension (OPEB) and participating employers in 2015. These
standards, GASB Statements No. 74 and 75, have substantially revised the accounting requirements
previously mandated under GASB Statements No. 43 and 45. The most notable change is that the Annual
Required Contribution (ARC) has been eliminated and the Net OPEB Liability will be an item on the
employer's financial statement rather than a footnote entry.
GASB 74 applies to financial reporting for public OPEB plans funded by OPEB trusts and is required to be
implemented for plan fiscal years beginning after June 15, 2016. Note that a plan's fiscal year might not be
the same as the employer's fiscal year. GASB 74 does not apply for plans without employer assets in a
dedicated trust meeting the criteria established in paragraph 3 of GASB 74. For this reason, we believe that
GASB 74 does not apply for the City.
GASB 75 governs the specifics of accounting for public OPEB plan obligations for participating employers and
is required to be implemented for employer fiscal years beginning after June 15, 2017. GASB 75 requires a
liability for OPEB obligations, known as the Net OPEB Liability (Total OPEB Liability for unfunded plans), to
be recognized on the balance sheets of participating employers. Changes in the Net OPEB Liability (Total
OPEB Liability for unfunded plans) will be immediately recognized as OPEB Expense on the income
statement or reported as deferred inflows/outflows of resources depending on the nature of the change. For
unfunded plans, all changes are recognized in expense immediately.
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 14
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Retiree Medical Benefits for FPF and LEOFF 1 Employees
GASB Statement No. 75 Calculation of the Discount Rate
GASB 75 requires the discount rate used to measure the Total OPEB Liability (the Actuarial Accrued Liability
calculated using the Individual Entry Age Normal Cost Method) to be a yield or index rate for 20-year, tax-
exempt general obligation municipal bonds with an average rating of AA/Aa or higher.
The Bond Buyer General Obligation 20-bond municipal bond index for bonds that mature in 20 years is 3.44%
as of December 28, 2017. Rounding this to the nearest 1/4% results in a discount rate of 3.50% as of the
December 31, 2017 measurement date.
The Bond Buyer General Obligation 20-bond municipal bond index for bonds that mature in 20 years is 4.10%
as of December 27, 2018. Rounding this to the nearest 1/4% results in a discount rate of 4.00% as of the
December 31, 2018 measurement date.
This will need to be re-evaluated as of later measurement dates.
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 15
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Retiree Medical Benefits for FPF and LEOFF 1 Employees
GASB Statement No. 75 Total OPEB Liability
Total OPEB Liability December 31, 2017 December 31, 2018
Total OPEB liability $45,802,831 $43,028,675
Covered employee payroll 0 0
N/A N/A
Valuation date January 1, 2017 January 1, 2017
Measurement date December 31, 2017 December 31, 2018
Discount Rate
Municipal bond rate 3.50%4.00%
Other Key Actuarial Assumptions
Total OPEB liability as a % of covered
employee payroll
The total OPEB liability was determined by an actuarial valuation as of the valuation date, calculated based
on the discount rate below, and was then projected forward to the measurement date. There have been no
significant changes between the valuation date and fiscal year ends. If there were significant changes, an
additional analysis or valuation might be required.
Please see Appendix A of the January 1, 2017 Actuarial Valuation for details of the key actuarial
assumptions and methods used.
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 16
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Retiree Medical Benefits for FPF and LEOFF 1 Employees
GASB Statement No. 75 Changes in Total OPEB Liability
Increase (Decrease)
Total OPEB
Changes in Total OPEB Liability Liability
Balance as of December 31, 2017 $45,802,831
Changes for the year:
Service cost 0
Interest on total OPEB liability 1,575,580
Effect of plan changes 0
Effect of economic/demographic gains or losses 0
Effect of assumptions changes or inputs (2,763,593)
Expected benefit payments (1,586,143)
Balance as of December 31, 2018 43,028,675
Sensitivity Analysis
1% Decrease Discount Rate 1% Increase
3.00%4.00%5.00%
Total December 31, 2018 OPEB liability $48,833,903 $43,028,675 $38,216,507
Current
1% Decrease Trend Rates 1% Increase
Total December 31, 2018 OPEB liability $38,032,278 $43,028,675 $48,920,411
The following presents the total OPEB liability of the City, calculated using the discount rate of 4.00%, as well
as what the City's total OPEB liability would be if it were calculated using a discount rate that is one
percentage point lower (3.00%) or one percentage point higher (5.00%) than the current rate.
The following presents the total OPEB liability of the City, calculated using the current healthcare cost trend
rates as well as what the City's total OPEB liability would be if it were calculated using trend rates that are
one percentage point lower or one percentage point higher than the current trend rates.
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 17
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or
liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product.
Retiree Medical Benefits for FPF and LEOFF 1 Employees
GASB Statement No. 75 Schedule of Changes in Total OPEB Liability and Related Ratios
$ Thousands
Fiscal Year Ending December 31
2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
Total OPEB Liability
Service cost $0 N/A N/A N/A N/A N/A N/A N/A N/A N/A
Interest on total OPEB liability 1,576 N/A N/A N/A N/A N/A N/A N/A N/A N/A
Changes of benefit terms 0 N/A N/A N/A N/A N/A N/A N/A N/A N/A
Effect of economic/demographic gains or (losses)0 N/A N/A N/A N/A N/A N/A N/A N/A N/A
Effect of assumption changes or inputs (2,764)N/A N/A N/A N/A N/A N/A N/A N/A N/A
Expected benefit payments (1,586)N/A N/A N/A N/A N/A N/A N/A N/A N/A
Net change in total OPEB liability (2,774)N/A N/A N/A N/A N/A N/A N/A N/A N/A
Total OPEB liability, beginning 45,803 N/A N/A N/A N/A N/A N/A N/A N/A N/A
Total OPEB liability, ending (a)43,029 N/A N/A N/A N/A N/A N/A N/A N/A N/A
Covered employee payroll $0 N/A N/A N/A N/A N/A N/A N/A N/A N/A
Total OPEB liability as a % of covered employee payroll N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
This schedule is presented to illustrate the requirement to show information for 10 years.However,recalculations of prior years are not required,and if prior years are not reported in
accordance with the current GASB standards, they should not be reported.
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 18
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Retiree Medical Benefits for FPF and LEOFF 1 Employees
GASB Statement No. 75 OPEB Expense
January 1, 2018 to
Measurement Period December 31, 2018
Service cost $0
Interest on total OPEB liability 1,575,580
Effect of plan changes 0
Recognition of Deferred Inflows/Outflows of Resources
Recognition of economic/demographic gains or losses 0
Recognition of assumption changes or inputs (2,763,593)
OPEB Expense (1,188,013)
As of December 31, 2018, the deferred inflows and outflows of resources are as follows:
Deferred Inflows Deferred Outflows
Deferred Inflows / Outflows of Resources of Resources of Resources
Differences between expected and actual experience $0 $0
Changes of assumptions 0 0
Total 0 0
Measurement Period Ending December 31:
2019 $0
2020 0
2021 0
2022 0
2023 0
Thereafter 0
Amounts currently reported as deferred outflows of resources and deferred inflows of resources related to
other postemployment benefits will be recognized in OPEB expense below. Note that additional future
deferred inflows and outflows of resources may impact these numbers.
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 19
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Retiree Medical Benefits for FPF and LEOFF 1 Employees
GASB Statement No. 75 Schedule of Deferred Inflows
and Outflows of Resources
Amount Balance of Balance of
Measurement Recognized Deferred Deferred
Period in 12/31/2018 Inflows as of Outflows as of
in which Original Measurement 12/31/2018 12/31/2018
Original Experience Recognition Period Measurement Measurement
Amount Arose Period*Expense Date Date
Economic or
demographic $0 1/1-12/31/2018 0.0 $0 $0 $0
(gains) or losses Total 0 0 0
Assumption ($2,763,593)1/1-12/31/2018 1.0 ($2,763,593)$0 $0
changes or inputs
Total (2,763,593)0 0
* Economic/demographic (gains)/losses and assumption changes or inputs are recognized over the average
remaining service life for all active and inactive members; immediate recognition is used when the average
remaining service life is less than one.
Milliman Financial Reporting Valuation
GASB 67, 68 and 75 Disclosures for Fiscal Year Ending December 31, 2018 20
City of Renton
This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes.
Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by
their own actuary or other qualified professional when reviewing the Milliman work product.
Glossary
Actuarially
Determined
Contribution
A target or recommended contribution to a defined benefit pension plan for
the reporting period, determined based on the funding policy and most
recent measurement available when the contribution for the reporting period
was adopted.
Deferred
Inflows/Outflows
of Resources
Portion of changes in net pension liability that is not immediately recognized
in Pension or OPEB Expense. These changes include differences between
expected and actual experience, changes in assumptions, and differences
between expected and actual earnings on plan investments.
Discount Rate Single rate of return that, when applied to all projected benefit payments,
results in an actuarial present value of projected benefit payments equal to
the sum of:
1) The actuarial present value of benefit payments projected to be made in
future periods where the plan assets are projected to be sufficient to
meet benefit payments, calculated using the Long-Term Expected Rate
of Return.
2) The actuarial present value of projected benefit payments not included in
(1), calculated using the Municipal Bond Rate.
Fiduciary Net Position Equal to market value of assets.
Long-Term Expected
Rate of Return
Long-term expected rate of return on pension plan investments expected to
be used to finance the payment of benefits, net of investment expenses.
Money-Weighted
Rate of Return
The internal rate of return on pension plan investments, net of investment
expenses.
Municipal Bond Rate Yield or index rate for 20-year, tax-exempt general obligation municipal
bonds with an average rating of AA/Aa or higher.
Net Pension Liability Total Pension Liability minus the Plan's Fiduciary Net Position.
Projected Benefit
Payments
All benefits estimated to be payable through the pension or OPEB plan to
current active and inactive employees as a result of their past service and
expected future service.
Service Cost The portion of the actuarial present value of projected benefit payments that
is attributed to a valuation year.
Total Pension Liability The portion of actuarial present value of projected benefit payments that is
attributable to past periods of member service using the Entry Age Normal
cost method based on the requirements of GASB 67 and 68.
Total OPEB Liability The portion of actuarial present value of projected benefit payments that is
attributable to past periods of member service using the Entry Age Normal
cost method based on the requirements of GASB 74 and 75.