Unfunded Liability in 2012

Total Liability: $1.19 billion

Actuarial Assets: none listed in 2012 report

Unfunded Liability: $1.19 billion

Unfunded Liability in 2010

Total Liability: $1.21 billion

Actuarial Assets: $1 million

Unfunded Liability: $1.21 billion

Percent Funded in 2012

Funding Ratio: The ratio of the amount of actuarial assets to the amount owed.

Funding ratio in 2012: 10%

Percent unfunded in 2012: 90%

Percent Funded in 2010

Funding Ratio: The ratio of the amount of

actuarial assets to the amount owed.

Funding ratio in 2010: 9%

Percent unfunded in 2010: 91%

Rate of Return

Assumed rate of return: 4%

Current rate of return for pensions: 8.25%

Former assumed rate of return for pensions: 8.50%

*All rates net of investment expenses

“Current funding practice has virtually all benefits provided directly out of the general assets of the City. Higher interest rate assumptions would be available if the City were to make substantial pre-funding contributions to the assets of the plan.”

—Buck Consultants, former city actuary

Retiree Benefits Cost to City (2012)

Annual Required Contribution (ARC) for 2012: $73.8 million

Actual Contribution in 2012: $33.8 million

Shortfall: $40 million

Net OPEB Obligation Start of Year: $98.4 million

Net OPEB Obligation End of Year: $138.6 million

Net OPEB Obligation: Here this figure represents the gap between the amount that should be contribution and what is actually contributed. 

Retiree Benefits Cost to City (2010)

Annual Required Contribution (ARC) for 2010: $79.5 million

Actual Contribution in 2010: $28.7 million

Shortfall: $59.8 million

Net OPEB Obligation Start of Year: $13 million

Net OPEB Obligation End of Year: $63.9 million

Net OPEB Obligation: Here this figure represents the gap between the amount that should be contribution and what is actually contributed.

Photo: Flickr/Doug Kerr

Annual Cost of Retiree Benefits

Normal Annual Cost: $28.9 million

Additional Cost Because of Shortfall: $42.6 million

Total Annual Cost: $73.8 million

Time to Pay off Debt: 30 years

Note: Total Annual Cost also includes $2.2 million in ‘Interest Cost.’ 

Number of City Workers in Plan

General City Workers: 3,915

School Workers: 4,487

Water Department Workers: 338

Total: 8,740

Note: Includes active city workers and workers who are no longer employed by the city.

Retiree Benefits - Individuals

Monthly Medical Premiums

General City Workers: $615.14

Police: $789.63

Fire: $792.97

School: $801.26

Average: $749.75

Note: Rates shown are identified as the ‘classic’ rates in the Dec. 2012 actuarial valuation report. 

Retiree Benefits – Families

Monthly Medical Premiums

General City Workers: $1,533.23

Police: $2,036.08

Fire: $2,043.69

School: $2,069.55

Average: $1,920.63

Note: Rates shown are identified as the ‘classic’ rates in the Dec. 2012 actuarial valuation report. 

OPEB 101

What are Other Post-Employment Benefits (OPEB)?

Other post-employment benefits (OPEB) are employee benefits other than pensions that are received after employment ends. OPEB can include the following post-employment items:

• Medical benefits
• Dental benefits
• Vision benefits
• Prescription medicine benefits
• Hearing benefits
• Disability benefits, if not part of a pension plan
• Long-term health care benefits, if not part of a pension plan
• Life insurance, if provided separately from a pension plan
• Other health benefits, if not part of a pension plan

Source: Adapted from the Office of the State Controller, New York.

How did cities and states used to account for OPEB?

Before 2004, local and state governments typically followed a “pay-as-you-go” accounting approach in which the cost of benefits is not reported until after employees retire. However, this approach is not comprehensive—only revealing a limited amount of data and failing to account for costs and obligations incurred as governments receive employee services each year for which they have promised future benefit payments in exchange.

Source: Adapted from the Government Accounting Standards Board.

How has accounting for OPEB changed?

In June 2004, the Government Accounting Standards Board adopted a new rule governing OPEB accounting, known as Statement 45. This rule requires that local and state governments report, for the first time, annual OPEB costs and their unfunded actuarial accrued liabilities for past service costs. The rule, according to GASB, is meant to foster improved accountability and a better foundation for informed policy decisions about the level and types of benefits provided and potential methods of financing those benefits.

The Government Accounting Standards Board (GASB) is a national body that sets the standards for governmental accounting and reporting. Generally, these are accounting standards that state and local governments use.

Source: Adapted from the Office of the State Controller, New York, and the Government Accounting Standards Board.

How has the new rule been implemented?

Local and state governments were allowed to apply Statement 45 prospectively. At the beginning of the year of implementation, nearly all governments started with zero financial-statement liability. From that point forward, a government accumulated a liability called the net OPEB obligation, if and to the extent its actual OPEB contributions are less than its annual OPEB cost, or expense. The net OPEB obligation (not the same as the Unfunded Actuarial Liability) will increase rapidly over time if, for example, a government’s OPEB financing policy is pay-as- you-go, and the amounts paid for current premiums are much less than the annual OPEB cost.

Source: Adapted from the Government Accounting Standards Board.

When did governments have to be compliant with the new rule?

Timeline: The new rules were phased in over three years, according to the below schedule.

■ Government entities with $100 million+ in revenues: Had to comply with GASB 45 starting with the fiscal year that began after December 15, 2006.

■ Government entities with revenues between $10 million and $100 million: Had to comply starting with the fiscal year that began after December 15, 2007.

■ Government entities with revenues under $10 million: Had to comply starting with the fiscal year beginning after December 15, 2008.

Source: Adapted from the Office of the State Controller, New York.