City of San José Federated
Postemployment Healthcare
Plan
Revised Actuarial Valuation
Funding Report as of June 30, 2021
Produced by Cheiron
March 2022
4b(1)
FCERS 3-17-22
TABLE OF CONTENTS
Section Page
Section I Board Summary ....................................................................................................... 1
Section II Certification ...................................................................................................... .......9
Section III Assets ........................................................................................................... ..........11
Section IV Measures of Liability .............................................................................................1 3
Section V Contributions........................................................................................................ ..18
Section VI Actuarial Section of the ACFR ..............................................................................20
Appendices
Appendix A Membership Information .......................................................................................25
Appendix B Actuarial Assumptions and Methods .....................................................................30
Appendix C Summary of Plan Provisions ..................................................................................44
Appendix D Glossary of Terms .................................................................................................. 50
Appendix E List of Abbreviations .............................................................................................5 2
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
1 This report measures assets and liabilities of the City of San José Federated Postemployment Healthcare Plan for funding purposes only. There is a separate report for financial reporting.
Dashboard
The charts above are intended to provide a quick overview of the revised current valuation results compared to the prior valuation results. Th e chart on the left shows contributions to the 115 Trust for FYE 2022 and 2023. The normal cost shown by the red line represents the expected cost of the explicit subsidy benefits attributable to the current year of service. All contributions above the normal cost go toward paying off the Unfunded Actuarial Liability (UAL). The projected contributi on amount from the prior valuati on is shown by the blue line.
The implicit subsidy payment is no t shown as it is funded on a pa y-as-you-go basis as a part of the health premiums for active employees. The City’s implicit subsidy payment is approximately $5.2 million for FYE 2023.
The chart on the right summarizes the funded status as of the June 30, 2020 and revised June 30, 2021 actuarial valuations. The stacked bars repres ent the Actuarial Liabil ity for the explicit subsidy, with the liability broken into separa te components for member s currently receiving benefits, vested terminated members, and ac tive members. These amounts are only for the portion of the plan that is intende d to be pre-funded, so they do not include the implicit subsidy.
The green line represents the assets, and the funded percentage is shown next to the green line.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
2 Contributions
There are two components to the benefits under the Plan: the e xplicit subsidy and the implicit subsidy. The explicit subsidy (or premium subsidy) is paid from the Trust and is the premium for health coverage selected by the retiree, up to 100% of the premium for the lowest cost plan offered to active employees. The implicit subsidy is the difference between the expected claims cost for a retiree or spouse and the total (retiree plus city) premium.
Historically, member and City contributions to the Plan were negotiated through collective bargaining and were not actuarially determined. With the implementation of Measure F, member contributions are fixed at 7.5% of pay; the City’s contribution toward the explicit subsidy is actuarially determined; and, the City also pays the implicit subsidy on a pay-as-you-go basis as a part of active health premiums. Finally, the City has an option to limit its contribution toward the explicit subsidy to 14% of payroll.
Table I-1 shows the contribution amounts for the fiscal years ending in 2022 and 2023.
Table I-1
Summary of Trust Contribution Amounts
FYE 2023 FYE 2022 % Chan ge
Explicit Subsidy
Members 8,807 $ 9,076 $ -3.0%
City's Actuarially Determined Contribution 18,780 19,936 -5.8% Total 27,587 $ 29,012 $ -4.9%
Estimated City Optional Cap 48,963 $ 46,555 $ 5.2% Dollar amounts in thousands
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
3 The chart below shows the historical and projec ted contributions to th e Plan. The purple bars represent the member contributions, and the gold bars are the City’s contributions to pre-fund the explicit subsidy. The gray area behind the bars re presents the projected annual benefit payments.
The black line represents the normal cost, and the red line is the projection of the total contributions from the 2020 actuarial valuation. The significant reduc tion in contributions between FYE 2018 and FYE 2019 is due to the imp lementation of Meas ure F, including the VEBA elections, the new lowest cost health pl an, and the adoption of actuarially determined contributions.
Historical and Projected Trust Contributions FYE 2013-2043 16 17 19 18 17 16
11 10 10 10 9 8 8 7 6 6 5 5 4 3 3 2 2 2 2 1 1 1 1 0 0
18 19
23 26 27 29
21 22 21 20 19 18 17 18 18 18 18 18 19 19 19 19 19 20 20 20 0 0 0 0 0$0
$10
$20
$30
$40
$50
$60
2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 Millions
Fiscal Year Ending
Explicit PAYGo Cost City Explicit EE Contrib
Explicit Normal Cost 2020 Valuation
Because the full benefit tier of th e Plan is closed to new entran ts, the member contributions are expected to decline as current active members elig ible for full benefits retire or otherwise leave active employment with the City. The City’s actuar ially determined contri bution is expected to decline slightly over the next few years as the am ortization of the current year’s gains are phased in and then increase slightly thereafter as the member contributions decrease.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
4 Funded Status
Table I-2 below summarizes the Actuarial Liability, Market Value of Assets, Unfunded Actuarial Liability, and funded percentage for the Plan as of June 30, 2021 compared to June 30, 2020.
The Actuarial Liability increased by 5.6% comp ared to an expected increase of 2.4%. The additional increase is primarily due to assumption changes, offset by premium experience. At the same time, assets increased 26.8% primarily due to large inves tment gains. As a result, the Unfunded Actuarial Liability d ecreased by about 19.5% and the funded percentage increased from 54.3% to 65.1% for the explicit subsidy.
Table I-2
Summary of Funded Status - Explicit Subsidy Only
6/30/2021 6/30/2020 Chan ge
Actuarial Liability
Actives 177,296 $ 173,797 $ 2.0%
Deferred Vested 24,485 14,919 64.1% In Pay Status 388,606 370,361 4.9%
Total Actuarial Liability 590,387 $ 559,077 $ 5.6% Assets 384,613 303,313 26.8%
Unfunded Actuarial Liability 205,774 $ 255,764 $ -19.5% Funded Percentage 65.1% 54.3% 10.9%
Dollar amounts in thousands
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
5 The following chart shows the historical trend of assets and the Actuaria l Liability on a funding basis. Over the last 10 years, the UAL for the explicit subsidy has been reduced by $307.0 million due to a combination of a reduction in the Actuarial Liability of $60.2 million and an increase in assets of $246.8 million. The reducti on in Actuarial Liability was primarily due to plan changes and favorable medical cost trend e xperience. The increase in the assets has been primarily attributable to contribu tions and recent investment retu rns. In the future, growth in assets will become more depende nt on investment return s as benefit payments grow to equal or exceed contributions.
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Funded Ratio 21.2% 28.0% 34.1% 33.2% 35.0% 45.3% 49.2% 54.5% 54.3% 65.1% UAL/(Surplus) $512.8 $405.1 $385.5 $421. 5 $418.8 $299.6 $286.5 $246.3 $255.8 $205.8 (in millions)
Discount Rate 7.50% 7.25% 7.00% 7.00% 6.875% 6.875% 6.75% 6.75% 6.25% 6.00% $0
$100
$200
$300
$400
$500
$600
$700
$800
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Millions
Historical Assets and Actuarial Liability
Explicit Subsidy Only
Actuarial Liability Market Value of Assets
The chart on the following page shows a 20-year projection of assets and Actuarial Liability (AL), and also shows the projecte d funded percentage for the explicit subsidy. If all assumptions are met in the future including an expected return of 6.00% each year, the funded percentage for the explicit subsidy is expected to reach 100% by 2037.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
6 Projected Assets and Actuarial Liability 2021-2041
Changes Since the Prior Valuation
Table I-3 below breaks out the sources of the ch anges in UAL for the fiscal year ending June 30, 2021. The total UAL decreased about $50.0 million since the prior year.
Table I-3
Changes in Unfunded Actuarial Liability
Explicit Subsidy Only
Unfunded Actuarial Liability, June, 30, 2020 255,764 $
Unfunded Actuarial Liability, June, 30, 2021 205,774
Change in Unfunded Actuarial Liability (49,990)$
Sources of Changes
Tread Water less Contributions (10,092) $
Investment Experience (57,618)
Liability Experience (28,559)
Assumption Changes 46,274
VEBA Transfers 5
Total Changes (49,990) $
Dollar amounts in thousands
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
7 Contributions in excess of the Tread Water amount decreased the UAL by $10.1 million. The Tread Water amount equals the normal cost plus the interest on the UAL . If all assumptions are met, contributions equal to the Tread Water am ount would result in no change to the dollar amount of the UAL. Investment experience de creased the UAL by about $57.6 million. Liability experience decreased the UAL by about $28.6 mil lion, mainly due to lower-than-expected premiums for dental and Medicare eligible h ealth plans offset by de mographic experience.
Assumption changes increased the UAL by about $46.3 million, primarily due to the recognition of additional future increases in Medicare elig ible premiums due to the aging of the plan population as well as the reduction in the discount rate from 6.25% to 6.00%.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
8 Table I-4 below provides a summary of the results of this valuation compared to the prior valuation.
Table I-4
Summary of Valuation Results
June 30, 2021 June 30, 2020 % Chan ge
Active Members
Eligible for Full Benefits 1,344 1,445 -7.0% Eligible for Catastrophic Disability Only 2,285 2,151 6.2% Total Active Members 3,629 3,596 0.9% Deferred Vested Members 152 156 -2.6% Members in Pay Status (Medical and/or Dental) 3,692 3,682 0.3% Members In-Lieu only 58 46 26.1% Total 7,531 7,480 0.7%
Full Benefit Member Payroll 126,946 $ 130,725 $ -2.9% Total Payroll 339,546 322,850 5.2%
Actuarial Liability - Explicit 590,387 $ 559,077 $ 5.6% Market Value of Assets 384,613 303,313 26.8% Unfunded Actuarial Liability 205,774 $ 255,764 $ -19.5% Funded Percentage 65.1% 54.3% 10.9%
Actuarial Liability - Implicit 72,473 91,342 -20.7% FYE 2023 FYE 2022 % Chan ge
City's Actuarially Determined Contribution 18,780$ 19,936 $ -5.8% City's Actuarially Determined Contribution Rate 5.37% 5.99% -0.6% City's Implicit Subsidy Payment 5,247 $ 5,439 $ -3.5% Dollar amounts in thousands
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION II – CERTIFICATION
9 The purpose of this report is to present the annu al actuarial valuation of the City of San José Federated Postemployment Healthcare Plan. This report is for the use of the Board in setting actuarially determined amounts for the City to contribute to the Plan. There is a separate report for accounting and financial reporting under GASB Statements 74 and 75.
In preparing our report, we relied on informatio n, some oral and some written, supplied by the Plan. This information includes, but is not lim ited to, the Plan provisions, employee data, and financial information. We performed an informal examination of the obvious characteristics of the data for reasonableness and consistency in accordance with Actuarial Standard of Practice No. 23.
The health assumptions and discount rate assumption were adopted by the Board of Administration at the November 18, 2021 Board meeting based upon our recommendations. All other assumptions in this report were adopted at the November 21, 2019 Board meeting based on recommendations from our Experience Study cove ring Plan experience through June 30, 2019.
Please refer to the experience st udy report and our Board presentati ons for an explanation of the rationale for each assumption. We believe these assumptions are reasonable for the purpose of the funding valuation.
The liability measures and fund ing ratios in this report are for the purpose of establishing contribution amounts. These measures are not appr opriate for assessing the sufficiency of Plan assets to cover the estimated cost of settling the Plan’s benefit obligations.
Cheiron utilizes ProVal actuarial valuation software leased from Winklevoss Technologies (WinTech) to calculate liabilities and project benefit payments. We have relied on WinTech as the developer of ProVal. We ha ve a basic understanding of ProV al and have us ed ProVal in accordance with its original intended purpo se. We have not identified any material inconsistencies in assumptions or output of ProVal that would affect this valuation.
Health care trends for this valuation were de veloped using the Society of Actuaries (SOA) Long-Run Medical Cost Trend Model. The SOA Long-Run Medical Cost Trend Model and its baseline projection are based on an econometric analysis of hi storical U.S. medical expenditures and the judgments of experts in the field. The long-run baseline projecti on and input variables have been developed under the guidance of the SOA Project Oversight Group.
We have relied on the Society of Actuaries as the developer of the Model. We have reviewed the Model and have a basic understanding of the Model and have used the Model in accordance with its original intended purpose. We have not identified any material inconsistencies in assumptions or output of the Model that would affect this valuation.
Deterministic projections in this valuation report were developed using H-scan, a proprietary tool used to illustrate the impact of changes in assumptions, methods, plan provisions, or actual experience on the future financial status of the Plan. H-scan uses standard roll-forward techniques that implicitly assume a stable active population.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION II – CERTIFICATION
10 Future actuarial measurements may differ signif icantly from the current measurements due to such factors as the following: Pl an experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; and, changes in Plan provisions or applicable law.
This report and its contents have been prep ared in accordance with generally recognized and accepted actuarial principles and practices and our understanding of the Code of Professional Conduct and applicable Actuarial Standards of Pr actice set out by the Actuarial Standards Board as well as applicable laws and regulations. Furthermore, as credentialed actuaries, we collectively meet the Qualification Standards of the American Academy of Actuaries to render the opinion contained in this repo rt. This report does not address any contract ual or legal issues.
We are not attorneys, and our firm does not provide any legal services or advice.
This report was prepared for the Board for the purposes described herei n. Other users of this report are not intended users as defined in the Actuarial Standa rds of Practice, and Cheiron assumes no duty or liability to any other user.
William R. Hallmark, ASA, EA, FCA, MAAA Michael W. Schionning, FSA, MAAA Consulting Actuary Princi pal Consulting Actuary
John L. Colberg, FSA, EA, MAAA
Principal Consulting Actuary
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION III – ASSETS
11 Historically, assets were invested in two separa te trust vehicles: a 401( h) account within the pension plan and a separate 115 Trust. The 401( h) account has been de pleted and all future benefits will be paid from the 115 Trust.
Statement of Change in Market Value of Assets
Table III-1 below shows the changes in the Market Value of Assets for the last two fiscal years.
The implicit subsidy is shown as both a contribu tion and a payment from th e Plan, but it is not actually contributed to the trust or paid from the trust. It is just paid directly by the City as a part of active health plan premiums.
Table III-1
Change in Market Value of Assets
6/30/2021 6/30/2020
Fiscal Year Ending Total Total
Market value, beginning of year 303,313,301$ 294,488,947 $ Contributions
Employee 10,275,430 10,692,150
City 20,948,983 21,790,130
Implicit subsidy 5,287,332 4,742,930
Total 36,511,745 $ 37,225,210 $
Net investment earnings 77,360,485 3,077,272
Benefit payments
Explicit subsidy 26,583,889 26,035,849
Implicit subsidy 5,287,332 4,742,930
Total 31,871,221 $ 30,778,779 $
Administrative expenses 696,954 686,011
VEBA Transfer 4,658 13,338
Market value, end of year 384,612,698$ 303,313,301 $
Estimated Rate of Return 24.5% 1.0%
In the last year, investments, in aggregate, returned approx imately 24.5% co mpared to an expected rate of return of 6.25%, resulting in an investment gain of approximately $57.6 million.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION III – ASSETS
12 The chart below shows the actual investment return on the Market Value of Assets compared to the assumed return for the last 10 years. The compound average of the actual returns is about
5.5%.
Historical Rates of Return
-3.6%
9.1%
16.4%
-2.8% -1.2%
6.8% 4.6%
3.1%
1.0%
24.5%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Year Ending June 30,
Retu rn on Mark et Value Assumption
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION IV – MEASURES OF LIABILITY
13 This section presents detailed information on liability measures for the Plan for funding purposes, including:
Projected benefit payments,
Present value of future benefits,
Normal cost, and
Actuarial Liability.
Projected Benefit Payments
The projected benefit payments are the fundamental basis for the valuation representing the amount that is expected to be paid in each future year for members in the Plan as of the valuation date if all assumptions are met. The chart belo w shows the projected be nefit payments for the next 70 years.
$0
$10
$20
$30
$40
$50
$60
2021 2026 2031 2036 2041 2046 2051 2056 2061 2066 2071 2076 2081 2086 2091 Millions
Projected Benefit Payments
Dental Explicit Medical Implicit Medical
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION IV – MEASURES OF LIABILITY
14 Table IV-1 below shows the same projected be nefit payments for the next 20 years. These payments include the expected annual implicit subsidy as well as expected Plan premium payments (the explicit subsidy).
Table IV-1
Expected Net Benefit Payments
Fiscal Year Explicit Subsid y Implicit
Ending Medical Dental Total Subsid y Total
2022 22,463,717$ 3,096,990 $ 25,560,707 $ 5,467,884 $ 31,028,591 $ 2023 23,181,536 3,231,937 26,413,474 5,246,678 31,660,152 2024 26,038,449 3,357,628 29,396,077 5,886,510 35,282,587 2025 27,245,221 3,480,074 30,725,295 6,186,877 36,912,172 2026 28,357,477 3,600,078 31,957,555 6,199,851 38,157,406 2027 29,991,498 3,715,274 33,706,772 6,389,493 40,096,265 2028 31,006,726 3,824,662 34,831,388 6,393,517 41,224,905 2029 32,226,839 3,934,119 36,160,958 6,480,630 42,641,589 2030 34,009,869 4,042,425 38,052,293 6,554,468 44,606,761 2031 35,527,402 4,148,879 39,676,281 6,652,808 46,329,090 2032 37,141,611 4,250,444 41,392,055 6,794,294 48,186,349 2033 38,358,045 4,334,215 42,692,260 6,705,883 49,398,143 2034 39,655,162 4,397,805 44,052,967 6,718,346 50,771,313 2035 40,953,853 4,445,329 45,399,182 6,739,344 52,138,526 2036 41,898,063 4,480,153 46,378,216 6,619,253 52,997,469 2037 42,858,203 4,507,417 47,365,621 6,588,556 53,954,177 2038 43,614,186 4,529,657 48,143,843 6,367,411 54,511,254 2039 44,456,613 4,539,701 48,996,315 6,290,275 55,286,590 2040 44,857,036 4,534,616 49,391,652 5,971,396 55,363,048 2041 45,193,084 4,515,111 49,708,195 5,518,295 55,226,490
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION IV – MEASURES OF LIABILITY
15 Present Value of Future Benefits
The present value of future benefits represents the expected amount of money needed today if all assumptions are met to pay for al l benefits both earned as of the valuation date and expected to be earned in the future by current Plan member s under the current Plan provisions. Table IV-2 below shows the present value of future benefits as of June 30, 2021 and June 30, 2020.
Table IV-2
Present Value of Future Benefits
June 30, 2021 June 30, 2020
Actives
Deferred
Vested
In Pay
Status Total Total
%
Change
Explicit Subsidy
Non-Medicare Eligible 76,592$ 9,635 $ 59,629 $ 145,857 $ 146,000 $ -0.1% Medicare Eligible 124,078 14,849 285,999 424,927 379,064 12.1% Dental 18,476 0 42,979 61,455 73,178 -16.0% Total Explicit Subsidy 219,147$ 24,485 $ 388,606 $ 632,238 $ 598,242 $ 5.7% Implicit Subsidy 41,773 5,294 34,068 81,136 99,252 -18.3% Total 260,920 $ 29,779 $ 422,675 $ 713,374 $ 697,494 $ 2.3% Dollar amounts in thousands
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION IV – MEASURES OF LIABILITY
16 Normal Cost
Under the Entry Age (EA) actuarial cost method, the present value of future benefits for each individual is spread ov er the individual’s expected working career as a level percentage of the individual’s expected pay. The normal cost rate is determined by taking the value, as of entry age into the Plan, of each member’s projected future be nefits divided by the value, also at entry age, of the member’s expected future salary. The normal cost rate is multiplied by current salary to determine each member’s normal cost. The normal cost of the Plan is the sum of the normal costs for each individual. The normal cost repres ents the expected amount of money needed to fund the benefits attributed to the next year of service under the Entry Age actuarial cost method.
Table IV-3 below shows the EA normal cost as of June 30, 2021 and June 30, 2020 separately by component, develops the nor mal cost rate, and app lies the rate to the pr ojected payroll for the fiscal year for which contributions are determined.
Table IV-3
Explicit Subsidy Normal Cost
June 30, 2021 June 30, 2020
Full Benefits Catastrophic Total Total % Change
Non-Medicare Eligible 2,294$ 107 $ 2,401$ 2,252 $ 6.6% Medicare Eligible 3,168 0 3,168 2,803 13.0% Dental 541 0 541 644 -16.0% Total Normal Cost 6,003 $ 107 $ 6,110$ 5,698 $ 7.2% Valuation Pay 123,301 $ 179,328 $ 329,796 $ 313,211 $ 5.3% Total Normal Cost Rate 4.87% 0.06% 1.85% 1.82% 1.7%
FYE 2023 FYE 2022
Full Benefits Catastrophic Total Total % Change
Expected Pay 117,424 $ 232,308 $ 349,732 $ 332,536 $ 5.2% Total Normal Cost 5,719 $ 139 $ 5,858$ 5,434 $ 7.8% Dollar amounts in thousands
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION IV – MEASURES OF LIABILITY
17 Actuarial Liability
The Actuarial Liability represents the expected amount of money needed today, if all assumptions are met, to pay for benefits attributed to service prior to the valuation date under the Entry Age actuarial cost method. As such, it is the amount of assets targeted by the actuarial cost method for the Plan to hold as of the valuation da te. It is not the amount necessary to settle the obligation.
Table IV-4 below shows the Actuarial Liability as of June 30, 2021 and June 30, 2020 separately by component.
Table IV-4
Actuarial Liability
June 30, 2021 June 30, 2020
Actives
Deferred
Vested
In Pay
Status Total Total
%
Change
Explicit Subsidy
Non-Medicare Eligible 59,341$ 9,635 $ 59,629 $ 128,605 $ 129,654 $ -0.8% Medicare Eligible 102,691 14,849 285,999 403,539 360,130 12.1% Dental 15,264 0 42,979 58,243 69,293 -15.9% Total Explicit Subsidy 177,296$ 24,485 $ 388,606 $ 590,387 $ 559,077 $ 5.6% Implicit Subsidy 33,111 5,294 34,068 72,473 91,342 -20.7% Total 210,407 $ 29,779 $ 422,675 $ 662,861 $ 650,419 $ 1.9% Dollar amounts in thousands
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION V – CONTRIBUTIONS
18 Contributions for Administrative Expenses
Under the contribution allocation procedure employed by the Plan, there are three components to the contribution toward the expl icit subsidy: the normal cost, ad ministrative expenses, and an amortization payment on the Unfunded Actuaria l Liability (UAL). The normal cost was developed in Section IV. This section develops the administrative expenses, the UAL contribution, and the City’s actuarially determ ined contribution for the explicit subsidy. The implicit subsidy is funded on a pay-as-you-g o basis through the paym ent of active health premiums.
Contributions for admin istrative expenses are set equa l to $90 per member for FYE 2023 (increasing 3.0 percent each year). There are currently 7,531 memb ers, resulting in estimated administrative expenses for FYE 2023 of $677,790.
Amortization of the Unfunded Actuarial Liability
The difference between the Actuar ial Liability and the Market Va lue of Assets is the Unfunded Actuarial Liability (UAL). Table V-1 calculates the UAL and funded percen tage for the explicit subsidy.
Table V-1
Unfunded Actuarial Liability
Explicit Subsidy Only
June 30, 2021 June 30, 2020
Actuarial Liability 590,387 $ 559,077 $
Assets 384,613 303,313
Unfunded Actuarial Liability 205,774$ 255,764 $ Funded Percentage 65.1% 54.3%
The UAL for the explicit subsidy as of June 30, 2017 is amortized as a level dollar amount over 20 years. Subsequent amortizati on bases are amortized over 20 year s with a three- year phase in and out. Table V-2 on the followi ng page shows the schedule of amortization bases for payment of the UAL.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION V – CONTRIBUTIONS
19 Table V-2
UAL Amortization
Outstanding Remaining FYE 2023
Balance Period Phase-in Phase-out Payment
2017 UAL 236,964 $ 16 N/A N/A 22,775$
2018 Changes 1,276 17 0 3 115
2019 Changes (34,018) 18 1 3 (2,963)
2020 Changes 19,829 19 2 3 1,152
2021 Changes (40,781) 20 3 3 (1,219)
FYE 2022 Payment* 22,504
Total 2021 UAL 205,774$ 19,859 $
* FYE 2022 amortization payment discounted to 7/1/2021 Dollar amounts in thousands
Contribution Amounts
The City pays the actuarially determined contri bution for the explicit subsidy, but has the option to cap its contribution at 14% of Federated payroll, includi ng the payroll for members only covered for catastrophic di sability. The actuarially determined contribution is the normal cost, administrative expenses, and th e amortization payment on the UAL less expected member contributions. Members eligible for full benefits contribute 7.50% of pay.
Table V-3 shows the components of the Actuar ially Determined Contribution (ADC) amounts for the explicit subsidy for FYE 2023 and 2022.
Table V-3
City's Actuarially Determined Contribution (ADC)
Explicit Subsidy Only
FYE 2023 FYE 2022 % Chan ge
Normal Cost 5,858 $ 5,434 $ 7.8% Admin Expenses 678 381 78.0% UAL Payment 21,051 23,197 -9.3% Total Contribution 27,587$ 29,012 $ -4.9% Projected Member Contributions 8,807$ 9,076 $ -3.0% City's ADC Amount 18,780 $ 19,936 $ -5.8% Projected Payroll 349,732 332,536 5.2% City's ADC Percentage 5.4% 6.0% -0.6%
Dollar amounts in thousands
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION VI – ACTUARIAL SECTION OF THE ACFR
20 The Government Finance Officers Association (G FOA) maintains a checklist of items to be included in the Plan’s Annual Co mprehensive Financial Report (A CFR) to receive recognition for excellence in financial reporting. The schedul es in this section are listed by the GFOA for inclusion in the Actuarial Section of the Plan’s ACFR. Liability amounts shown in these exhibits include both the explicit and implicit subsidies.
Table VI-1
Member Benefit Coverage Information
Actuarial Liability
Actuarial
Valuation
Retirees,
Beneficiaries
and Other
Inactives
Active
Members
Reported
Assets
Portion of Liability Covered
by Reported Assets
Date (A) (B) (A) (B)
6/30/2021 452,454$ 210,406 $ 384,613 $ 85% 0% 6/30/2020 443,476 206,943 303,313 68% 0% 6/30/2019 422,108 209,644 294,489 70% 0% 6/30/2017 426,984 223,130 277,256 65% 0% 6/30/2016 408,627 221,825 248,583 61% 0% 6/30/2015 450,793 313,468 225,845 50% 0% 6/30/2014 469,903 347,770 209,761 45% 0% 6/30/2013 435,826 293,580 199,776 46% 0% 6/30/2012 495,967 374,905 157,695 32% 0% Dollar amounts in thousands
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION VI – ACTUARIAL SECTION OF THE ACFR
21 Table VI-2
Analysis of Financial Experience
Gain or (Loss) for Year Ending on Valuation Date Due to:
Actuarial Combined Total
Valuation Investment Liability Financial Non-Recurring Total Date Income Experience Experience Items Experience
6/30/2021 57,618$ 25,838 $ 83,456 $ (22,368)$ 61,088 $ 6/30/2020 (17,738) 69,483 51,745 (34,497) 17,248 6/30/2019 (10,654) (34,979) (45,633) 14,784 (30,849) 6/30/2018 (5,915) 26,064 20,149 (11,137) 9,012 6/30/2017 117 5,259 5,376 123,632 129,008 6/30/2016 (16,044) (11,608) (27,652) 99,545 71,893 6/30/2015 (19,264) 6,948 (12,316) (64,155) (76,471) 6/30/2014 19,767 31,177 50,944 148,417 199,361 6/30/2013 6,847 5,834 12,681 114,786 127,467 6/30/2012 (14,897) (27,919) (42,816) 136,154 93,338 Dollar amounts in thousands
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION VI – ACTUARIAL SECTION OF THE ACFR
22 Schedule of Funding Progress
The schedule of funding progress compares th e assets used for funding purposes to the comparable liabilities to determine how well the Pl an is funded and how th is status has changed over the past several years. The Actuarial Liabilit y is compared to the Actuarial Value of Assets to determine the funding ratio.
Table VI-3
Schedule of Funding Progress
Actuarial
Valuation
Actuarial
Value of
Assets
Actuarial
Liability
Unfunded
Actuarial
Liability
(UAL)
Funded
Ratio
Annual
Covered
Payroll
UAL as
Percentage of
Covered
Payroll
Date (a) (b) (b-a) (a/b) (d) ((b-a)/c)
6/30/2021 384,613$ 662,860 $ 278,247 $ 58% 339,546 $ 82% 6/30/2020 303,313 650,419 347,106 47% 322,850 108% 6/30/2019 294,489 631,752 337,263 47% 299,002 113% 6/30/2018 277,256 650,114 372,858 43% 298,985 125% 6/30/2017 248,583 630,452 381,869 39% 287,339 133% 6/30/2016 225,845 764,261 538,416 30% 266,823 202% 6/30/2015 209,761 817,673 607,912 26% 251,430 242% 6/30/2014 199,776 729,406 529,630 27% 234,677 226% 6/30/2013 157,695 870,872 713,177 18% 226,098 315% 6/30/2012 137,798 1,096,620 958,822 13% 225,859 425% Dollar amounts in thousands
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION VI – ACTUARIAL SECTION OF THE ACFR
23 Schedule of Active Member Data
Valuation Annual Avera ge% C h a n ge in
Date Under A ge 65 A ge 65+ Total Pa yroll Annual Pa y Average Pay 2021 2 3,508 121 3,629 339,546,040 $ $ 93,565 4.2% 2020 2 3,495 101 3,596 322,850,457 89,780 5.1% 2019 2 3,412 88 3,500 299,001,886 85,429 4.1% 2018 2 3,377 84 3,461 284,008,289 82,060 -2.6% 2017 2 3,321 89 3,410 287,339,424 84,264 -0.9% 2016 1 2,310 77 2,387 202,911,153 85,007 5.8% 2015 1 2,527 74 2,601 208,957,370 80,337 5.9% 2014 1 2,800 64 2,864 217,167,654 75,827 3.7% 2013 3,028 65 3,093 226,097,882 73,100 -0.4% 2012 3,017 59 3,076 225,859,144 73,426
1 Does not include Tier 2B Active Employees
2 Includes members that are only eligible for catastrophic disability benefits Active Member Counts
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION VI – ACTUARIAL SECTION OF THE ACFR
24 Added to
Rolls
Removed
from Rolls
%
Increase Average
Period Count
Annual
Subsidy Count Count Count
Annual
Subsidy Count
Annual
Subsidy
in Annual
Subsidy
Annual
Subsidy
Medical
2020-21 3,057 $ 23,648 107 117 3,047 $ 23,464 (10) $ (184) -0.8% $ 7,701 2019-20 2,909 21,588 254 106 3,057 23,648 148 2,059 9.5% 7,736 2018-19 2,923 20,566 124 138 2,909 21,588 (14) 1,023 5.0% 7,421 2017-18 2,920 23,621 139 136 2,923 20,566 3 (3,056) -12.9% 7,036 2016-17 2,821 21,844 210 111 2,920 23,621 99 1,777 8.1% 8,090 2015-16 2,769 21,341 183 131 2,821 21,844 52 503 2.4% 7,743 2014-15 2,737 21,941 152 120 2,769 21,341 32 (599) -2.7% 7,707 2013-14 2,718 22,657 151 132 2,737 21,941 19 (716) -3.2% 8,016 2012-13 2,680 25,223 158 120 2,718 22,657 38 (2,566) -10.2% 8,336 2011-12 2,557 25,519 203 80 2,680 25,223 123 (295) -1.2% 9,412 Dental
2020-21 3,454 $ 3,561 120 109 3,465 $ 3,558 11 $ (3) -0.1% $ 1,027 2019-20 3,405 3,502 158 109 3,454 3,561 49 58 1.7% 1,031 2018-19 3,375 3,478 123 93 3,405 3,502 30 25 0.7% 1,029 2017-18 3,322 3,414 152 99 3,375 3,478 53 63 1.9% 1,030 2016-17 3,264 3,224 170 112 3,322 3,414 58 190 5.9% 1,028 2015-16 3,206 3,212 159 101 3,264 3,224 58 12 0.4% 988 2014-15 3,133 3,130 160 87 3,206 3,212 73 82 2.6% 1,002 2013-14 3,103 3,742 138 108 3,133 3,130 30 (612) -16.4% 999 2012-13 3,044 3,924 144 85 3,103 3,742 59 (182) -4.6% 1,206 2011-12 2,906 3,745 203 65 3,044 3,924 138 179 4.8% 1,289 Annual subsidies are explicit amounts in thousands
Added to and Removed from Rolls
Beginning of
Period End of Period Net Change
Schedule of Retirees and Beneficiaries
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX A – MEMBERSHIP INFORMATION
25 Member Data
Valuation Date June 30, 2021 June 30, 2020 % Change
Active Employees Eligible for Full Benefits
Count 1,344 1,445 -6.99%
Average Age 50.7 50.3 0.85%
Average OPEB Benefit Service 17.8 17.6 1.09%
Total Payroll $138,542,350 $142,837,698 -3.01%
Active Employees Eligible for Catastrophic Disability Only Count 2,285 2,151 6.23%
Average Age 39.4 39.0 1.03%
Average OPEB Benefit Service 3.9 3.8 3.96%
Total Payroll $201,003,690 $180,012,759 11.66%
Retirees and Surviving Spouses with Medical Coverage *
Pre-65 853 913 -6.57%
Post-65 2,194 2,144 2.33%
Total 3,047 3,057 -0.33%
Retirees and Surviving Spouses with Dental Coverage *
Total 3,465 3,454 0.32%
Retirees and Surviving Spouses in In-Lieu Credit Program * Total 237 199 19.10%
Term Vested Members 152 156 -2.56%
* Counts do not include dependent spouses
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX A – MEMBERSHIP INFORMATION
26 Status Reconciliation
Terminated Survivin g
Active Vested Retiree Spouse Disabled Total
Beginning of Year 3,596 156 3,143 408 177 7,480
New Hires 0 0 0 0 0 0
Rehires 23 (2) 0 0 0 21
Vested Terminations (14) 14 0 0 0 0
Service Retirements (88) (11) 99 0 0 0
Disabled Retirements 0 0 (1) 0 1 0
New survivors (1) (1) (11) 41 0 28
No longer covered (185) (4) (79) (25) (6) (299)
Data corrections 2 0 3 0 0 5
New Catastrophic Disabilit
y 296 0 0 0 0 296
End of Year 3,629 152 3,154 424 172 7,531
Counts do not include dependent spouses
Counts include members in In-Lieu credit program and those eligible for catastrophic disability only
Member Data as of June 30, 2021:
Years of OPEB Benefit Service
Age Group < 5 5 - 9 10 - 14 15 - 19 20 - 24 25 - 29 30 – 34 35+ Total U n d e r 2 5 000000000
2 5 t o 2 9 000000000
3 0 t o 3 4 0 1 5 600000 2 1
3 5 t o 3 9 5 4 0 5 7 1 2 0000 1 1 4
4 0 t o 4 4 1 2 89 05 04 1 0 0 02 1 0
45 to 49 1 20 52 70 134 12 0 0 289
50 to 54 0 22 50 66 130 42 6 0 316
5 5 t o 5 9 0 1 54 33 68 81 8 6 02 0 6
60 to 64 1 8 41 17 36 6 7 2 118
65 and u
p 0 2 11 16 25 10 5 1 70
Total 8 150 350 267 454 88 24 3 1,344
Active Employees Eligible for Full Benefits
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX A – MEMBERSHIP INFORMATION
27 Age Group < 5 5 - 9 10 - 14 15 - 19 20 - 24 25 - 29 30 – 34 35+ Total U n d e r 2 5 9 1 0000000 9 1
2 5 t o 2 9 3 7 6 2 7 000000 4 0 3
3 0 t o 3 4 3 8 8 1 2 9 000000 5 1 7
3 5 t o 3 9 2 3 9 1 2 7 710000 3 7 4
4 0 t o 4 4 1 8 1 9 4 241000 2 8 2
4 5 t o 4 9 1 1 3 5 6 414000 1 7 8
5 0 t o 5 4 8 8 6 0 431100 1 5 7
5 5 t o 5 9 9 0 3 7 314310 1 3 9
6 0 t o 6 4 4 7 3 7 602010 9 3
65 and up
19 19 6 3 2 2 0 0 51
Total 1,632 586 32 13 14 6 2 0 2,285
Active Employees Eligible for Catastrophic Disability Benefit Only Years of OPEB Benefit Service
0 21
114
210
289 316
206
118 7091
403
517 374
282 178 157
139
93 51
0 100
200
300
400
500
600
< 25 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65+ Count
Age G roup
Chart A-1
Active Count Distribution
Eligible for Full Benefits Eligible for Catastrophic Disability Only
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX A – MEMBERSHIP INFORMATION
28 Age Group Males Females Total
Under 50 3 7 10 16
50 to 54 29 16 45 56
55 to 59 165 127 292 308
60 to 64 277 229 506 540
65 to 69 302 282 584 666
70 to 74 354 283 637 708
75 to 79 224 197 421 496
80 to 84 147 150 297 342
85 to 89 68 83 151 186
Over 90
37 67 104 147
Total 1,606 1,441 3,047 3,465
Counts do not include dependent spouses or members in In-Lieu credit program Medical Insurance
Retirees, Disabled Retirees and Surviving Spouses
Dental
Insurance
0 100
200
300
400
500
600
700
Under
50 50 to 54 55 to 59 60 to 64 65 to 69 70 to 74 75 to 79 80 to 84 85 to 89 Over 90 Count
Age Group
Chart A-2
Retiree Count Distribution by Election Tier
Employee only Employee and spouse Employee and child Family
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX A – MEMBERSHIP INFORMATION
29 Retirees &
Medical Plan Surviving Spouses Spouses Total
Pre-Medicare Medical Plans
Kaiser DHMO 82 65 147
Kaiser HDHP 80 50 130
Kaiser $25 Co-pay 532 344 876
Kaiser $15 Co-pay (Hawaii) 314
Kaiser $25 Co-pay (Northwest) 77 1 4
Anthem DHMO 83 1 1
Anthem Select $20 Co-pay 63 31 94
Anthem Traditional $20 Co-pay 000
Anthem HDHP 43 29 72
Anthem Select PPO 29 9 38
Anthem Classic PPO 6 1 7
Total 853 540 1,393
Medicare Medical Plans
Kaiser Senior Advantage 1335 497 1,832
Kaiser Senior Advantage (Hawaii) 4 15
Kaiser Senior Advantage (Northwest) 25 93 4
Anthem Medicare HMO 15 7 22
Anthem Medicare PPO 815 304 1,119
Total 2,194 818 3,012
Medical Plan Elections as of July 1, 2021
Age Group Male Female Total
Under 45 7 11 18
45 to 49 20 31 51
50 to 54 22 41 63
55 to 59 8 6 14
6 0 t o 6 4 325
Over 65 0 1 1
Total 60 92 152
* Includes term vested participants with at least 15
years of OPEB benefit service (37.5% pension multiplier) Current Vested Terminations*
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
30 Economic Assumptions
The expected return on Plan assets and per pe rson cost trend assumptions shown below were adopted by the Board of Administration with our input at the November 18, 2021 Board meeting.
Please refer to the presentation for that meeting for details, including the rationale for each assumption.
1. Expected Return on Plan Assets
6.00% per year. The Board expects a long-term ra te of return of 6.1% based on Meketa’s 20-year capital market assumptions and the System’s current investment policy.
2. Per Person Cost Trends
Medical trends were developed using the 2021 Society of Actu aries Long-Run Medical Cost Trend Model with the following parameters:
Initial trend rate:
Non-Medicare Eligible: 8.00%
Medicare Eligible: 4.00%
Inflation: 2.25%
Real GDP per Capita: 1.50%
Excess Medical Cost Growth: 1.10%
Expected GDP Share in 2030: 20.3%
Resistance Point: 20.0%
Year limited to GDP growth: 2075
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
31 Annual Increase
Fiscal Year Pre- Medicare Fiscal Year Pre- Medicare
Beginning Medicare Eligible Dental Beginning Medicare Eligible Dental 2022 Varies by Plan 2052 4.43 4.43 3.50
2023 7.49% 4.15% 3.50% 2053 4.42 4.42 3.50
2024 7.15 4.26 3.50 2054 4.41 4.41 3.50
2025 6.80 4.36 3.50 2055 4.40 4.40 3.50
2026 6.46 4.46 3.50 2056 4.40 4.40 3.50
2027 6.12 4.57 3.50 2057 4.39 4.39 3.50
2028 5.78 4.67 3.50 2058 4.38 4.38 3.50
2029 5.44 4.77 3.50 2059 4.37 4.37 3.50
2030 5.10 4.87 3.50 2060 4.36 4.36 3.50
2031 4.86 4.86 3.50 2061 4.35 4.35 3.50
2032 4.77 4.77 3.50 2062 4.35 4.35 3.50
2033 4.73 4.73 3.50 2063 4.34 4.34 3.50
2034 4.70 4.70 3.50 2064 4.33 4.33 3.50
2035 4.68 4.68 3.50 2065 4.32 4.32 3.50
2036 4.65 4.65 3.50 2066 4.29 4.29 3.50
2037 4.63 4.63 3.50 2067 4.23 4.23 3.50
2038 4.61 4.61 3.50 2068 4.17 4.17 3.50
2039 4.60 4.60 3.50 2069 4.12 4.12 3.50
2040 4.58 4.58 3.50 2070 4.06 4.06 3.50
2041 4.56 4.56 3.50 2071 4.01 4.01 3.50
2042 4.55 4.55 3.50 2072 3.96 3.96 3.50
2043 4.54 4.54 3.50 2073 3.91 3.91 3.50
2044 4.52 4.52 3.50 2074 3.86 3.86 3.50
2045 4.51 4.51 3.50 2075 3.81 3.81 3.50
2046 4.50 4.50 3.50 2076 3.78 3.78 3.50
2047 4.49 4.49 3.50 2077 3.78 3.78 3.50
2048 4.47 4.47 3.50 2078+ 3.78 3.78 3.50
2049 4.46 4.46 3.50
2050 4.45 4.45 3.50
2051 4.44 4.44 3.50
The table above shows the trend increases on a fi scal year basis; pre mium rates change on a calendar year basis. For the fiscal year beginning July 1, 2022, the trend was developed using actual calendar year 2022 pre miums and a trend assumption for calendar year 2023. The trend factors vary by plan as shown in the table below.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
32 FY Beginning
Plan 2022 Trend
Pre-Medicare
Kaiser Plans 3.59%
Anthem HMO Plans -0.91%
Anthem High Deductible Plan 12.84%
Anthem PPO Plans 12.84%
Medicare
Kaiser Plan 1.67%
Anthem HMO Plan 1.82%
Anthem PPO Plan 0.43%
Dental
HMO Plan 1.76%
PPO Plan -7.69%
Deductibles, Co-payments, Out-of-Pocke t Maximums, and Annual Maximum (where applicable) are assumed to increase at the above trend rates.
3. Changes Since Last Valuation
The per-person cost trends were updated.
The discount rate assumption was lowered from 6.25% to 6.00%.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
33 Demographic Assumptions
The OPEB assumptions were adopted by the Boar d of Administration at the November 18, 2021 Board meeting based on our recommendations. Th e demographic assumptions shared with the pension plan shown below were adopted at the November 21, 2019 Board meeting based on recommendations from our expe rience study covering Plan experience through June 30, 2019.
Please refer to the full experien ce study report for de tails, including the rationale for each assumption.
1. Salary Increase Rate
Wage inflation component: 3.00%
In addition, the following merit component is added based on an individual member’s years of service.
Salary Merit Increases
Years of Service Merit/ Longevity Years of Service Merit/ Longevity 0 3.75% 8 1.00
1 3.00 9 0.85
2 2.50 10 0.70
3 2.15 11 0.55
4 1.85 12 0.45
5 1.60 13 0.30
6 1.40 14 0.20
7 1.20 15+ 0.10
2. Rates of Termination
Rates of termination are show in the following table.
Rates of Termination
Years of Service Termination Rate Years of Service Termination Rate 0 15.00% 8 5.50
1 12.75 9 4.75
2 11.75 10 4.25
3 10.75 11 4.00
4 9.75 12 3.75
5 8.75 13 3.50
6 7.75 14 3.25
7 6.50 15+ 3.25
Termination rates do not apply once a member is eligible for retirement.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
34 3. Rates of Refund
Tier 1:
Rates of vested terminated em ployees electing a re fund of contributions are shown in the following table.
Rates of Refund
Years of
Service Under Age 35 Ages 35 - 44
Ages 45 and
Older
0-4 100.00% 100.00% 100.00%
5 25.00 15.00 18.00
6 20.00 12.50 15.00
7 20.00 10.00 12.00
8 20.00 10.00 9.00
9 20.00 10.00 6.00
10 20.00 10.00 3.00
11 17.50 10.00 0.00
12 15.00 10.00 0.00
13 10.00 10.00 0.00
14 10.00 7.50 0.00
15 10.00 5.00 0.00
16 10.00 2.50 0.00
17+ 10.00 0.00 0.00
Tier 2:
Vested terminated employees are expected to ta ke a refund if it exceeds the actuarial present value of their deferred benefit payment.
4. Deferred Vested Member Retirement Age
Tier 1 terminated vested members are assumed to retire at age 57 and Tier 2 terminated vested members are assumed to retire at age 62.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
35 5. Retirement Rates
Rates of retirement for Tier 1 members are based on age according to the following table – Tier 1.
Tier 1
Rates of Retirement by Age and Service
Age
Less than 15 Years
of Service
15 or more Years
of Service and less
than 30 Years of
Service
30 or more Years
of Service
50 0.0% 0.0% 70.0%
51 0.0 0.0 70.0
52 0.0 0.0 70.0
53 0.0 0.0 70.0
54 0.0 0.0 70.0
55 10.0 35.0 50.0
56 10.0 20.0 45.0
57 10.0 20.0 40.0
58 5.0 15.0 35.0
59 5.0 15.0 30.0
60 5.0 15.0 30.0
61 10.0 20.0 30.0
62 15.0 20.0 30.0
63 20.0 20.0 30.0
64 20.0 20.0 30.0
65 20.0 20.0 30.0
66 25.0 30.0 30.0
67 25.0 35.0 30.0
68 25.0 35.0 30.0
69 25.0 35.0 30.0
70 & over 100.0 100.0 100.0
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
36 Rates of retirement for Tier 2 members are based on age according to the following table – Tier 2. These rates are based on CalP ERS retirement rates for its 2.0% at age 62 formula with adjustments based on professi onal judgment for diff erences between the CalPERS benefits and the benefits provided to Tier 2 members.
Tier 2
Rates of Retirement by Age and Service
Years of Service
Age 5 – 10 11 – 20 21 – 25 26 – 34 35 +
55 3.0% 5.0% 7.0% 10.0% 15.0%
56 2.0% 3.5% 4.0% 7.0% 10.5%
57 2.5% 4.5% 5.0% 8.5% 12.75%
58 3.0% 5.5% 7.0% 11.0% 16.5%
59 3.5% 7.0% 9.0% 13.5% 20.25%
60 – 61 4.0% 8.5% 10.0% 14.5% 21.75%
62 7.5% 12.5% 17.5% 25.0% 100.0%
63 – 69 5.0% 10.0% 15.0% 25.0% 100.0%
70 & over 100.0% 100.0% 100.0% 100.0% 100.0%
6. Disability Rates
Disability rates are equal to the 0.973 times the CalPERS 2017 non-industrial disability incidence rates for miscellaneous state agencies, blended 55% male and 45% female. Sample disability rates of active members are provided in the following table.
Rates of Disability at Selected Ages
Age Disability
25 0.0272
30 0.0303
35 0.0613
40 0.1366
45 0.2519
50 0.3240
55 0.2631
60+ 0.2191
45% of disabilities are assume d to be duty related, and 55% are assumed to be non-duty related.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
37 7. Base Rates of Mortality
Base mortality rates are based on the sex-dis tinct employee and retiree mortality tables shown below.
Base Mortality Tables
Category Male Female
Healthy
Annuitant
0.995 times the 2010 Public General
Mortality Table (PubG-2010) for
Healthy Retirees
0.960 times the 2010 Public General
Mortality Table (PubG-2010) for
Healthy Retirees
Healthy Non-
Annuitant
0.992 times the 2010 Public General
Mortality Table (PubG-2010) for
Healthy Employees
1.084 times the 2010 Public General
Mortality Table (PubG-2010) for
Healthy Employees
Disabled
Annuitant
1.051 times the CalPERS 2009
Ordinary Disability Mortality Table
0.991 times the CalPERS 2009
Ordinary Disability Mortality Table
8. Rates of Mortality Improvement
Future mortality improvements are reflected by applying the most recent projection scale issued by the Society of Actuaries on a genera tional basis from the base year of 2010 for the Pub2010 tables and 2009 for the CalPERS tabl es. The projection scale used for the June 30, 2021 valuation is MP-2021.
9. Married Percentage
Percentage Married
Gender Percentage
Males 80%
Females 60%
10. Percent of Future Retirees Electing Coverage Versus In-Lieu Credits
Upon retirement, members are assumed to elect coverage or enter the In-Lieu credit program according to the following table.
Future Retiree Participation
CoverageI n - L i e u
Active Members 80% 20%
Terminated Vested Members 60% 40%
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
38 11. Dependent Coverage Elections
Upon retirement, members who elect coverage are assumed to cover dependents according to the following table.
Assum ed Futur e Retir ee Tier Elections
Pr e-Medicar e Medicar e
Coverage Tier Male Female Male Female
Retiree Only 31% 55% 35% 64%
Retiree and Children 4% 9% 0% 0%
Retiree and Spouse 37% 24% 65% 36%
Retiree and Family 28% 12% 0% 0%
100% of members eligible for dental are assumed to elect spousal coverage.
12. In-Lieu Assumptions
Members who elect to receive the In-Lieu credits are assumed to remain in the In-Lieu credit program for five years, after which they are assumed to el ect coverage and use their In-Lieu credits. The amount of the In-Lie u credit is 25% of the subsidy for the tier of coverage for which the retiree qualifies. Future retiree medi cal tier qualification assumptions are provided in the following table.
Assumed Future Retiree In-Lieu Credit Tier
Pr e-Medicar e Medicar e
Coverage Tier Male Female Male Female
Retiree Only 35% 35% 55% 55%
Retiree and Children 0% 0% 0% 0%
Retiree and Spouse 20% 20% 45% 45%
Retiree and Family 45% 45% 0% 0%
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
39 13. Health Plan Election
Retirees who are not yet age 65 are assumed to be eligible for Medicare when they reach age 65 and are assumed to enroll in the Medicare-e ligible plan corresponding to their current Pre-Medicare plan election. Futu re retirees are assumed to elect plans in the proportion shown in the following table.
% Electing % Electing
Pre-Medicare Medical Plans Medicare-Eligible Medical Plans ꞏ Kaiser DHMO 10% ꞏ Kaiser Senior Advantage 60% ꞏ Kaiser $25 Co-pay 67% ꞏ Anthem Medicare HMO 1% ꞏ Kaiser HDHP 8% ꞏ Anthem Medicare PPO 39%
ꞏ Anthem DHMO 1%
ꞏ Anthem Select $20 Co-pay 5%
ꞏ Anthem Traditional $20 Co-pay 1%
ꞏ Anthem HDHP PPO 3% Dental Plans (All Retirees)
ꞏ Anthem Select PPO 4% ꞏ Delta Dental PPO 98%
ꞏ Anthem Classic PPO 1% ꞏ DeltaCare HMO 2%
* Eligible for coverage and elect coverage
Assumed Plan Elections for Future Retirees*
The Anthem $20 Copay Traditional HMO plan was added effective January 1, 2022.
14. Voluntary Employees' Beneficiary Association Balance Drawdown
Members are assumed to draw down their VEBA balances by the blended active and retiree member plus spouse premium, w ithout factoring in th e lowest cost premium, and increased by a factor of 1.5 to es timate the adjustment from a blended active and retiree premium to a retiree only premium.
15. Dependent Age
For current retirees, actual spouse date of birth was used when available. For future retirees, male retirees are assumed to be three years olde r than their partner, an d female retirees are assumed to be two years younger than their partner.
16. Administrative Expenses
$90 per member for FYE 2023, increasing at th e wage inflation assumption of 3.00% per annum.
17. Changes Since Last Valuation
Plan elections assumptions and the administrative expense assumption were updated.
The assumed rate of mortality improvement was updated from MP-2020 to MP-2021.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
40 Claim and Expense Assumptions
The claim and expense assumpti ons shown below were adopted by the Board of Administration at the November 18, 2021 Board meeting based upon our recommendations.
The claims costs are based on the fully insured premiums charged to the City for the active and retiree population in 2021 and 2022. For non-Medicare adults, the premiums for each coverage tier (retiree only, retiree plus spouse, retiree plus child(ren) and retiree plus family) were blended based on enrollment data for the 2021 calendar y ear. The same process was used for Medicare adults, except only Medicare-eligible retirees were included. The resulting per person per month (PPPM) cost was then adjusted using age curves. The pre-Medica re adult claims curves were then loaded for the cost of children; the load for children decreases by retiree age since older retirees have fewer children. The impact of ch ildren on Medicare costs was assumed to be de minimis. All claims costs are developed jo intly for the Federated, Police, and Fire Postemployment Healthcare Plans of the City of San José.
This report does not reflect future changes in bene fits, penalties, taxes, or administrative costs that may be required as a result of the Patient Protection and Affordable Care Act of 2010, related legislation, or regulations.
1. Average Annual Claims and Expense Assumptions
The following claim and expens e assumptions were develope d as of July 1, 2021 based on the premiums for 2021 and 2022. The explicit subsidy amount (100% of the premium for the lowest cost health plan available to active C ity employees) is assume d to grow based on the Pre-Medicare cost trend rates.
The following tables show the claims costs for each medical plan as of the valuation date:
Sample Claims Costs - Non-Medicare Eligible
Kaiser Anthem HMO Anthm PPO
Age Male Female Male Female Male Female
40 $10,056 $12,370 $11,610 $14,047 $14,780 $18,672
45 10,291 12,078 11,653 13,535 15,607 18,613 50 10,885 12,338 12,073 13,604 17,037 19,481 55 12,058 13,082 13,103 14,182 19,441 21,164 60 14,101 13,747 15,051 14,678 23,310 22,715 64 16,605 13,515 17,525 14,269 27,868 22,668
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
41 Sample Claims Costs - Medicare Eligible
Kaiser Senior Adv Anthem HMO Anthem Select PPO
Age Male Female Male Female Male Female
65 $2,922 $2,578 $4,873 $4,299 $5,041 $4,447
70 3,103 2,628 5,175 4,383 5,353 4,534 75 3,566 2,956 5,948 4,929 6,153 5,099 80 4,050 3,352 6,754 5,590 6,987 5,783 85 4,374 3,663 7,294 6,108 7,546 6,319
Sample Claims Costs - Dental
Dental Blended
Age Unisex
All 576.46
2. Medicare Part D Subsidy
Per GASB guidance, the Part D Subsidy has not been reflected in this valuation.
3. Medicare Part B
All Medicare eligible retirees are assumed to participate in Medicare Part B.
4. Medicare Eligibility
All retirees who turn age 65 are assumed to be eligible for Medicare.
5. Annual Limits
Assumed to increase at the same rate as trend.
6. Lifetime Maximums
Are not assumed to have any financial impact.
7. Geography
Implicitly assumed to remain the same as current retirees.
8. Retiree Contributions
Retirees pay the difference between the actual premium for the elected medical plan and the lowest cost medical plan available to active memb ers if the retiree is eligible to receive the explicit subsidy. No retiree contributions are required for dental.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
42 9. Changes Since Last Valuation
All claims costs were updated to reflect the changes in plan premiu ms and the populations covered. Any implicit subs idy calculated for Me dicare-eligible members is treated as an explicit subsidy reflecting additional anticipa ted increases in Medicare-eligible premiums attributable to the aging of the Medicare-eligible population.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
43 Contribution Allocation Procedure
The contribution allocation procedure primarily c onsists of an actuarial cost method, an asset smoothing method, and an amortization method as described below.
1. Actuarial Cost Method
The Entry Age actuarial cost method was us ed for active employees, whereby the normal cost is computed as the leve l annual percentage of pay requ ired to fund the retirement benefits between each member’s date of hi re and assumed retirement. The Actuarial Liability is the difference betw een the present value of futu re benefits and the present value of future normal costs. Or, equivalently, it is the accumulation of normal costs for all periods prior to the valuation date. Th e normal cost and Actuarial Liability are calculated on an individual basis. The sum of the individual amounts is the normal cost and Actuarial Liability for the Plan. The Actu arial Liability for the Plan represents the target amount of assets the Plan should have as of the valuation date according to the actuarial cost method.
2. Asset Valuation Method
The Actuarial Value of Assets equals the Market Value of Assets.
3. Amortization Method
The Unfunded Actuarial Liability is the diffe rence between the Actu arial Liability and the Actuarial Value of Assets. The Unfunded Actuarial Liability as of June 30, 2017 is amortized as a level dollar amount over a closed 20-year period. All subsequent amortization bases are amortized over 20-year periods with a 3-ye ar phase-in and phase- out.
4. Contributions
The City will contribute the annual implicit subsidy as part of active employee health premiums and will prefund the explicit subsidy based on th e normal cost, administrative expenses and amortization payment de scribed above less expected employee contributions. The City has the option to l imit its contribution towards the explicit subsidy to no more than 14% of total payroll.
Active members that are eligible for full benefits will contribute 7.50% of pay.
5. Changes Since Last Valuation
None.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX C – SUMMARY OF PLAN PROVISIONS
44 POSTEMPLOYMENT HEALTHCARE PLAN
Eligibility: Employees hired before September 2013 who did not elect to opt-in to the Voluntary Employees' Beneficiary Association (VEBA).
Medical: Employees who retire (incl uding deferred vested members) with at least 15 years of service with the City (“OPEB benefi t service”), or with a monthly pension equal to at least 37.5% of final compensation, are el igible to elect medical coverage upon retirement.
Tier 1 employees (hired before September 30, 2012) are eligible for retirement at age 55 with five years of service or at any age with 30 years of service. Tier 2 employees (hired on or after Septembe r 30, 2012) are elig ible for unreduced service retirement at age 65 with five years of service or reduced service retirement at age 55 with five years of service. Service credited thru reciprocity agreements counts towards an employee’s required service to retire, but only service with the City counts towards the required years of service to receive OPEB benefits. Employees who retire with less than 15 years of service can elect coverage but receive no explicit subsidy.
Employees who become disabled with at least 15 years of service or have a monthly pension equal to at least 37.5% of final compensation are eligible to elect medical coverage upon retirement.
Spouses or domestic partners of retired members are allowed to participate if they were enrolled in the City’s medical plan at the time of the member’s retirement.
Dependent children are eligible to receive coverage until the age of 26.
Surviving spouses/domestic partners/child ren of deceased members are eligible for coverage if the following conditions are met:
1. The employee has 15 years of service at time of death or is entitled to a monthly pension of at least 37.5% of final compensation; and,
2. Both the member and the survivors were enrolled in the active medical plan immediately before death; and,
3. The survivor will receive a monthly pension benefit.
Dental: Employees who retire or become disabled di rectly from City service with at least five years of service or with a monthly pension equal to at least 37.5% of final compensation and are enrolled in a City dent al plan at retirement are eligible to elect dental coverage upon retirement. Spouses, domestic partners, or children of retired members are allowed to participate if they were enrolled in the City’s dental plan at the time of the member’s retirement.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX C – SUMMARY OF PLAN PROVISIONS
45 Surviving spouses/domestic partners/child ren of deceased members are eligible for coverage if the following conditions are met:
1. The employee has five years of service at time of death or is entitled to a monthly pension of at least 37.5% of final compensation; and,
2. Both the member and the survivors were enrolled in the active dental plan immediately before death; and,
3. The survivor will receive a monthly pension benefit.
Benefits for Retirees:
Medical: The Plan pays 100% of the premium for the lowest cost health plan available to active City employees. The member pays the difference if another plan is elected.
Dental: The Plan pays 100% of the dental insurance premiums.
In-Lieu: Upon retirement, members may elect to receive cred its equal to 25% of the premium subsidy the Plan w ould have paid in-lieu of the actual subsidy. These credits may be used at a future date to supplement the Plan’s premium subsidy for the coverage elected.
Premiums: Monthly premiums for calendar years 2021 and 2022 are as follows.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX C – SUMMARY OF PLAN PROVISIONS
46 Sin gle Em p/Sp Emp/Chd Famil y
Medical
Non-Medicare Monthly Rates
Kaiser DHMO $610.44 $1,220.88 $1,068.28 $1,831.32
Kaiser $25 Co-pay 745.52 1,491.04 1,304.64 2,236.56
Kaiser HDHP 514.34 1,028.68 900.10 1,543.02
Anthem HMO $20 Co-pa
y 724.82 1,594.58 1,304.68 2,246.90
Anthem DHMO 558.80 1,229.40 1,005.86 1,732.34
Anthem HDHP 977.80 2,151.16 1,760.04 3,031.20
Anthem Select PPO 1,587.22 3,491.90 2,857.00 4,920.42
Anthem Classic PPO 1,697.56 3,734.68 3,055.62 5,262.48
Medicare-Eligible Monthly Rates
Kaiser Senior Advantage $262.90 $525.80 $525.80 $788.70 Anthem Medicare PPO 480.04 960.08 960.08 1,440.12
Anthem Medicare HMO 425.71 851.42 851.42 1,277.13
Dental
Delta Dental PPO $50.88 $111.92 $122.12 $157.72
DeltaCare HMO 24.44 48.86 42.74 73.30
Anthem HMO Medicare family rates assume the children are on the Non-Medicare $20 Co-pay Anthem HMO. 2021 Monthly Premiums
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX C – SUMMARY OF PLAN PROVISIONS
47 Sin gle Em p/Sp Emp/Chd Famil y
Medical
Non-Medicare Monthly Rates
Kaiser DHMO $607.66 $1,215.32 $1,063.40 $1,822.98
Kaiser $25 Co-pay 742.12 1,484.24 1,298.70 2,226.36
Kaiser HDHP 511.98 1,023.96 895.96 1,535.94
Anthem HMO Select $20 Co-pa
y 661.56 1,455.40 1,190.80 2,050.78
Anthem HMO Traditional $20 Co-pay 760.52 1,673.12 1,368.94 2,357.58 Anthem DHMO 510.02 1,234.30 1,122.10 1,581.14
Anthem HDHP 1,163.58 2,559.88 2,094.44 3,607.12
Anthem Select PPO 1,888.78 4,155.36 3,399.82 5,855.30
Anthem Classic PPO 2,020.10 4,444.26 3,636.18 6,262.34
Medicare-Eligible Monthly Rates
Kaiser Senior Advantage $260.92 $521.84 $521.84 $782.76 Anthem Medicare PPO 465.06 930.12 930.12 1,395.18
Anthem Medicare HMO 423.76 847.52 847.52 1,271.28
Dental
Delta Dental PPO $42.24 $92.90 $101.36 $130.90
DeltaCare HMO 24.44 48.86 42.74 73.30
Anthem HMO Medicare family rates assume the children are on the Non-Medicare $20 Co-pay Anthem HMO. 2022 Monthly Premiums
Summary of 2022 Benefit Plans:
Medicare-Eligible Plans Kaiser Anthem HMO Anthem PPO
Annual Out-of-Pocket Maximum Single $1,500
Family $3,000
$1,000 per
member $0
Annual Deductible None None None
Office Visit copay $25 $25 $0
Emergency Room copay $50 $100 $0
Hospital Care copay $250 $100 $0
Prescription Drug retail copay
(30-day supply):
Generic
Brand
Non-Fo
rmulary
$10
$10
N/A
$10
$25
$40
$10
$25
$40
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX C – SUMMARY OF PLAN PROVISIONS
48 Kaiser Anthem HMO Anthem PPO*
Non-Medicare
Plans:
High
Deductible DHMO $25 Co-Pay $20 Co-Pay DHMO Select PPO Classic PPO High
Deductible
Annual Out-of-
Pocket
Maximum
(sin
gle/family)
$5,950/
$11,900
$4,000/
$8,000
$1,500/
$3,000
$1,500/
$3,000
$4,000/
$8,000
$2,100/
$4,200
$2,100/
$4,200
$4,000/
$8,000
Annual
Deductible
(sin
gle/family)
$3,000/
$6,000
$1,500/
$3,000 None None $1,500/
$3,000 $100/$200 $100/$200 $2,500/
$5,000
Office Visit
copa
y 30%** $40 $25 $20 $20 $25 $25 20%**
Emergency
Room copay 30%** 30%** $100 $100 30%** $100 $100 20%** Hospital Care
copay 30%** 30%** $100 $100 30%** 10%** 10%** 20%**
Prescription
Drug retail copay
(30-da
y supply):
Generic
Brand
Non-Formular
y
$10
$30
N/A
$10
$30
N/A
$10
$25
N/A
$10
$30
$60
$10
$30
$60
$10
$25
$40
$10
$25
$40
$10
$30
$60
* In-Network benefits
** After deductible is paid.
Cost-Sharing Provisions:
It is assumed for the purpose of this valuation that the City of San José will in the future maintain a consistent level of cost sharing for benefits with the retirees. This may be achieved by adjusting benefit provisions, retiree-paid premiums, or both.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX C – SUMMARY OF PLAN PROVISIONS
49 VOLUNTARY EMPLOYEES' BENEFICIARY ASSOCIATION (VEBA)
Eligibility: Employees who elected to opt-in to the Voluntary Employees' Beneficiary Association (VEBA).
Employee Group VEBA Contribution Rate
Tier 1 and Tier 2A (Hired before September 2013)
Mana gement: 2.5%
Non-Mana gement 3.5%
Tier 2B
Not Unit 99 2.0%
Unit 99 N/A
Contributions: Employees are required to make mandato ry contributions into the VEBA on a pre-tax basis.
Medical: VEBA funds can be used to reimbur se members for eligible healthcare expenses.
VEBA members on service-connected di sability receive single coverage benefits from the Postemployment Hea lthcare Plan up to age 65 once VEBA funds are exhausted.
Note: The summary of major plan provisions is designed to outline principal plan benefits.
If the Department of Retirement Services sh ould find the plan summary not in accordance with the actual provisions, the actuary shou ld immediately be alerted so the proper provisions are valued.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX D – GLOSSARY OF TERMS
50 1. Actuarial Assumptions
Assumptions as to the occurrence of future events affecting pension costs, such as: mortality, withdrawal, and retirement; changes in compensation; rates of investment earnings, and asset appreciation or depreciation; procedures used to determine the Actuarial Value of Assets; and, other relevant items.
2. Actuarial Cost Method
A procedure for determining th e actuarial present value of pension plan benefits and expenses and for developing an a llocation of such value to each year of service, usually in the form of a normal cost and an Actuarial Liability.
3. Actuarial Gain (Loss)
A measure of the difference between actual expe rience and that expected based upon a set of actuarial assumptions during the period between two actuarial valuation dates, as determined in accordance with a particular actuarial cost method.
4. Actuarial Liability
The portion of the actuarial present value of proj ected benefits that will not be paid by future normal costs. It represents the value of the past normal costs with interest to the valuation date.
5. Actuarial Present Value (Present Value)
The value as of a given date of a future amount or series of payments . The actuarial present value discounts the payments to the given date at the assumed investment return and includes the probability of the paymen t being made. As a simple ex ample: assume you owe $100 to a friend one year from now. Also, assume there is a 1% probability of your friend dying over the next year, in which case you will not be ob ligated to pay him. If the assumed investment return is 10%, the actuarial present value is:
Probability 1
Amount of Payment (1+Discount Rate)
$100 x (1 – .01) 1/(1+.1) = $90
6. Actuarial Valuation
The determination, as of a specified date, of the normal cost, Actuaria l Liability, Actuarial Value of Assets, and related actuarial present values for a pension plan.
7. Actuarial Value of Assets
The value of cash, investments, and other property belonging to a pension plan as used by the actuary for the purpose of an actuarial valuation. The purpose of an Actuarial Value of Assets is to smooth out fluctuations in market values. This way long- term costs are not distorted by short-term fluctuations in the market.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX D – GLOSSARY OF TERMS
51 8. Amortization Payment
The portion of the pension plan contribution, whic h is designed to pay interest and principal on the Unfunded Actuarial Liability in order to pay for that liability in a given number of years.
9. Entry Age Normal Actuarial Cost Method
A method under which the actuarial present value of the projected benefits of each individual included in an actuarial valuation is alloca ted as a level percentage of pay from the individual’s date of entry into the plan to the individual’s assumed cessation of employment.
10. Normal Cost
That portion of the actuarial present value of pension plan benefits and expenses which is allocated to a valuation year by the actuarial cost method.
11. Unfunded Actuarial Liability
The excess of the Actuarial Liability over the Actuarial Value of Assets.
12. Funded Percentage
The ratio of the Actuarial Value of Assets to the Actuarial Liability.
13. Mortality Table
A set of percentages that estimate the probabil ity of death at a particular point in time.
Typically, the rates are annual and based on age and sex.
14. Discount Rate
The assumed interest rate used for converting projec ting dollar related values to a present value as of the valuation date.
15. Medical Trend
The assumed increase in dollar related values in the future due to the increase in the cost of health care.
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX E – LIST OF ABBREVIATIONS
52 Actuarial Accrued Liability (AAL)
Actuarial Valuation Report (AVR)
Annual Required Contribution (ARC)
Coordination of Benefits (COB)
Deductible and Coinsurance (DC)
Deferred Retirement Option Plan (DROP)
Durable Medical Equipment (DME)
Employee Assistance Program (EAP)
Employee Benefits Division (EBD)
Fiscal Year Ending (FYE)
Governmental Accounting Standards Board (GASB)
Hospital Emergency Room (ER)
In-Network (INN)
Inpatient (IP)
Medicare Eligible (ME)
Net Other Postemployment Benefit (NOO)
Non-Medicare Eligible (NME)
Not Applicable (NA)
Office Visit (OV)
Other Postemployment Benefit (OPEB)
Out-of-Network (OON)
Out-of-Pocket (OOP)
Outpatient (OP)
Pay-as-you-go (PAYGo)
Per Person Per Month (PPPM)
Pharmacy (Rx)
Preferred Provider Organization (PPO)
Primary Care Physician (PCP)
Specialist Care Provider (SCP)
Summary Plan Description (SPD)
Unfunded Actuarial Accrued Liability (UAAL)
Unfunded Actuarial Liability (UAL)
Urgent Care (UC)
CITY OF SAN JOSÉ FEDERATED POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX E – LIST OF ABBREVIATIONS
53