City of San José Police and Fire
Department Postemployment
Healthcare Plan
Revised Actuarial Valuation
Funding Report as of June 30, 2021
Produced by Cheiron
March 2022
TABLE OF CONTENTS
Section Page
Section I Board Summary .......................................................................................................1
Section II Certification ...........................................................................................................10
Section III Assets .....................................................................................................................12
Section IV Measures of Liability .............................................................................................15
Section V Contributions..........................................................................................................22
Section VI Actuarial Section of the ACFR ..............................................................................25
Appendices
Appendix A Membership Information .......................................................................................33
Appendix B Actuarial Assumptions and Methods .....................................................................42
Appendix C Summary of Plan Provisions ..................................................................................56
Appendix D Glossary of Terms ..................................................................................................61
Appendix E List of Abbreviations .............................................................................................64
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT 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 Police and Fire Department Postemployment Healthcare Plan for funding purposes on ly. There are separate reports for financial reporting. This revised report reflects a correction of the allocation of assets between Police and Fire in the 401(h) account.
Dashboard
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
2 The charts on the previous page are intended to provide a quick overview of the current valuation results compared to the prior valua tion results. The chart s on the top show contributions for FYE 2022 and 2023 for Police (left chart) and Fire (right chart) . The normal co st shown by the red line represents the expected cost of the explicit premium subsidy benefits attributable to the current year of service. All c ontributions above the normal cost go toward paying off the Unfunded Actuarial Liability (UAL). The projected contribution amount from the prior valuation is shown by the blue line. The implicit subsidy is not shown on these cha rts as it is funded on a pay-as-you-go basis as a part of the health premiums for active employees . The City’s implicit subsidy payment is approximately $3.2 million for FYE 2023.
The charts on the bottom of the previous page summarize the funded status as of the June 30, 2020 and June 30, 2021 actuarial valuations. The stacked bars represent the Actuarial Liability, with the liability broke n into separate components for members currently receiving benefits, vested terminated members, and active members. These liability amounts are only for the portion of the plan that is intended to be pre -funded, so they do not include the implicit subsidy. The green lines represent the assets, and the funded ratio improved to 41% for Police and 38% for Fire.
More detail and discussion is provided in the following sections.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
3 Contributions
There are two components to the benefits under the Plan: the exp licit subsidy and the implicit subsidy. The explicit subsidy (or premium subsidy) is paid by the Plan and is the p remium for health coverage selected by the retir ee, up to 100% of the premium for the lowest cost plan offered to active employees plus the pr emium for the dental plan selected by the retiree . 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, me mber contributions became fixed at 8.0% of pay , and the City’s contribution toward the explicit subsidy became actuarially determined separately for Police and Fire . However, the City has the option to limit its contribution for the explicit subsidy to 11% of Police and Fire payroll. Finally, the City a lso pays the implicit subsidy on a pay -as-you-go basis as a part of active health premiums. Because the Board’s role is related to the funding of the explicit subsidy, the focus of this report is on the statu s of that funding and the developme nt of the Act uarially Determined Contribution (ADC) for the pre-funded benefits.
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 % Change
Police Department
Members 5,567$ 6,030$ -7.7%
City 17,943 17,245 4.0%
Total 23,510$ 23,275$ 1.0%
Fire Department
Members 4,974$ 5,187$ -4.1%
City 11,249 11,027 2.0%
Total 16,223$ 16,214$ 0.1%
Total Trust Contributions
Members 10,541$ 11,217$ -6.0%
City 29,192 28,272 3.3%
Grand Total 39,733$ 39,489$ 0.6%
Estimated City Optional Cap 28,714$ 27,282$ 5.2% Dollar amounts in thousands
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
4 The chart below shows the projected contributions to the Plan. The purple bars represent the member contributions, and the gold bars are the City’s contributions to pre-fund the explic it subsidy. The red line represents the sum of member contributions and the City’s optional cap. To the extent the bars rise above the red line, the projected contributions exceed the City’s optional cap. The gray area behind the bars represents the projected annual benefit payments.
Projected Contributions FYE 2022-2042
Because new entrants are only entitled to catastrophic disability benefits and do not contribute to the Plan, the member contributions are expect ed to decline as current ac tive members who are eligible for full benefits retire or otherwise leave active employment with the City. The City’s actuarially determined contribution is expected to increase faster than payr oll as the member contributions decrease. The Pl an has historically had positive net cash flow, but we only expect that to last through FYE 2027.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
5 Funded Status
Table I-2 below summarizes the Actuarial Liability, Market Value of Assets, Unfunded Actuarial Liability, and funded percentage f or the Plan a s of June 30, 2021 compared to June 30, 2020.
The Actuarial Liability for the explicit subsidy increased 2.2% for Police a nd 1.5% for Fire. At the same time, assets increased 30.6% for Police and 36.1% for Fire due primarily to investment returns. As a result, the Unfunded Actuarial Liability decreased by 11.2% for Police and 12.1% for Fire and the funded percentage increased from 32.1% to 41.0% for Police and improved from
28.2% to 37.9% for Fire. The funded percentages are for the explicit subsidy only.
Table I-2
Summary of Funded Status - Explicit Subsidy Only
6/30/2021 6/30/2020 % Change
Police Department
Actuarial Liability
Actives 122,275$ 127,495$ -4.1%
Deferred Vested 2,581 2,435 6.0% In Pay Status 314,331 299,826 4.8% Total 439,187$ 429,756$ 2.2%
Assets 180,002 137,789 30.6%
Unfunded Actuarial Liability 259,185$ 291,967$ -11.2% Funded Percentage 41.0% 32.1% 8.9%
Fire Department
Actuarial Liability
Actives 100,275$ 97,632$ 2.7%
Deferred Vested 905 270 235.2%
In Pay Status 153,125 152,651 0.3% Total 254,305$ 250,553$ 1.5%
Assets 96,311 70,743 36.1%
Unfunded Actuarial Liability 157,994$ 179,810$ -12.1% Funded Percentage 37.9% 28.2% 9.6%
Grand Total
Aggregate UAL 417,179$ 471,778$ -11.6% Aggregate Funded Percentage 39.8% 30.7% 9.2%
Dollar amounts in thousands
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
6 The chart below shows the historical trend of a ssets and the Actuarial Liability (excluding the implicit subsidy) on a funding basis for the City of San José Police and Fire Department Postemployment Healthcare Plan. Over the last 10 years, the UAL for the explicit subsidy has been reduced by $ 116.1 million due to an increase in assets of $2 13.3 million somewhat offset by an increase in the Actuarial Liabi lity of $97.3 million. The increase in Actu arial Liability includes the impact of reduci ng the discount rate from 7.25% in 2012 to 6.00% in 2021. The increase in the assets has been primarily attributable to contributions and recent investment returns. In the futu re, growth in assets will become mo re dependent on investment returns as benefit payments grow to equal or exceed contributions.
Funded Ratio 11.1% 14.7% 16.8% 19.4% 21.7% 27.0% 27.1% 30.5% 30.7% 39.8% UAL 533$ 437$ 458$ 482$ 501$ 411$ 436$ 424$ 472$ 417$ Discount Rate 7.25% 7.125% 7.00% 7.00% 6.875% 6.875% 6.50% 6.50% 6.25% 6.00% $0
$100
$200
$300
$400
$500
$600
$700
$800
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Millions
Actuarial Liability (Funding) Market Value of Assets
Historical Actuarial Liability and Assets
The chart on the next page shows a 20-year projection of assets and Actuarial Liability (AL), and also shows the projected funded percentage for the explicit subsidy. If all assumptions are met in the fu ture including an expected return of 6.00% each year and the C ity does not impose its optional cap on contributions, the funded percentage for the explicit subsidy is expected to reach 100% by 2043. If the City imposes its optional cap on contributions eve ry year, the funded percentage for the explicit subsidy is not expected to reach 100%.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
7 Projected Assets and Actuarial Liability 2021-2041
Changes Since the Prior Valuation
Table I -3 below breaks out the sources of the change s in UAL for the fiscal year ending June 30, 2021. The total UAL for the explicit subsidy decreased about $54.6 million since the prior year.
Table I-3
Changes in Unfunded Actuarial Liability - Explicit Subsidy Only Total
Unfunded Actuarial Liability, June 30, 2020 471,778$
Unfunded Actuarial Liability, June 30, 2021 417,179
Change in Unfunded Actuarial Liability (54,599)$
Sources of Changes
Contributions below Tread Water 1,824$
Investment Experience (38,588)
Liability Experience (51,393)
Assumption Changes 33,558
Total Changes (54,599)$
Dollar amounts in thousands
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
8 The primary sources of the decrease in the UAL were i nvestment experience, which decreased the UAL by about $ 38.6 million, and liability experience, which decreased the UAL by about $51.4 million. The liability experience was mainly driven by the decreases in the Medicare eligible and dental premium rates offset by demographic experience. The decreases in the UAL were somewhat offset by two factors. Contributions were below the Tread Water level b y about $1.8 million. The Tread Water amount equals normal cos t plus the interest on the UAL. If all assumptions are met, contributions equal to the Tread Water amount would result in no change to the dollar amount of the UAL. Assumption changes increased the UAL by $33.6 million, mainly due to reducing the discount rate from 6.25% to 6.00% and plan election assumptions.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION I – BOARD SUMMARY
9 Table I -4 below provides a summary of the results of thi s valu ation compared to the prior valuation.
Table I-4
Summary of Valuation Results
June 30, 2021
Police Fire Total June 30, 2020 Change
Active Members
Full Benefits 517 469 986 1,073 -8.1% Catastrophic Disability Only 564 188 752 636 18.2% Total Active Members 1,081 657 1,738 1,709 1.7% Deferred Vested Members 9 3 12 10 20.0% In Pay Status or In-Lieu 1,424 849 2,273 2,217 2.5% Total 2,514 1,509 4,023 3,936 2.2% Full Benefit Member Payroll 77,450$ 66,504$ 143,954$ 150,664$ -4.5% Total Payroll 157,594 95,841 253,435 240,798 5.2% Actuarial Liability - Explicit 439,187$ 254,305$ 693,492$ 680,308$ 1.9% Market Value of Assets 180,002 96,311 276,313 208,531 32.5% Unfunded Actuarial Liability 259,184$ 157,995$ 417,179$ 471,777$ -11.6% Funded Percentage 40.99% 37.87% 39.84% 30.65% 9.2%
Actuarial Liability - Implicit 42,518$ 22,199$ 64,716$ 58,706$ 10.2% FYE 2023
Police Fire Total FYE 2022 Change
City's ADC Amount 17,943$ 11,249$ 29,192$ 28,271$ 3.3% City's ADC Rate 11.1% 11.4% 11.2% 11.4% -0.2%
City's Implicit Subsidy Payment 2,113$ 1,039$ 3,152$ 3,040$ 3.7% Dollar amounts in thousands
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION II – CERTIFICATION
10 The purpose of this report is to pres ent the annual actua rial valuation of the City of San José Police and Fire Postemployment Department Healthcare Plan. This report is for the u se of the Board in setting actuarially determined amounts for the City to contribute to the Plan . There are separate reports for accounting and financial reporting under GASB Statements 74 and 75.
In preparing our report, we relied on information , some oral and some written , supplied by the Plan. This information includes, but is not limited to, the plan provisions, employee data, and financial information. We performed an informal examination o f the obvious characteristics of the data for reasonableness a nd consistency in accordance with Actuarial Standard of Practice No. 23.
The health assumptions and discount rate assumption were ado pted by the Boa rd of Administration at the December 2, 2021 Board meeting based upon our recommendations. Price inflation and wage inflation assumptions were adopted at the December 3, 2020 Board meeting based upon our recommendations . All other assumption s in this repor t were adopted at the November 4, 2021 Board meeting based on recommendations from our experience study covering plan experience through June 30, 2021. Please refer to the experience study report and our Board presentatio ns for an explanatio n of the ration ale for each assumption. We believe these assumptions are reasonable for the purpose of the funding valuation.
The liability measures and funding ratios in this report are for the purpose of establishing contribution amounts. These measures are not approp riate 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 liabi lities and proj ect benefit payments. We have relied on WinTe ch as the developer of ProVal. We have a basic understanding o f ProVal and have used ProVal in accordance with its original intended purpose. We have not identified any materia l inconsistencies in assumptions or output of ProVal that would affect this valuation.
Health care trends for this valuation were developed u sing 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 historical U .S. medical expenditures and the judgments of experts in the f ield. The long -run baseline projection 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 assu mptions, methods, pl an 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 POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION II – CERTIFICATION
11 Future actuarial measurements may differ significantly from the current measurem ents due to such factors as the following: plan experience d iffering 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 c ontents have be en prepared in accordance with generally reco gnized and accepted actuarial principles and practices and our understanding of the Code of Professional Conduct and applicable Actuarial Standards of Practice set out by the A ctuarial Standards Board as well as applicable laws and regulations . Furthermore , as credentialed actuaries, we collectively meet the Qualific ation Standards of the American Academy of Actuaries to render the opinion contained in this report. This report d oes not address any contractual or legal issues.
We are not attorneys, and our firm does not provide any legal services or advice.
This repor t was prepared for the Board for the purposes described herein. Other users of this report are not intended users as defined in the Ac tuarial Standar ds of Practice, and Cheiron assumes no duty or liability to any other user.
This valuation report does not reflect future changes in benefits, penalties, taxes, or administrative costs that may be required as a result of the Patient Protect ion and Afforda ble Care Act of 2010, related legislation, or regulations.
William R. Hallmark, ASA, EA, FCA, MAAA Michael W. Schionning, FSA, MAAA Consulting Actuary Principal Consulting Actuary
John L. Colberg, FSA, EA, MAAA
Principal Consulting Actuary
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION III – ASSETS
12 Assets are invested in two separate trust vehicles: a 401(h) account within the pension plan and a separate 115 Trust. All City contributions are made to the 115 Trust while member contributions are made to the 401(h) accou nt. Benefit payments are currently being paid from the 401(h) account, but some benefit payments will likely need to be paid from the 115 Trust in the near future.
Statement of Change in Market Value of Assets
Table III-1 and Table III-2 show the changes in the Market Value of Assets for the last two fiscal years for Police and Fire separately. The implicit subsidy is shown as both a contributi on and a payment from the Plan, but it is not actually contributed to the trust or paid from the trust. It is paid directly by the City as a part of active health plan premiums.
Fiscal Year Ending 2021 Fiscal Year Ending 2020
401(h) 115 Trust Total 401(h) 115 Trust Total
Market Value, Beginning 27,248$ 110,541$ 137,789$ $ 32,736 92,254$ $ 124,990 Contributions
Member 6,743 0 6,743 7,331 0 7,331 City 0 15,320 15,320 0 14,595 14,595 Implicit subsidy 1,950 0 1,950 1,927 0 1,927 Total $ 8,693 $ 15,320 $ 24,013 $ 9,258 $ 14,595 $ 23,853 Net Investment Earnings 6,562 28,448 35,010 1,103 3,723 4,826 Benefit Payments
Explicit subsidy 14,796 0 14,796 13,876 0 13,876 Implicit subsidy 1,950 0 1,950 1,927 0 1,927 Total $ 16,746 $ 0 $ 16,746 $ 15,803 $ 0 $ 15,803 Administrative Expenses 31 33 64 46 31 77 Market Value, End $ 25,726 $ 154,276 $ 180,002 $ 27,248 $ 110,541 $ 137,789 Estimated Rate of Return 28.3% 22.6% 23.5% 3.7% 3.5% 3.5% Dollar amounts in thousands
Table III-1
Market Value of Assets - Police Department
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION III – ASSETS
13 Fiscal Year Ending 2021 Fiscal Year Ending 2020
401(h) 115 Trust Total 401(h) 115 Trust Total
Market Value, Beginning 2,200$ 68,543$ 70,743$ $ 4,115 56,852$ $ 60,967 Contributions
Member 5,732 0 5,732 5,804 0 5,804 City 0 10,062 10,062 0 9,408 9,408 Implicit subsidy 1,065 0 1,065 1,420 0 1,420 Total $ 6,797 $ 10,062 $ 16,859 $ 7,224 $ 9,408 $ 16,632 Net Investment Earnings 276 17,707 17,983 115 2,302 2,417 Benefit Payments
Explicit subsidy 8,163 0 8,163 7,808 0 7,808 Implicit subsidy 1,065 0 1,065 1,420 0 1,420 Total $ 9,228 $ 0 $ 9,228 $ 9,228 $ 0 $ 9,228 Administrative Expenses 26 20 46 26 19 45 Market Value, End $ 19 $ 96,292 $ 96,311 $ 2,200 $ 68,543 $ 70,743 Estimated Rate of Return 28.3% 22.5% 22.6% 3.7% 3.5% 3.5% Dollar amounts in thousands
Table III-2
Market Value of Assets - Fire Department
In the last year, investments, in aggregate, returned approximately 23.5% for Police and 22.6% for Fire compared to an expected rate of return of 6.25%, resulting in a total investment gain of approximately $38.7 million. The assets in the 401 (h) account returned approximately 28.3%, while the assets in the 115 Trust returned approximately 22.5%.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION III – ASSETS
14 The chart below shows the actual investm ent 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
6.0%.
Historical Rates of Return
-1.3%
8.7%
14.1%
-1.5% -1.4%
8.8%
4.4% 4.3% 3.5%
23.1%
-5%
0%
5%
10%
15%
20%
25%
30%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Y ear Ending June 30
Return on Market Value Assumption
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION IV – MEASURES OF LIABILITY
15 This section p resents detailed information on liability measure s 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 fu ndamental 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 charts b elow show the projected benefit payments for the next 70 years.
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
2021 2026 2031 2036 2041 2046 2051 2056 2061 2066 2071 2076 2081 2086 2091 Millions
Projected Benefit Payments - Police
Dental Explicit Medical Part B In-Lieu Implicit Medical
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
2021 2026 2031 2036 2041 2046 2051 2056 2061 2066 2071 2076 2081 2086 2091 Millions
Projected Benefit Payments - Fire
Dental Explicit Medical Part B In-Lieu Payouts Implicit Medical CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION IV – MEASURES OF LIABILITY
16 Tables IV-1 and IV-2 show the expected net benefit payments for the next 20 years for the Police and Fire Departments respectively. 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 - Police Department
Fiscal Year Total
Ending Explicit Subsidy Implicit Expected
June 30 Medical Dental Total Subsidy Payments
2022 $ 13,793 $ 1,346 15,139$ $ 2,147 17,285$ 2023 15,141 1,437 16,578 2,113 18,691 2024 18,215 1,523 19,737 2,657 22,394 2025 19,256 1,606 20,862 2,913 23,775 2026 20,886 1,683 22,570 3,152 25,721 2027 22,683 1,765 24,447 3,304 27,751 2028 24,012 1,841 25,854 3,538 29,392 2029 25,315 1,913 27,228 3,757 30,985 2030 26,686 1,981 28,666 3,967 32,633 2031 27,735 2,041 29,776 4,078 33,854 2032 28,879 2,101 30,981 4,305 35,286 2033 29,725 2,160 31,885 4,305 36,189 2034 30,658 2,218 32,876 4,252 37,128 2035 31,458 2,271 33,729 4,340 38,069 2036 32,219 2,318 34,537 4,223 38,760 2037 32,778 2,359 35,137 3,845 38,981 2038 33,441 2,390 35,831 3,714 39,546 2039 34,093 2,419 36,513 3,520 40,032 2040 34,674 2,444 37,119 3,204 40,323 2041 35,111 2,464 37,575 2,907 40,482 Dollar amounts in thousands
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION IV – MEASURES OF LIABILITY
17 Table IV-2
Expected Net Benefit Payments - Fire Department
Fiscal Year Total
Ending Explicit Subsidy Implicit Expected
June 30 Medical Dental Total Subsidy Payments
2022 $ 8,413 $ 810 9,223$ $ 1,114 10,337$ 2023 8,902 863 9,765 1,039 10,804 2024 10,071 921 10,992 1,234 12,226 2025 10,974 973 11,947 1,338 13,285 2026 11,689 1,021 12,709 1,359 14,069 2027 12,998 1,073 14,071 1,528 15,599 2028 13,823 1,122 14,944 1,614 16,558 2029 14,728 1,166 15,894 1,844 17,738 2030 15,365 1,203 16,568 1,986 18,554 2031 16,138 1,242 17,380 2,242 19,623 2032 16,940 1,285 18,225 2,418 20,643 2033 17,565 1,329 18,894 2,594 21,487 2034 18,099 1,372 19,471 2,663 22,134 2035 18,747 1,415 20,163 2,704 22,866 2036 19,266 1,451 20,717 2,620 23,336 2037 19,882 1,485 21,367 2,558 23,925 2038 20,507 1,516 22,023 2,540 24,563 2039 21,059 1,542 22,602 2,506 25,108 2040 21,545 1,563 23,108 2,575 25,683 2041 21,961 1,577 23,538 2,583 26,122 Dollar amounts in thousands
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION IV – MEASURES OF LIABILITY
18 Present Value of Future Benefits
The present value of future benefits represents the expected amount of money needed to day, if all assumptions are met, to pay for all benefits both earned as of the val uation date and expected to be earned in the future by curren t plan members under the current plan provisions. Table IV-3 below shows the present value of future benefits as of June 30, 2021 and June 30, 2020.
Table IV-3
Present Value of Future Benefits
June 30, 2021
Actives
Deferred
Vested
In Pay
Status Total June 30, 2020 Change
Police Department
Explicit Subsidy
Non-Medicare Eligible 80,354$ 948$ 73,264$ 154,566$ 148,423$ 4.1% Medicare Eligible 74,210 1,433 219,110 294,752 284,564 3.6% Dental 10,350 200 21,957 32,507 37,998 -14.4% Total Explicit Subsidy 164,914$ 2,581$ 314,331$ 481,826$ 470,985$ 2.3% Fire Department
Explicit Subsidy
Non-Medicare Eligible 61,275$ 328$ 23,830$ 85,433$ 82,804$ 3.2% Medicare Eligible 70,784 509 118,045 189,338 184,761 2.5% Dental 9,317 68 11,250 20,635 24,047 -14.2% Total Explicit Subsidy 141,376$ 905$ 153,125$ 295,405$ 291,612$ 1.3% Aggregate
Explicit Subsidy
Non-Medicare Eligible 141,629$ 1,276$ 97,094$ 239,999$ 231,227$ 3.8% Medicare Eligible 144,994 1,941 337,155 484,090 469,326 3.1% Dental 19,667 268 33,207 53,142 62,045 -14.3% Total Explicit Subsidy 306,289$ 3,486$ 467,456$ 777,231$ 762,598$ 1.9% Implicit Subsidy 37,760 427 34,706 72,892 66,497 9.6% Grand Total 344,049$ 3,913$ 502,162$ 850,123$ 829,094$ 2.5% Dollar amounts in thousands
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION IV – MEASURES OF LIABILITY
19 Normal Cost
Under the Entry Age (EA) act uarial cost method, the present value of future benefits for each individual is spread over 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 benefit s divided by the value, also at entry age, of each member’s expected future salary. The normal cost rate is multi plied by current salary to determine ea ch member’s normal cost. T he normal cost of the Plan is the sum of the normal costs for each individual. The normal cost represents 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 -4 shows the EA no rmal cost as of June 30, 2021 and June 30, 2020 separately by component, develops the normal cost rate, and applies the rate to the proj ected payroll for the fiscal year for which contributions are determined.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION IV – MEASURES OF LIABILITY
20 Table IV-4
Explicit Subsidy Normal Cost
June 30, 2021 June 30, 2020
Full Benefits Catastrophic Total Total % Change
Police Department
Non-Medicare Eligible 2,734$ 891$ 3,625$ 3,521$ 3.0% Medicare Eligible 2,186 0 2,186 2,196 -0.4% Dental 349 0 349 436 -19.8% Total Normal Cost 5,270$ 891$ 6,161$ 6,152$ 0.1% Valuation Pay 77,450$ 66,752$ 144,202$ 134,928$ 6.9% Total Normal Cost Rate 7.01% 1.37% 4.27% 4.56% -6.4%
Fire Department
Non-Medicare Eligible 2,281$ 257$ 2,539$ 2,437$ 4.2% Medicare Eligible 2,586 0 2,586 2,447 5.7% Dental 354 0 354 412 -14.0% Total Normal Cost 5,222$ 257$ 5,479$ 5,297$ 3.4% Valuation Pay 66,504$ 22,757$ 89,261$ 86,601$ 3.1% Total Normal Cost Rate 8.08% 1.16% 6.14% 6.12% 0.3%
FYE 2023 FYE 2022
Full Benefits Catastrophic Total Total % Change
Police Department
Expected Pay 69,586$ 92,736$ 162,321$ 151,687$ 7.0% Total Normal Cost 4,878$ 1,270$ 6,148$ 5,774$ 6.5% Fire Department
Expected Pay 62,173$ 36,543$ 98,716$ 96,335$ 2.5% Total Normal Cost 5,024$ 424$ 5,447$ 5,215$ 4.5% Aggregate
Expected Pay 131,759$ 129,279$ 261,038$ 248,022$ 5.2% Total Normal Cost 9,902$ 1,694$ 11,596$ 10,989$ 5.5% Dollar amounts in thousands
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION IV – MEASURES OF LIABILITY
21 Actuarial Liability
The Actuarial Liability rep resents the expected amount of money ne eded 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 th e valuation date. It is not the amount ne cessary to settle the obligation.
Table IV-5 shows the Actuarial Liability as of June 30, 2021 and June 30, 2020 separately by component.
Table IV-5
Actuarial Liability
June 30, 2021
Actives
Deferred
Vested
In Pay
Status Total June 30, 2020
%
Change
Police Department
Explicit Subsidy
Pre-Medicare 52,791$ 948$ 73,264$ 127,003$ 122,874$ 3.4% Medicare Eligible 61,173 1,433 219,110 281,716 271,426 3.8% Dental 8,311 200 21,957 30,468 35,456 -14.1% Total Explicit 122,275$ 2,581$ 314,331$ 439,187$ 429,756$ 2.2% Implicit Subsidy 16,189 315 26,013 42,518 38,347 10.9% Total Police 138,464$ 2,896$ 340,345$ 481,704$ 468,102$ 2.9% Fire Department
Explicit Subsidy
Pre-Medicare 40,737$ 328$ 23,830$ 64,895$ 62,710$ 3.5% Medicare Eligible 52,649 509 118,045 171,202 166,748 2.7% Dental 6,890 68 11,250 18,208 21,095 -13.7% Total Explicit 100,276$ 905$ 153,125$ 254,305$ 250,553$ 1.5% Implicit Subsidy 13,394 112 8,692 22,199 20,359 9.0% Total Fire 113,670$ 1,017$ 161,817$ 276,504$ 270,912$ 2.1% Aggregate
Explicit Subsidy 222,551$ 3,486$ 467,456$ 693,492$ 680,308$ 1.9% Implicit Subsidy 29,583 427 34,706 64,716 58,706 10.2% Grand Total 252,134$ 3,913$ 502,162$ 758,208$ 739,014$ 2.6% Dollar amounts in thousands
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION V – CONTRIBUTIONS
22 Amortization of the Unfunded Actuarial Liability
Under the contribution allocation procedure employed by the Plan, there are three components to the contribut ion toward the explicit subsidy : the normal cost , administrative expenses, and an amortization payme nt on the Unfunded Actuarial Liability (UAL). The normal cost was developed in Section I V. This section develops the administrative expenses, the UAL contribution, and the City’s actuarially dete rmined contribution for the explicit subsidy. The implicit su bsidy is funded on a pay -as-you-go basis through the payment of active health premiums.
The difference between the Actuarial Liability and the Market Value 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 % Change
Police Department
Actuarial Liability 439,187$ 429,756$ 2.2% Assets 180,002 137,789 30.6%
Unfunded Actuarial Liability 259,185$ 291,967$ -11.2% Funded Percentage 41.0% 32.1% 27.8%
Fire Department
Actuarial Liability 254,305$ 250,553$ 1.5% Assets 96,311 70,743 36.1%
Unfunded Actuarial Liability 157,994$ 179,810$ -12.1% Funded Percentage 37.9% 28.2% 34.1%
Aggregate UAL 417,179$ 471,777$ -11.6% Aggregate Funded Percentage 39.8% 30.7% 30.0%
The UAL for the explicit subsidy as of June 30, 20 17 was amortized as a level percentage of payroll over 2 5 years. Subsequent amortization bases are also amortized over 25 yea rs, but payment levels are phased in an d out over three years. Table V-2 on the following page shows the schedule of amortization bases for payment of the UAL.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION V – CONTRIBUTIONS
23 Table V-2
UAL Amortization
Outstanding Remaining FYE 2023
Balance Period Phase-in Phase-out Payment
Police Department
Fresh Start UAL 241,053$ 21 N/A N/A 15,513$
2018 Changes 12,076 22 0 3 728
2019 Changes (9,988) 23 1 3 (585)
2020 Changes 33,526 24 2 3 1,296
2021 Changes (34,363) 25 3 3 (670)
FYE 2022 Payment* 16,881
Total 2021 Police UAL 259,184$ 16,282$
Fire Department
Fresh Start UAL 150,665$ 21 N/A N/A 9,696$
2018 Changes 10,124 22 0 3 611
2019 Changes (5,658) 23 1 3 (331)
2020 Changes 14,766 24 2 3 571
2021 Changes (22,514) 25 3 3 (439)
FYE 2022 Payment* 10,611
Total 2021 Fire UAL 157,995$ 10,107$
Grand Total 417,179$ 26,388$
* FYE 2022 amortization payment discounted to 7/1/2021 Dollar amounts in thousands
Contributions for Administrative Expenses
Contributions for admin istrative expenses are set to be $41.00 per memb er for FYE 2023 (increasing 3. 00 percent per year). There are currently 3, 936 members, resulting in estimated administrative expenses for FYE 2023 of $164,943.
Contribution Amounts
The City pays the act uarially determined contribution for the explicit su bsidy but has the option to cap its contribution at 1 1% of Police and Fire payroll, including the payroll for members only eligible for catastrophic disability benefits. The actuarially determined contribution is the normal cost plus administrative expense s plus the amortization payment on the UAL less expected member contributions. Members eligible for full benefits contribute 8.00% of pay.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION V – CONTRIBUTIONS
24 Table V-3 shows the components of the Actuarially Determined Co ntribution (ADC) amounts for the explicit subsidy for FYE 2023 and 2022.
Table V-3
City's Actuarially Determined Contribution (ADC)
Explicit Subsidy Only
FYE 2023 FYE 2022 % Change
Police Department
Normal Cost Amount 6,148$ 5,774$ 6.5% Administrative Expense 103 100 3.5% UAL Payment 17,259 17,400 -0.8% Total Contribution 23,510$ 23,274$ 1.0% Projected Member Contributions 5,567 6,030 -7.7% City's ADC Amount 17,943$ 17,245$ 4.1% Projected Total Payroll 162,321 151,687 7.0% City's ADC Percentage 11.1% 11.4% -2.8%
Fire Department
Normal Cost Amount 5,447$ 5,215$ 4.5% Administrative Expense 62 62 0.2% UAL Payment 10,713 10,938 -2.1% Total Contribution 16,223$ 16,214$ 0.1% Projected Member Contributions 4,974 5,187 -4.1% City's ADC Amount 11,249$ 11,027$ 2.0% Projected Total Payroll 98,716 96,335 2.5% City's ADC Percentage 11.4% 11.4% -0.4%
Grand Totals
City's ADC Amount 29,192$ 28,271$ 3.3% Projected Total Payroll 261,038 248,022 5.2% City's ADC Percentage 11.2% 11.4% -1.9%
City's Optional Cap 28,714$ 27,282$ 5.2% Dollar amounts in thousands
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION VI – ACTUARIAL SECTION OF THE ACFR
25 The Government Finance O fficers Association (GFOA) maintains a c hecklist of items to be included in the Plan’s Annual Comprehensive Financial Report ( ACFR) to receive recognition for excellence in financial reporting. The schedules in this se ction 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
Police Department - Member Benefit Coverage Information Actuarial Liability
Retirees and Market Portion of Liability
Actuarial Vested Active Value of Covered by
Valuation Terminated Members Assets * Actuarial Value of Assets Date (A) (B) (A) (B)
6/30/2021 343,241$ 138,464$ 180,002$ 52% 0% 6/30/2020 324,689 143,413 137,789 42% 0% 6/30/2019 293,344 142,094 124,990 43% 0% 6/30/2018 305,606 166,211 111,659 37% 0% 6/30/2017 280,546 150,792 99,926 36% 0% 6/30/2016 307,941 188,002 97,412 32% 0% 6/30/2015 290,354 179,969 85,322 29% 0% 6/30/2014 275,902 180,568 70,102 25% 0% 6/30/2013 268,633 183,266 57,832 22% 0% 6/30/2012 374,949 268,590 49,797 13% 0% * Actuarial Value of Assets for 6/30/2016 and earlier Dollar amounts in thousands
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION VI – ACTUARIAL SECTION OF THE ACFR
26 Table VI-2
Fire Department - Member Benefit Coverage Information
Actuarial Liability
Retirees and Market Portion of Liability
Actuarial Vested Active Value of Covered by
Valuation Terminated Members Assets * Actuarial Value of Assets Date (A) (B) (A) (B)
6/30/2021 162,834$ 113,670$ 96,311$ 59% 0% 6/30/2020 161,088 109,823 70,743 44% 0% 6/30/2019 154,885 103,007 60,967 39% 0% 6/30/2018 161,946 113,510 50,861 31% 0% 6/30/2017 147,204 101,704 42,591 29% 0% 6/30/2016 164,063 118,866 37,795 23% 0% 6/30/2015 161,381 108,049 29,243 18% 0% 6/30/2014 153,132 97,108 23,503 15% 0% 6/30/2013 153,366 95,261 17,203 11% 0% 6/30/2012 225,919 127,862 16,587 7% 0% * Actuarial Value of Assets for 6/30/2016 and earlier Dollar amounts in thousands
Table VI-3
Police Department - Analysis of Financial Experience
Gain or (Loss) for the Year Ending on Valuation Date Due to:
Actuarial Combined Total
Valuation Investment Liability Financial Assumption Total Date Income Experience Experience Changes Experience
unhide additional row each year and copy down formulas 6/30/2021 25,626$ 27,361$ 52,988$ (21,845)$ 31,143$ 6/30/2020 (4,115) 17,054 12,938 (30,044) (17,106) 6/30/2019 (2,839) 64,974 62,135 (6,817) 55,318 6/30/2018 (2,442) 3,712 1,270 (22,819) (21,549) The analysis was combined for Police and Fire for 6/30/2017 and earlier Dollar amounts in thousands
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION VI – ACTUARIAL SECTION OF THE ACFR
27 Table VI-4
Fire Department - Analysis of Financial Experience
Gain or (Loss) for the Year Ending on Valuation Date Due to:
Actuarial Combined Total
Valuation Investment Liability Financial Assumption Total Date Income Experience Experience Changes Experience
unhide additional row each year and copy down formulas 6/30/2021 12,961$ 23,287$ 36,248$ (14,737)$ 21,511$ 6/30/2020 (2,137) 19,190 17,052 (18,287) (1,235) 6/30/2019 (1,205) 34,915 33,710 (1,749) 31,961 6/30/2018 (1,548) (311) (1,859) (13,568) (15,427) The analysis was combined for Police and Fire for 6/30/2017 and earlier Dollar amounts in thousands
Table VI-5
Police and Fire Department - Analysis of Financial Experience Gain or (Loss) for the Year Ending on Valuation Date Due to:
Actuarial Combined Total
Valuation Investment Liability Financial Non-Recurring Total Date Income Experience Experience Items Experience
delete last row each year 6/30/2017 2,647 (15,108) (12,461)$ 29,245 16,784 6/30/2016 (2,914) (2,728) (5,642)$ 4,864 (778) 6/30/2015 582 7,990 8,572$ (3,449) 5,123 6/30/2014 2,802 16,222 19,024$ 13,689 32,713 6/30/2013 2,437 (4,536) (2,099)$ 258,939 256,840 6/30/2012 (6,011) 4,760 (1,251)$ 58,173 56,922 The analysis was combined for Police and Fire for 6/30/2017 and earlier Dollar amounts in thousands
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION VI – ACTUARIAL SECTION OF THE ACFR
28 The schedul e of funding progress compares the asse ts used for funding purposes to the comparable liabilities to determine how well the Plan is funded and how this status has changed over the past several years. The Actuarial Liability is compared to the Actuarial Value of Assets to determine the funding r atio. Since the June 30, 2017 valuation , the Actuarial Value of Assets is equal to the Market Value of Assets.
Table VI-6 Table VI-1
Police Department - Schedule of Funding Progress Police Department - Member Benefit Coverage Information Unfunded UAL as a
Actuarial Actuarial Annual Percentage
Actuarial Value of Actuarial Liability Funded Covered of Covered Valuation Assets Liability (UAL) Ratio Payroll Payroll
Date (a) (b) (b - a) (a ÷ b) (c) ((b - a) ÷ c)
6/30/2021 180,002$ 481,704$ 301,702$ 37.4% 157,594$ 191% 6/30/2020 137,789 468,102 330,314 29.4% 147,269 224% 6/30/2019 124,990 435,438 310,448 28.7% 146,865 211% 6/30/2018 111,659 471,817 360,158 23.7% 131,888 273% 6/30/2017 99,926 431,338 331,412 23.2% 120,299 275% 6/30/2016 97,412 495,943 398,531 19.6% 111,029 359% 6/30/2015 85,322 470,323 385,001 18.1% 109,783 351% 6/30/2014 70,102 456,470 386,368 15.4% 112,947 342% 6/30/2013 57,832 451,899 394,067 12.8% 109,783 359% 6/30/2012 49,797 643,539 593,742 7.7% 107,929 550% Dollar amounts in thousands
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION VI – ACTUARIAL SECTION OF THE ACFR
29 Table VI-7 Table VI-2
Fire Department - Schedule of Funding Progress Fire Department - Member Benefit Coverage Information Unfunded UAL as a
Actuarial Actuarial Annual Percentage
Actuarial Value of Actuarial Liability Funded Covered of Covered Valuation Assets Liability (UAL) Ratio Payroll Payroll
Date (a) (b) (b - a) (a ÷ b) (c) ((b - a) ÷ c)
6/30/2021 96,311$ 276,504$ 180,193$ 34.8% 95,841$ 188% 6/30/2020 70,743 270,912 200,169 26.1% 93,529 214% 6/30/2019 60,967 257,891 196,925 23.6% 88,953 221% 6/30/2018 50,861 275,456 224,595 18.5% 86,541 260% 6/30/2017 42,591 248,908 206,317 17.1% 83,517 247% 6/30/2016 37,795 282,928 245,133 13.4% 83,043 295% 6/30/2015 29,243 269,430 240,187 10.9% 74,950 320% 6/30/2014 23,503 250,240 226,737 9.4% 75,242 301% 6/30/2013 17,203 248,627 231,424 6.9% 74,862 309% 6/30/2012 16,587 353,781 337,194 4.7% 64,696 521% Dollar amounts in thousands
Schedule of Active Member Data - Police
Valuation Annual Average Change in
Date Under 65 Age 65+ Total Payroll Annual Pay Average Pay 2021 1,081 0 1,081 157,000,932$ 145,237$ 3.3% 2020 1,047 0 1,047 147,268,605 140,658 -0.5% 2019 1,039 0 1,039 146,865,241 141,352 4.4% 2018 974 0 974 131,888,184 135,409 1.0% 2017 897 0 897 120,299,327 134,113 10.0% 2016 911 0 911 111,028,782 121,876 3.1% 2015 929 0 929 109,868,577 118,265 4.4% 2014 997 0 997 112,946,895 113,287 6.1% 2013 1,028 0 1,028 109,783,295 106,793 6.5% 2012 1,076 0 1,076 107,929,300 100,306 Active Member Counts
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION VI – ACTUARIAL SECTION OF THE ACFR
30 Schedule of Active Member Data - Fire
Valuation Annual Average Change in
Date Under 65 Age 65+ Total Payroll Annual Pay Average Pay 2021 657 0 657 95,556,891$ 145,444$ 2.9% 2020 662 0 662 93,529,264 141,283 5.1% 2019 662 0 662 88,952,979 134,370 3.1% 2018 664 0 664 86,541,114 130,333 1.0% 2017 646 0 646 83,370,711 129,057 4.3% 2016 671 0 671 83,043,310 123,761 7.5% 2015 648 0 648 74,613,261 115,144 0.5% 2014 657 0 657 75,241,817 114,523 3.9% 2013 679 0 679 74,861,955 110,253 9.4% 2012 642 0 642 64,696,203 100,773 Active Member Counts
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION VI – ACTUARIAL SECTION OF THE ACFR
31 Police Department - Schedule of Retirees and Beneficiaries Added to and Removed from Rolls
Added
to Rolls
Removed
from Rolls
% Increase
in Average
Period Count
Annual
Subsidy Count Count Count
Annual
Subsidy Count
Annual
Subsidy
Annual
Subsidy
Annual
Subsidy
Medical
2020-21 1,353 12,410$ 74 24 1,403 13,091$ 50 681$ 5.5% 9,331$ 2019-20 1,242 11,217 132 21 1,353 12,410 111 1,193 10.6% 9,172 2018-19 1,233 10,633 69 60 1,242 11,217 9 584 5.5% 9,031 2017-18 1,198 12,719 73 38 1,233 10,633 35 (2,086) -16.4% 8,624 2016-17 1,169 12,037 56 27 1,198 12,719 29 681 5.7% 10,616 2015-16 1,141 11,641 60 32 1,169 12,037 28 397 3.4% 10,297 2014-15 1,106 11,900 71 36 1,141 11,641 35 (259) -2.2% 10,202 2013-14 1,083 11,802 50 27 1,106 11,900 23 98 0.8% 10,759 2012-13 1,037 12,823 66 20 1,083 11,802 46 (1,022) -8.0% 10,897 2011-12 991 12,267 77 31 1,037 12,823 46 557 4.5% 12,366 Dental
2020-21 1,359 1,723$ 66 26 1,399 1,776$ 40 53$ 3.1% 1,269$ 2019-20 1,315 1,693 71 27 1,359 1,723 44 30 1.8% 1,268 2018-19 1,269 1,626 70 24 1,315 1,693 46 67 4.1% 1,288 2017-18 1,248 1,605 59 38 1,269 1,626 21 20 1.3% 1,281 2016-17 1,220 1,510 50 22 1,248 1,605 28 96 6.3% 1,286 2015-16 1,199 1,497 42 21 1,220 1,510 21 12 0.8% 1,237 2014-15 1,139 1,428 79 19 1,199 1,497 60 69 4.8% 1,249 2013-14 1,111 1,353 45 17 1,139 1,428 28 75 5.6% 1,254 2012-13 1,070 1,384 53 10 1,111 1,353 41 (31) -2.2% 1,218 2011-12 1,028 1,330 50 11 1,070 1,384 42 54 4.0% 1,294 Annual subsidies are explicit amounts in thousands
Beginning of Period End of Period Net Change
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
SECTION VI – ACTUARIAL SECTION OF THE ACFR
32 Schedule of Retirees and Beneficiaries - Fire
Added
to Rolls
Removed
from Rolls
% Increase
in Average
Period Count
Annual
Subsidy Count Count Count
Annual
Subsidy Count
Annual
Subsidy
Annual
Subsidy
Annual
Subsidy
Medical
2020-21 825 7,332$ 36 29 832 7,525$ 7 192$ 2.6% 9,044$ 2019-20 799 6,791 41 15 825 7,332 26 542 8.0% 8,888 2018-19 803 6,518 27 31 799 6,791 (4) 272 4.2% 8,499 2017-18 776 7,455 47 20 803 6,518 27 (937) -12.6% 8,117 2016-17 752 6,976 42 18 776 7,455 24 479 6.9% 9,607 2015-16 758 6,965 28 34 752 6,976 (6) 11 0.2% 9,277 2014-15 743 7,095 35 20 758 6,965 15 (130) -1.8% 9,189 2013-14 749 7,737 29 35 743 7,095 (6) (642) -8.3% 9,549 2012-13 752 8,665 28 31 749 7,737 (3) (929) -10.7% 10,329 2011-12 745 8,838 30 23 752 8,665 7 (173) -2.0% 11,523 Dental
2020-21 839 970$ 32 30 841 977$ 2 7$ 0.7% 1,161$ 2019-20 828 963 26 15 839 970 11 7 0.7% 1,156 2018-19 828 962 26 26 828 963 0 1 0.2% 1,163 2017-18 808 942 39 19 828 962 20 20 2.1% 1,162 2016-17 798 893 30 20 808 942 10 49 5.5% 1,166 2015-16 793 891 23 18 798 893 5 2 0.2% 1,120 2014-15 778 876 29 14 793 891 15 15 1.8% 1,124 2013-14 779 949 23 24 778 876 (1) (73) -7.7% 1,126 2012-13 785 1,015 18 23 779 949 (6) (66) -6.5% 1,218 2011-12 770 995 20 7 785 1,015 15 20 2.0% 1,293 Annual subsidies are explicit amounts in thousands
Added to and Removed from Rolls
Beginning of
Period End of Period Net Change
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX A – MEMBERSHIP INFORMATION
33 Member Data
Police Department - Summary of Member Data
Valuation Date June 30, 2021 June 30, 2020 % Change
Active Employees Eligible for Full Benefits
Count 517 578 -10.55% Average Age 46.7 46.4 0.74% Average OPEB Benefit Service 18.7 18.4 1.46% Total Payroll 85,177,803$ 90,768,550$ -6.16%
Active Employees Eligible for Catastrophic Disability Only Count 564 469 20.26%
Average Age 31.7 31.7 0.03% Average OPEB Benefit Service 3.4 3.3 4.11% Total Payroll 71,823,129$ 56,500,055$ 27.12%
Term Vested Members** 9 9 0.00% Retirees and Surviving Spouses with Coverage*
Medical and Dental Coverage 1,219 1,197 1.84% Medical Coverage Only 1 1 0.00% In-Lieu Medical with Dental Coverage 159 141 12.77% Dental Coverage Only 21 21 0.00% In-Lieu Medical Coverage Only 24 14 71.43% Total 1,424 1,374 3.64%
Total Count 2,514 2,430 3.46% * Counts do not include dependent spouses.
** Includes only those members with 20 or more years of OPEB benefit service.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX A – MEMBERSHIP INFORMATION
34 Fire Department - Summary of Member Data
Valuation Date June 30, 2021 June 30, 2020 % Change
Active Employees Eligible for Full Benefits
Count 469 495 -5.25% Average Age 47.1 46.5 1.21% Average OPEB Benefit Service 17.4 16.9 3.01% Total Payroll 72,131,382$ 73,995,442$ -2.52%
Active Employees Eligible for Catastrophic Disability Only Count 188 167 12.57% Average Age 35.6 34.9 2.06% Average OPEB Benefit Service 4.8 4.3 10.88% Total Payroll 23,425,509$ 19,533,822$ 19.92%
Term Vested Members** 3 1 200.00% Retirees and Surviving Spouses with Coverage*
Medical and Dental Coverage 780 781 -0.13% Medical Coverage Only 0 0 N/A In-Lieu Medical with Dental Coverage 44 40 10.00% Dental Coverage Only 17 18 -5.56% In-Lieu Medical Coverage Only 8 4 100.00% Total 849 843 0.71% Total Count 1,509 1,506 0.20% * Counts do not include dependent spouses.
** Includes only those members with 20 or more years of OPEB benefit service.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX A – MEMBERSHIP INFORMATION
35 Police Department - Status Reconciliation
Terminated Surviving
Active Vested Retiree Spouse Disabled Total
Beginning of Year 1,047 9 792 130 452 2,430 New Hires 111 0 0 0 0 111 Rehires 10 0 0 0 0 10 Non-Vested Termination (10) 0 0 0 0 (10) Vested Terminations 0 0 0 0 0 0 Service Retirements (52) 0 52 0 0 0 Disabled Retirements (10) 0 (1) 0 11 0 New Survivors 0 0 0 10 0 10 No longer covered (15) 0 (8) (3) (14) (40) Data corrections 0 0 3 0 0 3 New Catastrophic Disability 0 0 0 0 0 0 End of Year 1,081 9 838 137 449 2,514 Counts do not include dependent spouses
Counts include members in In-Lieu credit program and those eligible for catastrophic disability only Fire Department - Status Reconciliation
Terminated Surviving
Active Vested Retiree Spouse Disabled Total
Beginning of Year 662 1 270 130 443 1,506 New Hires 21 0 0 0 0 21 Rehires 2 0 0 0 0 2 Non-Vested Termination 0 0 0 0 0 0 Vested Terminations (1) 1 0 0 0 0 Service Retirements (25) 0 25 0 0 0 Disabled Retirements (2) 0 0 0 2 0 New Survivors 0 0 0 8 0 8 No longer covered 0 0 (4) (9) (16) (29) Data corrections 0 1 0 0 0 1 New Catastrophic Disability 0 0 0 0 0 0 End of Year 657 3 291 129 429 1,509 Counts do not include dependent spouses
Counts include members in In-Lieu credit program and those eligible for catastrophic disability only
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX A – MEMBERSHIP INFORMATION
36 Member Data as of June 30, 2021:
Police Department - Retirees, Disabled Retirees and Surviving Spouses Years of OPEB Benefit Service
Age
Group < 5 5 - 9 10 - 14 15 - 19 20 - 24 25 - 29 30 + Total Under 25 0 0 0 0 0 0 0 0
25 to 29 0 0 0 0 0 0 0 0
30 to 34 0 14 1 0 0 0 0 15
35 to 39 0 20 45 7 0 0 0 72
40 to 44 0 8 37 34 17 0 0 96
45 to 49 1 4 25 40 80 19 0 169
50 to 54 0 1 9 20 66 43 1 140
55 to 59 0 0 2 6 5 7 2 22
60 to 64 0 0 0 0 1 2 0 3
65 and up 0 0 0 0 0 0 0 0
Total 1 47 119 107 169 71 3 517
Police Department - Active Employees Eligible For Full Benefits
Fire Department - Retirees, Disabled Retirees and Surviving Spouses Age
Group < 5 5 - 9 10 - 14 15 - 19 20 - 24 25 - 29 30 + Total Under 25 0 0 0 0 0 0 0 0
25 to 29 0 0 0 0 0 0 0 0
30 to 34 0 9 2 0 0 0 0 11
35 to 39 0 27 28 1 0 0 0 56
40 to 44 0 24 61 22 6 0 0 113
45 to 49 1 4 27 30 45 5 0 112
50 to 54 0 3 13 25 74 26 2 143
55 to 59 0 0 1 6 18 8 0 33
60 to 64 0 0 0 0 1 0 0 1
65 and up 0 0 0 0 0 0 0 0
Total 1 67 132 84 144 39 2 469
Fire Department - Active Employees Eligible For Full Benefits Years of OPEB Benefit Service
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX A – MEMBERSHIP INFORMATION
37 Police Department - Active Employees Eligible for Catastrophic Disability Benefits Only Years of OPEB Benefit Service
Age
Group < 5 5 - 9 10 - 14 15 - 19 20 - 24 25 - 29 30 + Total Under 25 47 0 0 0 0 0 0 47
25 to 29 195 7 0 0 0 0 0 202
30 to 34 136 55 0 0 0 0 0 191
35 to 39 50 21 2 0 0 0 0 73
40 to 44 14 10 4 1 1 0 0 30
45 to 49 6 3 0 2 2 0 0 13
50 to 54 1 0 1 0 2 0 0 4
55 to 59 1 0 0 0 3 0 0 4
60 to 64 0 0 0 0 0 0 0 0
65 and up 0 0 0 0 0 0 0 0
Total 450 96 7 3 8 0 0 564
Fire Department - Active Employees Eligible for Catastrophic Disability Benefits Only Years of OPEB Benefit Service
Age
Group < 5 5 - 9 10 - 14 15 - 19 20 - 24 25 - 29 30 + Total Under 25 3 0 0 0 0 0 0 3
25 to 29 22 3 0 0 0 0 0 25
30 to 34 47 31 0 0 0 0 0 78
35 to 39 24 15 2 0 0 0 0 41
40 to 44 4 13 7 2 0 0 0 26
45 to 49 2 2 1 1 1 0 0 7
50 to 54 1 3 0 1 1 0 0 6
55 to 59 0 2 0 0 0 0 0 2
60 to 64 0 0 0 0 0 0 0 0
65 and up 0 0 0 0 0 0 0 0
Total 103 69 10 4 2 0 0 188
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX A – MEMBERSHIP INFORMATION
38 0 15
72 96
169 140
22 343
202 191 73 20
13 4
4 0
0 50
100
150
200
250
< 25 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 + 65+ Count
Age Group
Chart A-1a
Active Count Distribution - Police Department
Eligible for Full Benefits Eligible for Catastrophic Disability Only
0 11
56 113 112 143
33 13
38 78
41 26 7
6 2 0
0 50
100
150
200
250
300
< 25 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 + 65+ Count
Age Group
Chart A-1b
Active Count Distribution - Fire Department
Eligible for Full Benefits Eligible for Catastrophic Disability Only
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX A – MEMBERSHIP INFORMATION
39 Police Department - Retirees, Disabled Retirees and Surviving Spouses Age Medical Insurance Dental
Group Males Females Total Insurance
Under 50 26 7 33 49 50 to 54 84 14 98 149 55 to 59 156 28 184 229 60 to 64 158 27 185 217 65 to 69 189 15 204 223 70 to 74 200 35 235 245 75 to 79 123 24 147 151 80 to 84 61 22 83 84 85 to 89 23 12 35 36 Over 90 6 10 16 16 Total 1,026 194 1,220 1,399 Counts do not include dependent spouses
0 50
100
150
200
250
300
< 50 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 - 84 85 - 89 90+ Count
Age Group
Chart A-2a
Police Department Retiree Count Distribution by Election Tier Family Employee and Child(ren) Employee and Spouse Employee Only
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX A – MEMBERSHIP INFORMATION
40 Fire Department - Retirees, Disabled Retirees and Surviving Spouses Age Medical Insurance Dental
Group Males Females Total Insurance
Under 50 4 2 6 10 50 to 54 27 4 31 39 55 to 59 69 9 78 95 60 to 64 88 11 99 106 65 to 69 81 15 96 99 70 to 74 118 25 143 149 75 to 79 137 35 172 178 80 to 84 81 19 100 105 85 to 89 19 13 32 35 Over 90 14 9 23 25 Total 638 142 780 841 Counts do not include dependent spouses
0 50
100
150
200
250
300
< 50 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 - 84 85 - 89 90+ Count
Age Group
Chart A-2b
Fire Department Retiree Count Distribution by Election Tier Family Employee and Child(ren) Employee and Spouse Employee Only
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX A – MEMBERSHIP INFORMATION
41 Police & Fire Department Vested Terminations*
Age Group Police Fire Total
Under 45 0 0 0 45 to 49 0 0 0 50 to 54 9 3 12 55 to 59 0 0 0 60 to 64 0 0 0 Over 65 0 0 0 Total 9 3 12 *Includes only those term vested participants with at least 20 years of OPEB benefit service
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
42 Economic Assumptions
The expected return on Plan asset s and per pers on c ost trend assumptions shown below were adopted by the Board of Administration with our input at the December 2, 2021 Board meeting.
Price inflation and w age inflation assumptions were adopte d at the December 3, 2020 Board meeting based up on our recomme ndations. 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 rate 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 u sing the 2021 Society of Actuaries 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 POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
43 Annual Increase
Fiscal Year Pre- Medicare Part B Fiscal Year Pre- Medicare Part B Beginning Medicare Eligible Dental Premiums Beginning Medicare Eligible Dental Premiums 2022 Varies by Plan 6.96% 2052 4.45 4.45 3.50 3.70
2023 7.49% 4.15% 3.50% 3.04 2053 4.44 4.44 3.50 3.70
2024 7.15 4.26 3.50 5.25 2054 4.43 4.43 3.50 3.70
2025 6.80 4.36 3.50 4.94 2055 4.42 4.42 3.50 3.70
2026 6.46 4.46 3.50 5.68 2056 4.41 4.41 3.50 3.70
2027 6.12 4.57 3.50 5.81 2057 4.40 4.40 3.50 3.70
2028 5.78 4.67 3.50 5.91 2058 4.39 4.39 3.50 3.70
2029 5.44 4.77 3.50 5.66 2059 4.38 4.38 3.50 3.70
2030 5.10 4.87 3.50 5.37 2060 4.37 4.37 3.50 3.70
2031 4.93 4.93 3.50 5.27 2061 4.36 4.36 3.50 3.70
2032 4.87 4.87 3.50 5.16 2062 4.36 4.36 3.50 3.70
2033 4.78 4.78 3.50 5.05 2063 4.35 4.35 3.50 3.70
2034 4.74 4.74 3.50 4.94 2064 4.34 4.34 3.50 3.70
2035 4.71 4.71 3.50 4.83 2065 4.33 4.33 3.50 3.70
2036 4.68 4.68 3.50 4.72 2066 4.30 4.30 3.50 3.70
2037 4.66 4.66 3.50 4.61 2067 4.24 4.24 3.50 3.70
2038 4.64 4.64 3.50 4.51 2068 4.18 4.18 3.50 3.70
2039 4.62 4.62 3.50 4.40 2069 4.12 4.12 3.50 3.70
2040 4.60 4.60 3.50 4.29 2070 4.07 4.07 3.50 3.70
2041 4.59 4.59 3.50 4.18 2071 4.02 4.02 3.50 3.70
2042 4.57 4.57 3.50 4.07 2072 3.96 3.96 3.50 3.70
2043 4.56 4.56 3.50 3.96 2073 3.91 3.91 3.50 3.70
2044 4.54 4.54 3.50 3.85 2074 3.86 3.86 3.50 3.70
2045 4.53 4.53 3.50 3.75 2075 3.81 3.81 3.50 3.70
2046 4.51 4.51 3.50 3.70 2076 3.78 3.78 3.50 3.70
2047 4.50 4.50 3.50 3.70 2077 3.78 3.78 3.50 3.70
2048 4.49 4.49 3.50 3.70 2078+ 3.78 3.78 3.50 3.70
2049 4.48 4.48 3.50 3.70
2050 4.47 4.47 3.50 3.70
2051 4.46 4.46 3.50 3.70
The table above shows the trend increases on a fiscal year basis; premium rates change on a calendar year basis. For the fiscal year beginning July 1, 2022, the trend was developed using actual calendar year 2022 premiums and a trend assumption for calendar year 202 3. The trend factors vary by plan as shown in the table below.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
44 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-Pocket Maximums, and An nual Maxi mum (where applicable) are assumed to increase at the above trend rates.
3. Changes Since the Last Valuation
The per-person cost t rends were updated, and t he discount rate was reduced from 6.25% to
6.00%.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
45 Demographic Assumptions
The OPEB assumpti ons were adopted by the Board of Administration at the December 2, 2021 Board meeting based on our recommendations. The demo graphic assumptions shared with the pension plan shown below were adopted at th e November 4, 2021 Board meeting based on recommendations from our experience study covering Plan experience through June 30, 2021.
Please refer to the full experience study rep ort for detail s, including the rationale for each assumption.
1. Salary Increase Rate
Wage inflation component: Reflect currently bar gained across-the-board increases and
3.00% per annum (0.75% real wage growt h) thereafter. For this valuation, Fire members have bargained increases of 4.25% for FYE 2022 and 3.00% for FYE 2023. Police members bargained increases of 3.85% for FYE 2022.
The following merit component is added to wage inflation, based on an individu al member’s years of service:
Merit Salary Increases
Years of Service Merit/ Longevity
0 6.50%
1 6.50
2 6.25
3 5.75
4 5.25
5 4.25
6 2.50
7 1.50
8 1.00
9 0.80
10+ 0.60
2. Administrative Expenses
For FYE 2023, trust administrative expenses are a ssumed to equal $41 per full benefit member and are assumed to increase at the wage inflation assumption of 3.00% per annum.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
46 3. Retirement Rates
Rates of retirement are based on ag e and service according to the followin g Tables. Tier 1 rates only apply when the member is eligible for unreduced pension benefits.
Tier 1 Rates of Retirement by Age and Service
Police Fire
Age <30 Years 30+ Years <30 Years 30+ Years
50 55.0% 100.0% 35.0% 100.0%
51 45.0 100.0 35.0 100.0
52 40.0 100.0 35.0 100.0
53 30.0 100.0 35.0 100.0
54 30.0 100.0 35.0 100.0
55 30.0 100.0 30.0 100.0
56 30.0 100.0 25.0 100.0
57 30.0 100.0 20.0 100.0
58 – 61 50.0 100.0 27.5 100.0
62+ 100.0 100.0 100.0 100.0
Tier 2 Rates of Retirement by Age and Service
Police
Age
5 – 19
Years
20 – 24
Years
25 – 29
Years 30+ Years
50 – 56 2.0% 2.0% 2.0% 5.0%
57 – 59 7.5 10.0 20.0 100.0
60 – 61 10.0 20.0 35.0 100.0
62 – 64 25.0 50.0 75.0 100.0
65+ 100.0 100.0 100.0 100.0
Tier 2 Rates of Retirement by Age and Service
Fire
Age
5 – 19
Years
20 – 24
Years
25 – 29
Years 30+ Years
50 – 56 1.0% 1.0% 1.0% 2.5%
57 – 59 5.0 7.5 15.0 100.0
60 – 61 7.5 15.0 25.0 100.0
62 – 64 20.0 35.0 50.0 100.0
65+ 100.0 100.0 100.0 100.0
Tier 1 vested terminated members a re assumed to retire at age 50 if the y have 25 or more years of service or at age 55 if they have l ess than 25 years of service. Tier 2 vested terminated members are assumed to retire at age 60.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
47 4. Rates of Termination
Sample rates of refund/termination are show in the following table.
Rates of Termination*
Service Police Fire
0 13.75% 8.50%
1 11.75 4.00
2 10.00 2.75
3 8.50 1.75
4 7.50 1.25
5 6.75 1.00
6 6.00 0.90
7 5.50 0.80
8 5.00 0.70
9 4.75 0.60
10 4.50 0.50
11 4.25 0.50
12 3.75 0.50
13 3.25 0.50
14 2.75 0.50
15 2.25 0.50
16 1.75 0.50
17 1.50 0.50
18 1.25 0.50
19+ 1.00 0.50
*Termination rates do not apply once a member is eligible for unreduced retirement.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
48 5. Rates of Mortality
Mortality rat es for actives, retirees, bene ficiaries, terminated vested, and rec iprocals are based on the sex -distinct employee and annuitant mortality tables shown below. Future mortality improvements are reflected by applying the SOA MP -2021 projection scale on a generational basis from the base year of 2010.
Base Mortality Tables
Category Male Female
Healthy
Retirees
1.002 times the 2010 P ublic
Safety Above Median Income
Mortality Table (Pub(s)-2010(A))
for Healthy Retirees
1.002 times the 2010 Public
Safety Above Median Income
Mortality Table (Pub(s)-2010(A))
for Healthy Retirees
Disabled
Retiree
0.915 times the Public Safet y
Mortality Ta ble (PubS-2010) for
Disabled Retirees
0.915 times the Public Safety
Mortality Table (PubS-2010) for
Disabled Retirees
Beneficiaries
1.032 times the 2010 Pub lic
General Above Median Income
Mortality Table (Pub(g)-
2010(A)) for Healthy Retirees
1.032 times t he 2010 Public
General Above Median Income
Mortality Table (Pub(g)-
2010(A)) for Healthy Retirees
Healthy
Non-Annuitant
0.979 times the 2010 Public
Safety A bove Median Income
Mortality Table (Pub(s)-2010(A))
for Healthy Employees
0.979 times the 2010 Publ ic
Safety Above Median Income
Mortality Table (Pub(s)-2010(A))
for Healthy Employees
6. Disability Rates
For Police, disability rates are equal to the CalPERS police industrial and non-industrial rates for public agencies multiplied by 90% for ages under 50 and 140% for ages 50 and older. For Fire, disability rates are equal to the CalPERS fire industrial and non -industrial rates for public agencies multiplied by 90% for ages under 50 and 180% fo r ages 50 and older.
Sample disability rates of active participants are provided in the following table.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
49 Rates of Disability at Selected Ages
Age Police Fire
25 0.16% 0.03%
30 0.45 0.08
35 0.74 0.15
40 1.03 0.28
45 1.32 0.50
50 2.70 5.08
55 6.88 7.54
60 8.71 10.77
65 10.47 14.84
100% of disabilities are assumed to be duty related.
7. Married Percentage
Percentage Married
Gender Percentage
Males 85%
Females 85%
8. 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
Coverage In-Lieu
Active Members 70% 30%
Terminated Vested Members 50% 50%
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
50 9. Dependent Coverage Election
Upon retirement, members who elect coverage are assumed to cover dependents according to the following table.
Assumed Future Retiree Tier Elections
Pre-Medicare Medicare
Coverage Tier Male Female Male Female
Retiree Only 20% 52% 27% 74%
Retiree and Children 7% 22% 0% 0%
Retiree and Spouse 34% 13% 73% 26%
Retiree and Family 39% 13% 0% 0%
100% of members eligible for dental are assumed to elect spousal coverage.
10. 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 elect coverage and use their In-Lieu credits. The amou nt of the In -Lieu credit is 25% of the subsidy for the tier of coverage for which the retiree qualifies. Future retiree medical tier qualification assumptions are provided in the following table.
Assumed Future Retiree In-Lieu Credit Tier
Pre-Medicare Medicare
Coverage Tier Male Female Male Female
Retiree Only 25% 25% 40% 40%
Retiree and Children 0% 0% 0% 0%
Retiree and Spouse 20% 20% 60% 60%
Retiree and Family 55% 55% 0% 0%
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
51 11. Health Plan Election
Retirees who are not yet age 65 a re assumed to be eligible for Medicare when they reach age 65 and are assumed to enroll in the Medicare -eligible plan corresponding to their current Pre-Medicare plan ele ction. Future retirees are assumed to elect plans in the proportion shown in the following table.
% Electing % Electing
Pre-Medicare Medical Plans Medicare-Eligible Medical Plans Kaiser DHMO 4% Kaiser Senior Advantage 43%
Kaiser $25 Co-pay 62% Anthem Medicare HMO 1%
Kaiser HDHP 6% Anthem Medicare PPO 56%
Anthem DHMO 2%
Anthem Select $20 Co-pay 8%
Anthem Traditional $20 Co-pay 1%
Anthem HDHP PPO 7% Dental Plans (All Retirees)
Anthem Select PPO 8% Delta Dental PPO 99%
Anthem Classic PPO 2% DeltaCare HMO 1%
* 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.
12. 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, without factoring in the lowest cost premium , and in creased by a factor of 1.5 to estimate the adjustment from a blended active and retiree prem ium to a retiree only premium.
13. Dependent Age
For current retirees, actual spouse date of birth was use d when available. For future retirees, husbands are assumed to be three years older than their wives.
14. Changes Since the Last Valuation
Plan elections assumptions and the administrative expense assumption were updated.
The assumed rate of mortality impro vement was updated from MP -2019 to MP -2021. The Beneficiary mortality table was updated.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
52 Claim and Health Plan Benefit Expense Assumptions
The claim and expense assumptions shown below were adopted by the Board of Administration at the December 2, 2021 Board meeting based upon our recommendations.
The claims costs are based o n the fully insured premiums charged to the City f or 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 year. 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 adj usted using age curv es. The pre -Medicare adult claims curves were then loaded for the cost of child ren; the load for children decreases by retiree age since older retirees have fewer children. The impact of children o n Medicare costs was assumed to be de minimis. All claims c osts are develo ped jointly for the Federated, Police, and Fire Postemployment Healthcare Plans of the City of San José but the load for children for Police and Fire was developed separately from the load for Federated.
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 and regulations.
1. Average Annual Claims and Expense Assumptions
The following cla im and expense assumptions were developed 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 a ctive City employees) is assumed to gro w 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 $10,255 $12,604 $11,561 $13,979 $14,589 $18,432
45 10,484 12,298 11,595 13,463 15,406 18,374 50 11,078 12,553 12,005 13,524 16,819 19,233 55 12,259 13,299 13,020 14,091 19,193 20,895 60 14,324 13,965 14,945 14,576 23,014 22,427 64 16,858 13,721 17,395 14,163 27,515 22,381
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
53 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 579.18
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 members, if the retiree is elig ible to receive the explicit subsidy. No retiree contributions are required for dental.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
54 9. Changes Since the Last Valuation
All claims costs were up dated to reflect the changes in plan premiums and the populations covered.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
55 Contribution Allocation Procedure
The contribution allocation proc edure primarily consists of an actuarial cost meth od, an asset smoothing method, and an amortization method as described below.
1. Actuarial Cost Method
The Entry Age actuarial cost method was used for active employees, wh ereby the normal cost is computed a s the level annual percentage of pay required to f und the retire ment benefits between each member’s date of hire and assumed retirement. The Actuarial Liability is the difference bet ween the present value of future benefi ts and the present value of future normal costs. Or, equivalently, it is the accumula tion of normal costs for all periods prior to the valuation da te. The normal cost and Actuarial Liability are calculated on an indiv idual basis. The sum of the individual amounts is the norma l cost and Actuarial Liability for the Plan. The Actuarial Liability for the Pl an represents the target amount of assets the Pl an 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 difference between the Actuarial Liability and the Actuarial Value of Assets. The Unfunded Actuarial Liability as of June 30, 201 7 was amortized as a le vel percent of p ayroll over a closed 25-year period. All future amortization bas es will be amortized over 25-year period s with a 3-year phase -in and phase-out.
4. Contributions
The City will contribu te the annual implicit subsidy as part of active employee health premiums and will prefund the explicit subsidy based on the normal cost, administrative expenses, and the amortization pa yment described above less expected employee contributions. The City h as the option to limit its contribution to no more than 11% of total payroll.
Active members that are eligible for full benefits will contribute 8.00% of pay.
5. Changes Since the Last Valuation
None.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX C – SUMMARY OF PLAN PROVISIONS
56 POSTEMPLOYMENT HEALTHCARE PLAN
Eligibility: Employees hired before July 2013 that did not e lect to opt-in to the Voluntary Employees' Beneficiary Association (VEBA).
Medical/Dental:
Employees who retire (includ ing deferred vested members) with at least 15 years of service with the City (“OPEB benefit servi ce”), or with a monthly pension equal t o at least 37.5% of final compen sation, are eligible to elect medical coverage upon retirement.
Tier 1 employees (hired before August 4, 2013) are eligible for unreduced service retirement at age 55 with 20 years of s ervice, age 50 with 25 years of service , age 70 with n o service requi rement, or any age with 30 years of service. Reduced service retireme nt is available at age 50 with 20 years of service. Tier 2 employees (hired on or after August 4, 2013) are eligible f or unreduced service retirement at age 60 with 10 year s of service or reduced service retirement at age 50 with 10 years of service. Servi ce credited through reciprocity agreements counts towards an employee’s required service to retire, but only service w ith the City counts towards the required years of service to receive OPEB benefits.
Employees who become disabled with at l east 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 th e City’s medic al plan at the time of the member’s retirem ent.
Dependent children are eligible to receive coverage until the age of 26.
Surviving spouses/domestic partners /children of de ceased members are eli gible for coverage if the following conditions are met:
1. The e mployee 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 su rvivors were en rolled in the a ctive medical plan immediately before death; and,
3. The survivor will receive a monthly pension benefit.
Employees who separate from service after July 5, 1992 with 20 years of service, leaving contributions in the retirement p lan, are eligib le to elect med ical an d/or dental coverage upon retirement.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX C – SUMMARY OF PLAN PROVISIONS
57 Benefits for Retirees:
Medical: The Plan pays 100% of the premium for the lowest cost h ealth plan available to active City employees. The member pays the difference if another plan is elected.
To the extent th at the elected plan premium is less than the maximum subsidy amount, Medicare -eligible retirees receive reimbursement of Medicare Pa rt B premiums for themselves and their covered spouse, if applicable.
Dental: The Plan pays 100% of the dental insurance premiums.
Premiums: Monthly premiums for calendar years 2021 and 2022 are as follows.
Single Emp/Sp Emp/Chd Family
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-pay 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
2021 Monthly Premiums
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX C – SUMMARY OF PLAN PROVISIONS
58 Single Emp/Sp Emp/Chd Family
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-pay 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-Formulary
$10
$10
N/A
$10
$25
$40
$10
$25
$40
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX C – SUMMARY OF PLAN PROVISIONS
59 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
(single/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
(single/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
copay 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-day supply):
Generic
Brand
Non-Formulary
$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 sharin g for benefits with the retirees. This may be achieved by adjusting benefit provisions, contributions, or both.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX C – SUMMARY OF PLAN PROVISIONS
60 CATASTROPHIC DISABILITY HEALTHCARE PROGRAM
Eligibility: Employees h ired after June 2013 or e mployees who elected to opt -in to the Voluntary Employees' Beneficiary Association (VEBA).
Contributions: Employees are requ ired to make mandatory contributions into the VE BA on a pre-tax basis.
Employee Group VEBA Contribution Rate
Tier 1 5.0%
Tier 2 4.0%
Medical: VEBA funds can be used to reimburse members for eligible healthcare expenses.
VEBA m embers on serv ice-connected disability receive single coverage benefits from the Pos temployment Healt hcare 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 should find the plan sum mary not in accordance with the actual provisions, the actua ry should immed iately be a lerted so the proper provisions are valued.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX D – GLOSSARY OF TERMS
61 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 determini ng the actuarial pres ent value of pens ion plan benefits and expenses and for developin g an allocatio n 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 experience 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 projected 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 o r series of payme nts. The actuarial pre sent value discounts the payments to the given date at the assumed investment return and includes the probability of the payment being made. As a simple examp le: assume you owe $100 to a friend one year from now. Also , assume there is a 1% probability of y our friend dying over the next year, in which case you will not be obligated 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, Actuarial Liability, Actuarial Value of Assets, and related actuarial present values for a pension plan.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX D – GLOSSARY OF TERMS
62 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 n ot distorted by short-term fluctuations in the market.
8. Amortization Payment
The portion of the pension plan contribution, which is designed to pay interest and principal on the Unfunded Actuarial Liability in orde r to pay for that lia bility 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 allocated as a level per centage of pay from t he 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 th e probability 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 pr ojecting dollar related values to a pr esent value as of the valuation date.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX D – GLOSSARY OF TERMS
63 15. Medical Trend
The assumed increase in d ollar related values in the future due to the increase in the cost of health care.
CITY OF SAN JOSÉ POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX E – LIST OF ABBREVIATIONS
64 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 POLICE AND FIRE DEPARTMENT POSTEMPLOYMENT HEALTHCARE PLAN JUNE 30, 2021 ACTUARIAL VALUATION FUNDING REPORT
APPENDIX E – LIST OF ABBREVIATIONS
65