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OPEB 101 & Next Steps in Retirement Report

OPEB 101 & Next Steps in Retirement Report. David S. T. Matkin , PhD Assistant Professor of Public Administration Florida State University Research Fellow, LeRoy Collins Institute LeRoy Collins Institute Board Meeting September 12 th , 2012. Overview. Reports in Print/Press

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OPEB 101 & Next Steps in Retirement Report

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  1. OPEB 101 &Next Steps in Retirement Report David S. T. Matkin, PhD Assistant Professor of Public Administration Florida State University Research Fellow, LeRoy Collins Institute LeRoy Collins Institute Board Meeting September 12th, 2012

  2. Overview • Reports in Print/Press • Trouble Ahead: Florida Local Governments and Retirement Obligations (February 2011) • Report Card: Florida Municipal Pension Plans (November 2011) • Years in the Making: Florida’s Under-Funded Municipal Pension Plans (September 2012) • Retirement Topics in Development • OPEB 101 • Investment Returns • Benefit Levels

  3. Opeb 101

  4. OPEB 101 Outline • What is it? • Retirement Obligations (Healthcare Insurance Subsidies) • New Accounting Standard (Nos. 43 & 45) • Implicit & Explicit Benefits • Where do we stand? • Size of liabilities • Funding status • Size of annual contributions • Relationship to general debt • What should be done? • Board Recommendations?

  5. Size of the OPEB Liability

  6. Size of the OPEB Liability Franklin County Hollywood Miami Police Sanford

  7. Size of the OPEB Liability

  8. Funding the OPEB Liability • Fund the Liability • Explicit Benefits (n=67) • Pay-as-you-go = 45 • Prefund (Non-GAAP qualified) = 4 • Prefund (GAAP qualified) = 18 • Percent Funded (median) = 12% • Implicit Benefits (n=83) • Pay-as-you-go = 76 • Prefund (Non-GAAP qualified) = 2 • Prefund (GAAP qualified) = 5 • Percent Funded (median) = 30%

  9. Size of the Annual Required Contribution

  10. Size of the Annual Required Contribution Miami Police Franklin County

  11. Size of the Annual Required Contribution

  12. Funding the ARC

  13. Relationship to Other Long-term Debts

  14. Relationship to Other Long-term Debt

  15. Previous OPEB Recommendations Trouble Ahead Report: • Among other options, Florida lawmakers should give much consideration to repealing current Florida law requiring the implicit subsidization of healthcare benefits for Florida local governmental retirees. • State oversight by a relevant state agency should be provided in statute to manage local retiree health benefit obligations. This agency should establish standards and provide technical assistance, if desired, to local government staff and local officials.

  16. Investment returns

  17. Actual Returns

  18. Allocation in Equities

  19. Actual Returns Over Time

  20. Actual Return - Return Assumption

  21. Benefit levels

  22. Average Benefits Per Retiree

  23. Years of Benefits on Hand

  24. Years of Benefits on Hand

  25. Discussion and Questions

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