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GASB 45 Forum A Local Government’s Perspective

GASB 45 Forum A Local Government’s Perspective. February 7, 2007 Janet Smith Washington D.C. City of Phoenix, Arizona Personnel Director. Overview. GASB 45. The liability was significant With effective dates approaching, time for planning was short

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GASB 45 Forum A Local Government’s Perspective

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  1. GASB 45 ForumA Local Government’s Perspective February 7, 2007 Janet Smith Washington D.C. City of Phoenix, Arizona Personnel Director

  2. Overview GASB 45 • The liability was significant • With effective dates approaching, time for planning was short • Best interest of the city and the employees to reduce this liability • Bond ratings • Cash flows • Plan design • Citizen interest The Challenge

  3. Overview Liabilities • Blended rates between active employees and retirees • Provided retirees a subsidy to offset medical expenses

  4. Overview Working Together for a Positive Solution • Collaboration Required: • Employee unions & associations • Personnel, Budget and Research, and Finance departments • Actuarial Analysis: • Pension and Health Care actuary • Initial estimate based on preliminary data • Explore All Options: • Cost-sharing multiple employer plans • Community – rated plans • Political solutions • What are others doing? The Process

  5. Do I Really Have to Make Changes? Bottom Line Regardless of GASB: • Changing demographics made it necessary to change • Recognizing this liability and funding it is the right thing to do 2007 2008 20092010 2011 2012 2013 2014

  6. Considerations Designing the Solution • Impact to stakeholders: • Current retirees • Employees nearing retirement • New employees • Maintain retiree medical benefits • Opportunity to codify benefits • Manage costs • Craft a mutually agreeable solution Health care coverage will still be offered to employees and retirees

  7. A Look at the Changes Win/Win Solutions CITY EMPLOYEES Eliminated GASB liability by unblending actives and retirees (implicit subsidy) Long term reduction in GASB liability by setting an end date to the Retiree Subsidy Program Lower future health care costs by targeted health benefits programs Current retirees and those within 15 years receive: • Additional funds to reduce impact of unblending • Rate stabilization fund to address potential retiree rate fluctuations All other actives receive Post Employment Health accounts for future health care costs Targeted health benefits programs and options by population

  8. Next Steps Implementation • Communication of changes: • Employee, management, and retiree briefings • Employee publications • Mailings to retirees • Effective date of changes: August 1, 2007

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