063025 GASB 75 Report.pdf

CONTACT

Tina Liu, EA, MAAA, FCA tina.liu@nyhart.com

PHONE

General (317) 845-3500

GASB 75 ACTUARIAL VALUATION

Fiscal Year Ending June 30, 2025

CITY OF SALEM

Table of Contents

Page

Certification 1

Executive Summary 3

GASB Disclosures

Schedule of Changes in Net OPEB Liability and Related Ratios 5

OPEB Expense 7

Deferred Outflows / (Inflows) of Resources 8

Sensitivity Results 11

Projection of GASB Disclosures 12

Cash Flow Projections 13

Discussion of Discount Rates 14

Summary of Plan Participants 15

Substantive Plan Provisions 18

Actuarial Methods and Assumptions 20

Appendix 26

Comparison of Participant Demographic Information 27

Detailed Actuary's Notes 28

Glossary 29

Decrements Exhibit 30

Retirement Rates Exhibit 31

Definitions 32

September 10, 2025

Jeremy Morgan

City of Salem

555 Liberty Street SE

Suite 230

Salem, OR 97301

This report summarizes the GASB actuarial valuation for the City of Salem 2024/25 fiscal year . To the best of our knowledge, the report presents a fair position of the funded status of the plan in accordance with GASB Statement No. 75 (Accounting and Financial Reporting by Employers for

Post-Employment Benefits Other Than Pensions). This report may not be appropriate for other purposes. Please contact Nyhart prior to disclosing this report to any other party or relying on its content for any purpose other than that explained above . Failure to do so may result in misrepresentation or misinterpretation of this report.

The information presented herein is based on the actuarial assumptions and substantive plan provisions summarized in this report and participant information furnished to us by the Plan Sponsor. We have reviewed the employee census provided by the Plan Sponsor for reasonableness when compared to the prior information provided but have not audited the information at the source, and therefore do not accept responsibility for the accuracy or the completeness of the data on which the information is based. When relevant data may be missing, we may have made assumptions we feel are neutral or conservative to the purpose of the measurement . We are not aware of any significant issues with and have relied on the data provided .

The discount rate, other economic assumptions, and demographic assumptions have been selected by the Plan Sponsor with the concurrence of Nyhart .

In our opinion, the actuarial assumptions are individually reasonable and in combination represent our estimate of anticipated experience of the Plan . All calculations have been made in accordance with generally accepted actuarial principles and practice .

Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following :

· plan experience differing from that anticipated by the economic or demographic assumptions;

· changes in economic or demographic assumptions;

· increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period); and

· changes in plan provisions or applicable law.

We did not perform an analysis of the potential range of future measurements due to the limited scope of our engagement .

To our knowledge, there have been no significant events prior to the current year's measurement date or as of the date of this report that could materially affect the results contained herein.

Neither Nyhart nor any of its employees has any relationship with the plan or its sponsor that could impair or appear to impair the objectivity of this report. Our professional work is in full compliance with the American Academy of Actuaries “Code of Professional Conduct” Precept 7 regarding conflict of interest. The undersigned are compliant with the continuing education requirements of the Qualification Standards for Actuaries Issuing Statements of

Actuarial Opinion in the United States.

Should you have any questions please do not hesitate to contact us .

Andrew Smith, ASA, MAAA Actuary

Tina Liu, EA, MAAA, FCA

Actuary

Executive Summary City of Salem GASB 75 Valuation for Fiscal Year Ending June 30, 2025

Summary of Results

Presented below is the summary of GASB 75 results for the fiscal year ending June 30 , 2025 compared to the prior fiscal year as shown in the City's Notes to Financial Statement.

As of June 30, 2025 As of June 30, 2024

Total OPEB Liability 18,686,249 20,332,435 $$

Actuarial Value of Assets 0 0 $$

Net OPEB Liability 18,686,249 20,332,435 $$

Funded Ratio 0.0% 0.0%

FY 2024/25 FY 2023/24

OPEB Expense 1,658,632 1,794,600 $$

Annual Employer Contributions 829,106 709,946 $$

As of June 30, 2025 As of June 30, 2024

5.20%Discount Rate 4.21%

Expected Return on Assets N/AN/A

As of June 30, 2025

1,303 Total Active Participants

Total Retiree Participants 46

The active participants’ number above may include active employees who currently have no health care coverage . Refer to Summary of Participants section for an accurate breakdown of active employees with and without coverage .

Executive Summary

Summary of Results

Below is a breakdown of total GASB 75 liabilities allocated to past and current service compared to the prior year. The table below also provides a breakdown of the Total OPEB Liability allocated to pre- and post- Medicare eligibility. The liability shown below includes explicit (if any) and implicit subsidies. Refer to the Substantive Plan Provisions section for complete information on the Plan

Sponsor’s GASB subsidies.

0M

4M

8M

12M

16M

20M

24M

6/30/2024 6/30/2025

18.2M 16.3M

2.2M 2.4M

Retirees Active

Changes In Total OPEB Liability

M il li o n s

As of June 30, 2025Present Value of Future Benefits As of June 30, 2024

Active Employees 30,955,494 26,514,301 $$

Retired Employees 2,158,189 2,360,206

Total Present Value of Future Benefits 28,874,507 33,113,683 $$

As of June 30, 2025Total OPEB Liability As of June 30, 2024

Active Pre-Medicare 16,326,043 18,174,246 $ $

Active Post-Medicare 0 0

Active Liability 16,326,043 18,174,246 $ $

Retiree Pre-Medicare 2,360,206 2,158,189 Present Value of Future Benefits (PVFB) is the amount needed as of June 30, 2025 and June 30, 2024, to fully fund the City’s retiree health care subsidies for existing and future retirees and their dependents assuming all actuarial assumptions are met.

Total OPEB Liability is the portion of PVFB considered to be accrued or earned as of June 30, 2025 and June

30, 2024. This amount is a required disclosure in the

Required Supplementary Information section.

Retiree Post-Medicare 0 0

Retiree Liability 2,360,206 2,158,189 $$

Total OPEB Liability 18,686,249 20,332,435 $$

As of June 30, 2025As of June 30, 2024

Discount Rate 5.20% 4.21%

GASB Disclosures

Schedule of Changes in Net OPEB Liability and Related Ratios

OPEB Liability FY 2024/25 FY 2023/24 FY 2022/23 FY 2021/22 FY 2020/21

Total OPEB Liability

Total OPEB Liability - beginning of year 20,332,435 17,677,690 17,331,498 19,600,900 15,891,684 $ $ $ $ $

Service cost 1,105,484 990,950 1,109,061 1,535,571 1,158,458

Interest 885,264 756,503 740,493 455,980 445,841

Change of benefit terms 0 0 0 0 0

Changes in assumptions 527,068 915,214 352,979 (2,703,325) 1,684,624

Differences between expected and actual experience (3,334,896) 702,024 (1,178,357) (923,294) 1,002,500

(829,106)Benefit payments (709,946) (677,984) (634,334) (582,207)

Net change in total OPEB liability (1,646,186) 2,654,745 346,192 (2,269,402) 3,709,216 $ $ $ $ $

Total OPEB Liability - end of year 18,686,249 20,332,435 17,677,690 17,331,498 19,600,900 $ $ $ $ $

Plan Fiduciary Net Position

Plan fiduciary net position - beginning of year 0 0 0 0 0 $ $ $ $ $

Contributions - employer 829,106 709,946 677,984 634,334 582,207

Contributions - active employees 0 0 0 0 0

Net investment income 0 0 0 0 0

Benefit payments (829,106) (709,946) (677,984) (634,334) (582,207)

Trust administrative expenses 0 0 0 0 0

Net change in plan fiduciary net position 0 0 0 0 0 $ $ $ $ $

Plan fiduciary net position - end of year 0 0 0 0 0 $ $ $ $ $

Net OPEB Liability - end of year 18,686,249 20,332,435 17,677,690 17,331,498 19,600,900 $ $ $ $ $

Plan fiduciary net position as % of total OPEB liability 0.0% 0.0% 0.0% 0.0% 0.0%

Covered employee payroll 102,543,499 99,075,844 97,336,429 88,138,336 $ $ $ N/A $

Net OPEB liability as % of covered payroll 18.2% 20.5% 18.2% 22.2%N/A

*FY 2024/25 covered employee payroll is estimated based on FY 2023/24 payroll increased by the payroll growth assumption (3.50%). Historical payrolls were estimated when actuals were not available.

**Contributions and benefit payments are estimated implicit subsidy benefit payments.

Schedule of Changes in Net OPEB Liability and Related Ratios (Continued)

OPEB Liability FY 2019/20 FY 2018/19 FY 2017/18 FY 2016/17 FY 2015/16

Total OPEB LiabilityTotal OPEB Liability

Total OPEB Liability - beginning of year 14,762,771 13,022,350 13,248,635 12,432,574 $ $ $ $

Service cost 1,009,824 840,781 884,521 833,406

Interest 541,913 524,551 491,630 355,158

Change of benefit terms 0 0 0 (42,568)

Changes in assumptions 1,011,076 (263,711) (332,489) (373,074)

Differences between expected and actual experience (761,169) 1,262,401 (617,596) 586,322

Benefit payments (672,731) (623,601) (652,351) (543,183)

Net change in total OPEB liability 1,128,913 1,740,421 (226,285) 816,061 $ $ $ $

Total OPEB Liability - end of year 15,891,684 14,762,771 13,022,350 13,248,635 $ $ $ $

Plan Fiduciary Net Position

Plan fiduciary net position - beginning of yearPlan fiduciary net position - beginning of year 0 0 0 0 $ $ $ $

Contributions - employer 672,731 623,601 652,351 543,183

Contributions - active employees 0 0 0 0

Net investment income 0 0 0 0

Benefit payments (672,731) (623,601) (652,351) (543,183)

Trust administrative expenses 0 0 0 0

Net change in plan fiduciary net position 0 0 0 0 $ $ $ $

Plan fiduciary net position - end of year 0 0 0 0 $ $ $ $

Net OPEB Liability - end of year 15,891,684 14,762,771 13,022,350 13,248,635 $ $ $ $

Plan fiduciary net position as % of total OPEB liability 0.0% 0.0% 0.0% 0.0%

Covered employee payroll 86,012,605 83,103,966 77,265,090 74,652,261 $ $ $ $

Net OPEB liability as % of covered payroll 18.5% 17.8% 16.9% 17.7%

* Historical payrolls were estimated when actuals were not available.

**Contributions and benefit payments are estimated implicit subsidy benefit payments.

OPEB Expense

OPEB Expense FY 2024/25 FY 2023/24

Discount Rate

Beginning of year 4.21% 4.13%

End of year 5.20% 4.21%

Service cost 1,105,484 990,950 $ $

Interest 885,264 756,503

Change of benefit terms 0 0

Projected earnings on OPEB plan investments 0 0

Reduction for contributions from active employees 0 0

OPEB plan administrative expenses 0 0

Current period recognition of deferred outflows / (inflows) of resources

Differences between expected and actual experience (481,045) 13,593 $ $

Changes in assumptions 148,929 33,554

Net difference between projected and actual earnings on OPEB plan investments 0 0

Total current period recognition 47,147 (332,116)$ $

Total OPEB expense 1,794,600 1,658,632 $ $

Deferred Outflows / (Inflows) of Resources

Deferred Outflows / (Inflows) of Resources represents the following items that have not been recognized in the OPEB Expense :

1. Differences between expected and actual experience of the OPEB plan

2. Changes of assumptions

3. Differences between projected and actual earnings in OPEB plan investments (for funded plans only)

The initial amortization period for the first two items noted above is based on expected future service lives while the difference between the projected and actual earnings in OPEB plan investment is amortized over five years . All balances are amortized linearly on a principal only basis and new bases will be created annually for each of the items above.

Differences between expected and actual experience for FYE Initial Balance Initial Amortization

Period

Annual

Recognition

Unamortized Balance as of June 30, 2025

June 30, 2017 0 0 0 N/A$ $ $

June 30, 2018 (617,596) 8 (77,196) 0 $ $ $

June 30, 2019 1,262,401 8 157,800 157,801 $ $ $

June 30, 2020 (761,169) 8 (95,146) (190,293)$ $ $

June 30, 2021 1,002,500 8 125,313 375,935 $ $ $

June 30, 2022 (923,294) 8 (115,412) (461,646)$ $ $

June 30, 2023 (1,178,357) 8 (147,295) (736,472)$ $ $

June 30, 2024 702,024 8 87,753 526,518 $ $ $

June 30, 2025 (3,334,896) 8 (416,862) (2,918,034)$ $ $

Deferred Outflows / (Inflows) of Resources (Continued)

Changes in assumptions for FYE Initial Balance Initial Amortization

Period

Annual

Recognition

Unamortized Balance as of June 30, 2025

June 30, 2017 0 0 0 N/A$ $ $

June 30, 2018 (332,489) 8 (41,562) 0 $ $ $

June 30, 2019 (263,711) 8 (32,964) (32,963)$ $ $

June 30, 2020 1,011,076 8 126,385 252,766 $ $ $

June 30, 2021 1,684,624 8 210,578 631,734 $ $ $

June 30, 2022 (2,703,325) 8 (337,916) (1,351,661)$ $ $

June 30, 2023 352,979 8 44,122 220,613 $ $ $

June 30, 2024 915,214 8 114,402 686,410 $ $ $

June 30, 2025 527,068 8 65,884 461,184 $ $ $

Unamortized Balance as of June 30, 2025

Annual

Recognition

Initial Amortization

Period Initial Balance

Net Difference between projected and actual earnings in

OPEB plan investments for FYE

June 30, 2021 0 0 0 N/A$ $$

June 30, 2022 0 0 0 N/A$ $$

June 30, 2023 0 0 0 N/A$ $$

June 30, 2024 0 0 0 N/A$ $$

June 30, 2025 0 0 0 N/A$ $$

Deferred Outflows / (Inflows) of Resources (Continued)

Deferred Outflows Deferred InflowsAs of fiscal year ending June 30, 2025

Differences between expected and actual experience 1,060,254 (4,306,445)$ $

Changes in assumptions 2,252,707 (1,384,624)

Net difference between projected and actual earnings in OPEB plan investments N/A N/A

Total 3,312,961 $ (5,691,069)$

Annual Amortization of Deferred Outflows / (Inflows)

The balances as of June 30, 2025 of the deferred outflows / (inflows) of resources will be recognized in OPEB expense in the future fiscal years as noted below.

FYE Balance

(213,356)$ 2026

(338,199)$ 2027

(369,437)$ 2028

(705,319)$ 2029

(251,990)$ 2030

(499,807)Thereafter $

Sensitivity Results

The following presents the Net OPEB Liability as of June 30, 2025, calculated using the discount rate assumed and what it would be using a 1% higher and 1% lower discount rate.

· The current discount rate is 5.20%.

· The 1% decrease in discount rate would be 4.20%.

· The 1% increase in discount rate would be 6.20%.

The following presents the Net OPEB Liability as of June 30, 2025, using the health care trend rates assumed and what it would be using 1% higher and 1% lower health care trend rates.

· The current health care trend rate starts at an initial rate of 8.00%, decreasing to an ultimate rate of 4.50%.

· The 1% decrease in health care trend rates would assume an initial rate of 7.00%, decreasing to an ultimate rate of 3.50%.

· The 1% increase in health care trend rates would assume an initial rate of 9.00%, decreasing to an ultimate rate of 5.50%.

As of June 30, 2025 Net OPEB Liability

1% Decrease

Current Discount Rate

1% Increase As of June 30, 2025 Net OPEB Liability

1% Increase

1% Decrease

Current Trend Rates

18,686,249

17,104,661

20,423,628

16,650,164

18,686,249

21,064,940

Projection of GASB Disclosures

The Total OPEB Liability (TOL) is expected to change on an annual basis as a result of expected and unexpected events. Under normal circumstances, it is generally expected to have a net increase each year. Below is a list of the most common events affecting the total OPEB liability and whether they increase or decrease the liability.

Expected Events

· Increases in TOL due to additional benefit accruals as employees continue to earn service each year

· Increases in TOL due to interest as the employees and retirees age

· Decreases in TOL due to benefit payments

Unexpected Events

· Increases in TOL when actual health care costs increase more than expected. A liability decrease occurs when the reverse happens.

· Increases in TOL when more new retirements occur than expected or fewer terminations occur than anticipated. Liability decreases occur when the opposite outcomes happen.

· Increases or decreases in TOL depending on whether benefits are improved or reduced.

Projection of Total OPEB Liability

(TOL)

FY 2024/25 FY 2025/26

TOL as of beginning of year 20,332,435 18,686,249 $ $

Normal cost as of beginning of year 1,105,484 1,021,861

Exp. benefit payments during the year (829,106) (687,613)

Interest adjustment to end of year 885,264 1,007,170

Exp. TOL as of end of year 21,494,077 20,027,667 $ $

Actuarial Loss / (Gain) (2,807,828) TBD

Actual TOL as of end of year 18,686,249 TBD$ $

Discount rate as of beginning of year 4.21% 5.20%

Discount rate as of end of year TBD 5.20%

Cash Flow Projections

The below projections show the actuarially estimated employer-paid contributions for retiree health benefits for the next thirty years. Results are shown separately for a closed group of current/future retirees. These projections include explicit and implicit subsidies.

FYE

Current

Retirees

Future

Retirees* Total FYE

Current

Retirees

Future

Retirees* Total FYE

Current

Retirees

Future

Retirees* Total

2026 2036 2046 543,024 27,989 0 144,589 2,055,879 2,259,777 687,613 2,083,868 2,259,777 $$$$$$$$$

2027 2037 2047 466,829 16,496 0 305,000 2,135,591 2,303,268 771,829 2,152,087 2,303,268 $$$$$$$$$

2028 2038 2048 359,782 17,257 0 477,318 2,209,385 2,224,459 837,100 2,226,642 2,224,459 $$$$$$$$$

2029 2039 2049 329,563 0 0 653,833 2,298,785 2,284,856 983,396 2,298,785 2,284,856 $$$$$$$$$

2030 2040 2050 302,904 0 0 848,911 2,356,854 2,323,339 1,151,815 2,356,854 2,323,339 $$$$$$$$$

2031 2041 2051 218,993 0 0 1,053,117 2,351,550 2,265,140 1,272,110 2,351,550 2,265,140 $$$$$$$$$

2032 2042 2052 203,148 0 0 1,283,814 2,344,088 2,163,223 1,486,962 2,344,088 2,163,223 $$$$$$$$$

2033 2043 2053 138,835 0 0 1,470,845 2,351,788 2,204,366 1,609,680 2,351,788 2,204,366 $$$$$$$$$

2034 2044 2054 94,199 0 0 1,689,793 2,266,225 2,240,249 1,783,992 2,266,225 2,240,249 $$$$$$$$$

2035 2045 2055 99,198 0 0 1,876,607 2,271,140 2,181,544 1,975,805 2,271,140 2,181,544 $$$$$$$$$

Projected Employer Pay-go Cost

0.0M

0.4M

0.8M

1.2M

1.6M

2.0M

2.4M

2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 2052 2054

Current Retirees Future Retirees

M il li o n s

* Projections for future retirees do not take into account future new hires.

Discussion of Discount Rates

Under GASB 75, the discount rate used in valuing OPEB liabilities for unfunded plans as of the Measurement Date must be based on a yield for 20-year tax-exempt general obligation municipal bonds with an average rating of AA /Aa or higher (or equivalent quality on another rating scale).

For the current valuation, the discount rate was selected from the range of indices as shown in the table below, where the range is given as the spread between the lowest and highest rate shown.

Bond Buyer Go 20-

Bond Municipal

Bond Index

S&P Municipal Bond

20-Year High Grade

Rate Index

Fidelity 20-Year

Go Municipal

Bond Index

Bond Index Range

Actual

Discount

Rate Used

Yield as of June 30, 2024 3.93% 4.21% 3.97% 3.93% - 4.21% 4.21%

Yield as of June 30, 2025 5.20% 4.81% 4.71% 4.71% - 5.20% 5.20%

3.50%

4.00%

4.50%

5.00%

5.50%

Jun-24 Sep-24 Dec-24 Mar-25 Jun-25

20-Year Municipal Bond Indices

Bond Buyer 20-Bond GO Index S&P Municipal Bond 20 Year High Grade Rate Index

Fidelity GO AA - 20 Yrs Nyhart recommended

Summary of Plan Participants

Active Employees

Actives with coverage Single Non-Single3 Total Avg. Age Avg. Svc Salary

PPO 234 604 838 45.6 11.5 N/A

Kaiser 123 170 293 43.3 8.1 N/A

HDHP 21 30 51 44.7 6.9 N/A

Total actives with coverage 378 804 1,182 45.0 10.5 N/A

Actives without coverage Total Avg. Age Avg. Svc Salary

Total actives without coverage4 121 34.8 2.9 N/A

3 Non-Single enrollment includes participants electing 2-person and family coverage levels 4 Actives without coverage are assumed not to elect coverage at retirement. They have been excluded from this GASB valuation

Active Age-Service Distribution

Years of Service

Age < 1 1 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 & up Total

Under 25 38 21 59

25 to 29 36 63 14 113

30 to 34 24 80 51 11 166

35 to 39 14 62 57 17 9 159

40 to 44 23 52 38 28 39 9 1 190

45 to 49 12 35 31 20 37 39 7 181

50 to 54 15 29 27 17 23 40 30 2 183

55 to 59 3 25 22 18 20 21 23 3 2 137

60 to 64 2 11 13 12 17 17 8 7 3 90

65 to 69 1 3 3 2 6 2 3 2 22

70 & up 1 1 1 3

Total 168 381 257 126 151 128 72 12 6 2 1,303

Retirees

Retirees with coverage Single Non-Single3 Total Avg. Age

PPO 17 13 30 61.8

Kaiser 0 2 2 57.9

HDHP 9 5 14 61.1

Total retirees with coverage 26 20 46 61.4

Retiree Age Distribution

Age Retirees

< 45

45 to 49

50 to 54 1

55 to 59 13

60 to 64 32

65 to 69

70 to 74

75 to 79

80 to 84

85 to 89

90 & up

Total 46

Substantive Plan Provisions

Eligibility Employees are eligible for retiree health benefits until Medicare eligibility once they meet the pension eligibility requirements under the Oregon Public Employees Retirement System (OPERS) as noted below.

General Service Eligibility for PERS benefits are as follows:

1. Tier I – earlier of

a. Age 58 (normal retirement), or

b. Age 55 (early retirement), or

c. 30 years of service (normal retirement), or

d. 25 years of service (early retirement) – 911 Operators only

2. Tier II – earlier of

a. Age 60 (normal retirement), or

b. Age 55 (early retirement), or

c. 30 years of service (normal retirement), or

d. 25 years of service (early retirement) – 911 operators only

3. OPSRP – earlier of

a. Age 65 (normal retirement), or

b. Age 58 with 30 years of service (normal retirement), or

c. Age 55 (early retirement), or

d. 25 years of service (early retirement) – 911 Operators only

Police and Fire Eligibility for PERS benefits are as follows:

1. Tier I and II – earlier of

a. Age 55 (normal retirement), or

b. Age 50 with 25 years of service (normal retirement), or

c. Age 50 (early retirement), or

d. 30 years of service (normal retirement)

2. OPSRP – earlier of

a. Age 60 (normal retirement), or

b. Age 53 with 25 years of service (normal retirement), or

c. Age 50 with 5 years of service (early retirement)

Spouse Benefit Surviving spouses are eligible to remain on health coverage until age 65 at their own expense if they are age

55 at the time the employee or retiree passes away.

Retiree Cost Sharing Retirees are responsible for the full premium rates.

Substantive Plan Provisions

Medical Benefits Same benefit options are available to retirees as active employees. The PPO and HDHP plans are self-insured and the Kaiser plan is fully-insured and community-rated.

The monthly premiums effective January 1, 2025 are as shown below:

Plans EE EE/Spouse

Kaiser $ 825.98 $ 1,652.00

PPO $ 987.73 $ 1,975.40

HDHP $ 502.78 $ 1,005.53

Actuarial Methods and Assumptions

The actuarial assumptions used in this report represent a reasonable long-term expectation of future OPEB outcomes. As national economic and City experience change over time, the assumptions will be tested for ongoing reasonableness and, if necessary, updated.

The discount rate, other economic assumptions, and demographic assumptions have been selected by the City with the concurrence of Nyhart. Evaluation of the reasonableness of the expected rate of return on assets was outside the scope of our assignment. In our opinion, the actuarial assumptions are individually reasonable and in combination represent our estimate of anticipated experience of the Plan. All calculations have been made in accordance with generally accepted actuarial principles and practice.

There are changes to the actuarial methods and assumptions since the last full GASB valuation, which was for the fiscal year ending June 30, 2023. Refer to

Actuary’s Notes section for complete information on these changes. For the current year GASB valuation, we have also updated the per capita costs. We expect to update discount rate, health care trend rates, mortality table, and per capita costs again in the next full GASB valuation, which will be for the fiscal year ending June 30, 2027.

Measurement Date For fiscal year ending June 30, 2025, a June 30, 2025 measurement date was used.

Actuarial Valuation Date July 1, 2025

Liabilities as of June 30, 2025 are based on an actuarial valuation date of July 1, 2025 with no adjustments to get to the June 30, 2025 measurement date.

Liabilities as of June 30, 2024 are based on an actuarial valuation date of July 1, 2023 projected to June 30, 2024, reflecting actual premiums and updated discount rate.

Discount Rate 5.20% as of June 30, 2025 and 4.21% as of June 30, 2024. Please refer to the Discussion of Discount Rates section for more information on selection of the discount rate, which was chosen by the Plan Sponsor in concurrence with Nyhart.

Payroll Growth 3.50% for general wage inflation plus merit and productivity increases which are based on those used in the

Oregon Public Employees Retirement System (OPERS) actuarial valuation as of June 30, 2020, consistent with the City’s 2022 Experience Study. Sample annual salary increases for merit and productivity are as shown below:

YOS General Police/Fire

0 3.70% 4.44%

5 2.24% 2.39%

10 1.21% 1.23%

15 0.54% 0.69%

20 0.16% 0.52%

25 0.01% 0.44%

30+ 0.00% 0.21%

Cost Method Allocation of Actuarial Present Value of Future Benefits for services prior and after the Measurement Date was determined using Entry Age Normal Level % of Salary method where:

• Service Cost for each individual participant, payable from date of employment to date of retirement, is sufficient to pay for the participant’s benefit at retirement; and

• Annual Service Cost is a constant percentage of the participant’s salary that is assumed to increase according to the Payroll Growth.

Employer Funding Policy Pay-as-you-go cash basis

Census Data Census data as of June 30, 2025 was provided by the City in July 2025. We have reviewed it for reasonableness. The hire dates were updated with the original pension system hire dates received from the

2021 valuation for continued active employees.

Health Care Coverage Election Rate Based on the City’s 2022 Experience Study:

Active employees with current coverage: 45% will elect coverage at retirement

Active employees with no coverage: 0% will elect coverage at retirement

Inactive employees with current coverage: 100%

Inactive employees with no coverage: 0%

Spousal Coverage 65% of males and 35% of females are assumed to be married at retirement for future retirees, based on the

City’s 2022 Experience Study.

Spouse election for current retirees is based on actual data.

Mortality General Actives: SOA Pub-2016 Employees Headcount Weighted Mortality Table fully generational using

Scale MP-2021

General Retirees: SOA Pub-2016 Retirees Headcount Weighted Mortality Table fully generational using Scale

MP-2021

Public Safety Actives: SOA Pub-2016 Safety Employees Headcount Weighted Mortality Table fully generational using Scale MP-2021

Public Safety Retirees: SOA Pub-2016 Safety Retirees Headcount Weighted Mortality Table fully generational using Scale MP-2021

Surviving Spouses: SOA Pub-2016 Contingent Survivor Headcount Weighted Mortality Table fully generational using Scale MP-2021

The plan does not have sufficient data to have credible experience. Therefore, mortality assumptions are set to reflect general population trends based upon Pub-2016 Mortality tables and the most recent generational projection scale MP-2021 released by the Society of Actuaries (SOA) for future mortality improvements.

Disability None

Turnover Rate Assumption used to project annual terminations (voluntary and involuntary) prior to meeting minimum retirement eligibility for retiree health coverage. The rates represent the probability of termination in the next 12 months and are based on the City’s 2022 Experience Study.

General Police and Fire

YOS Male Female Unisex

0 22.5% 22.5% 20.0%

5 10.8% 10.9% 6.6%

10 6.2% 7.2% 4.5%

15 4.4% 5.1% 3.0%

20 3.1% 3.7% 2.0%

25 2.2% 2.7% 1.6%

30+ 2.1% 2.1% 1.6%

Health Care Trend Rates FYE Medical/Rx FYE Medical/Rx

2026 8.00% 2034 6.00%

2027 7.75% 2035 5.75%

2028 7.50% 2036 5.50%

2029 7.25% 2037 5.25%

2030 7.00% 2038 5.00%

2031 6.75% 2039 4.75%

2032 6.50% 2040+ 4.50%

2033 6.25%

Rising GLP-1 drug (diabetic/weight loss drugs) usage is driving increased pre-65 trends.

Retiree Contributions Retiree contributions are assumed to increase according to health care trend rates.

The initial trend rate combined employer history, national trends, professional judgement, and data published by government agencies, while medical trends blend short-term and long-term expectations.

The ultimate trend rate was selected based on historical medical CPI information.

Retirement Rate Sample annual retirement rates by group are as shown below. The rates below are based on the OPERS actuarial valuation as of December 31, 2021 and modified based on the City’s 2022 Experience Study.

General

Tier I / II OPSRP

Age <30 YOS 30+ YOS <30 YOS 30+ YOS

50 0.0% 15.0% 0.0% 0.0%

55 2.5% 15.0% 2.5% 5.0%

60 11.0% 21.0% 3.8% 20.0%

65 28.0% 37.5% 35.0% 20.0%

70 28.5% 28.5% 20.0% 25.0%

75+ 100.0% 100.0% 100.0% 100.0%

Police/Fire

Tier I / II OPSRP

Age <25 YOS 25+ YOS <25 YOS 25+ YOS

50 3.0% 32.0% 1.5% 5.5%

55 15.5% 27.0% 5.0% 27.0%

60 12.0% 27.0% 15.0% 27.0%

65 40.0% 50.0% 35.0% 40.0%

70 100.0% 100.0% 100.0% 100.0%

Per Capita Costs Annual per capita costs were calculated based on the City’s monthly premium rates effective on January 1, 2025 for Kaiser and HDHP. For the PPO plan, Nyhart calculated a monthly premium equivalent rate of

$1,066 based on the City’s actual claims from the midpoint and projected to July 1, 2025 using a trend rate of 8.0% and enrollment experience for the 24-month period ending June 30, 2025 (with a 70% weighting on the most recent 12 months). For the Kaiser plan, the premium rates were actuarially increased using 2023

HealthMAPS health index factors and ASOP 6 General Employees subscriber enrollment. For HDHP and PPO plans, the premium/premium equivalent rates were actuarially increased using 2023 HealthMAPS health index factors and City’s subscriber enrollment. The costs are assumed to increase with health care trend rates. Sample annual per capita costs are as shown below:

Explicit Subsidy The difference between (a) the premium rate and (b) the retiree contribution. Below is an example of the monthly explicit subsidies for a future retired Teacher enrolled in the PPO plan.

Premium

Rate

Retiree

Contribution

Explicit

Subsidy

A B C = A – B

Retiree $ 987.73 $ 987.73 $ 0.00

Spouse $ 987.67 $ 987.67 $ 0.00

Implicit Subsidy The difference between (a) the per capita cost and (b) the premium rate. Below is an example of the monthly implicit subsidies for a future male retiree age 64 with spouse of the same age enrolled in the PPO plan.

Kaiser PPO HDHP

Age Male Female Male Female Male Female

<55 $ 10,400 $ 11,900 $ 14,500 $ 16,600 $ 6,800 $ 7,800

55 – 59 $ 14,000 $ 13,600 $ 19,500 $ 18,900 $ 9,200 $ 8,900

60 – 64 $ 18,300 $ 16,600 $ 25,600 $ 23,200 $ 12,100 $ 11,000

Per Capita

Cost

Premium

Rate

Implicit

Subsidy

A B C = A – B

Retiree $ 2,133.33 $ 987.73 $ 1,145.60

Spouse $ 1,933.33 $ 987.67 $ 945.66

The per capita costs represent the cost of coverage for a retiree-only population.

Actuarial standards require the recognition of higher inherent costs for a retired population versus an active population.

All employers that utilize premium rates based on blended active/retiree claims experience will have an implicit subsidy. There is an exception for

Medicare plans using a true community-rated premium rate.

GASB Subsidy Breakdown Below is a breakdown of the GASB 75 monthly total cost for a future male retiree age 64 with spouse of the same age enrolled in the PPO plan.

Retiree Spouse

Retiree contribution $ 987.73 $ 987.67

Explicit subsidy $ 0.00 $ 0.00

Implicit subsidy $ 1,145.60 $ 945.66

Total monthly cost $ 2,133.33 $ 1,933.33

Models

ProVal Valuation software developed by Winklevoss Technologies, LLC. This software is widely used for the purpose of performing postretirement medical valuations. We coded the plan provisions, assumptions, methods, and participant data summarized in this report, and reviewed the liability and cost outputs for reasonableness.

We are not aware of any weakness or limitations in the software and have determined it is appropriate for performing this valuation.

2023 HealthMAPS Manual Rating manual developed by WTW. Aging factors are used to develop per capita costs by age for plans with limited credible exposure to develop plan-specific factors. We are not aware of any weakness or limitations in the factors and have determined they are appropriate for performing this valuation.

$0

$400

$800

$1,200

$1,600

$2,000

$2,400

Retiree Spouse

$988 $988

$1,146 $946

GASB Subsidy Breakdown

Retiree contribution Explicit subsidy

Implicit subsidy

APPENDIX

Appendix

Comparison of Participant Demographic Information

The active participants’ number below may include active employees who currently have no health care coverage. Refer to Summary of Participants section for an accurate breakdown of active employees with and without coverage.

As of June 30, 2023 As of June 30, 2025

Active Participants 1,218 1,303

Retired Participants 51 46

Averages for Active

Age 44.5 44.0

Service 10.3 9.8

Averages for Inactive

Age 61.7 61.4

Appendix City of Salem GASB 75 Valuation for Fiscal Year Ending June 30, 2025

Detailed Actuary’s Notes

There have been no substantive plan provision changes since the last full valuation, which was for the fiscal year ending June 30, 2023.

The following assumptions have been updated:

1. Discount rate as of the Measurement Date has been updated from 4.21% as of June 30, 2024 to 5.20% as of June 30, 2025 based on a yield for 20-year tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher (or equivalent quality on another rating scale). This change has caused a decrease in liabilities. The discount rate will be updated annually to reflect market conditions as of the Measurement Date.

2. In May 2025, the Society of Actuaries (SOA) released the Pub-2016 Mortality Tables, which serve as an important update to the Pub-2010 Tables previously utilized for public sector plans. We have incorporated these new tables, including separate mortality assumptions for active employees and retired participants, aligning with the detail provided by the Pub-2016 tables. The impact of this update was a slight increase in liabilities.

• General Actives: SOA Pub-2016 General Employees Headcount Weighted Mortality Table fully generational using Scale MP-2021

• General Retirees: SOA Pub-2016 General Retirees Headcount Weighted Mortality Table fully generational using Scale MP-2021

• Public Safety Actives: SOA Pub-2016 Public Safety Headcount Weighted Mortality Table fully generational using Scale MP-2021

• Public Safety Retirees: SOA Pub-2016 Public Safety Retiree Teachers Headcount Weighted Mortality Table fully generational using Scale

MP-2021

• Surviving Spouses: SOA Pub-2016 Continuing Survivor Headcount Weighted Mortality Table fully generational using Scale MP-2021

3. Health care trend rates have been updated to an initial rate of 8.00%, decreasing by 0.25% annually to an ultimate rate of 4.50%. This change caused a significant increase in liabilities.

Additionally, claims costs and premiums were updated for 2025 which caused a significant decrease in liabilities, driven by lower-than-expected 2025

Kaiser and HDHP premiums, and PPO claim costs. The updated census data resulted in a decrease in liabilities, mostly from more than expected terminated active employees who are eligible for OPEB benefits and not electing coverage.

GLOSSARY

Glossary – Decrements Exhibit

The table below illustrates how actuarial assumptions can affect a long-term projection of future liabilities. Starting with 100 employees at age 35, the illustrated actuarial assumptions show that 44.43 employees out of the original 100 are expected to retire and could elect retiree health benefits at age 55.

Age

Remaining

Employees

# of

Terminations per Year3

# of Retirements per Year

Total

Decrements Age

Remaining

Employees

# of

Terminations per Year

# of Retirements per Year

Total

Decrements

35 100.000 6.276 0.000 6.276 46 55.938 2.085 0.000 2.085

36 93.724 5.677 0.000 5.677 47 53.853 1.866 0.000 1.866

37 88.047 5.136 0.000 5.136 48 51.987 1.656 0.000 1.656

38 82.911 4.648 0.000 4.648 49 50.331 1.452 0.000 1.452

39 78.262 4.209 0.000 4.209 50 48.880 1.253 0.000 1.253

40 74.053 3.814 0.000 3.814 51 47.627 1.060 0.000 1.060

41 70.239 3.456 0.000 3.456 52 46.567 0.877 0.000 0.877

42 66.783 3.131 0.000 3.131 53 45.690 0.707 0.000 0.707

43 63.652 2.835 0.000 2.835 54 44.983 0.553 0.000 0.553

44 60.817 2.564 0.000 2.564 55 44.430 0.000 44.430 44.430

45 58.253 2.316 0.000 2.316

3 The above rates are illustrative rates and are not used in our GASB calculations.

35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Decrements Exhibit

Actives Total Terminations Total Retirements

Glossary – Retirement Rates Exhibit

The table below illustrates how actuarial assumptions can affect a long-term projection of future liabilities. The illustrated retirement rates show the number of employees who are assumed to retire annually based on 100 employees age 55 who are eligible for retiree health care coverage. The average age at retirement is 62.0.

Age

Active

Employees

BOY

Annual

Retirement

Rates*

Retirements per Year

Active

Employees

EOY

55 100.000 5.0% 5.000 95.000

56 95.000 5.0% 4.750 90.250

57 90.250 5.0% 4.513 85.738

58 85.738 5.0% 4.287 81.451

59 81.451 5.0% 4.073 77.378

60 77.378 5.0% 3.869 73.509

61 73.509 5.0% 3.675 69.834

62 69.834 30.0% 20.950 48.884

63 48.884 15.0% 7.333 41.551

64 41.551 15.0% 6.233 35.318

65 35.318 100.0% 35.318 0.000

* The above rates are illustrative rates and are not used in our GASB calculations.

55 56 57 58 59 60 61 62 63 64 65

Retirement Rates Exhibit

Actives Total Retirements

Glossary – Definitions

GASB 75 defines several unique terms not commonly employed in the funding of pension and retiree health plans. The definitions of the terms used in the

GASB actuarial valuations are noted below.

1. Actuarial Assumptions – Assumptions as to the occurrence of future events affecting health care costs, such as: mortality, withdrawal, disablement and retirement; changes in compensation and Government provided health care benefits; rates of investment earnings and asset appreciation or depreciation; procedures used to determine the Actuarial Value of Assets; characteristics of future entrants for Open Group Actuarial Cost Methods;

and other relevant items.

2. Actuarial Cost Method – A procedure for determining the Actuarial Present Value of Future Benefits and expenses and for developing an actuarially equivalent allocation of such value to time periods, usually in the form of a Service Cost and a Total OPEB Liability.

3. Actuarially Determined Contribution - A target or recommended contribution to a defined benefit OPEB plan for the reporting period, determined in accordance with the parameters and in conformity with Actuarial Standards of Practice.

4. Actuarial Present Value – The value of an amount or series of amounts payable or receivable at various times, determined as of a given date by the application of a particular set of Actuarial Assumptions. For purposes of this standard, each such amount or series of amounts is:

a. adjusted for the probable financial effect of certain intervening events (such as changes in compensation levels, Social Security, marital status, etc.);

b. multiplied by the probability of the occurrence of an event (such as survival, death, disability, termination of employment, etc.) on which the payment is conditioned; and

c. discounted according to an assumed rate (or rates) of return to reflect the time value of money.

5. Deferred Outflow / (Inflow) of Resources – represents the following items that have not been recognized in the OPEB Expense:

a. Differences between expected and actual experience of the OPEB plan

b. Changes in assumptions

c. Differences between projected and actual earnings in OPEB plan investments (for funded plans only)

6. Explicit Subsidy – The difference between (a) the amounts required to be contributed by the retirees based on the premium rates and (b) actual cash contribution made by the employer.

7. Funded Ratio – The actuarial value of assets expressed as a percentage of the Total OPEB Liability.

8. Healthcare Cost Trend Rate – The rate of change in the per capita health claims costs over time as a result of factors such as medical inflation, utilization of healthcare services, plan design, and technological developments.

9. Implicit Subsidy – In an experience-rated healthcare plan that includes both active employees and retirees with blended premium rates for all plan members, the difference between (a) the age-adjusted premiums approximating claim costs for retirees in the group (which, because of the effect of age on claim costs, generally will be higher than the blended premium rates for all group members) and (b) the amounts required to be contributed by the retirees.

10. OPEB – Benefits (such as death benefits, life insurance, disability, and long-term care) that are paid in the period after employment and that are provided separately from a pension plan, as well as healthcare benefits paid in the period after employment, regardless of the manner in which they are provided. OPEB does not include termination benefits or termination payments for sick leave.

11. OPEB Expense – Changes in the Net OPEB Liability in the current reporting period, which includes Service Cost, interest cost, changes of benefit terms, expected earnings on OPEB Plan investments, reduction of active employees’ contributions, OPEB plan administrative expenses, and current period recognition of Deferred Outflows / (Inflows) of Resources.

12. Pay-as-you-go – A method of financing a benefit plan under which the contributions to the plan are generally made at about the same time and in about the same amount as benefit payments and expenses becoming due.

13. Per Capita Costs – The current cost of providing postretirement health care benefits for one year at each age from the youngest age to the oldest age at which plan participants are expected to receive benefits under the plan.

14. Present Value of Future Benefits – Total projected benefits include all benefits estimated to be payable to plan members (retirees and beneficiaries, terminated employees entitled to benefits but not yet receiving them, and current active members) as a result of their service through the valuation date and their expected future service. The actuarial present value of total projected benefits as of the valuation date is the present value of the cost to finance benefits payable in the future, discounted to reflect the expected effects of the time value (present value) of money and the probabilities of payment. Expressed another way, it is the amount that would have to be invested on the valuation date so that the amount invested plus investment earnings will provide sufficient assets to pay total projected benefits when due.

15. Real Rate of Return – the rate of return on an investment after adjustment to eliminate inflation.

16. Select and Ultimate Rates – Actuarial assumptions that contemplate different rates for successive years. Instead of a single assumed rate with respect to, for example, the investment return assumption, the actuary may apply different rates for the early years of a projection and a single rate for all subsequent years. For example, if an actuary applies an assumed investment return of 8% for year 20W0, then 7.5% for 20W1, and 7% for 20W2 and thereafter, then 8% and 7.5% select rates, and 7% is the ultimate rate.

17. Service Cost – The portion of the Actuarial Present Value of projected benefit payments that are attributed to a valuation year by the Actuarial Cost

Method.

18. Substantive Plan – The terms of an OPEB plan as understood by the employer(s) and plan members.

19. Total OPEB Liability – That portion, as determined by a particular Actuarial Cost Method, of the Actuarial Present Value of Future Benefits which is attributed to past periods of employee service (or not provided for by the future Service Costs).