2-1.0-City of Tarpon Springs Final GASB 75 Report-FY 2024.pdf

City of Tarpon Springs

Actuarial Valuation Report (GASB 75)

Prepared for the Year Ending September 30, 2023

(Updated for the Year Ending September 30, 2024)

Prepared by:

Jefferson Solutions, Inc.

www.jefsi.com http://www.jefsi.com/

JEFFERSON SOLUTIONS, INC.

Table of Contents

Overview of GASB 74 and 75

Actuarial Valuation Opinion

Executive Summary

Overview of OPEB Plan

Principal Results

Actuarially Determined Contribution

Actuarial Gain / Loss

Schedule of Deferred Outflows and Deferred Inflows of Resources 9

10-Year Projection of Employer Benefit Payments

Assumption Sensitivity

Summary of Demographic Information

Actuarial Methods

Assumptions and Methodology

Calculation of Per Capita Costs

Glossary

Suggested Footnotes for OPEB

Schedules of Required Supplementary Information

Breakout by Fund

Overview of GASB 74 and 75

GASB - Acronym that stands for Governmental Accounting Standards Board. This is the accounting board that sets standards for governmental entities. Following GASB standards allows for the preparation of financial statements that are in conformity with Generally Accepted Accounting Principles (GAAP).

GASB statements 74 and 75, establish the reporting standards for Other Postemployment Benefit (“OPEB”) plans.

It is designed to recognize the Other Postemployment Benefits earned by employees throughout their working career vs. when they are paid in retirement - accrual accounting vs. “pay-as-you-go” accounting. Additionally, each eligible active employee earns benefits each year representing benefits to be paid in retirement or a “Service Cost”. These amounts are reflected in the financial statement each year so that OPEB benefits for an eligible employee shall be fully charged to the financial statement when that eligible employee terminates employment.

In 2012 GASB issued GASB Statements 67 and 68 to update and standardize the financial reporting of pension liabilities. This increased the transparency of pension liabilities by moving them to the balance sheet and made financial statement disclosures of pension liabilities more comparable between municipal entities. GASB Statements 74 and 75 are designed to have the same effect on OPEB plans.

GASB 74 and 75 require retiree medical plans to disclose information about asset and liability levels and show historical contribution information. GASB 74 only applies in situations where a separate trust is established to prefund these benefits. GASB 75 requires employers to perform periodic actuarial valuations to determine annual accounting costs and to keep a running tally of the extent to which these amounts are over or under funded.

GASB 74 and 75 apply to those benefits provided after retirement, except for pension benefits, such as medical, dental and life insurance. The philosophy behind the accounting standard is that these postemployment benefits are part of the compensation earned by employees in return for their services, and the cost of these benefits should be recognized while employees are providing those services, rather than after they have retired. This philosophy has already been applied for years to defined benefit pensions. GASB 74 and 75 extend this practice to all other postemployment benefits.

The process of determining the liability for OPEB benefits is based on many assumptions about future events. The key actuarial assumptions are:

• Turnover and retirement rates: How likely is it that an employee will qualify for postemployment benefits and when will they start?

• Medical inflation and per capita cost assumptions: When an employee starts receiving postemployment benefits many years from now, how much will be paid each year for the benefits and how rapidly will the costs grow?

• Mortality assumption: How long is a retiree likely to receive benefits?

• Discount rate assumption: What is the present value of those future benefit payments in terms of today’s dollars?

Since the liability is being recognized over the employee’s whole career with the City, the present value is divided into three pieces: the part that is attributed to past years (the “Total OPEB Liability” or “Past Service Liability”), the part that is being earned this year (the “Service Cost”), and the part that will be earned in future years (the “Future Service Liability”).

Actuarial Valuation Opinion

This report presents results of the actuarial valuation of the City of Tarpon Springs Retiree Health Benefit Program (“the Plan”) as of October 1, 2022. In our opinion, this report is complete and accurate and represents fairly the actuarial position of the Plan for the purposes stated herein.

The City of Tarpon Springs provided the participant data, financial information and plan descriptions used in this valuation. The actuary has analyzed the data and other information provided for reasonableness but has not independently audited the data or other information provided. The actuary has no reason to believe the data or other information provided is not complete and accurate and knows of no further information that is essential to the preparation of the actuarial valuation.

Actuarial information under Government Accounting Standards Board Statement No. 75 (GASB No. 75) is for the purpose of fulfilling employer financial accounting requirements. The results have been prepared on a basis consistent with our understanding of GASB No. 75 and are based upon assumptions prescribed by the City.

Determinations for purposes other than meeting employer financial accounting requirements may be significantly different from the results reported herein.

In our opinion, all costs, liabilities, rates of interest, and other factors underlying these actuarial computations have been determined on the basis of actuarial assumptions and methods that are each reasonable (or consistent with authoritative guidance) for the purposes herein taking into account the experience of the Plan and future expectations.

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 operations of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the Plan's funded status); and changes in program provisions or applicable law.

Our scope for this actuarial valuation did not include analyzing the potential range of such future measurements, and we did not perform that analysis.

The undersigned with actuarial credentials collectively meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein.

This report was prepared solely for the benefit and internal use of the plan sponsor. This report is not intended for the benefit of any other party and may not be relied upon by any third party for any purpose, and Jefferson Solutions, Inc. accepts no responsibility or liability with respect to any party other than the plan sponsor.

To the best of our knowledge, no employee of Jefferson Solutions, Inc. is an officer or director of the employer.

In addition, we are not aware of any relationship between the Jefferson Solutions, Inc. and the employer that may impair or appear to impair the objectivity of the work detailed in this report.

Jefferson Solutions, Inc.

February 12, 2025

Alexander Kirimov, FCA, ASA, MAAA, EA Raymond R. Cerrone

Specialist Leader and Consulting Actuary Project Leader

Executive Summary

Governmental Accounting Requirements and Report Purposes

The Governmental Accounting Standards Board released the Statement of Governmental Accounting Standards No. 74 and No. 75 in June 2015. These statements require trusts (GASB No. 74) and employers (GASB No. 75) to accrue the cost of post-employment benefits other than pensions (“OPEB”) while eligible employees are providing services to the employer.

The purposes of this actuarial valuation report are to provide the City with:

1) Status of the retiree health benefit program’s accrued liabilities (Total OPEB Liability) using the most recent census data and health plan rates;

2) Projected cash contributions (pay-as-you-go costs); and

3) Projected GASB No. 75 expense for the current fiscal year. GASB No. 75 disclosure information to fulfill the City’s financial reporting requirements is provided in this valuation report.

Funding Policy

Currently, the City does not pre-fund retiree health benefits and instead provides for benefits on a pay-as-you-go basis.

The key measures from the actuarial valuation of retiree health benefits with valuation date of October 1, 2022 and measurement dates of September 30, 2023 and September 30, 2024 are:

October 1, 2022 October 1, 2023

Present Value of Future Benefits $ 4,003,758 $ 4,827,976

Total OPEB liability $ 2,329,565 $ 2,793,115

Fiscal Year Ending

September 30, 2023 September 30, 2024

OPEB Expense $ 199,164 $ 295,600

Projected cash and implicit contributions $ 159,551 $ 165,630

OPEB Liability and Participant Information:

October 1, 2022 October 1, 2023 Head Count

Active $ 1,279,961 $ 1,732,289 262

Retired (Inactive) 1,049,604 1,060,826 16

Total OPEB liability $ 2,329,565 $ 2,793,115 278

Significant Changes from the Previous Actuarial Valuation

• Decreasing the discount rate from 4.09% to 3.81%.

• Initial trend rates were advanced, the model for trends in subsequent years is based on the Getzen Model as updated through October 2024.

Continued

Executive Summary (Continued)

Key Assumptions:

Census Collection Date .............................................................................................................................. October 1, 2022

Discount Rate (September 30, 2023 / September 30, 2024) ....................................................................... 4.09% / 3.81%

Year 1 Inflation Rate ................................................................................................................................................ 7.00%

Year 2 Inflation Rate ................................................................................................................................................. 8.00%

Ultimate Inflation Rate ............................................................................................................................................ 4.54%

Year Ultimate Inflation Rate is Reached

Actuarial Cost Method ............................................................................................. Entry Age Normal (Percent of Salary)

Discount Rate Comment:

As prescribed by GASB No. 75, the discount rate will be based on the index rate for 20-year tax-exempt general obligation municipal bond index rate with an average rating of AA/Aa or higher as of the measurement date. To comply with this provision, the Bond Buyer 20-Bond General Obligation Index will be used. The discount rate of 4.09% is the September 30, 2023, and 3.81% is the September 30, 2024 value of this index.

Cash Costs vs. Implicit Rate Subsidy:

GASB No. 75 requires that employers recognize the expected claims of the retiree population less the expected contributions by those retirees. This is not necessarily the same determination as the expected cash payments of the employer for retiree health benefits. The difference is that many post-employment health plans (including the City’s program) charge the same premium rates for all participants in a non-Medicare plan regardless of their age. This single premium rate is called a blended premium rate because it blends the expected claims of both active and retired participants. Retirees are generally older than the average participant in a non-Medicare plan, which means they are expected to generate higher claims than the average participant of the plan; therefore, they are receiving a subsidy even if they pay 100% of the blended premium rate because they would be paying less in premiums than their claims costs. This subsidy is referred to as the “Implicit Rate Subsidy”.

Another way of considering the Implicit Rate Subsidy is to assume the retirees were removed from a blended plan and, instead, separately rated. In this scenario, the premium rate for the remaining active population would be lower; therefore, the retirees’ premium rate is being subsidized by the premiums for active employees. Since the employer generally pays a portion of the premiums for the active employees, this subsidy creates a liability for the employer.

By comparison, the cash costs are the actual dollars paid by the employer to cover a portion or all the retirees’ premium rates.

This is sometimes referred to as the “Explicit Rate Subsidy”. This is the benefit that is explicitly stated by the City that will be paid on behalf of retirees.

GASB 75 reports are required to value both the Implicit Rate Subsidy and the Explicit Rate Subsidy. This report values the Implicit Rate Subsidy only.

Overview of OPEB Plan

1. PLAN TYPES: Same benefit options are offered to retirees as active employees. The City’s health plans are fully insured, and community rated.

2. ELIGIBILITY:

• General Employee are required to reach age 55 and have 5 years of service; and

• Police or Fire Employees are eligible at age 50 with 10 years of service or 25 years with no age requirement.

3. BENEFIT COST SHARING (RETIREE AND SPOUSE): Retirees and their covered spouses are required to pay 100% of the premiums for elected coverage. See examples for the calculation of the per capita cost on page 21.

4. SURVIVING SPOUSE BENEFIT:

• Surviving spouses of police officers killed in the line of duty will receive paid health insurance until remarriage or to age 65; dependents of police killed in the line of duty are covered until age 25.

• All other retirees or active employees are eligible for COBRA coverage upon the member’s death.

5. DISABILITY BENEFITS:

- Any participant who becomes totally and permanently disabled due to an illness or injury contracted in the line of duty and is deemed to be unable to perform useful and efficient service to the City is immediately eligible for a disability benefit.

- Any participant who has 10 or more years of Credited Service and becomes totally and permanently disabled and is deemed to be unable to perform useful and efficient service to the City is immediately eligible for a disability benefit.

6. DURATION OF BENEFITS: The benefits in this plan end when the retiree and or the covered spouse reach age 65.

This valuation does not account for the cost of benefits to retirees or their spouses after age 65.

7. ANNUAL GROSS PREMIUMS (FLORIDA MUNICIPAL TRUST PLAN 015):

October 1, 2022 October 1, 2023 October 1, 2024

Plan Single Two or More Single Two or More Single Two or More

Florida Municipal Trust Plan 015$10,049.16 $19,250.28 $10,752.60 $20,597.76 $12,163.00 $24,560.00

Principal Results

This section provides a summary of the actuarial valuation results. All information is provided as of the measurement date except for census data. The valuation results were based on October 1, 2022 census data. All liabilities are net of expected retiree contributions.

October 1, 2022 October 1, 2023

Present Value of Future Benefits

Actives $ 2,954,154 $ 3,767,150

Retired 1,049,604 1,060,826

Total $ 4,003,758 $ 4,827,976

Total OPEB Liability (Individual Entry Age Normal)

Active $ 1,279,961 $ 1,732,289

Retired 1,049,604 1,060,826

Total $ 2,329,565 $ 2,793,115

OPEB Costs:

September 30, September 30, Service Cost $ 130,328 $ 165,660

Interest 97,347 109,574

Deferred (Inflows)/Outflows from Expected & Actual Experience 169,197 169,197

Deferred (Inflows)/Outflows from Changes in Assumptions (197,708) (148,831)

Net OPEB Expense $ 199,164 $ 295,600

Funded Ratio NA NA

Annual Covered Payroll $16,485,145 $17,062,125

Net OPEB Liability (Asset) as % of Covered Payroll 14.13% 16.37%

Discount Rate 4.09% 3.81%

Summary of Assets

The plan Retiree Health Benefit Program is currently funded on a pay-as-you-go basis. Therefore, at all times the net assets available for plan benefits is zero.

Actuarially Determined Contribution

September 30, September 30, Service Cost with Interest at 4.09% / 3.81% $ 135,658 $ 171,972

30-year amortization of Net OPEB Liability 136,195 157,821

Actuarially Determined Contribution $ 271,853 $ 329,793

Actual Contribution (159,551) (165,630)

Contribution deficiency $ 112,302 $ 164,163

Covered payroll $16,485,145 $17,062,125

Actuarially determined contribution as a % of covered payroll 1.65% 1.93%

Actuarial Gain / Loss

September 30, September 30, Total OPEB Liability, Beginning of Year $ 2,354,074 $ 2,397,689

Fiduciary Net Position, September 30, 2022 - -

Net OPEB Liability, September 30, 2022 $ 2,354,074 $ 2,397,689

Service Cost 130,328 165,660

Plan Change - -

Interest @ 4.09% / 3.81% 97,347 109,574

Contributions (159,551) (165,630)

Changes in Assumptions 90,862 395,426

Expected Net OPEB Obligation, End of Year $ 2,513,060 $ 2,902,719

Gain attributable to experience (115,371) -

Total OPEB Liability, End of Year $ 2,397,689 $ 2,902,719

Fiduciary Net Position, End of Year - -

Net OPEB Liability, End of Year $ 2,397,689 $ 2,902,719

Schedule of Deferred Outflows and Deferred Inflows of Resources

Differences between expected and actual experience

Amortized in Fiscal Year Ending

09/30/2024 09/30/2025 09/30/2026 09/30/2027 09/30/2028 09/30/2029 There After

09/30/2018 $317,530 7.00 $45,361 $272,166 $45,361 $3 - - - - -

09/30/2020 $117,912 7.00 $16,845 $67,380 $16,845 $16,845 $16,842 - - - -

09/30/2021 $768,290 6.38 $120,422 $361,266 $120,422 $120,422 $120,422 $45,758 - - -

09/30/2024 ($115,371) 8.59 ($13,431) ($13,431) ($13,431) ($13,431) ($13,431) ($13,431) ($13,431) ($13,431) ($21,354)

Net $1,088,361 $169,197 $687,381 $169,197 $123,839 $123,833 $32,327 ($13,431) ($13,431) ($21,354)

Changes in assumptions

Amortized in Fiscal Year Ending

09/30/2024 09/30/2025 09/30/2026 09/30/2027 09/30/2028 09/30/2029 There After

9/30/2018 $13,362 7.00 $1,909 $11,454 $1,908 - - - - - -

9/30/2019 $101,497 7.00 $14,500 $72,500 $14,500 $14,497 - - - - -

9/30/2020 $311,583 7.00 $44,512 $178,048 $44,512 $44,512 $44,511 - - - -

9/30/2021 ($6,779) 6.38 ($1,063) ($3,189) ($1,063) ($1,063) ($1,063) ($401) - - -

9/30/2022 ($1,710,760) 6.38 ($268,144) ($536,288) ($268,144) ($268,144) ($268,144) ($268,144) ($101,896) - -

9/30/2023 $90,862 8.59 $10,578 $10,578 $10,578 $10,578 $10,578 $10,578 $10,578 $10,578 $16,816

9/30/2024 $395,426 8.09 $48,878 - $48,878 $48,878 $48,878 $48,878 $48,878 $48,878 $102,158

Net ($804,809) ($148,830) ($266,897) ($148,831) ($150,742) ($165,240) ($209,089) ($42,440) $59,456 $118,974

Deferred Balances September 30, 2024 Deferred Balances September 30, 2024Deferred

Outflows

Deferred

(Inflows) Net

Deferred

Outflows

Deferred

(Inflows) Net

Changes in assumptions $519,774 ($908,855) ($389,081) ($26,903) ($41,407) $401,309 ($639,648) ($238,339)

Differences between expected and actual experience $320,292 ($88,509) $231,783 $169,197 $123,839 $183,022 ($75,078) $107,944

$840,066 ($997,364) ($157,298) $82,432 $584,331 ($714,726) ($130,395)

Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Fiscal Year Ending Amortization Fiscal Year Ending Amortization

09/30/2025 ($26,903) 09/30/2026 ($41,407)

09/30/2026 ($41,407) 09/30/2027 ($176,762)

09/30/2027 ($176,762) 09/30/2028 ($55,871)

09/30/2028 ($55,871) 09/30/2029 $46,025

09/30/2029 $46,025 09/30/2030 $46,025

There After $97,620 - There After $51,595

($157,298) ($130,395)

Measurement

Period Ended Initial Amount

Amortization

Period

Measurement

Period Ended Initial Amount

Amortization

Period

Annual

Recognition

Amortized

Through

09/30/2023

Amortization

FYE September

30, 2024

Amortization

FYE September

30, 2023

Annual

Recognition

Amortized

Through

09/30/2023

10-Year Projection of Employer Benefit Payments

Presented in this section are the projected employer benefit payments for the next ten years based on the program design effective in the 2022 - 2023 fiscal year. These projected benefit payments are based on the actuarial methods and assumptions are described in the section(s) Actuarial Methods on page 15 and Assumptions And Methodology beginning on page 16. If actual experience differs from those expected by the actuarial assumptions, the actual benefit payments will vary from those presented below.

Period Explicit Subsidy Implicit Subsidy Total

09/30/2023 $0 $159,551 $159,551

09/30/2024 $0 $165,630 $165,630

09/30/2025 $0 $161,031 $161,031

09/30/2026 $0 $153,114 $153,114

09/30/2027 $0 $158,757 $158,757

09/30/2028 $0 $152,628 $152,628

09/30/2029 $0 $173,227 $173,227

09/30/2030 $0 $187,629 $187,629

09/30/2031 $0 $203,261 $203,261

09/30/2032 $0 $201,309 $201,309

Assumption Sensitivity

This section provides information about the sensitivity of the Total OPEB Liability to certain assumptions made in this actuarial valuation. The discount rate and benefit cost trend rate are the most significant assumptions used in this valuation. The table below shows the effect of increasing and decreasing those assumptions by 100 basis points above/below their projected levels in all future years.

September 30, Discount Rate Plus 1.00%

Current OPEB Liability $2,397,689 $2,902,719

OPEB Liability - Discount Plus 1.00% $2,211,060 $2,666,631

Decrease $186,629 $236,088

Percent Decrease 7.78% 8.13%

Discount Rate Minus 1.00%

OPEB Liability - Discount Minus 1.00% $2,604,175 $3,163,326

Increase $206,486 $260,607

Percent Increase 8.61% 8.98%

Trend Plus 1.00%

OPEB Liability - Trend Plus 1.00% $2,698,149 $3,314,675

Increase $300,460 $411,956

Percent Increase 12.53% 14.19%

Trend Minus 1.00%

OPEB Liability - Trend Minus 1.00% $2,144,393 $2,558,006

Decrease $253,296 $344,713

Percent Decrease 10.56% 11.88%

Summary of Demographic Information

This section details the statistics related to the participants in the post-employment benefit plan. The census collection date is October 1, 2022.

The file that was used to prepare the GASB 75 valuation was provided by the City. Our understanding is that this file represents the population of the City’s active and retired employees as of October 1, 2022, the census collection date.

CENSUS RECONCILIATION COMMENT: The census file contained 309 records. The GASB 75 valuation excluded 31 records because the employee may have been hired after the census collection date (October 1, 2022) or the records represented individuals that are not entitled to benefits.

All Active and Retired Employees:

Actives Retirees Total

Male 179 13 192

Female 83 3 86

Total 262 16 278

Active Employees:

Age

Not Currently Eligible to

Retire Currently Eligible to Retire1 TOTAL

29 and Under 27 - 27

30 - 34 37 - 37

35 - 39 30 - 30

40 - 44 26 - 26

45 - 49 22 1 23

50 - 54 28 8 36

55 - 59 7 26 33

60 - 64 8 25 33

65 and Over 1 16 17

Total 186 76 262

Average Age 46.2

Average Service 9.8

1 These active employees have met the minimum age and service requirements needed to vest in an OPEB benefit upon retirement.

Summary of Demographic Information (Continued)

Current Retirees:

Age Retirees Spouses TOTAL

54 and Under 2 1 3

55 - 59 1 2 3

60 - 64 10 3 13

65 - 69 1 - 1

70 - 74 - 1 1

75 - 79 1 - 1

80 and Over 1 - 1

Total 16 7 23

Average Age for Retired Employees: 58.8

Summary of Demographic Information (Continued)

Years of Service

Age Under

5 5 to 9 10 to

15 to

20 to

25 to

30 to

34 35 Plus TOTAL

<20 - - - - - - - - -

20 to 24 7 - - - - - - - 7

25 to 29 14 6 - - - - - - 20

30 to 34 22 14 1 - - - - - 37

35 to 39 9 17 3 1 - - - - 30

40 to 44 8 11 3 4 - - - - 26

45 to 49 5 6 3 4 4 1 - - 23

50 to 54 14 6 3 3 6 3 1 - 36

55 to 59 4 6 6 4 6 4 2 1 33

60 to 64 6 8 4 9 3 1 1 1 33

65 Plus - 5 1 3 5 - 1 2 17

TOTAL 89 79 24 28 24 9 5 4 262

Average Age 46.2

Average Service 9.8

Actuarial Methods

Actuarial Cost Method

The Actuarial Cost Method used to determine the Total OPEB Liability, and the Annual Required Contribution is the Entry Age Normal (EAN) method as prescribed by GASB No. 75. This method is in the family of future benefit cost methods, which requires an estimate of the projected benefit payable at retirement to determine costs and liabilities.

The Normal Cost (or Service Cost) is the annual allocation required for each participant from entry date to the assumed retirement date so that the accumulated allocation at retirement is equal to the liability for the projected benefit. The projected benefits are based on estimates of future years of service and projected health benefit costs. The normal cost is developed as a level percent of compensation as prescribed by GASB No. 75.

The Present Value of Future Benefits is equal to the value of the projected benefit payable at retirement discounted back to the participant’s current age. Discounts include such items as interest and mortality. The present value of future normal cost allocations is equal to the discounted value of the normal costs allocated from the member’s current age to retirement age.

The difference between the Present Value of Future Benefits and the present value of future normal cost allocations represents the Total OPEB Liability at the participant’s current age.

The Total OPEB Liability for participants currently receiving payments is calculated as the actuarial present value of future benefits expected to be paid. No normal cost is allocated for these participants.

Financial and Census Data

The City provided the participant data, financial information and plan descriptions used in this valuation. The actuary has checked the data for reasonableness but has not independently audited the data. The actuary has no reason to believe the data is not complete and accurate and knows of no further information that is essential to the preparation of the actuarial valuation.

Plan Fiduciary Net Position

Market value of assets as of the measurement date is zero because the plan is funded on a pay-as-you-go basis.

Method Changes Since Last Year

None.

Assumptions and Methodology

Economic Assumptions

1. DISCOUNT RATE: An interest rate of 4.09% was used to calculate the net OPEB expense for the fiscal year ending September 30, 2023, and 3.81% for the fiscal year ending September 30, 2024.

2. PAYROLL GROWTH: 3.50% per year.

3. PRE 65 MEDICAL TREND: Health care costs were modeled in accordance with the Society of Actuaries Getzen Model of Long-Run Medical Cost Trends as updated through October 2024 for 2024 thru 2090 + .

The long-term trend rates were based on the following assumptions:

• Rate of Inflation: ....................................................................................................................... 3.10%

• Rate of Growth in Real Income / GDP per capita: .................................................................... 1.40%

• Income Multiplier for Health Spending: ................................................................................... 1.00%

• Health Share of GDP Resistance Point: ................................................................................... 25.00%

• Year after which medical costs are limited to rate of growth in GDP

The SOA Long-Run Medical Cost Trend Model and its baseline projection are based on an econometric analysis of historical US medical expenditures and the judgments of experts in the field. The long-run baseline projection and input variables have been developed under the guidance of an SOA Project Oversight Group.

The above schedule represents a reasonable medical trend projection for the current plan provisions and demographics of the Retiree Welfare Benefits Plan, and no changes to these baseline assumptions are necessary.

Period Trend Rate Period Trend Rate

2024 8.00% 2069 5.26%

2025 8.00% 2070 5.25%

2026 7.50% 2071 5.24%

2027 7.00% 2072 5.23%

2028 6.50% 2073 5.22%

2029 6.35% 2074 5.21%

2030 6.20% 2075 5.20%

2031 6.04% 2076 5.19%

2032 5.89% 2077 5.18%

2033 5.74% 2078 5.17%

2034 to 2057 5.59% 2079 5.16%

2058 5.51% 2080 5.15%

2059 5.46% 2081 5.08%

2060 5.43% 2082 5.02%

2061 5.40% 2083 4.95%

2062 5.38% 2084 4.89%

2063 5.36% 2085 4.83%

2064 5.34% 2086 4.77%

2065 5.32% 2087 4.71%

2066 5.31% 2088 4.66%

2067 5.29% 2089 4.60%

2068 5.28% 2090 + 4.54%

Assumptions and Methodology (Continued)

Demographic Assumptions

4. CENSUS COLLECTION DATE: The census used in this report represents the eligible population as of October 1, 2022. The valuation date is October 1, 2022 and the measurement dates are September 30, 2023 and September 30, 2024.

5. RETIREMENT RATES: These Assumptions are consistent with similar municipal entities in the state of Florida.

Hazardous Duty Retirement

Years of Service Age

Probability of

Retirement

10-19 50 - 54 5.00%

55 - 59 15.00%

60 - 64 40.00%

65 & Over 100.00%

20 & Over Under 55 15.00%

55 - 59 30.00%

60 - 64 40.00%

65 & Over 100.00%

Non-Hazardous Duty Retirement

Years of Service Age

Probability of

Retirement

10-19 65 - 74 30.00%

75 & Over 100.00%

20-29 55-64 20.00%

65 - 69 30.00%

70 & Over 100.00%

30 & Over Under 55 45.00%

55 - 59 20.00%

60 - 64 30.00%

65 - 69 50.00%

70 & Over 100.00%

6. WITHDRAWAL RATES: These Assumptions are consistent with similar municipal entities in the state of Florida.

Non-Hazardous Duty Withdrawal - Males Non-Hazardous Duty Withdrawal - Females

Years of Service Age

% of Active

Members

Separating Within

Next Year Years of Service Age

% of Active

Members

Separating Within

Next Year

Under 1 Under 35 25.00% Under 3 Under 30 22.00%

35 & Over 11.00% 30 - 34 15.00%

35 - 44 5.00%

1-2 All Ages 16.00% 45-49 14.00%

50-59 18.00%

3-4 Under 40 11.00% 60&Over 25.00%

40 & Over 5.00%

3-4 Under 30 18.00%

5-9 Under 30 12.50% 30 - 39 14.00%

30 - 49 5.00% 40 - 59 5.00%

50 - 59 3.00% 60 & Over 20.00%

60 & Over 7.50%

5-9 Under 35 5.00%

10 & Over Under 35 7.50% 35 - 44 6.00%

35 - 39 4.00% 45 - 59 4.50%

40 - 49 3.50% 60 & Over 3.00%

50 - 54 2.00%

55 - 59 3.00% 10 & Over Under 40 6.00%

60 & Over 4.50% 40 - 44 5.00%

45 - 49 3.75%

50 - 54 3.25%

55 - 59 2.75%

60 & Over 6.00%

Hazardous Duty Withdrawal - Males Hazardous Duty Withdrawal - Females

Years of Service Age

% of Active

Members

Separating Within

Next Year Years of Service Age

% of Active

Members

Separating Within

Next Year

Under 1 All Ages 8.50% Under 1 All Ages 20.00%

1 All Ages 7.50% 1 & Over All Ages 4.00%

2-5 Under 40 4.50%

40 & Over 2.50%

6 & Over Under 40 2.00%

40 & Over 1.50%

7. DISABILITY RATES: These Assumptions are consistent with similar municipal entities in the state of Florida.

Hazardous Duty Non Hazardous Duty

Age Male Female Age Male Female

20 0.25% 0.50% 20 0.03% 0.03%

25 0.25 0.50 25 0.03 0.03

30 0.25 0.75 30 0.03 0.03

35 0.30 1.00 35 0.04 0.04

40 0.45 1.25 40 0.07 0.07

45 0.60 1.50 45 0.10 0.10

50 0.60 1.50 50 0.14 0.14

55 0.60 1.50 55 0.24 0.24

60 0.75 1.50 60 0.29 0.29

65 1.00 1.50 65 0.34 0.34

70 1.50 1.50 70 0.44 0.44

8. MORTALITY: Pub-2010 General Employees Headcount-Weighted Mortality fully generational using Scale MP- 2021, Pub-2010 General Retirees Headcount-Weighted Mortality fully generational using Scale MP-2021, Pub- 2010 General Disabled Retirees Headcount-Weighted Mortality, Pub-2010 General Contingent Survivors Headcount-Weighted Mortality, Pub-2010 Safety Employees Headcount-Weighted Mortality fully generational using Scale MP-2021, Pub-2010 Safety Retirees Headcount-Weighted Mortality fully generational using Scale MP-2021, Pub-2010 Safety Disabled Retirees Headcount-Weighted MortalityPub-2010 Safety Contingent Survivors Headcount-Weighted Mortality.

Benefit Assumptions

9. PARTICIPATION RATE: It was assumed that 20% of future retirees eligible for coverage will elect coverage under the Florida Municipal Trust Plan 015 plan.

PERCENT MARRIED: It was assumed that 50% of future retirees will be married, with spouses who will also elect coverage under the Florida Municipal Trust Plan 015 plan, with male spouses assumed to be 3 years older than female spouses. For current retirees, actual census information was used.

10. PER CAPITA COSTS: The following rates were used in the development of per capita costs:

October 1, 2022 October 1, 2023 October 1, 2024

Plan Single Two or More Single Two or More Single Two or More

Florida Municipal Trust Plan 015$10,049.16 $19,250.28 $10,752.60 $20,597.76 $12,163.00 $24,560.00

11. IMPLICIT SUBSIDY: GASB No. 75 requires that employers recognize the expected claims of the retiree population less the expected contributions by those retirees. This is not necessarily the same determination as the expected cash payments of the employer for retiree health benefits. The difference is that many post-employment health plans (including the City’s program) charge the same premium rates for all participants in a non-Medicare plan regardless of their age. This single premium rate is called a blended premium rate because it blends the expected claims of both active and retired participants. Retirees are generally older than the average participant in a non-Medicare plan, which means they are expected to generate higher claims than the average participant of the plan; therefore, they are receiving a subsidy even if they pay 100% of the blended premium rate because they would be paying less in premiums than their claims costs. This subsidy is referred to as the “Implicit Rate Subsidy”.

The following age-based factors were used to adjust for the implicit subsidy and are based on an average age of 46 calculated as of October 1, 2022. These inputs are from the Society of Actuaries’ June 2013 research report “Health Care Costs - From Birth to Death” by Dale Yamamoto (https://www.soa.org/research-reports/2013/research-health-care-birth-death/)

Age Annual Increase

Factor Age Adjusted Claim Factor

40 1.88% 0.8841

45 3.05% 0.9704

50 4.31% 1.1277

55 4.05% 1.3926

60 4.28% 1.6984

See example of how this implicit subsidy is applied on page 21.

Other Assumptions

12. ACTUARIAL VALUE OF ASSETS: None

13. ADMINISTRATIVE EXPENSES: Included in the premiums used.

https://www.soa.org/research-reports/2013/research-health-care-birth-death/ https://www.soa.org/research-reports/2013/research-health-care-birth-death/

Calculation of Per Capita Costs This is an example for: a female employee assumed to be age 60 with a spouse assumed to be age 63 with a contribution rate of 100.00%

2023 - 2024 2024 - 2025

Retiree Spouse Retiree Spouse

1. Medical Premium $10,752.60 $20,597.76 $12,163.00 $24,560.00

2. Less Individual Premium - $10,752.60 - $12,163.00

3. Adjusted cost for Medical Premium ( 1 - 2 ) $10,752.60 $9,845.16 $12,163.00 $12,397.00

4. Age adjustment factor 1.69837 1.92591 1.77106 2.00834

5. Age Adjusted Medical ( 3 * 4 ) $18,261.88 $18,960.86 $21,541.40 $24,897.33

6. Contribution Percentage 100.00% 100.00% 100.00% 100.00%

7. Retiree Contribution ( 3 * 6 ) $10,752.60 $9,845.16 $12,163.00 $12,397.00

Net Cost to City ( 5 - 7 ) $7,509.28 $9,115.70 $9,378.40 $12,500.33

Glossary

Brief explanations of terms used in this report:

Annual OPEB Expense

The amount recognized by an employer in each accounting period for contributions to a defined benefit OPEB plan on the modified accrual basis of accounting.

Collective deferred outflows of resources and deferred inflows of resources related to OPEB

Deferred outflows of resources and deferred inflows of resources related to OPEB arising from certain changes in the collective net OPEB liability or collective total OPEB liability.

Covered Payroll

Annual compensation paid (or expected to be paid) to active employees covered by an OPEB plan, in aggregate.

Net OPEB liability (NOL)

The liability in excess of the Fiduciary Net Position of employers and nonemployer contributing entities to plan members for benefits provided through a defined benefit OPEB plan that is administered through a trust that meets the criteria of the GASB Statements.

Normal Cost or Service Cost

The portion of the Total Present Value of Future Benefits attributed to employee service during the current fiscal year by the actuarial cost method. These terms are used interchangeably. Service cost appears as a component of the annual OPEB costs.

Other Postemployment Benefits (OPEB)

Retiree health care benefits and post-employment benefits provided separately from a pension plan (excluding termination offers and benefits).

Plan Fiduciary Net Position (FNP)

Set equal to the market value of assets as of the measurement date.

Present Value of Future Benefits (PVFB)

The value, as of the valuation date, of the projected benefits payable to all members for their accrued service and their expected future service, discounted to reflect the time value (present value) of money and adjusted for the probabilities of retirement, withdrawal, death and disability.

Total OPEB liability (TOL)

The portion of the actuarial present value of projected benefit payments that is attributed to past periods of member service in conformity with the GASB Statements. The TOL is the liability of employers and non-employer contributing entities to plan members for benefits provided through a defined benefit OPEB plan that is not administered through a trust that meets the criteria of the GASB Statements.

Suggested Footnotes for OPEB

Plan description:

GASB Statement No. 75, “Accounting and Financial reporting for Postemployment Benefits Other than Pensions”, establishes accounting and reporting requirements for postretirement benefits (OPEB). The standard does not require funding of OPEB expense, but any difference between the amount funded to the plan and the OPEB liability is required to be recorded in the employers’ financial statements as an increase (or decrease) in the net OPEB liability. The City is a pay as you go plan, there for the full OPEB liability is recorded in the statements.

Plan Description and Funding Policy

The City of Tarpon Springs administers a single employer defined benefit healthcare plan (the “Plan”) that provides medical insurance benefits to its employees and their eligible dependents. Because the City provides a medical plan to active employees of the City and their eligible dependents, the City is also required by Section 112.0801, Florida Statutes, to provide retirees with the opportunity to participate in this Plan. Employees who retire from the City of Tarpon Springs and their dependents are eligible to continue to participate in the City’s health insurance programs at the “blended” employee group rate which is determined annually by the City and approved by the City Commission.

Retirees have 31 days to elect to enroll in the City’s health insurance plan in which they were participating at the time of retirement unless otherwise stated in a plan document or collective bargaining agreement. As of the latest actuarial valuation date, a total of 262 active employees and 16 retired, inactive employees were participating in the City’s health program. The City provides no funding for any portion of the premiums after retirement; however, the City recognizes that there is an “implicit subsidy” arising as a result of the blended rate premium since retiree health care costs, on average, are higher than active employee healthcare costs. The plan is not accounted for as a trust fund since an irrevocable trust has not been established to fund the plan. The plan does not issue a separate financial report.

The benefits in this plan end when the retiree and or the covered spouse reach age 65. This valuation does not account for the cost of benefits to retirees or their spouses after age 65.

Funding Policy:

The City's funding policy for the implicit rate subsidy is a pay-as-you-go basis.

Employees covered by benefit terms:

As of October 1, 2022, the following employees were covered by the benefit terms:

Inactive employees or beneficiaries currently receiving benefit payments

Inactive employees entitled to but not yet receiving benefit payments -

Active Employees 262

Total Participants covered by OPEB Plan 278

Total OPEB Liability:

The City’s total OPEB liability of $2,902,719 was measured as of September 30, 2024 (measurement date) and was determined by an actuarial valuation as of October 1, 2022, with updating procedures used to roll forward the OPEB liability to the measurement date. The total OPEB liability represents the sum of expected future benefit payments which may be attributed to past service or ‘earned’, discounted to the end of the year using the current discount rate.

Funding Policy:

The City's funding policy for the implicit rate subsidy is a pay-as-you-go basis.

Suggested Footnotes for OPEB (Continued)

Actuarial assumptions and other inputs:

The total OPEB liability in the October 1, 2022 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified:

Discount Rate (September 30, 2023 / September 30, 2024)

4.09% / 3.81%

Healthcare Cost Trend Rates:

2023 - 2024Trend 7.00%

2024 - 2025 Trend 8.00%

Ultimate Trend 4.54%

Year Ultimate Trend is Reached 2090

Salary Increases 3.50%

The discount rate was based on the index provided by Bond Buyer 20-Bond General Obligation Index based on the 20 year AA municipal bond rate as of September 30, 2024.

Mortality rates: Pub-2010 General Employees Headcount-Weighted Mortality fully generational using Scale MP- 2021, Pub-2010 General Retirees Headcount-Weighted Mortality fully generational using Scale MP-2021, Pub- 2010 General Disabled Retirees Headcount-Weighted Mortality, Pub-2010 General Contingent Survivors Headcount-Weighted Mortality, Pub-2010 Safety Employees Headcount-Weighted Mortality fully generational using Scale MP-2021, Pub-2010 Safety Retirees Headcount-Weighted Mortality fully generational using Scale MP- 2021, Pub-2010 Safety Disabled Retirees Headcount-Weighted MortalityPub-2010 Safety Contingent Survivors Headcount-Weighted Mortality.

Significant Changes from the Previous Actuarial Valuation

• Decreasing the discount rate from 4.09% to 3.81%.

• Initial trend rates were advanced, the model for trends in subsequent years is based on the Getzen Model as updated through October 2024.

Changes in the Total OPEB Liability: Fiscal Year Ending

September 30, OPEB Liability Beginning of Year $ 2,354,074 $ 2,397,689

Changes for the Year

Service Cost 130,328 165,660

Plan Change - -

Interest 97,347 109,574

Assumption Changes 90,862 395,426

Difference Between Actual and Expected Experience (115,371) -

Benefit payments (159,551) (165,630)

OPEB Liability End of Year $ 2,397,689 $ 2,902,719

Suggested Footnotes for OPEB (Continued)

Sensitivity of the total OPEB liability to changes in the discount rate:

The following presents the total OPEB Liability, calculated using the discount rate of 3.81%, as well as what the total OPEB Liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate:

Discount Rate

Total OPEB Liability 1% Decrease Baseline 1% Increase

September 30, 2023 $2,604,175 $2,397,689 $2,211,060

September 30, 2024 $3,163,326 $2,902,719 $2,666,631

Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates:

The following presents the total OPEB Liability, calculated using the trend rate starting at 7.00%, as well as what the total OPEB Liability would be if it were calculated using a trend rate that is one percentage point lower or one percentage point higher than the current rate:

Healthcare Cost Trend Rates

Total OPEB Liability 1% Decrease Baseline 1% Increase

September 30, 2023 $2,144,393 $2,397,689 $2,698,149

September 30, 2024 $2,558,006 $2,902,719 $3,314,675

OPEB Expense, Deferred Outflows of Resources, and Deferred Inflows of Resources Related to OPEB

For the year ended September 30, 2023, the City recognized OPEB expense of $199,164. The OPEB expense for the year ending September 30, 2024 is $295,600.

At September 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows Deferred (Inflows) Net

Changes in assumptions $519,774 ($908,855) ($389,081)

Differences between expected and actual experience $320,292 ($88,509) $231,783

$840,066 ($997,364) ($157,298)

Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in

Fiscal Year Ending Amortization

09/30/2025 ($26,903)

09/30/2026 ($41,407)

09/30/2027 ($176,762)

09/30/2028 ($55,871)

09/30/2029 $46,025

There After $97,620

($157,298)

Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Schedules of Required Supplementary Information

Schedule of Changes in the City’s Total OPEB Liability and Related Ratios

September

30, 2023 September

30, 2024

OPEB Liability Beginning of Year $ 2,354,074 $ 2,397,689

Changes for the Year

Service Cost 130,328 165,660

Plan Change - -

Interest 97,347 109,574

Assumption Changes 90,862 395,426

Difference Between Actual and Expected Experience (115,371) -

Benefit payments (159,551) (165,630)

OPEB Liability End of Year $ 2,397,689 $ 2,902,719

Covered payroll $16,485,145 $17,062,125

Total OPEB liability as a percentage of covered payroll 14.54% 17.01%

Breakout by Fund

General

Sanitation

Fund Water/Sewer Stormwater

Golf

Course/Marina

Vehicle

Maintenance Total

Change in OPEB Liability

Total OPEB Liability, September 30, 2023 2,138,622$ 19,098$ 209,141$ 19,298$ 3,840$ 7,690$ 2,397,689$

Service Cost 131,943 1,220 26,737 2,899 1,184 1,677 165,660

Interest @ 4.09% 96,612 894 10,453 969 218 428 109,574

Contributions (162,248) (288) (2,207) (620) (267) - (165,630)

Changes in Assumptions 346,322 3,285 39,584 3,546 835 1,854 395,426

Expected Net OPEB Obligation, September 30, 2024 2,551,251$ 24,209$ 283,708$ 26,092$ 5,810$ 11,649$ 2,902,719$

(Gain) Loss attributable to experience - - - - - - -

Total OPEB Liability, September 30, 2024 2,551,251$ 24,209$ 283,708$ 26,092$ 5,810$ 11,649$ 2,902,719$

OPEB Expense for the Fiscal Year Ending September 30, 2024

Service Cost 131,943$ 1,220$ 26,737$ 2,899$ 1,184$ 1,677$ 165,660$

Interest on Net OPEB Liability (Asset) 96,612 894 10,453 969 218 428 109,574

Deferred (Inflows)/Outflows from Expected & Actual Experience 152,905 1,270 13,857 738 157 270 169,197

Deferred (Inflows)/Outflows from Changes in Assumptions (130,810) (1,241) (14,547) (1,338) (298) (597) (148,831)

Net OPEB Expense 250,650$ 2,143$ 36,500$ 3,268$ 1,261$ 1,778$ 295,600$