EXHIBIT_3_-_OPEB_Valuation.pdf

City of Orlando Retiree Health Care Program Actuarial Valuation Report September 30, 2024

City of Orlando Retiree Health Care Program

Table of Contents

Section Page

-- Cover Letter

1-3 Executive Summary

A Valuation Results

2-3

5-8

10-11

Development of the Actuarially Determined Contribution – 7.00% Determination of Unfunded Actuarial Accrued Liability – 7.00% Gain/(Loss) Analysis Comments Other Observations Risk Measures

B

Sensitivity Analysis

Postemployment Health Insurance -- Sensitivity Tests

C Retiree Premium Rate Development

1-2 Retiree Premium Rate Development and Members by Health Care Plan and Coverage Type

2 Actuarial Disclosures 3-4 Health Care Trend Assumption 5 Members as of Valuation Date by Health Care Plan and Coverage Type

D Summary of Benefit Provisions and Valuation Data

1-8

10-13

Summary of Benefit Provisions Summary of Insurance Offered Active Members by Age and Years of Service Retired Members by Age Retired and Deferred Members by Age Revenues and Expenses Development of Actuarial Value of Assets

E Actuarial Cost Method and Actuarial Assumptions

2-9

10-11

Valuation Methods Actuarial Assumptions Used for the Valuation Miscellaneous and Technical Assumptions

Table of Contents (Concluded)

Section Page

F Supplementary Information

Supplementary Information Historical Schedules

Appendix 1-2 Glossary

March 18, 2025

Ms. Katrina A. Laudeman Treasurer, Office of Business and Financial Services City of Orlando 400 South Orange Avenue Orlando, Florida 32801

Dear Ms. Laudeman:

Submitted in this report are the results of an Actuarial Valuation of the assets and benefit values associated with the employer financed retiree health benefits provided by the City of Orlando. The date of the valuation was September 30, 2024.

This report was prepared at the request of the Board and is intended for use by the Retiree Health Care Program and those designated or approved by the Board. This report may be provided to parties other than the System only in its entirety and only with the permission of the Board. GRS is not responsible for unauthorized use of this report.

The purposes of the valuation are to measure the Plan’s funding progress and to determine the employer contribution rate for the fiscal year beginning October 1, 2025 through September 30, 2026. This report should not be relied on for any purpose other than the purposes described herein. Determinations of financial results, associated with the benefits described in this report, for purposes other than those identified above may be significantly different. This report does not satisfy the disclosure requirements of GASB Statements No. 74 and No. 75, which are issued in separate reports. Please see the report dated January 29, 2025 for information related to GASB Statement No. 74 reporting. A separate report that incorporates GASB Statement No. 75 was issued July 22, 2024.

The contribution rate in this report is determined using the actuarial assumptions and methods disclosed in Section E of this report. This report includes risk metrics on pages A-10 and A-11 but does not include a more robust assessment of the risks of future experience not meeting the actuarial assumptions.

Additional assessment of risks was outside the scope of this assignment.

This valuation assumed the continuing ability of the plan sponsor to make the contributions necessary to fund this plan. A determination regarding whether or not the plan sponsor is actually able to do so is outside our scope of expertise and was not performed.

This report was prepared using our proprietary valuation model and related software which, in our professional judgment, has the capability to provide results that are consistent with the purposes of the valuation, and has no material limitations or known weaknesses. We performed tests to ensure that the model reasonably represents that which is intended to be modeled.

City of Orlando

The findings in this report are based on data and other information through September 30, 2024. The valuation was based upon information furnished by the City concerning Retiree Health Care Program benefits, financial transactions, plan provisions and active members, terminated members, retirees and beneficiaries. We checked for internal reasonability and year-to-year consistency, but did not audit the data. We are not responsible for the accuracy or completeness of the information provided by the City.

This report was prepared using assumptions adopted by the Board. The assumptions are established by the Board after consulting with the actuary. All actuarial assumptions used in this report are reasonable for the purposes of this valuation. The combined effect of the assumptions is expected to have no significant bias (i.e., not significantly optimistic or pessimistic). All actuarial assumptions and the actuarial cost method used in this valuation follow the guidance in the applicable Actuarial Standards of Practice. The actuarial methods and assumptions used in the actuarial valuation are summarized in Section E of this report.

This report has been prepared by actuaries who have substantial experience valuing retiree health care programs. To the best of our knowledge, the information contained in this report is accurate and fairly presents the actuarial position of the City of Orlando Retiree Health Care Program as of the valuation date.

All calculations have been made in conformity with generally accepted actuarial principles and practices, and with the Actuarial Standards of Practice issued by the Actuarial Standards Board.

Brad L. Armstrong, Abra D. Hill, and Heidi G. Barry are Members of the American Academy of Actuaries (MAAA) and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein.

Respectfully submitted, Gabriel, Roeder, Smith & Company

Brad L. Armstrong, ASA, EA, FCA, MAAA

Abra D. Hill, ASA, FCA, MAAA

Heidi G. Barry, ASA, EA, FCA, MAAA

BLA/ADH/HGB:dj

C1890

EXECUTIVE SUMMARY

Executive Summary

Introduction

This is the September 30, 2024 actuarial valuation of the City of Orlando Retiree Health Care Program which covers General, Police, and Fire members. This report describes the current actuarial condition of the plan, determines the Actuarially Determined Contribution (ADC), and analyzes the changes in principal values. The ADC is also presented as a contribution rate (as a percentage of projected payroll). We have assessed that the contribution rate calculated under the current funding policy is a reasonable ADC.

The ADC is determined actuarially based on the plan provisions in effect as of the valuation date and the actuarial assumptions and methods adopted by the City. The City’s current policy is that the ADC determined by a given actuarial valuation becomes effective one year after the valuation date. For example, the ADC determined by this September 30, 2024 valuation will be applicable for the fiscal year beginning October 1, 2025 and ending September 30, 2026.

Data

The City supplied data for retired, active, and inactive members as of September 30, 2024. We did not audit this data, but we did apply a number of validation tests to the data. Please see Section D for a summary of the data.

Financing Method

The actuarial cost method and the amortization periods are set by the City. The ADC and liabilities are computed using the Entry Age Normal actuarial cost method. The ADC is the sum of two pieces: the normal cost and the amortization of the Unfunded Actuarial Accrued Liability. Both the normal cost and amortization are determined as a level percent-of-payroll. The ADC, which is a dollar amount, is also shown as a level percentage of projected payroll.

A summary of principal valuation results is shown on page 3.

Contribution Amounts

The total ADC for the fiscal year beginning October 1, 2025 is $25,296,668. Actual premiums on behalf of retirees may be treated as employer contributions in relation to the ADC. The amount of estimated employer paid retiree health care premiums during the fiscal year beginning October 1, 2025 is $28,334,938 ($10,736,774 for General, $11,022,952 for Police and $6,575,212 for Fire). These amounts reflect the employer portion of all premiums, including stop-loss premiums and administrative expenses. Therefore, the expected net employer pre-funding contribution for September 30, 2026 is $0 (maximum of $25,296,668 - $28,334,938 not less than $0).

For additional details, please see Sections A and F of this report.

Benefit Provisions

There were benefit provision changes related to co-pay amounts, specifically for the HMO and PPO In-Network Tier 2/3 mail order prescription drugs. Please see Section D for a full description of the plan provisions. The change did not materially impact the accrued liabilities.

Actuarial Assumptions

There have been changes in the actuarial assumptions as follows:

• The health care cost trend was reset; please see pages C-3 and C-4 for more information on this assumption.

• Mortality rates have been updated to the mortality rates used by the Florida Retirement System

(FRS)

Please see Section E for a full description of the actuarial assumptions used in this valuation.

Actuarial Methods

The method used to amortize the unfunded liability was changed from a 30-year open period to a 30-year closed period, beginning with the September 30, 2017 valuation. Therefore, the 2024 valuation uses a period of 23 years and will decrease in each subsequent valuation. Please see Section E for a description of the actuarial methods used in this valuation.

(All Dollar Amounts in Thousands)

Fire Total

Valuation Date September 30, 2024 September 30, 2024 September 30, 2024 September 30, 2024

ADC for Fiscal Year Ending September 30, 2026 September 30, 2026 September 30, 2026 September 30, 2026

Actuarially Determined Contributions (ADC)

Annual Amount $ 9,549 $ 9,309 $ 6,439 $ 25,297

Percentage of Projected Payroll 7.04% 12.70% 12.63% 9.73%

Membership

Number of

Active Members 2,096 917 529 3,542

Deferred Members 0 0 0 0

Retirees and Beneficiaries 935 798 466 2,199

Total 3,031 1,715 995 5,741

Covered Payroll $ 129,098 $ 69,767 $ 48,526 $247,391

Assets

Actuarial Value* $ 83,661 $ 89,549 $ 57,961 $231,171

Actuarial Information

Normal Cost $ 2,713 $ 1,994 $ 1,703 $ 6,409

Actuarial Accrued Liability (AAL) 175,850 188,225 121,830 485,905

Unfunded Actuarial Accrued Liability (UAAL) 92,189 98,676 63,869 254,734

Funded Ratio 47.6% 47.6% 47.6% 47.6%

UAAL as % of Covered Payroll 71.4% 141.4% 131.6% 103.0%

Equivalent Single Amortization Period 23 years 23 years 23 years 23 years

General Police

* The Actuarial Value of Assets was allocated among the three groups based on the ratio of the group’s Actuarial Accrued Liability (AAL) to the total AAL.

SECTION A

VALUATION RESULTS

City of Orlando Retiree Health Care Program A-1

Development of the Actuarially Determined Contribution for the Other Postemployment Benefits

Fiscal Year Beginning October 1, 2025

Normal Cost

Normal Retirement $ 1,772,731 $ 1,715,197 $ 1,399,980 $ 4,887,908

Early Retirement 824,652 0 0 824,652

Termination Benefits 0 0 0 0

Death-in-Service 8,138 76,964 45,374 130,476

Disability 69,173 193,509 251,344 514,026

Life Insurance 37,977 8,063 6,118 52,158

Total Normal Cost 2,712,671 1,993,733 1,702,816 6,409,220

Amortization of Unfunded Actuarial

Accrued Liabilities 6,835,930 7,315,242 4,736,276 18,887,448

(Amortized over 23 years)

Actuarially Determined Contribution (ADC) $ 9,548,601 $ 9,308,975 $ 6,439,092 $ 25,296,668

Projected Pensionable Payroll for the Fiscal Year

Beginning October 1, 2025 $135,633,541 $73,299,015 $50,982,516 $259,915,072

Actuarially Determined Contribution (ADC) 7.04% 12.70% 12.63% 9.73%

ADC Per Active Participant $ 4,556 $ 10,152 $ 12,172 $ 7,142

Contributions for

October 1, 2025 - September 30, 2026

Actuarially Determined Contribution for

Development of the

General Police Fire Total

The results on this and the following page are calculated with the intermediate trend rates shown on page C-4 and under the assumption that the employer funding policy is to contribute consistently an amount at least equal to the Actuarially Determined Contribution (ADC). Therefore, under this policy the employer can assume a long-term investment return assumption. The assumption used to calculate the liabilities shown above includes a 7.00% investment return rate.

The unfunded actuarial accrued liabilities were amortized as a level percent-of-payroll over a period of 23 years.

City of Orlando Retiree Health Care Program A-2

Determination of Unfunded Actuarial Accrued Liability as of September 30, 2024

General Police Fire Total

A. Present Value of Future Benefits

1. Retirees and Beneficiaries $122,102,554 $148,542,517 $ 82,641,381 $353,286,452

2. Vested Terminated Members 0 0 0 0

3. Active Members 68,830,881 51,278,671 47,289,116 167,398,668

Total Present Value of Future Benefits $190,933,435 $199,821,188 $129,930,497 $520,685,120

B. Present Value of Future Employer Normal Costs 15,083,511 11,595,888 8,100,244 34,779,643

C. Present Value of Future Contributions from Current

Active Members 0 0 0 0

D. Actuarial Accrued Liability (A.-B.-C.) $175,849,924 $188,225,300 $121,830,253 $485,905,477

E. Actuarial Value of Assets 83,661,197 89,548,824 57,961,156 231,171,177

F. Unfunded Actuarial Accrued Liability (D.-E.) $ 92,188,727 $ 98,676,476 $ 63,869,097 $254,734,300

G. Funded Ratio (E./D.) 47.6% 47.6% 47.6% 47.6%

The assumption used to calculate the liabilities shown above includes a 7.00% investment return rate.

City of Orlando Retiree Health Care Program A-3

Determination of Unfunded Actuarial Accrued Liability Split by Direct and Indirect Costs as of September 30, 2024

Group Indirect Direct Total

General 43,304,475$ 132,545,449$ 175,849,924$

Police 49,474,500 138,750,800 188,225,300

Fire 33,567,286 88,262,967 121,830,253

Grand Total 126,346,261$ 359,559,216$ 485,905,477$

Actuarial Accrued Liability

Direct costs are liabilities attributable to the employer portion of the premium. Indirect costs may be attributable to the active members subsidizing retiree costs as well as differences between the aggregate claims and the illustrative rates.

City of Orlando Retiree Health Care Program A-4

Valuation Results Gain/(Loss) Analysis

General Police Fire Total

(1) UAAL* at prior valuation date 99,080,135$ 89,839,748$ 60,558,327$ 249,478,210$

(2) Employer Normal cost 2,637,075 1,930,189 1,685,043 6,252,307

(3) Actual contributions 9,291,178 7,716,880 5,539,798 22,547,856

(4) Interest accrual: [(1)+1/2 [(2)-(3)]] x 0.0700 6,702,716 6,086,248 4,104,166 16,893,130

(5) Expected UAAL: (1)+(2)-(3)+(4) 99,128,748 90,139,305 60,807,738 250,075,791

(6) Change in plan provisions - - - -

(7) Change in actuarial assumptions** 2,544,525 7,354,678 4,930,767 14,829,970

(8) Change in methods - - - -

(9) Expected UAAL after changes: (5)+(6)+(7)+(8) 101,673,273 97,493,983 65,738,505 264,905,761

(10) Actual UAAL at end of year 92,188,727 98,676,476 63,869,097 254,734,300

(11) Gain/(loss) as of the valuation date: (9)-(10) 9,484,546 (1,182,493) 1,869,408 10,171,461

(a) Gain/(loss) due to investments (325,327) (348,221) (225,389) (898,937)

(b) Gain/(loss) due to all others 9,809,873 (834,272) 2,094,797 11,070,398

(12) Gain/(loss) as percent of actuarial accrued liabilities at prior valuation date 5.1 % (0.7)% 1.6 % 2.2 %

* Unfunded Actuarial Accrued Liabilities.

** Does not reflect the annual update in trend rates.

City of Orlando Retiree Health Care Program A-5

Comments

Comment A: Overall plan experience was more favorable than expected leading to an actuarial gain. Factors contributing to the gain include, but are not limited to:

• Post-65 per capita claims costs lower than expected; and

• Fewer participants electing 2-person coverage upon retirement than expected.

The gain was partially offset by experience losses due to:

• Updating the health care cost trend expectation (trend rates are detailed on page C-4); and

• Investment return below expectations (on an actuarial value basis detailed on page D-17).

The combined impact of the plan experience increased the unfunded actuarial accrued liability by $10,171,461, which increased the employer ADC as a dollar amount.

However, expressed as a percentage of active member payroll, the employer ADC increased from 9.64% of payroll in the prior valuation to 9.73% of payroll in the current valuation. All else being equal, the ADC is projected to remain level as a percentage-of-payroll and increase as a dollar amount at a rate of 2.50% per year.

Comment B: This valuation uses the expected return from the target allocation. Movement towards the target allocation was approved in November 2016.

Comment C: There were no benefit provision changes reflected in this report.

There have been changes in actuarial assumptions and methods as follows:

• The health care cost trend was reset; please see pages C-3 and C-4 for more information on this assumption.

• Mortality rates have been updated to the mortality rates used by the Florida Retirement System

(FRS).

City of Orlando Retiree Health Care Program A-6

Comments (Continued)

Comment D: The plan is now 47.6% funded compared to 46.6% in the prior valuation based on the actuarial value of assets. At the direction of the plan sponsor, assets have been allocated between groups in proportion to the respective actuarial accrued liabilities. If the plan based its funded status on the market value of assets, it would have been 48.7% funded, and the employer contribution would have been approximately $0.4 million lower. If the source of funding is different for any of the three groups, a discussion about the possible need for an alternate allocation method should be considered.

Comment E: The method used to amortize the unfunded liability was changed from a 30-year open period to a 30-year closed period, beginning with the September 30, 2017 valuation. Therefore, the 2024 valuation uses a period of 23 years and will decrease in each subsequent valuation. Please see Section E for a description of the actuarial methods used in this valuation.

Comment F: The total ADC for the fiscal year beginning October 1, 2025 is $25,296,668. Actual premiums on behalf of retirees may be treated as employer contributions in relation to the ADC. The amount of estimated employer paid retiree health care premiums during the fiscal year beginning October 1, 2025 is $28,334,938 ($10,736,774 for General, $11,022,952 for Police, and $6,575,212 for Fire). These amounts reflect the employer portion of all premiums, including stop-loss premiums and administrative expenses.

Therefore, the expected net employer pre-funding contribution for September 30, 2026 is $0 (maximum of $25,296,668 - $28,334,938 not less than $0).

The pre-65 illustrative rates are blended rates covering both active employees and pre-65 retirees. Because the (younger) active employees generally incur lower health costs than the retiree group, there is an implicit subsidy included in the active premium. The expected premiums provided above include adjustment for this subsidy in order to reflect the entire expected cost of the retiree benefits. We assumed that illustrative rates are based on actual claim experience.

Comment G: Various data assumptions were necessary due to missing or incomplete information within the membership data. Please see the Miscellaneous and Technical Assumptions found at the end of Section E of this report.

Comment H: The City has complied with GASB Statements No. 74 and No. 75 beginning with the fiscal years ending September 30, 2017 and September 30, 2018, respectively. Please see the report dated January 29, 2025 for information related to GASB Statement No. 74, and the report dated July 22, 2024 for information related to GASB Statement No. 75 for the fiscal year ending September 30, 2024. The basis for the September 30, 2025 GASB Statement No. 74 and September 30, 2024 GASB Statement No. 75 information is expected to be in this valuation (as of September 30, 2024), where roll-forward techniques will be applied.

City of Orlando Retiree Health Care Program A-7

Comments (Continued)

Comment I: The City has asked us to provide the following illustration for FYE 2026 for budgeting purposes only.

The purpose of this exhibit is to provide both an estimate of the expected employer portion of the ADC to be set aside for advance funding and the expected indirect cost. The actual indirect cost calculated with actual FYE 2026 claims and premiums could be significantly different.

There are a couple of important items to note when estimating the indirect costs associated with the City OPEB plan.

• These calculations assume that the actual claims costs are the basis for developing the illustrative rates. It is our understanding that this is the case, but this is something that we are unable to independently verify.

• The most important item is that the full employer portion of the contribution is equal to the ADC, if the intention is full-funding.

• This estimate of indirect cost is the difference between two estimated numbers (the expected employer paid retiree claims in FYE 2026 and the expected employer paid premiums in FYE 2026), and should not be used once actual claims or premiums for FYE 2026 are known.

Step 1 - Find the expected employer portion of the retiree claims paid

$ 28,334,938 FYE 2026 Expected City Portion of Retiree Claims

Step 2 (FYE 2026) - Estimate advanced funding

$ 25,296,668 FYE 2026 ADC

$(28,334,938) Less FYE 2026 Expected City Portion of Retiree Claims

$ 0 Equals Expected Portion of ADC for Advanced Funding (Minimum 0)

Step 3 (FYE 2026) - Estimate Indirect Costs

$ 28,334,938 FYE 2026 Expected City Portion of Retiree Claims

$(21,052,215) Less FYE 2026 Expected City Portion of the Retiree Premiums

$ 7,282,723 Equals Expected Indirect Cost

City of Orlando Retiree Health Care Program A-8

Comments (Concluded)

Comment J: The City has asked us to provide the following illustration using actual FYE 2024 information.

It is important to note that this illustration uses numbers that were provided for the Retiree Health Care valuation and may be estimated, or otherwise not match the City’s finalized data. Values shown below are net of Pharmacy Rebates, but RDS Subsidies have not been netted off. This illustration should be seen as an example of the method used to calculate the indirect costs. The City should independently verify the values for FY 2024.

Step 1 - Find the actual employer portion of the retiree claims paid for FYE 2024

a. $ 30,781,691 Retiree Health Claims, net of Pharmacy Rebates - Provided by Robinson Bush

b. $ 1,100,723 Plus Stop-Loss and Admin Expenses - Provided by Robinson Bush

c. $ (5,965,121) Less Retired Member Contribution Amount - Provided by City

d. $25,917,293 Equals City Portion of Retiree Health Benefits

e. $ 197,649 Plus City Portion of Life Benefits - Provided by City

f. $ 26,114,942 Equals FYE 2024 City Portion of Retiree Claims

Step 2 - Determine advanced funding based on actual claims

a. $ 22,547,856 FYE 2024 ADC from 9/30/2022 OPEB Valuation Report

b. $(26,114,942) Less FYE 2024 City Portion of Retiree Claims

c. $ (3,567,086) Equals Portion of ADC for Advanced Funding

Step 3 - Calculate the Indirect Costs

a. $ 26,114,942 FYE 2024 City Portion of Retiree Claims

b. $(17,167,613) Less FYE 2024 City Portion of Retiree Premiums - Provided by City

c. $ 8,947,329 Equals Indirect Costs

City of Orlando Retiree Health Care Program A-9

Other Observations

General Implications of the Contribution Allocation Procedure or Funding Policy on Future Expected System Contributions and Funded Status

Given the plan’s contribution allocation procedure, if all actuarial assumptions are met (including the assumption of the plan earning 7.00% on the actuarial value of assets), it is expected that:

(1) The employer normal cost as a percentage of pay will be sufficient to finance benefits accruing each year;

(2) The Unfunded Actuarial Accrued Liabilities (UAAL) is expected to be fully amortized in 23 years (September 30, 2048); and

(3) The funded status of the plan will increase gradually to a 100% funded ratio.

The above statements assume that the full Actuarially Determined Contribution (ADC) is contributed each year.

Limitations of Funded Status Measurements

Unless otherwise indicated, a funded status measurement presented in this report is based upon the actuarial accrued liability and the actuarial value of assets. Unless otherwise indicated, with regard to any funded status measurements presented in this report:

(1) The measurement is inappropriate for assessing the sufficiency of System assets to cover the estimated cost of settling the Program’s benefit obligations; for example, transferring the liability to an unrelated third party in a market value type transaction.

(2) The measurement is dependent upon the actuarial cost method which, in combination with the plan’s amortization policy, affects the timing and amounts of future contributions. The amounts of future contributions will most certainly differ from those assumed in this report due to future actual experience differing from assumed experience based upon the actuarial assumptions. Even if the funded status measurement in this report was 100%, it would not be synonymous with no required future contributions. If the funded status were 100%, the Plan would still require future normal cost contributions (i.e., contributions to cover the cost of the active membership accruing an additional year of service credit).

(3) The measurement would produce a different result if the Market Value of Assets (MVA) were used instead of the actuarial value of assets, unless the MVA is used in the measurement.

City of Orlando Retiree Health Care Program A-10

Risks Associated with Measuring the Accrued Liability and Actuarially Determined Contribution

The determination of the accrued liability and the actuarially determined contribution requires the use of assumptions regarding future economic and demographic experience. Risk measures, as illustrated in this report, are intended to aid in the understanding of the effects of future experience differing from the assumptions used in the course of the actuarial valuation. Risk measures may also help with illustrating the potential volatility in the accrued liability and the actuarially determined contribution that result from the differences between actual experience and the actuarial assumptions.

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 due to changing conditions; 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, or additional cost or contribution requirements based on the Plan’s funded status); and changes in plan provisions or applicable law. The scope of an actuarial valuation does not include an analysis of the potential range of such future measurements.

Examples of risk that may reasonably be anticipated to significantly affect the plan’s future financial condition include:

1. Investment Risk – actual investment returns may differ from the expected returns;

2. Asset/Liability Mismatch Risk – changes in asset values may not match changes in liabilities, thereby altering the gap between the accrued liability and assets and consequently altering the funded status and contribution requirements;

3. Contribution Risk – actual contributions may differ from expected future contributions. For example, actual contributions may not be made in accordance with the plan’s funding policy or material changes may occur in the anticipated number of covered employees, covered payroll, or other relevant contribution base;

4. Salary and Payroll Risk – actual salaries and total payroll may differ from expected, resulting in actual future accrued liability and contributions differing from expected;

5. Longevity Risk – members may live longer or shorter than expected and receive benefits for a period of time other than assumed; and

6. Other Demographic Risks – members may terminate, retire or become disabled at times or with benefits other than assumed resulting in actual future accrued liability and contributions differing from expected.

The effects of certain trends in experience can generally be anticipated. For example, if the investment return since the most recent actuarial valuation is less (or more) than the assumed rate, the cost of the plan can be expected to increase (or decrease). Likewise, if longevity is improving (or worsening), increases (or decreases) in cost can be anticipated.

City of Orlando Retiree Health Care Program A-11

Plan Maturity Measures

Risks facing a retiree health plan evolve over time. A young plan with virtually no investments and paying few benefits may experience little investment risk. An older plan with a large number of members in pay status and a significant trust may be much more exposed to investment risk. Generally accepted plan maturity measures include the following:

2023 2022 2021

Ratio of the market value of assets to total payroll 0.96 0.84 0.85 0.96

Ratio of actuarial accrued liabilities to payroll 1.96 1.94 2.03 2.02

Ratio of actives to retirees and beneficiaries 1.61 1.54 1.51 1.59

Ratio of net cash flow to market value of assets -0.3% 0.6% 1.8% 3.7%

Duration of the present value of future benefits 11.89 11.94 12.04 11.96

Health Care Plan

Ratio of Market Value of Assets to Payroll

The relationship between assets and payroll is a useful indicator of the potential volatility of contributions. For example, if the market value of assets is 2.0 times the payroll, a return on assets 5% different than assumed would equal 10% of payroll. A higher (lower) or increasing (decreasing) level of this maturity measure generally indicates a higher (lower) or increasing (decreasing) volatility in plan sponsor contributions as a percentage of payroll.

Ratio of Actuarial Accrued Liability to Payroll

The relationship between actuarial accrued liability and payroll is a useful indicator of the potential volatility of contributions for a fully funded plan. A funding policy that targets a funded ratio of 100% is expected to result in the ratio of assets to payroll and the ratio of liability to payroll converging over time.

The ratio of liability to payroll may also be used as a measure of sensitivity of the liability itself. For example, if the actuarial accrued liability is 2.5 times the payroll, a change in liability 2% other than assumed would equal 5% of payroll. A higher (lower) or increasing (decreasing) level of this maturity measure generally indicates a higher (lower) or increasing (decreasing) volatility in liability (and also plan sponsor contributions) as a percentage of payroll.

Ratio of Actives to Retirees and Beneficiaries

A young plan with many active members and few retirees will have a high ratio of actives to retirees. A mature open plan may have close to the same number of actives to retirees resulting in a ratio near 1.0.

A super-mature or closed plan may have significantly more retirees than actives resulting in a ratio below 1.0.

SECTION B

SENSITIVITY ANALYSIS

City of Orlando Retiree Health Care Program B-1

Postemployment Health Insurance -- Sensitivity Tests

Actuarial valuations deal with the cost of benefits to be paid in the future. The payments considered will range from one month in the future to decades from the valuation date (for a young, newly hired employee who may retire many years from now and live many years after that). In order to establish a present day cost for these future benefit obligations, the actuary bases the valuation on a number of assumptions about future occurrences. The occurrences that must be considered include employee turnover, pay increases, disablement, retirements, deaths and investment income on anticipated plan assets.

When the benefits being valued are health care benefits, a key factor is the future cost of the medical benefits being promised. This is projected using the current cost of the Program’s health care benefits and assumed future health care cost increases. The final cost of providing retiree health care benefits will depend upon how the charges for health care services actually increase in the future.

In order to demonstrate how the cost of these benefits can vary depending upon future health care cost increases, we have performed additional valuations based upon alternative health care cost increase assumptions. The schedule on page B-2 compares (i) the computed cost of the retiree health care benefits using the valuation assumptions to (ii) results of alternate valuations. One of the alternate valuations is based upon an optimistic health care cost increase assumption. The other is based upon a more pessimistic health care cost increase assumption. The schedule on page C-4 exhibits the health care cost increase assumptions used in each of the valuations.

City of Orlando Retiree Health Care Program B-2 for the Fiscal Year Beginning October 1, 2025

The selection of future health care cost increases is one of the key assumptions in determining plan liabilities. If the health care cost trend rates upon which the calculation of the Actuarially Determined Contribution is based were changed to either the pessimistic or optimistic trends noted on page C-4, the annual contribution as a percentage-of-payroll for the combined groups (illustrated using the entry age 23-year amortization) would change as follows.

Optimistic

Total Normal Cost $ 6,409,220 $ 6,977,127 $ 5,650,312

Amortization of Unfunded Actuarial

Accrued Liabilities 18,887,448 22,157,487 14,549,623

(Amortized over 23 years)

Actuarially Determined Contribution (ADC) 25,296,668 29,134,614 20,199,935

Projected Pensionable Payroll for the Fiscal Year

Beginning October 1, 2025 $259,915,072 $259,915,072 $259,915,072

Actuarially Determined Contribution (ADC) 9.73% 11.21% 7.77%

ADC Per Active Participant $ 7,142 $ 8,225 $ 5,703

October 1, 2025 - September 30, 2026

Actuarially Determined Contribution for

Development of the

Contributions for Intermediate Pessimistic

The figures above are based upon a 7.00% investment return assumption and assume the employer will contribute an amount at least equal to the ADC each year.

SECTION C

RETIREE PREMIUM RATE DEVELOPMENT

City of Orlando Retiree Health Care Program C-1

Retiree Premium Rate Development and Members by Health Care Plan and Coverage Type

Our understanding is that the City of Orlando retiree health plan became self-insured as of January 1, 2012.

Florida State law states that non-Medicare eligible retirees cannot be charged a different premium than active employees for the same plan.

For valuation purposes, the self-insured medical and drug plan initial per capita costs were developed separately for pre-65 and post-65 retirees using claims experience from October 2021 to September 2024.

Claims, exposures, rebates, stop-loss and administrative fees are supplied by the City for the retired members of the health care program. Claims are projected, net of rebates, on an incurred claim basis (using best estimate assumptions), adjusted for plan design changes, and loaded for administrative and stop-less expenses.

The initial medical and drug premium rates used in the valuation are a weighted average cost of the three-year experience period to smooth out any large year-to-year fluctuations.

Age-graded and sex-distinct premiums are utilized by this valuation. The premiums developed by the preceding process are appropriate for the unique age and sex distribution currently existing. Over the future years covered by this valuation, the age and sex distribution will most likely change. Therefore, our process “distributes” the average premium over all age/sex combinations and assigns a unique premium for each combination. The age/sex specific premiums more accurately reflect the health care utilization and cost at that age.

The monthly calendar year premiums submitted are shown below:

Illustrative Premium Rates HMO POS HMO POS

Active

Employee $ 841.99 $ 925.33 $ 913.62 $ 1,004.04 Employee and

Spouse 1,670.91 2,002.28 1,918.60 2,299.10

Retired Pre-65

Employee 841.99 925.33 913.62 1,004.04 Employee and

Spouse 1,670.91 2,002.28 1,918.60 2,299.10

Retired Post-65

Employee 612.36 672.33 661.35 726.12 Employee and

Spouse 1,173.77 1,440.57 1,267.67 1,555.82

2024 2025

City of Orlando Retiree Health Care Program C-2

Retiree Premium Rate Development and Members

(Concluded)

The January 1, 2025 illustrative rates provided by the City of Orlando were utilized to determine the portion of the premium expected to be contributed by employees.

Combined monthly one-person medical, and drug premiums at select ages are shown below:

Age Male Female

45 $625.40 $ 863.13

50 814.34 1,003.19

55 1,071.58 1,170.01

60 1,384.01 1,362.77

Age Male Female

65 $673.83 $635.56

70 734.05 710.30

75 788.38 769.28

80 827.64 813.17

For Those Eligible for Medicare

For Those Not Eligible for Medicare

Actuarial Disclosures

The premium rates used in this valuation were developed using the proprietary Excel models which, in Kurt Dosson’s professional judgment, provide the initial projected costs which are consistent with the purposes of the valuation. We performed tests to ensure that the models, in their entirety, reasonably represent that which is intended to be modeled.

Aging factors used in the premium development models were developed based on the information and data from a 2013 study commissioned by the Society of Actuaries entitled “Health Care Costs – From Birth to Death.”

Kurt Dosson is a Member of the American Academy of Actuaries (MAAA) and meets the Qualification Standards of the American Academy of Actuaries to certify the per capita retiree health care rates shown above.

Kurt Dosson, ASA, FCA, MAAA

City of Orlando Retiree Health Care Program C-3

Health Care Trend Assumption

Background

Retiree health care valuations require an assumption about how the health costs that the plan is absorbing will change over the years. This assumption includes more than just “health inflation.” It includes the impact of:

• The introduction of new procedures and medications and how they are priced.

• The utilization of services and products by covered retirees and their dependents and how that utilization changes over the years.

Retiree health valuations use a health cost trend assumption that changes over the years. The near-term rates reflect the fact that currently employers are seeing sharp increases in the cost of health goods and services. However, they do not anticipate that health costs will increase at these rates indefinitely. To do so would be to ignore the real-world implications of this sort of projection. For example, if health costs represent 20% of disposable income initially and grow at 12% per year for the next 10 years while disposable income increases at 4% would imply that after 10 years health would absorb 40% of our disposable income. Over a 20-year period, these rates of increase would imply that at the end of the 20-year period, health costs would absorb almost 80% of our disposable income.

The valuation attempts to deal with the future by recognizing that it is more reasonable to assume that current trends will have to change in the future before we reach the absurd situation of having little or no money to spend on things that are not related to health (including food, shelter, clothes, etc.). Health costs are assumed to increase at rates greater than general inflation for a temporary “cooling off” period.

At the end of the cooling off period, health costs are assumed to increase in line with general inflation. As years elapse, there are fewer remaining years in the cooling off period. A summary of the rates of medical inflation used in this valuation of the program are shown on the following page. Retirees pay the premium rates shown on the prior page. These premiums were assumed to increase with medical inflation.

City of Orlando Retiree Health Care Program C-4

Health Care Trend Assumption (Concluded)

The combined medical and prescription drug per capita costs are projected to increase as shown in the table below:

Beginning

October 1, Pre-65 Post-65 Pre-65 Post-65 Pre-65 Post-65

2025 7.25% 6.50% 9.25% 8.50% 5.25% 4.50%

2026 7.00% 6.25% 8.75% 8.00% 5.25% 4.25%

2027 6.75% 6.00% 8.25% 7.50% 5.00% 4.00%

2028 6.50% 5.75% 7.75% 7.00% 4.75% 4.00%

2029 6.25% 5.75% 7.25% 6.50% 4.50% 3.75%

2030 6.00% 5.50% 6.75% 6.25% 4.25% 3.75%

2031 5.75% 5.25% 6.25% 6.00% 4.25% 3.50%

2032 5.50% 5.00% 5.75% 5.75% 4.00% 3.50%

2033 5.00% 4.75% 5.25% 5.50% 4.00% 3.50%

2034 4.75% 4.50% 5.00% 5.25% 3.75% 3.50%

2035 4.50% 4.25% 4.75% 5.00% 3.75% 3.50%

2036 4.25% 4.25% 4.50% 4.75% 3.50% 3.50%

2037 4.00% 4.00% 4.25% 4.50% 3.50% 3.50%

2038 3.75% 3.75% 4.00% 4.25% 3.50% 3.50%

2039 3.50% 3.50% 3.75% 4.00% 3.50% 3.50%

2040 & Later 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%

Medical and Drug Trend Rates

Optimistic PessimisticIntermediate

City of Orlando Retiree Health Care Program C-5

Members as of Valuation Date

September 30, 2024

1-Person 2-Person 1-Person 2-Person

HMO 2,226 873 1,691 449

PPO 78 14 49 10

Total 2,304 887 1,740 459

Actives* Retirees

Health Care Plan Type

* 351 active members who are eligible for retiree health care but who are currently waiving coverage are not included in this schedule, but are included in our calculations.

SECTION D

SUMMARY OF BENEFIT PROVISIONS AND VALUATION DATA

City of Orlando Retiree Health Care Program D-1

Summary of Benefit Provisions as of September 30, 2024

Plan Participants

For City payment of retiree health insurance, all members are governed by collective bargaining agreements between the City of Orlando and the individual unions or City Policy and Procedures, Section 808.51.

City Policy and Procedures, Section 808.51, titled City Payment of Retiree Health Insurance, states that this policy is applicable to all employees not otherwise covered by retiree health insurance benefits specifically contained in a collective bargaining agreement. Currently, the following union agreements refer back to policy 808.51 for eligibility for City provided health insurance benefits for retirees:

• The Fire Communications Unit, International Association of Firefighters – Local 1365

• The Laborers’ International Union of North America (LIUNA) - Local 678

• The Service Employees International Union (SEIU) - Local 8

The result is that all employees in the General Employees’ Defined Benefit (DB) and Defined Contribution (DC) pension plans are governed by 808.51 for retiree health benefits.

Under the following pension plans, the following Union agreements which each exclude certain appointed and management positions have articles governing an employee’s eligibility to remain on the City’s group insurance plan for health insurance after retirement and the extent of the City’s contribution, if any, toward such coverage:

Police Defined Benefit (DB) Pension Plan

• The Fraternal Order of Police (FOP) - Lodge #25

• Florida State Lodge Fraternal Order of Police Lieutenants

Fire Defined Benefit (DB) Pension Plan

• The International Association of Firefighters (IAFF) - Local 1365

• District Chiefs Unit the International Association of Firefighters (IAFF) - Local 1365

City of Orlando Retiree Health Care Program D-2

(Continued)

Benefit Eligibility - Retirement

Plan participants are eligible to receive a portion of their postemployment health insurance costs paid by the City of Orlando if they are eligible for retirement at time of separation from employment. Eligibility conditions for retirement are:

General DB (1) (2) (3): Any age with 25 or more years of service, or Age 55 with 10 or more years of service

General DC (1) (2) (3): Age 55 with 10 or more years of service or Any age with 25 or more years of service

Police (3): Any age with 20 or more years of service

Fire (3): Any age with 20 or more years of service

(1) Members of the General DB and DC plans must have at least 10 years of service in order to receive a portion of their postemployment health insurance costs paid by the City. At age 65 with 5 years of service, access is offered to General members at their own expense.

(2) Elected Officials who have served at least ten (10) years as an elected official are eligible for the full City contribution.

(3) Appointed officials who have at least ten (10) years of credited service are eligible, at their option, for the appropriate service-related percentage of City contribution upon termination or for the full contribution upon receipt of their DB pension or upon attaining age 55. Provided further that appointed officials who have served at least ten (10) years and are eligible to receive severance upon termination are eligible to immediately receive the full City contribution.

Deferred Retirement

Plan participants who retire from a deferred (vested) status are offered access to postemployment health insurance at their own expense.

City of Orlando Retiree Health Care Program D-3

Non-Duty Disabled Retirement

Police and Fire Plan non-duty disabled retirees are not eligible for a City contribution for postemployment health insurance unless they have 20 or more years of credited service. Non-duty disabled retirees with less than 20 years of credited service are offered access to postemployment health insurance benefits at their own expense.

General DB and DC Plan participants on Long Term Disability under the City’s LTD program are eligible for postemployment health insurance under the following conditions:

LTD Participants

a) Those on long-term disability under the City ‘s LTD program with a date of hire prior to January 1, 2006 or with a date of long-term disability before June 30, 2017 will receive 100% of the Active City contribution, regardless of credited years of pension service, while they are on LTD.

b) Retirement-Eligible Employees hired on or after January 1, 2006 and with a date of long-term disability on or after June 30, 2017 may elect to remain on the City Group Health plan at their expense with no Retiree City Contribution.

c) Employees hired on or after January 1, 2006 who are not Retirement-Eligible Employees and have a date of long-term disability on or after June 30, 2017 are not eligible for any Retiree City Contribution and are not eligible to participate or remain on the City’s health insurance plan.

Definition of Retirement-Eligible Employee – An employee who is eligible and who immediately receives a Defined Benefit (DB) pension immediately upon termination or is a member of the City’s Defined Contribution (DC) Pension Plan and who is either at least age fifty-five (55) with ten (10) years of Credited Service, age sixty-five (65) with five (5) years of Credited Service, or who is any age with twenty-five (25) or more years of Credited Service.

Duty Disabled Retirement

Police and Fire Plan participants who retire from employment with a duty disability status are eligible for the full amount of the City employer contribution for postemployment health insurance regardless of years of credited service. See “Benefit Amount” herein for the current amount of the City employer contribution.

General DB and DC Plan participants are not eligible for duty disability benefits.

City of Orlando Retiree Health Care Program D-4

Survivors Benefits for Death of the Active Member

Survivors of active members who die in service are offered access to postemployment health insurance benefits at their own expense as long as the spouse is receiving a pension. (This applies to DB participants only. Dependents of DC participants, regardless of the circumstances, do not remain on the City’s medical plan with the exception of COBRA.)

Survivors Benefits for Police or Fire Death in the Line of Duty

For Police per 2007 Florida Statute (F.S.) 112.19 (2)(g), and for Fire per 2007 F.S. 112.191 (2)(f), the City’s group coverage health insurance plan shall be paid 100%, if a full-time law enforcement officer or a full-time firefighter is killed in the line of duty. These statutes include coverage for the surviving spouse until remarried, and each dependent child of the employee until the child reaches the age of majority or until the end of the calendar year in which the child reaches age 25 if:

(1) At the time of the employee’s death, the child is dependent upon the employee for support; and

(2) The surviving child continues to be dependent for support, or the surviving child is a full-time or part-time student and is dependent for support.

Duty Disabled Retiree’s Spouse and Dependent Benefits for Police or Fire Catastrophic Injury in the Line of Duty

For Police per 2007 F.S. 112.19 (2)(h), and for Fire per F.S. 112.191 (2)(g), the City’s basic group coverage health insurance plan shall be paid 100%, if a full-time law enforcement officer or a full-time firefighter suffers a catastrophic injury, as defined in the 2002 F.S. 440.02. These statutes include 100% coverage for the injured employee, the injured employee’s spouse, and each dependent child with the same conditions for a dependent child as outlined in the section above for Death in the Line of Duty. If the catastrophic injured employee subsequently dies, the City shall continue to pay 100% of the basic group coverage health insurance plan for the surviving spouse until remarriage and for the dependent children, under the same conditions for a dependent child as outlined in the section above for Death in the Line of Duty.

City of Orlando Retiree Health Care Program D-5

Retiree’s Spouse and Dependent Benefits

Spouses and Dependents of all DB plan retirees and DC plan retirees are offered access to postemployment health insurance benefits at their own expense, during the retiree’s lifetime. Surviving spouses of deceased retirees may purchase postemployment insurance at the spouse’s expense if the surviving spouse is receiving a pension (DB plan only). Spouses and Dependents of a Straight Life benefit will be able to continue on a COBRA benefit for a period of three years.