Retirement Commission Special Meeting Materials (linked)
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| Board/Commission | Retirement Commission |
|---|---|
| Meeting Date | January 04, 2023 |
| Pages | 33 |
| File Size | 0.4 MB |
| OCR Status | Searchable (OCR processed) |
| Source URL | Original |
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TOWN OF WATERFORD OPEB PLAN
ACTUARIAL VALUATION REPORT
JULY 1, 2022
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
Table of Contents
Executive Summary ................................................................................................................................................... 1
Valuation Results and Highlights ............................................................................................................................... 2
Purpose of the Valuation ....................................................................................................................................... 2
Information Available in the Valuation Report ...................................................................................................... 2
Changes Reflected in the Valuation ....................................................................................................................... 2
Cash Contribution for Fiscal Years Ending 2024 and 2025 .................................................................................... 2
Liability Experience During Period Under Review ................................................................................................. 2
Asset Experience During Period Under Review ..................................................................................................... 3
Certification ............................................................................................................................................................... 4
Development of Unfunded Accrued Liability and Funded Ratio ............................................................................... 5
Development of Unfunded Accrued Liability and Funded Ratio by Group ............................................................... 7
Determination of Normal Cost and Actuarially Determined Employer Contribution ............................................... 8
Actuarially Determined Employer Contribution per Group .................................................................................... 10
Development of Asset Values .................................................................................................................................. 11
Target Allocation and Expected Rate of Return ...................................................................................................... 17
Amortization of Unfunded Liability ......................................................................................................................... 18
Member Data .......................................................................................................................................................... 19
Expected Benefit Payments from Trust Fund .......................................................................................................... 21
Expected Per Capita Claims (without Medicare Integration) .................................................................................. 22
Description of Actuarial Methods ........................................................................................................................... 23
Description of Actuarial Assumptions ..................................................................................................................... 24
Summary of Plan Provisions .................................................................................................................................... 30
Report Prepared By:
Stephen Chykirda
Consulting Actuary
860.856.2047
SChykirda@hhconsultants.com
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 1
Executive Summary
Number of members
Active members
368
404
Retired members and dependents
179
119
Total
547
523
Covered employee payroll
29,029,526
31,115,420
Average plan salary
78,885
77,018
Actuarial present value of future benefits
32,284,998
27,947,165
Actuarial accrued liability
30,074,765
25,386,650
Plan assets
Market value of assets
8,465,847
6,109,331
Actuarial value of assets
9,206,097
6,109,331
Unfunded accrued liability
20,868,668
19,277,319
Funded ratio
30.6%
24.1%
Actuarially determined employer contribution (ADEC)
Fiscal year ending
2024
2022
ADEC
2,505,310
2,217,688
Fiscal year ending
2025
2023
ADEC
2,516,833
2,231,121
July 1, 2022
July 1, 2020
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 2
Ultimate cost = Benefits Paid + Expenses Incurred – Investment Return – Employee Contributions
Valuation Results and Highlights
Purpose of the Valuation
The purpose of the valuation is to develop the Actuarially Determined Employer Contribution (ADEC).
The ultimate cost of an OPEB plan is based primarily on the level of benefits promised by the plan. The OPEB
fund's investment earnings serve to reduce the cost of plan benefits and expenses. Thus,
The actuarial cost method distributes this ultimate cost over the working lifetime of current plan participants.
By means of this budgeting process, costs are allocated to both past and future years, and a cost is assigned to
the current year. The current year's allocated cost, or normal cost, is the building block upon which the
actuarially determined employer contribution is developed. The July 1, 2022 valuation produces the
contributions for the fiscal years ending 2024 and 2025.
Information Available in the Valuation Report
The Executive Summary is intended to emphasize the notable results of the valuation from the perspective of
the Plan Sponsor. Supporting technical detail is documented in Results of the Valuation, Supporting Exhibits and
Description of Actuarial Methods and Assumptions. A concise summary of the principal provisions of the Plan is
outlined in Summary of Plan Provisions.
Changes Reflected in the Valuation
This valuation reflects changes in the mortality improvement tables, and medical trend rates. These changes in
assumptions increased the liability by 3.4%. Medical premiums increased more than expected resulting in a
8.2% increase in the total liability.
Cash Contribution for Fiscal Years Ending 2024 and 2025
The Town cost is:
2024 Fiscal Year
2025 Fiscal Year
Town
$595,302
$595,301
Police and Fire
678,615
678,927
BOE Certified
1,171,162
1,180,779
BOE Non-Certified
60,231
61,826
Total
$2,505,310
$2,516,833
Liability Experience During Period Under Review
The accrued liability of $30,074,765 is slightly higher than expected primarily due to medical premiums that
were higher than expected since the last valuation. In addition to the higher premiums, there were more
certified personnel that retired since the last valuation that also attributed to the increase in the liability.
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 3
Asset Experience During Period Under Review
The plan's assets provided the following rates of return during the past two fiscal years:
2021 Fiscal Year 2022 Fiscal Year
Market Value Basis
26.2%
-13.7%
Actuarial Value Basis
10.4%
6.0%
The Actuarial Value of assets is used to determine plan contributions.
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 4
Certification
This report presents the results of the July 1, 2022 Actuarial Valuation for Town of Waterford OPEB Plan (the
Plan) for the purpose of estimating the funded status of the Plan and determining the Actuarially Determined
Employer Contribution (ADEC) for the fiscal years ending June 30, 2024 and June 30, 2025. This report is
intended to satisfy the requirements of Connecticut General Statute 7-450a. This report may not be appropriate
for any other purpose.
The valuation has been performed in accordance with generally accepted actuarial principles and practices. It is
intended to comply with all applicable Actuarial Standards of Practice.
I certify that the actuarial assumptions and methods that were selected by me and represent my best estimate
of anticipated actuarial experience under the Plan.
In preparing this valuation, I have relied on employee data provided by the Plan Sponsor, and on asset and
contribution information provided by the Trustee. I have audited neither the employee data nor the financial
information, although I have reviewed them for reasonableness.
The results in this valuation report are based on the Plan as summarized in the Summary of Plan Provisions
section of this report and the actuarial assumptions and methods detailed in the Description of Actuarial
Methods and Assumptions section of this report.
Future actuarial measurements may differ significantly from the current measurements presented in this report
due to factors such as, but not limited to, the following: plan experience differing from that anticipated by the
economic or demographic assumptions; changes in economic or demographic assumptions; increases or
decreases expected as part of the natural operation of the methodology used for these measurements (such as
the end of an amortization period or additional cost or contribution requirements based on the Plan’s funded
status); and changes in plan provisions or applicable law. Due to the limited scope of this report, an analysis of
the potential range of such future measurements has not been performed.
I have no relationship with the employer or the Plan that would impair, or appear to impair, my objectivity in
performing the work presented in this report. I am a member of the American Academy of Actuaries and meet
its Qualification Standards to render the actuarial opinion contained herein.
Stephen Chykirda, ASA, FCA, MAAA
Enrolled Actuary 20-07517
December 21, 2022
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 5
Development of Unfunded Accrued Liability and Funded Ratio
Actuarial accrued liability for active members
Members under age 65
$5,220,130
$4,696,437
Members over age 65
358,063
1,075,723
Dependents under age 65
1,889,341
1,809,894
Dependents over age 65
167,335
477,551
Total
7,634,869
8,059,605
Actuarial accrued liability for inactive members
Members under age 65
3,610,009
2,968,023
Members over age 65
11,169,636
9,271,484
Dependents under age 65
2,310,403
1,748,324
Dependents over age 65
5,349,848
3,339,214
Total
22,439,896
17,327,045
Total actuarial accrued liability
30,074,765
25,386,650
Actuarial value of assets
9,206,097
6,109,331
Unfunded accrued liability
20,868,668
19,277,319
Funded ratio
30.6%
24.1%
Actuarial accrued liability for active members
7,634,869
8,414,392
6,932,280
Actuarial accrued liability for inactive members
22,439,896
24,796,048
20,470,130
Total actuarial accrued liability
30,074,765
33,210,440
27,402,410
Actuarial accrued liability for active members
7,634,869
6,770,237
8,639,606
Actuarial accrued liability for inactive members
22,439,896
20,898,052
24,266,087
Total actuarial accrued liability
30,074,765
27,668,289
32,905,693
Healthcare Cost
Trend Rates
(6.75%
decreasing to
4.40%)
1% Decrease
(5.75%
decreasing to
3.40%)
1% Increase
(7.75%
decreasing to
5.40%)
July 1, 2022
July 1, 2020
Discount Rate
(6.50%)
1% Decrease
(5.50%)
1% Increase
(7.50%)
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 6
Actuarial Accrued Liability vs. Actuarial Value of Assets
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
2016
2018
2020
2022
Actuarial Accrued Liability
Actuarial Value of Assets
Funded Ratio
0%
5%
10%
15%
20%
25%
30%
35%
2016
2018
2020
2022
Market Value
Actuarial Value
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 7
Development of Unfunded Accrued Liability and Funded Ratio by Group
Actuarial accrued liability for active members
Members under age 65
$0
$59,611
$4,936,820
$223,699
$5,220,130
Members over age 65
0
137,952
220,111
0
358,063
Dependents under age 65
0
39,037
1,752,515
97,789
1,889,341
Dependents over age 65
0
60,705
106,630
0
167,335
Total
0
297,305
7,016,076
321,488
7,634,869
Actuarial accrued liability for inactive members
Members under age 65
880,357
1,716,989
1,012,663
0
3,610,009
Members over age 65
4,669,249
3,827,695
2,672,692
0
11,169,636
Dependents under age 65
360,110
1,211,964
738,329
0
2,310,403
Dependents over age 65
2,070,772
1,948,551
1,330,525
0
5,349,848
Total
7,980,488
8,705,199
5,754,209
0
22,439,896
Total actuarial accrued liability
7,980,488
9,002,504
12,770,285
321,488
30,074,765
Actuarial value of assets
2,442,883
2,755,730
3,909,074
98,410
9,206,097
Unfunded accrued liability
5,537,605
6,246,774
8,861,211
223,078
20,868,668
Funded ratio
30.6%
30.6%
30.6%
30.6%
30.6%
Town
Police and Fire
BOE Certified
BOE Non-
Certified
Total
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 8
Determination of Normal Cost and Actuarially Determined Employer Contribution
Cost
Cost
Town's normal cost
$243,080
0.8%
$283,365
0.9%
Amortization of unfunded accrued liability
2,173,878
7.5%
1,853,113
6.0%
Contribution before adjustment as of the
valuation date
2,416,958
8.3%
2,136,478
6.9%
Estimated valuation year payroll for actives
not yet at 100% assumed retirement age
29,029,526
31,115,420
Fiscal year ending
2024
2022
Adjustment for interest and inflation
88,352
81,210
Actuarially determined employer contribution
2,505,310
2,217,688
Expected benefit payments
2,126,970
1,644,333
Fiscal year ending
2025
2023
Adjustment for interest and inflation
11,523
13,433
Actuarially determined employer contribution
2,516,833
2,231,121
Expected benefit payments
2,075,404
1,773,727
July 1, 2022
July 1, 2020
Percent
of payroll
Percent
of payroll
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 9
Actuarially Determined Employer Contribution
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
2019
2020
2021
2022
2023
2024
2025
Normal Cost
Past Service Cost
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 10
Actuarially Determined Employer Contribution per Group
Town's normal cost
$0
$6,568
$202,866
$33,646
$243,080
Actuarial accrued liability
7,980,488
9,002,504
12,770,285
321,488
30,074,765
Actuarial value of assets
2,442,883
2,755,730
3,909,074
98,410
9,206,097
Unfunded accrued liability
5,537,605
6,246,774
8,861,211
223,078
20,868,668
Amortization of unfunded accrued liability
576,849
650,723
923,068
23,238
2,173,878
Contribution before adjustment as of the
valuation date
576,849
657,291
1,125,934
56,884
2,416,958
Fiscal year ending June 30, 2024
Adjustment for interest and inflation
18,453
21,324
45,228
3,347
88,352
Actuarially determined employer contribution
595,302
678,615
1,171,162
60,231
2,505,310
Expected benefit payments
686,467
615,216
809,416
15,871
2,126,970
Fiscal year ending June 30, 2025
Adjustment for interest and inflation
(1)
312
9,617
1,595
11,523
Actuarially determined employer contribution
595,301
678,927
1,180,779
61,826
2,516,833
Expected benefit payments
672,738
643,493
731,170
28,003
2,075,404
Town
Police and Fire
BOE Certified
Total
BOE Non-
Certified
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 11
Development of Asset Values
1. Beginning value of assets July 1, 2021
Trust assets
$9,062,017
$7,943,558
2. Contributions
Town contributions during year
750,000
750,000
Employee contributions during year
0
0
Total for plan year
750,000
750,000
3. Disbursements
Benefit payments during year
0
0
Administrative expenses during year
5,940
5,940
Total for plan year
5,940
5,940
4. Net investment return
Interest and dividends
0
N/A
Realized and unrealized gain / (loss)
(1,340,230)
N/A
Expected return
N/A
633,638
Recognized gain / (loss)
N/A
(115,159)
Required adjustment due to corridor
N/A
0
Reversal of prior year required adjustment
N/A
0
Investment-related expenses
0
N/A
Total for plan year
(1,340,230)
518,479
5. Ending value of assets July 1, 2022
Trust assets: (1) + (2) - (3) + (4)
8,465,847
9,206,097
6. Approximate rate of return
-13.7%
6.0%
Summary of Fund Activity
Market Value
Actuarial Value
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 12
1. Market value 7/1/2022
$8,465,847
2. Gain / (loss) not recognized in actuarial value 7/1/2022
(740,250)
3. Preliminary actuarial value 7/1/2022: (1) - (2)
9,206,097
4. Preliminary actuarial value as a percentage of market value: (3) ÷ (1)
108.7%
5. Gain / (loss) recognized for corridor minimum / maximum
N/A
6. Actuarial value 7/1/2022 after corridor minimum / maximum: (3) + (5)
9,206,097
7. Actuarial value as a percentage of market value: (6) ÷ (1)
108.7%
1. Market value 7/1/2021
$9,062,017
2. Town contributions
750,000
3. Employee contributions
0
4. TRB reimbursements
0
4. Benefit payments
0
5. Administrative expenses
5,940
6. Expected return at 6.50%
633,638
7. Expected value 7/1/2022: (1) + (2) + (3) - (4) - (5) + (6)
10,439,715
8. Market value 7/1/2022
8,465,847
9. Market value gain / (loss) for 2021-2022 plan year: (8) - (7)
(1,973,868)
Year
(a)
Gain / (loss)
(b)
Total
recognized
as of 7/1/2021
(d)
Total recognized
as of 7/1/2022:
(b) + (c)
2017-2018
$0
$0
$0
$0
$0
2018-2019
0
0
0
0
0
2019-2020
0
0
0
0
0
2020-2021
1,398,074
279,615
279,615
559,230
838,844
2021-2022
(1,973,868)
0
(394,774)
(394,774)
(1,579,094)
Total
(115,159)
(740,250)
Relationship of Actuarial Value to Market Value
(c)
Recognized in
current year:
20% of (a)
(e)
Not recognized
as of 7/1/2022:
(a) - (d)
Development of Market Value Gain / Loss for 2021-2022 Plan Year
Recognition of Gain / Loss in Actuarial Value
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 13
1. Beginning value of assets July 1, 2020
Trust assets
$6,109,331
$6,109,331
2. Contributions
Town contributions during year
1,100,000
1,100,000
Employee contributions during year
0
0
Total for plan year
1,100,000
1,100,000
3. Disbursements
Benefit payments during year
0
0
Administrative expenses during year
7,791
7,791
Total for plan year
7,791
7,791
4. Net investment return
Interest and dividends
0
N/A
Realized and unrealized gain / (loss)
1,860,477
N/A
Expected return
N/A
462,403
Recognized gain / (loss)
N/A
279,615
Required adjustment due to corridor
N/A
0
Reversal of prior year required adjustment
N/A
0
Investment-related expenses
0
N/A
Total for plan year
1,860,477
742,018
5. Ending value of assets July 1, 2021
Trust assets: (1) + (2) - (3) + (4)
9,062,017
7,943,558
6. Approximate rate of return
26.2%
10.4%
Summary of Fund Activity
Market Value
Actuarial Value
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 14
1. Market value 7/1/2021
$9,062,017
2. Gain / (loss) not recognized in actuarial value 7/1/2021
1,118,459
3. Preliminary actuarial value 7/1/2021: (1) - (2)
7,943,558
4. Preliminary actuarial value as a percentage of market value: (3) ÷ (1)
87.7%
5. Gain / (loss) recognized for corridor minimum / maximum
N/A
6. Actuarial value 7/1/2021 after corridor minimum / maximum: (3) + (5)
7,943,558
7. Actuarial value as a percentage of market value: (6) ÷ (1)
87.7%
1. Market value 7/1/2020
$6,109,331
2. Town contributions
1,100,000
3. Employee contributions
0
4. TRB reimbursements
0
4. Benefit payments
0
5. Administrative expenses
7,791
6. Expected return at 6.50%
462,403
7. Expected value 7/1/2021: (1) + (2) + (3) - (4) - (5) + (6)
7,663,943
8. Market value 7/1/2021
9,062,017
9. Market value gain / (loss) for 2020-2021 plan year: (8) - (7)
1,398,074
Year
(a)
Gain / (loss)
(b)
Total
recognized
as of 7/1/2020
(d)
Total recognized
as of 7/1/2021:
(b) + (c)
2016-2017
$0
$0
$0
$0
$0
2017-2018
0
0
0
0
0
2018-2019
0
0
0
0
0
2019-2020
0
0
0
0
0
2020-2021
1,398,074
0
279,615
279,615
1,118,459
Total
279,615
1,118,459
Relationship of Actuarial Value to Market Value
Development of Market Value Gain / Loss for 2020-2021 Plan Year
Recognition of Gain / Loss in Actuarial Value
(c)
Recognized in
current year:
20% of (a)
(e)
Not recognized
as of 7/1/2021:
(a) - (d)
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 15
1 Year
3 Years
5 Years
10 Years
2013
N/A
N/A
N/A
N/A
2014
N/A
N/A
N/A
N/A
2015
N/A
N/A
N/A
N/A
2016
N/A
N/A
N/A
N/A
2017
2.1%
N/A
N/A
N/A
2018
4.1%
N/A
N/A
N/A
2019
6.4%
4.2%
N/A
N/A
2020
5.4%
5.3%
N/A
N/A
2021
26.2%
12.3%
8.5%
N/A
2022
-13.7%
4.7%
4.9%
N/A
1 Year
3 Years
5 Years
10 Years
2013
N/A
N/A
N/A
N/A
2014
N/A
N/A
N/A
N/A
2015
N/A
N/A
N/A
N/A
2016
N/A
N/A
N/A
N/A
2017
N/A
N/A
N/A
N/A
2018
N/A
N/A
N/A
N/A
2019
N/A
N/A
N/A
N/A
2020
N/A
N/A
N/A
N/A
2021
10.4%
N/A
N/A
N/A
2022
6.0%
N/A
N/A
N/A
Period Ending
June 30
Rate of Return on Market Value of Assets
Average Annual Effective Rate of Return
Rate of Return on Actuarial Value of Assets
Period Ending
June 30
Average Annual Effective Rate of Return
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 16
Actual Rate of Return on Assets
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
2017
2018
2019
2020
2021
2022
Market Value
Actuarial Value
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 17
Target Allocation and Expected Rate of Return
July 1, 2022
Asset Class
Target
Allocation
Long-Term
Expected Real
Rate of Return*
Weighting
Core Fixed Income
16.00%
1.10%
0.18%
Dynamic Bonds
12.00%
1.10%
0.13%
Global Bonds
2.00%
0.70%
0.01%
US Large Cap
32.25%
4.50%
1.45%
US Small Cap
5.75%
4.80%
0.28%
International Equity Developed
21.00%
7.30%
1.53%
Emerging Markets
6.00%
8.60%
0.52%
Broad Real Assets
5.00%
3.40%
0.17%
100.00%
4.27%
Long-Term Inflation Expectation
2.40%
Long-Term Expected Nominal Return
6.67%
*Long-Term Real Returns are provided by Fiducient Advisors. The returns are geometric
means.
The long-term expected rate of return on OPEB plan investments was determined using a building block method
in which best-estimate ranges of expected future real rates of return are developed. Best estimates of the real
rates of return for each major asset class are included in the OPEB plan’s target asset allocation.
The information above is based on geometric means and does not reflect additional returns through investment
selection, asset allocation and rebalancing. The investment return assumption used assumed a change in the
long term asset allocation shown above. The plan sponsor will be reviewing the plan’s investment and
corresponding assumptions in the coming year. Based on the results of this analysis, we expect that there will
be changes in the asset allocation and/or investment return assumption. An expected rate of return of 6.50%
was used.
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 18
Amortization of Unfunded Liability
Date
established
Years
remaining
2022 base
July 1, 2022
2,173,878
14
20,868,668
Schedule of Amortization Bases
Amortization
installment
Present value
of remaining
installments as of
July 1, 2022
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 19
Member Data
The data reported by the Plan Sponsor for this valuation includes 368 active employees who met the Plan’s minimum age and service requirements as of
July 1, 2022.
Total members July 1, 2022
Active members
0
1
241
126
368
Retirees
46
46
26
0
118
Dependents of current retirees
20
24
17
0
61
Total
66
71
284
126
547
Average age July 1, 2022
Active members
N/A
53.1
46.4
50.8
47.9
Retirees
72.5
67.6
67.7
N/A
69.5
Dependents of current retirees
70.7
63.8
63.9
N/A
66.1
Total members July 1, 2020
Active members
0
15
244
145
404
Retirees
38
27
18
5
88
Dependents of current retirees
10
13
8
0
31
Total
48
55
270
150
523
Average age July 1, 2020
Active members
N/A
47.7
46.0
51.1
47.9
Retirees
71.3
69.3
69.1
83.4
70.9
Dependents of current retirees
65.5
71.5
62.1
N/A
67.1
Total
Town
Police and Fire
BOE Certified
BOE Non-
Certified
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 20
Member Counts by Status
0
100
200
300
400
500
600
2016
2018
2020
2022
Active
Members in Pay Status
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 21
Expected Benefit Payments from Trust Fund
An important consideration in formulating short-term or intermediate-term investment policy is the need for
liquidity to meet the payment requirements of the Plan. The Plan's investment advisors may wish to compare
expected benefit payments and expenses with anticipated cash income from investments and employer
contributions.
The table below presents projected annual benefit payments for the next twenty plan years. The following
assumptions are reflected in this table:
•
Retirements among active participants will occur consistent with the Plan's retirement assumption.
•
Benefits will continue to accrue according to the provisions of the Plan.
Differences between actual experience and that assumed will affect the pattern of benefit payments.
Participant categories reflect status as of July 1, 2022.
Year
Active as of
July 1, 2022
Retired and
Terminated as
of July 1, 2022
Total
Benefit
Payments
2022
$41,079
$2,070,332
$2,111,411
2023
118,059
2,008,912
2,126,971
2024
205,899
1,869,506
2,075,405
2025
289,699
1,764,425
2,054,124
2026
410,240
1,820,892
2,231,132
2027
537,553
1,787,913
2,325,466
2028
663,315
1,722,635
2,385,950
2029
762,659
1,647,406
2,410,065
2030
892,070
1,620,999
2,513,069
2031
1,047,999
1,578,015
2,626,014
2032
1,031,800
1,518,238
2,550,038
2033
1,242,391
1,478,466
2,720,857
2034
1,213,237
1,457,097
2,670,334
2035
1,181,237
1,424,965
2,606,202
2036
1,140,796
1,420,407
2,561,203
2037
1,038,821
1,419,624
2,458,445
2038
1,101,923
1,367,942
2,469,865
2039
1,070,300
1,360,285
2,430,585
2040
1,020,567
1,350,788
2,371,355
2041
969,202
1,339,060
2,308,262
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 22
Expected Per Capita Claims (without Medicare Integration)
Non-RIP Town/Police/Fire
RIP Town/Police/Fire
Sample
Age
Expected Claim
(Male)
Expected Claim
(Female)
Sample
Age
Expected Claim
(Male)
Expected Claim
(Female)
45
$13,409
$18,690
45
$14,423
$20,104
50
17,511
21,777
50
18,836
23,424
55
22,978
25,369
55
24,716
27,288
60
29,601
29,590
60
31,840
31,828
64
36,150
34,640
64
38,884
37,260
BOE
Sample
Age
Expected Claim
(Male)
Expected Claim
(Female)
45
$12,665
$17,652
50
16,539
20,568
55
21,702
23,961
60
27,958
27,947
65
35,597
33,875
70
42,822
39,621
75
49,141
44,475
The sample per capita claim for plans not integrated with Medicare was developed as follows: Using the total
count of active participants eligible for post-retirement medical benefits and retirees currently electing medical
coverage in a non-Medicare supplement plan, we calculate the total projected claims by multiplying the total
count by the average annual premium. Using the cost increases derived from a study sponsored by the Society
of Actuaries prepared by Dale H. Yamamoto from May 2013: “Health Care Costs from Birth to Death”, we
allocate the total projected claims by age and gender.
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 23
Description of Actuarial Methods
Asset Valuation Method
The Actuarial Value of assets used in the development of plan contributions phases in the recognition of
differences between the Market Value and Expected Actuarial Value by recognizing 20% of the difference each
year. The Actuarial Value is adjusted, if necessary, to be within the range of 80% and 120% of the Market Value
of assets.
Actuarial Cost Method
Change in Actuarial Method: None.
Entry Age Normal (level percentage of salary).
Normal Cost: Under this method, the total normal cost is the sum of amounts necessary to fund each active
member’s normal retirement benefit if paid annually from entry age to assumed retirement age. Entry age is the
age at which the employee would have been first eligible for the plan, if it had always been in effect. The normal
cost for each participant is expected to remain a level percentage of the employee’s salary. The normal cost for
the plan is the difference between the total normal cost for the year and the anticipated member contributions
for that year.
Past Service Liability: The present value of future benefits that relates to service before the valuation date is the
total past service liability. The unfunded past service liability is the difference between the total past service
liability and any assets (including accumulated member contributions).
The Unfunded Accrued Liability is amortized each year over 30 years on a closed basis, as a level dollar amount.
The amortization began July 1, 2006 and as of July 1, 2022, 14 years remain.
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 24
Description of Actuarial Assumptions
Changes in Actuarial Assumptions
The valuation reflects changes in the actuarial assumptions listed below. (The assumptions used before and after
these changes are more fully described in the next section.)
•
Mortality Improvement
•
Healthcare Cost Trend Rates
The assumptions indicated were changed to represent the Enrolled Actuary’s current best estimate of
anticipated experience of the plan.
Interest
6.50%.
Since the OPEB plan’s fiduciary net position and future contributions are projected to be sufficient to cover
expected benefit payments for current plan members, the long-term expected rate of return on OPEB plan
investments was used to discount liabilities.
Rate of compensation increase (including inflation)
2.40%.
The plan does not have statistically credible data on which to form a rate of compensation increase assumption.
This assumption is consistent with the inflation assumption.
Inflation
2.40%.
This assumption is consistent with the Social Security Administration’s current best estimate for the ultimate long-
term (75-year horizon) annual percentage increase in the CPI, as published in the 2022 OASDI Trustee Report.
Mortality
Pub-2010 Public Retirement Plans Mortality Tables (with separate tables for General employees, Public Safety
employees and Teachers) and for non-annuitants and annuitants, projected to the valuation date with Scale MP-2021.
Pub-2010 Public Retirement Plans Mortality Tables (with separate tables for General employees, Public Safety
employees and Teachers) and for non-annuitants and annuitants, projected to the valuation date with Scale MP-2020.
Mortality Improvement
Projected to date of decrement using Scale MP-2021 (generational).
(Prior: Projected to date of decrement using Scale MP-2020 (generational).)
We have selected this mortality assumption because it is based on the latest published public retirement plan
mortality study released by the Society of Actuaries. The plan does not have sufficiently credible data on which
to perform a mortality experience study.
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 25
Retirement
Town: Not applicable.
Police and Fire:
Age
Rate
45
25%
50
15%
55
13%
60
15%
65
100%
The actuarial assumption in regards to rates of retirement shown above are based on the rates used by the state
of Connecticut Municipal Employee Retirement System actuaries.
Non-Certified BOE:
Age
Rate
45
13.00%
50
13.00%
55
7.50%
60
9.50%
65
18.00%
70
18.00%
75
100.00%
The actuarial assumption in regards to rates of retirement shown above are based on the rates used by the state
of Connecticut Municipal Employee Retirement System actuaries.
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
HOOKER & HOLCOMBE | HHCONSULTANTS.COM
PAGE 26
Retirement (cont.)
Certified BOE: Per table below (from Connecticut State TRS 2020 Pension Valuation):
Eligible for Normal
(Unreduced) Retirement
(Age 60 and 20 Yrs. Serv.
Or 35 Yrs. Serv.) Less
than 35 years of Serv.
Eligible for Normal
(Unreduced) Retirement
(Age 60 and 20 Yrs. Serv.
Or 35 Yrs. Serv.) 35 or
more years of Serv.
Eligible for Early
(Reduced) Retirement
(Age 50 and 20 Yrs. Serv.
Or 25 Yrs. Serv.)
Age
Male
Female
Male
Female
Male
Female
50
35.0%
30.0%
1.50%
1.25%
51
35.0%
30.0%
1.50%
1.25%
52
35.0%
30.0%
1.50%
1.25%
53
35.0%
30.0%
1.50%
1.75%
54
35.0%
30.0%
2.00%
2.25%
55
35.0%
30.0%
3.00%
3.00%
56
35.0%
30.0%
4.00%
3.75%
57
35.0%
30.0%
5.00%
4.50%
58
35.0%
30.0%
6.50%
5.50%
59
35.0%
30.0%
8.00%
7.00%
60
20.0%
20.0%
30.0%
30.0%
61
20.0%
20.0%
30.0%
30.0%
62
22.5%
20.0%
30.0%
30.0%
63
22.5%
20.0%
30.0%
30.0%
64
25.0%
25.0%
30.0%
30.0%
65
27.5%
32.5%
35.0%
37.5%
66
27.5%
30.0%
35.0%
37.5%
67-68
27.5%
30.0%
30.0%
32.5%
69-74
27.5%
30.0%
30.0%
32.5%
75-80
100.0%
100.0%
100.0%
100.0%
The actuarial assumption in regards to rates of retirement shown above are based on the rates used by the
Connecticut State Teachers’ Retirement System actuaries.
Termination prior to retirement
Town: Not applicable.
Police and Fire:
Withdrawal and Vesting
Age
0-4 Years
5-24 Years
20
6.50%
5.00%
25
6.50%
5.00%
30
5.75%
4.00%
35
3.50%
2.50%
40
3.50%
2.00%
45
3.50%
1.50%
50
3.50%
0.00%
55
3.50%
0.00%
60
3.50%
0.00%
65
0.00%
0.00%
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
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PAGE 27
Termination prior to retirement (cont.)
The actuarial assumption in regards to rates of withdrawal shown above are based on the rates used by the
State of Connecticut Municipal Employee Retirement System actuaries.
Non-Certified BOE:
Male Rate
Female Rate
Age
0-4 Years
5-24 Years
0-4 Years
5-24 Years
20
16.00%
12.00%
24.00%
18.00%
25
16.00%
12.00%
19.00%
18.00%
30
12.50%
10.00%
16.00%
12.00%
35
10.00%
8.00%
12.00%
10.00%
40
9.50%
5.75%
10.00%
8.00%
45
8.50%
5.00%
9.00%
6.00%
50
8.50%
4.50%
9.00%
4.50%
55
6.50%
0.00%
8.00%
0.00%
60
6.50%
0.00%
8.00%
0.00%
65
6.00%
0.00%
8.00%
0.00%
70
6.00%
0.00%
8.00%
0.00%
The actuarial assumption in regards to rates of withdrawal shown above are based on the rates used by the
State of Connecticut Municipal Employee Retirement System actuaries.
Certified BOE: Rates based on gender and length of service for first Ten years and gender and age thereafter
(Connecticut State TRS 2020 Pension Valuation):
Service
Male Rate
Female Rate
0-1
15.00%
12.00%
1-2
11.00
11.00
2-3
8.50
9.50
3-4
7.00
8.00
4-5
5.50
7.50
5-6
4.50
7.00
6-7
4.00
6.50
7-8
3.50
6.00
8-9
3.50
5.50
9-10
3.50
5.00
10 +
use age-related rates until eligible
to retire
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
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PAGE 28
Termination prior to retirement (cont.)
Sample Age-Based Withdrawal Rates (until eligible to retire):
Age
Male Rate
Female Rate
25
1.80%
6.00%
30
1.80
6.00
35
1.80
4.25
40
1.80
2.50
45
1.80
2.00
50
2.25
2.40
55
4.00
3.90
59+
5.50
4.00
The actuarial assumption in regards to rates of withdrawal shown above are based on the rates used by the
Connecticut State Teachers’ Retirement System actuaries.
Utilization
Town/RIP eligible Police/RIP eligible Fire: Percentage of actives who continue with medical coverage: 100% if
retirement during RIP period. Percentage of suspended retirees who may elect medical coverage at a future
date: 20%.
Non-Certified BOE and Non-RIP eligible Fire: 50% of current active members will elect medical coverage at
retirement.
Certified BOE: 100% of current active members will elect medical coverage at retirement.
Medicare Replacement
30%.
Medicare Eligibility
25% of current Certified BOE members hired prior to April 1, 1986 are assumed to continue coverage post-65,
without Medicare coverage.
Spousal Coverage
50% of active members are assumed to be married and elect spousal benefits at retirement with wives 3 years
younger than husbands.
Healthcare Cost Trend Rates
6.50% in 2022, reducing by 0.20% each year to an ultimate rate of 4.40% per year for 2033 and later.
(Prior: 6.50% in 2020, reducing by 0.25% each year to an ultimate rate of 4.40% per year for 2029 and later.)
Dental is assumed to increase by 4.00% per year.
The trend rates were changed to align with the inflation assumption change and better reflect actual experience.
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
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PAGE 29
Premiums/Allocation rates
Town/Non-RIP Police/Non-RIP Fire
Employee
Employee Plus Spouse
$18,212.04
$38,288.64
Town/RIP Police/RIP Fire
Employee
Employee Plus Spouse
$19,903.92
$41,845.80
BOE
Employee
Employee Plus Spouse
$19,369.68
$41,526.36
Post-65
Employee
Employee Plus Spouse
$5,965.80
$11,913.60
Premiums were used as the basis for per capita costs.
Dental Premiums
Non-RIP Town/Non-RIP Police/Non-RIP Fire
Employee
Employee Plus Spouse
$397.56
$1,033.92
RIP Town/RIP Police/ RIP Fire
Employee
Employee Plus Spouse
$445.08
$1,157.28
BOE
Employee
Employee Plus Spouse
$388.68
$1,088.72
Patient Protection and Affordable Care Act (PPACA)
For purposes of this valuation, extended coverage for adult children and 100% coverage of preventive care are
assumed to be reflected in per capita costs.
For purposes of this valuation, elimination of lifetime maximum benefits and removal of the limits on essential
healthcare are assumed to have no impact on plan liabilities.
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
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PAGE 30
Summary of Plan Provisions
This exhibit summarizes the major provisions of the Plan. It is not intended to be, nor should it be interpreted as
a complete statement of all plan provisions. To the extent that this summary does not accurately reflect the
plan provisions, then the results of this valuation may not be accurate.
For Town Employees
Eligibility
Town - Current retirees with medical benefits (no future retirees). In addition, there is a group of current
retirees who have currently suspended benefits. These individuals and their spouse may elect medical at a
future date.
Police and Fire - RIP eligible employees may qualify for subsidized benefits if they retire within a specific date
range. Fire employees who are either not RIP eligible or retire outside the eligibility period may continue
medical after retirement.
Benefits
Medical and dental benefits pre-65.
Medical benefits post-65.
Dependent Coverage
Coverage available for spouses at retirement for the spouse’s lifetime.
Retiree Contributions
Pre-65: RIP eligible employees who are eligible for subsidized benefits pay the contribution percentage at time
of retirement times the premium rate at retirement. The premium rate at retirement becomes the Town’s cap
and the retiree pays any premium above the Town’s cap. All other Fire employees can continue coverage by
paying 100% of the cost.
Post 65: The Town’s cap is 50% of the Medicare supplement rate at the time of retirement and the retiree pays
any premium above the cap. Fire employees who do not retire under the RIP may continue coverage by paying
100% of the cost.
All others are not eligible for post-retirement medical benefits.
For existing retirees: Individual caps were provided by the Town. For pre-65 retirees, the post-65 cost is capped
at 50% of the pre-65 cap. For two retirees, the Town pays 100% of the cost.
ACTUARIAL VALUATION REPORT
TOWN OF WATERFORD OPEB PLAN
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PAGE 31
For Board of Education Employees
Eligibility for Medical and Dental
Non-Certified Administrators and Supervisors: 25 years of teaching/administrative experience (the last 10 years
in Waterford) and be eligible to collect CT Teacher Retirement Benefits.
Teachers and Certified Administrators: Age 55 with 20 years of teaching/administrative experience (the last 10
years in Waterford) and be eligible to collect CT Teacher Retirement Benefits.
Paraprofessionals: Age 60 with 20 years of service.
Secretaries: 10 years of service.
Contract Workers: Age 55 with 5 years of service or 25 years of service.
Custodians: Age 55 with 5 years of service or 25 years of service.
Retiree/Spouse cost of medical coverage
Administrators: Administrators hired before 7/1/2004: Retirees and spouses pay 50% of the premium owed
under age 65 and 100% on or after age 65. Administrators hired on or after 7/1/2004 but before July 1, 2014:
Retirees and spouses pay 70% of the premium owed under age 65 and 100% on or after age 65. Administrators
hired on or after 7/1/2014: Retirees and spouses pay 100% of the premium owed under age 65 and 100% on or
after age 65.
Teachers: Teachers hired before 10/1/1993: Retirees and spouses pay 50% of the premium owed under age 65
and 100% on or after age 65. Teachers hired between October 1, 1993 and August 31, 2004: Retirees and
spouses pay 60% of the premium under age 65 and 100% on or after age 65. Teachers hired between
September 1, 2004 and June 30, 2012: Retirees and spouses pay 70% of the premium under age 65 and 100%
on or after age 65. Teachers hired after July 1, 2012: Retirees and spouses pay 100% of the premium.
Non-Certified BOE: Retirees and spouses pay 100% of the premium owed for active employees while employee
is under age 65. There are no benefits on or over 65. Food Service employees are not eligible for benefits.
Plan of Coverage: Assumed the same as Active’s Plan. Assumed that retirees with current Medicare coverage
are not participating in this plan.