ORDER NO. 30855 ACTUARIAL SERVICES FOR GASB 45 WITH GABRIEL ROEDER SMITH & COMPANY AND INTERLOCAL AGREEMENT WITH NORTH CENTRAL TEXAS COUNCIL OF GOVERNMENTS Came to be heard this the 27th day of May, 2008, with a motion made by Commissioner Williams, seconded by Commissioner Letz. The Court unanimously approved by vote of 4-0-0 to: Move approval to require the Actuarial Services for GASB 45 with Gabriel Roeder Smith & Company and include the Interlocal Agreement with North Central Texas Council of Governments, and authorize County Judge to sign same, with the funds to come from the Professional Services line item, subject to the review by the County Attorney. COMMISSIONERS' COURT AGENDA REQUEST MADE BY: Jeannie Hargis OFFICE: Auditor's Office a~ MEETING DATE: May 2S$, 2008 TIME PREFERRED: preference. No SUBJECT: Consider, Discuss and Take Appropriate Action to approve Actuarial Services for GASB 45 with Gabriel Roeder Smith & Company and the Interlocal Agreement with the North Central Texas Council of Governments. Please see attached documents. The Commissioners Court approved the auditor's office preparing and requesting an RFP for Actuary Services on February 11, 2008. A copy is attached. EXECUTIVE SESSION REQUESTED: (PLEASE STATE REASON) NAME OF PERSON ADDRESSING THE COURT: Jeannie Hargis ESTIMATED LENGTH OF PRESENTATION: 5 minutes IF PERSONNEL MATTER -NAME OF EMPLOYEE: Time for submitting this request for Court to assure that the matter is posted in accordance with Title 5, Chapter 551 and 552, Government Code, is as follows: Meeting scheduled for Mondays: THIS REQUEST RECEIVED BY: THIS RQUEST RECEIVED ON: 5:00 PM previous Tuesday @ .M. All Agenda Requests will be screened by the County Judge's Office to determine if adequate information has been prepared for the Court's formal consideration and action at time of Court Meetings. Your cooperation will be appreciated and contribute towards your request being addressed at the earliest opportunity. See Agenda Request Rules Adopted by Commissioners' Court. Gabriel Roeder Smith & Company 5605 N. MacArthur Blvd. 469.524.0000 phone RS Consultants & Actuaries Suite 870 469.524.0003 fax Irving, TX 75038-2631 www.gabrielroeder.com May O5, 2008 Mrs. Paula Hargis Auditor Kerr County 700 Main St Kerrville, TX 78028 Re: Pricing Estimate for GASB OPEB Valuation for Kerr County Dear Mrs. Hargis, You have requested a pricing quote for a GASB 45 actuarial valuation under the Shared Services arrangement provided by Gabriel, Roeder, Smith & Co (GRS) and North Central Texas Council of Governments (NCTCOG). Based on the information you provided, the estimated cost of services for Kerr County is $4,680. This price is based on receiving data in the standard GRS format and using the following assumptions: Number of Participants. 100 - 999 Insured or Self-Funded Insured* Retirement Plans 1. TCDRS Health Plans 1. Fara-Major Medical it is a PPO $1,000 Deductible * An additional fee of $1,560 will be added if claims experience is required If other assumptions are identified, a revised proposal letter will be prepared by GRS. Also, additional fees may apply if the data is not received in standard format. Basic Services Basic services provided through the Shared Services program will include: • Actuarial valuation of employer OPEB in compliance with the requirements of paragraphs 11-27 of GASB 45. Valuations can be performed annually or biennially and will include: > A measurement of the actuarial liability, present value of projected benefits and normal cost as of the valuation date Mrs. Paula Hargis May O5, 2008 Page 2 > The estimated actuarially determined contribution for the applicable fiscal years > The estimated annual required contribution and accounting expense for the applicable fiscal years as required under GASB Statement Nos. 43 and 45 > Information needed to complete the "Notes to the Financial Statement" and "Required Supplementary Information" as defined in paragraphs 30 and 31 of GASB No. 43 > Information needed to complete the "Notes to the Financial Statement" and "Required Supplementary Information" as defined in paragraphs 24, 25 and 26 of GASB No. 45 > Required Supplementary Information as defined in paragraph 26 of the GASB 45 > Sensitivity analysis for health care trend rates, providing valuation results based on a higher and a lower health care trend > A hypothetical set of actuarial results using an alternative discount rate based on pre-funding • Two in person or conference call meetings as mutually agreed upon by Kerr County and GRS. Out of pocket travel expenses for governments located 100 miles or more from downtown Houston or DFW Airport will be charged to the government. • Access to GRS' web based Aggregate Reporting Module. This module allows for benchmarking of valuations for all members of the Shared Services program. The Aggregate Reporting Module includes current and historical information on plan provisions, assumptions, and actuarial results. Options Study It is anticipated that Kerr County may want to consider what the options are for mitigating their OPEB liability either in the first year or first two years. These Options studies would include alternative discount rates, alternative healthcare trend rates, benefit capitations, changes in retiree cost sharing, and possibly changes in eligibility requirements. The cost for this Options study will be $780 per study. Other studies may not be covered under the fixed fee amount above. If a study is not included in the fixed fee pricing, the hourly rates shown in "Additional Services" below will apply. GRS will provide written documentation of our understanding of the service(s) requested, the estimated number of hours by employee class, total costs and project timeline. Additional Services Gabriel Roeder Smith & Company Mrs. Paula Hargis May O5, 2008 Page 3 Fees for additional consulting services not included under Basic Services or included in the fixed fee Options studies will be priced separately upon request and will be based on the following hourly rates: Hourly GRS Resource Classification Rates Senior Consultant $364 Consultants $286 Senior Analysts $182 Actuarial Analysts $156 Systems Analysts and Programmers $208 Administrative Support Staff $115 Pricing assumes 20% paid upon acceptance by the government of the engagement, 50% upon receipt of the draft report and 30% upon acceptance of the final report. Pricing also assumes annual valuations. For Biennial valuations, an additional $1,040 is added to the price and GRS will provide the OPEB cost for the off year as a percentage of covered payroll and will walk forward the Net OPEB Obligation. Prices will be adjusted annually in January based on changes in the Consumer Price Index, All Urban Consumers, on a December over December basis. A copy of this proposal letter will be made a part of the engagement agreement between Kerr County and GRS. If you have any questions or need additional information please don't hesitate to e mail us at NCTCOG sharedservicesna,gabrielroeder.com or call either Jim Schaefer at 469/524-1808 or Joe Newton at 469/524-1807. Thank you for your interest in the Shared Services program. Gabriel, Roeder, Smith & Company Gabriel Roeder Smith & Company Gabriel Roeder Smith & Company 5605 N. MacArthur Blvd. 469.524.0000 phone R Consultants & Actuaries Suite 870 469.524.0003 fax Irving, TX 75038-2631 wwwgabrielroeder.com MASTER AGREEMENT Pursuant to the award of Joint Actuarial Services by the North Central Texas Council of Governments (NCTCOG), this agreement confirms the terms under which the (name of government) hereinafter referred to as `CONTRACTING GOVERNMENT" has engaged Gabriel, Roeder, Smith & Co. hereinafter referred to as "GRS" to perform actuarial consulting services. In as much as this relationship will involve several actuarial reviews and other services that will be governed by the Request for Proposal issued by NCTCOG on May 31, 2006 and our subsequent response to that proposal, we have agreed to establish this "master agreement" defining the general terms and conditions for all work performed. This agreement will not, by itself, authorize the performance of any services. Rather specific services will be authorized through a separate engagement letter that references this master agreement and details the services to be provided and the timeframe and fees required. In the event of an inconsistency between this master agreement and an individual engagement letter, the master agreement will be followed. As described in the above referenced Request for Proposal the following terms apply: A. Tax Exempt Entities. CONTRACTING GOVERNMENT is exempt from manufacturer's federal excise tax and states sales tax. Tax exemption certificates will be issued upon request. B. Role of NCTCOG. NCTCOG has served as a facilitator to the RFP and award process but the contractual relationship is between GRS and the CONTRACTING GOVERNMENT. C. AE~re~ate Information. GRS agrees to supply NCTCOG with the specified results from the valuations and to aggregate that information with that of other governments for the purpose of benchmarking. D. Fees. GRS agrees to follow the attached pricing schedule ("Attachment A") for pricing of its services. I. Review of Charges. CONTRACTING GOVERNMENT has the right to review the supporting documentation for any hourly charges or out of pocket expenses assessed to the CONTRACTING GOVERNMENT under the fee schedule. J. Termination. Both CONTRACTING GOVERNMENT and GRS will have the right to terminate this agreement through written notice. CONTRACTING GOVERNMENT will pay any charges or prorate fees incurred to the date the termination notice is received and actuary will cease any in progress work unless specific stopping points are provided in the letter. K. Work Product. The fmal work product will be the property of the CONTRACTING GOVERNMENT to be used as stated in the specific engagement letter. Ancillary use of the product is permitted but GRS is not responsible for the reliability of those projections. It is understood that all reports are subject to the open records laws of the State of Texas and the contracting jurisdiction. L. Independent Contractor. All the services provided by GRS will be as an independent contractor. None of the terms in the engagement letter will be interpreted to create an agency or employment relationship. M. Biennial Reviews. CONTRACTING GOVERNMENT agrees to provide census data in off years using the same cut off date and delivery dates as used for the year of review. Actuary agrees to review the off year census data and provide CONTRACTING GOVERNMENT with timely feedback regarding deficiencies in the data. N. Term. The term of this master agreement will be governed by the afore referenced NCTCOG RFP and will expire on September 30, 2012. O. Complete Agreement. This letter combined with the specific engagement letter and as clarified by the RFP and Proposal set forth the entire agreement between the. CONTRACTING GOVERNMENT and GRS. P. Indemnification. GRS covenants and agrees to indemnify and hold harmless and defend and does hereby indemnify, hold harmless, and defend NCTCOG and CONTRACTING GOVERNMENTS, its officers and employees, from and against any and all suits or claims for damages or injuries, including death, to persons or property, whether real or asserted, arising out of any negligent act or omission on the part of the contractor, its officers, agents, servants, employees, or subcontractors, and the contractor does hereby assume all liability for injuries, claims or suits for damages to persons, property, or whatever kind of character, whether real or asserted, occurring during or arising out of the performance of a contract as a result of any negligent act or omission on the part of the contractor, its officers, agents, servants, employees, or subcontractors to the extent permitted by law. Please review this master agreement letter and the attached schedules and indicate your acceptance by having an official of CONTRACTING GOVERNMENT sign below. Q. Force Maieure. A force majeure event shall be defined to include governmental decrees or restraints, acts of God (except that rain, wind, flood or other natural phenomena normally expected for the locality, shall not be construed as an act of God), work stoppages due to labor disputes or strikes, fires, explosions, epidemics, riots, war, rebellion, and sabotage. If a delay or failure of performance by either party to this contract results from the occurrence of a force majeure event, the delay Gabriel Roeder Smith & Company shall be excused and the time fixed for completion of the work extended by a period equivalent to the time lost because of the event. R. Professional Standards. GRS will provide qualified personnel for each engagement and follow all professional standards ascribed by the American Academy of Actuaries and the Governmental Accounting Standards Board. GABRIEL, ROEDER, SMITH & CO. By: Date: Title: CONTRACTING GOVERNMENT By Date: Title: Gabriel Roeder Smith & Company Attachment A Pricing of Services -Calendar Year 2007* Em to er First Year Hourly Rate for Governments by Total OPEB Participants Annual Biennial Options Study Additional Services 1 Less than 100-Insured 1 health lan $4,000 $5,000 $750/Study See Below la Less than 100-per additional health or retirement lan $1,000 $1,000 $750/Stud See Below 2 Between 100 and 249-Insured 1 health lan $4,500 $5,500 $750/Study See Below 2a Between 100 and 249-per additional health or retirement lan $1,000 $1,000 $750/Study See Below 3 Between 100 and 249-Self Insured 1 health lan $6,000 $7,000 $750/Study See Below 3a Between 100 and 249-per additional self insured health or retirement plan $1,000 $1,000 $750/Study See Below 4 Between 250 and 499-Insured 1 health lan $4,500 $5,500 $750/Study See Below 4a Between 250 and 499-per additional health or retirement lan $1,000 $1,000 $750/Study See Below 5 Between 250 and 499-Self Insured 1 health lan $6,000 $7,000 $750/Study See Below Sa Between 250 and 499-per additional self insured health or retirement lan $1,000 $1,000 $750/Study See Below 6 Between 500 and 749-Insured 1 health lan $4,500 $5,500 $750/Study See Below 6a Between 500 and 749-per additional health or retirement plan $1,000 $1,000 $750/Study See Below 7 Between 500 and 749-Self Insured 1 health lan $6,000 $7,000 $750/Study See Below 7a Between 500 and 749-per additional self insured health or retirement lan $1,000 $1,000 $750/Study See Below 8 Between 750 and 999-Insured 1 health plan $4,500 $5,500 $750/Study See Below 8a Between 750 and 999-per additional health or retirement plan $1,000 $1,000 $750/Study See Below 9 Between 750 and 999-Self Insured 1 health lan $6,000 $7,000 $750/Study See Below 9a Between 750 and 999-per additional self insured health or retirement plan $1,000 $1,000 $750/Study See Below 10 Between 1000 and 1499-Insured 1 health lan $5,000 $6,000 $750/Study See Below l0a Between 1000 and 1499-per additional health or retirement plan $1,000 $1,000 $750/Study See Below Gabriel Roeder Smith & Company 11 Between 1000 and 1499-Self Insured 1 health lan $6,500 $7,500 $750/Study See Below 1 la Between 1000 and 1499-per additional self insured health or retirement lan $1,000 $1,000 $750/Stud See Below 12 Between 1500 and 1999-Insured 1 health lan $5,000 $6,000 $750/Study See Below 12a Between 1500 and 1999-per additional health or retirement lan $1,000 $1,000 $750/Study See Below 13 Between 1500 and 1999-Self Insured 1 health lan $6,500 $7,500 $750/Study See Below 13a Between 1500 and 1999-per additional self insured health or retirement lan $1,000 $1,000 $750/Study See Below 14 Between 2000 and 2499-Insured 1 health lan $5,000 $6,000 $750/Study See Below 14a Between 2000 and 2499-per additional health or retirement lan $1,000 $1,000 $750/Study See Below 15 Between 2000 and 2499-Self Insured 1 health lan $6,500 $7,500 $750/Study See Below 15a Between 2000 and 2499-per additional self insured health or retirement lan $1,000 $1,000 $750/Study See Below 16 Between 2500 and 5000-Self Insured 1 health lan $7,000 $8,000 $750/Study See Below 16a Between 2500 and 5000-per additional self insured health or retirement lan $1,500 $1,500 $750/Study See Below Gabriel Roeder Smith & Company Plans (if a licable) First Year Hourly Rate for Governments by Total OPEB Participants Annual Biennial Options Study Additional Services 1 Less than 100-Insured 1 health lan $0 $0 $750/Study See Below 1 a Less than 100-per additional health or retirement Ian $0 $0 $750/Study See Below 2 Between 100 and 249-Insured 1 health lan $0 $0 $750/Study See Below 2a Between 100 and 249-per additional health or retirement lan $0 $0 $750/Study See Below 3 Between 100 and 249-Self Insured 1 health plan $0 $0 $750/Study See Below 3a Between 100 and 249-per additional self insured health or retirement lan $0 $0 $750/Study See Below 4 Between 250 and 499-Insured 1 health lan $0 $0 $750/Study See Below 4a Between 250 and 499-per additional health or retirement lan $0 $0 $750/Study See Below 5 Between 250 and 499-Self Insured 1 health lan $0 $0 $750/Study See Below Sa Between 250 and 499-per additional self insured health or retirement plan $0 $0 $750/Study See Below 6 Between 500 and 749-Insured 1 health lan $0 $0 $750/Study See Below 6a Between 500 and 749-per additional health or retirement lan $0 $0 $750/Study See Below 7 Between 500 and 749-Self Insured 1 health lan $0 $0 $750/Study See Below 7a Between 500 and 749-per additional self insured health or retirement lan $0 $0 $750/Study See Below 8 Between 750 and 999-Insured 1 health lan $0 $0 $750/Study See Below 8a Between 750 and 999-per additional health or retirement plan $0 $0 $750/Study See Below 9 Between 750 and 999-Self Insured 1 health lan $0 $0 $750/Study See Below 9a Between 750 and 999-per additional self insured health or retirement plan $0 $0 $750/Study See Below 10 Between 1000 and 1499-Insured 1 health plan $0 $0 $750/Study See Below l0a Between 1000 and 1499-per additional health or retirement plan $0 $0 $750/Study See Below 11 Between 1000 and 1499-Self Insured 1 health plan $0 $0 $750/Study See Below 11 a Between 1000 and 1499-per additional self insured health or retirement lan $0 $0 $750/Study See Below 12 Between 1500 and 1999-Insured 1 health plan $0 $0 $750/Study See Below Gabriel Roeder Smith & Company 4812 Between 1500 and 1999-per additional a health or retirement lan $0 $0 $750/Study See Below 13 Between 1500 and 1999-Self Insured 1 health lan $0 $0 $750/Study See Below 13a Between 1500 and 1999-per additional self insured health or retirement lan $0 $0 $750/Study See Below 14 Between 2000 and 2499-Insured 1 health lan $0 $0 $750/Study See Below 14a Between 2000 and 2499-per additional health or retirement lan $0 $0 $750/Study See Below 15 Between 2000 and 2499-Self Insured 1 health lan $0 $0 $750/Study See Below 15a Between 2000 and 2499-per additional self insured health or retirement lan $0 $0 $750/Study See Below 16 Between 2500 and 5000-Self Insured 1 health lan $0 $0 $750/Study See Below 16a Between 2500 and 5000-per additional self insured health or retirement lan $0 $0 $750/Study See Below • For the first valuation, the prices above include a mandatory kick-off meeting to begin the project and a meeting to present the findings. If the second meeting can take place either via web cast or through a conference call, we will discount the above valuation fees by $500. • For subsequent valuations, we anticipate the kickoff meeting to be via conference call or web cast. For any participant, if the meeting to present the results can take place either via web cast or through a conference call, we will discount the above valuation fees by $500. • Pricing assumes 20% paid upon acceptance by the government of the engagement, 50% upon receipt of the draft report and 30% upon acceptance of the final report. • Fees for additional services and optional services that are not determined as `basic' will be based on the following rates: GRS Position Title Hourly Rates Senior Consultant $350 Consultants $275 Senior Analysts $175 Actuarial Analysts $150 Systems Analysts and Programmers $200 Administrative Support Staff $110 *Prices will be adjusted annually beginning in January 2008 based on changes in the Consumer Price Index, All Urban Consumers, on a December over December basis. Current rates for your plan are reflected in the engagement agreement sent with this document. Gabriel Roeder Smith & Company INTERLOCAL AGREEMENT FOR COOPERATIVE PURCHASING FOR ACTUARIAL SHARED SERVICES THIS INTERLOCAL AGREEMENT ("Agreement"), made and entered into pursuant to the Texas Interlocal Cooperation Act, Chapter 791, Texas Government Code (the "Act"), by and between the North Central Texas Council of Governments, hereinafter referred to as "NCTCOG," having its principal place of business at 616 Six Flags Drive, Arlington, Texas 76011, and (name of entity) a local government, created and operated to provide one or more governmental functions and services, hereinafter referred to as "Participant," having its principal place of business at: WITNESETH WHEREAS, NCTCOG is a regional planning commission and political subdivision of the State of Texas operating under Chapter 391, Texas Local Government Code; and WHEREAS, pursuant to the Act, NCTCOG is authorized to contract with eligible entities to perform governmental functions and services, including the development of a standard approach for acquiring actuarial services; and WHEREAS, in reliance on such authority, NCTCOG has a cooperative purchasing program under which it contracts with eligible entities under the Act; and WHEREAS, Participant has represented that it is an eligible entity under the Act, that by Administrative Action has authorized this Agreement on (Date)* and that it desires to contract with NCTCOG on the terms set forth below; NOW, THEREFORE, NCTCOG and the PARTICIPANT do hereby agree as follows: ARTICLE 1: LEGAL AUTHORITY The Participant represents and warrants to NCTCOG that (1) it is eligible to contract with NCTCOG under the Act because its a local government, as defined in the Act, and (2) it possesses adequate legal authority to enter into this Contract. ARTICLE 2: APPLICABLE LAWS NCTCOG and the Participant agree to conduct all activities under this Agreement in accordance with all applicable rules, regulations, and ordinances and laws in effect or promulgated during the term of this Agreement. ARTICLE 3: WHOLE AGREEMENT This Agreement and any attachments, as provided herein, constitute the complete contract between the parties hereto, and supersede any and all oral and written agreements between the parties relating to matters herein. ARTICLE 4: BILLINGS Billings will be generated for the Actuarial Shared Services through Gabriel Roeder Smith & Company and will include an Administrative Fee of $100 per valuation cycle (annually or biennially) payable to NCTCOG. ARTICLE 5: CHANGES AND AMENDMENTS This Agreement may be amended only by a written amendment executed by both parties, except that any alternations, additions, or deletions to the terms of this Agreement which are required by changes in Federal and State law or regulations are automatically incorporated into this Agreement without written amendment hereto and shall become effective on the date designated by such law or regulation. NCTCOG reserves the right to make changes in the scope services offered through the Cooperative Purchasing Program to be performed hereunder. THIS INSTRUMENT HAS BEEN EXECUTED IN TWO ORIGINALS BY THE PARTIES HERETO AS FOLLOWS: *Denotes required fields NOTE• Facsimile copies of this document shall not be acceptable as ORIGINALS. Interstate vl rev. 10/05 Name of Participant (local government, agency, or non profit corporation) Mailing Address City State ZIP Code *Bv Signature of Authorized Official * Typed Name of Authorized Official * Typed Title of Authorized Official Date North Central Texas Council of Governments 616 Six Flags Drive, Arlington, Texas 76011 Signature of Authorized Off cial * Typed Name of Authorized Official * Typed Title of Authorized Official Date INTERLOCAL AGREEMENT FOR COOPERATIVE PURCHASING FOR ACTUARIAL SHARED SERVICES THIS INTERLOCAL AGREEMENT ("Agreement"), made and entered into pursuant to the Texas Interlocal Cooperation Act, Chapter 791, Texas Government Code (the "Act"), by and between the North Central Texas Council of Governments, hereinafter referred to as "NCTCOG," having its principal place of business at 616 Six Flags Drive, Arlington, Texas 76011, and (name of entity) a local government, created and operated to provide one or more governmental functions and services, hereinafter referred to as "Participant," having its principal place of business at: WITNESETH WHEREAS, NCTCOG is a regional planning commission and political subdivision of the State of Texas operating under Chapter 391, Texas Local Government Code; and WHEREAS, pursuant to the Act, NCTCOG is authorized to contract with eligible entities to perform governmental functions and services, including the development of a standard approach for acquiring actuarial services; and WHEREAS, in reliance on such authority, NCTCOG has a cooperative purchasing program under which it contracts with eligible entities under the Act; and WHEREAS, Participant has represented that it is an eligible entity under the Act, that by Administrative Action has authorized this Agreement on (Date)* and that it desires to contract with NCTCOG on the terms set forth below; NOW, THEREFORE, NCTCOG and the PARTICIPANT do hereby agree as follows: ARTICLE 1: LEGAL AUTHORITY The Participant represents and warrants to NCTCOG that (1) it is eligible to contract with NCTCOG under the Act because its a local government, as defined in the Act, and (2) it possesses adequate legal authority to enter into this Contract. ARTICLE 2: APPLICABLE LAWS NCTCOG and the Participant agree to conduct all activities under this Agreement in accordance with all applicable rules, regulations, and ordinances and laws in effect or promulgated during the term of this Agreement. ARTICLE 3: WHOLE AGREEMENT This Agreement and any attachments, as provided herein, constitute the complete contract between the parties hereto, and supersede any and all oral and written agreements between the parties relating to matters herein. ARTICLE 4: BILLINGS Billings will be generated for the Actuarial Shared Services through Gabriel Roeder Smith & Company and will include an Administrative Fee of $100 per valuation cycle (annually or biennially) payable to NCTCOG. ARTICLE 5: CHANGES AND AMENDMENTS This Agreement may be amended only by a written amendment executed by both parties, except that any alternations, additions, or deletions to the terms of this Agreement which are required by changes in Federal and State law or regulations are automatically incorporated into this Agreement without written amendment hereto and shall become effective on the date designated by such law or regulation. NCTCOG reserves the right to make changes in the scope services offered through the Cooperative Purchasing Program to be performed hereunder. THIS INSTRUMENT HAS BEEN EXECUTED IN TWO ORIGINALS BY THE PARTIES HERETO AS FOLLOWS: *Denotes required fields NOTE• Facsimile copies ofthis document shall not be acceptable as ORIGINALS. Name of Participant (local government, agency, or non profit corporation) Mailing Address City State ZIP Code *Bv Signature of Authorized Official * Typed Name of Authorized Official Typed Title of Authorized Official Date Interstate vl rev. 10/OS North Central Texas Council of Governments 616 Six Flags Drive, Arlington, Texas 76011 *Bv: Signature of Authorized Official Typed Name of Authorized Official Typed Title of Authorized Official Date ORDER N0.30729 RFP FOR ACTUARIAL STUDY IN COMPLIANCE WITH GASB 43 AND 45 Came to be heard this the 11th day of February, 2008, with a motion made by Commissioner Williams, seconded by Commissioner Oehler. The Court unanimously approved by vote of 4-0-0 to: Approve preparing a Request For Proposal (RFP) for an Actuary to prepare an Actuarial Study in compliance with GASB 43 and 45, to establish the liability for other post employment health care benefits. ~ , as ~o~a9 COMMISSIONERS' COURT AGENDA REOUEST ~.+~ PLEASE FURNISH ONE ORIGINAL AND TEN (101 COPIES OF THIS REQUEST AND DOCUMENTS TO BE REVIEWED BY THE COURT MADE BY: Jeannie Hargis OFFICE: County Auditor MEETING DATE: February 11, 2008 TIME PREFERRED: SUBJECT: Consider, Discuss and Take Appropriate Action to approve preparing an RFP for an Actuary to prepare an Actuarial Study in compliance with GASB 43 and 45 to establish the liability for other post employment healthcare benefits. The County will be required to have this liability posted to their books after December 15, 2009. The study will take around 6 to 9 months to prepare. The average cost for these services ranges from $5,000 to $10,000. In order to meet the deadline as set out by GASB, we will need to start the RFP process and award the bid shortly thereafter. EXECUTIVE SESSION REQUESTED: (PLEASE STATE REASON) NAME OF PERSON ADDRESSING THE COURT: Jeannie Hargis ESTIMATED LENGTH OF PRESENTATION: 2 minutes IF PERSONNEL MATTER -NAME OF EMPLOYEE: Time for submitting this request for Court to assure that the matter is posted in accordance with Title 5, Chapter 551 and SS2, Government Code, is as follows: Meeting scheduled for Mondays: THIS REQUEST RECEIVED BY: THIS RQUEST RECEIVED ON: 5:00 PM previous Tuesday @ .M. All Agenda Requests will be screened by the County Judge's Office to determine if adequate information has been prepared for the Court's formal consideration and action at time of Court Meetings. Your cooperation will be appreciated and contribute towards your request being addressed at the earliest opportunity. See Agenda Request Rules Adopted by Commissioners' Court. Summary of Statement No. 45 F„~.-• Governmental Accounting Standards. Board Summaries /Status Summary of Statement No. 45 Accounting and Financial Reporting by,Employers for Postemployment Benefits Ofher Than Pensions (issued 6104) In addition to pensions, many state and local governmental employers provide other postemployment benefits (OPEB) as part of the total compensation offered to attract and retain the services of qualified employees. OPEB includes postemployment healthcare, as well as other forms of postemployment benefits (for example, life insurance) when provided separately from a pension plan. This Statement establishes standards for the measurement, recognition, and display of OPEB expenseiexpenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information (RSI) in the financial reports of state and local governmental employers. The approach followed in this Statement generally is consistent with the approach adopted in Statement No. 27, Accounting for Pensions ~,r by State and Local Governmental Employers, with modifications to reflect differences between pension benefits and OPEB. Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, addresses financial statement and disclosure requirements for reporting by administrators or trustees of OPEB plan assets or by employers or sponsors that include OPEB plan assets as trust or agency funds in their financial reports. How This Statement Improves Financial Reporting Postemployment benefits (OPEB as well as pensions) are part of an exchange of salaries and benefits for employee services rendered. Of the total benefits offered by employers to attract and retain qualified employees, some benefits, including salaries and active- employee healthcare, are taken whi{e the employees are in active service, whereas other benefits, including postemployment healthcare and other OPEB, are taken after the employees' services have ended. Nevertheless, both types of benefits constitute compensation for employee services. From an accrual accounting perspective, the cost of OPEB, like the cost of pension benefits, generally should be associated with the periods in which the exchange occurs, rather than with the periods (often many years later) when benefits are paid or provided. However, in current practice, most OPEB plans are financed on a pay-as-you-go basis, and financial statements generally do not ~rr.r report the financial effects of OPEB until the promised benefits are paid. As a result, current financial reporting generally fails to: . Recognize the cost of benefits in periods when the related services are received by the employer Page 1 of 5 http://www.gasb.org/st/summary/gstsm45.htm1 1/31/200f . Summary of Statement No. 45 . Provide information about the actuarial accrued liabilities for promised benefits associated with past services and whether and to what extent those benefts have been funded . Provide information useful in assessing potential demands on the employer's future cash flows. This Statement improves the relevance and usefulness of financial reporting by {a) requiring systematic, accrual-basis measurement and recognition of OPEB cost (expense) over a period that approximates employees' years of service and (b) providing information about actuarial accrued liabilities associated with OPEB and whether and to what extent progress is being made in funding the plan. Summary of Standards Measurement (the Parameters) Employers that participate in single-employer or agent multiple- employerdefrned benefit OPEB plans (sole and agent employers) are required to measure and disclose an amount for annual OPEB cost on the accrual basis of accounting. Annual OPEB cost is equal to the employer's annual required contribution to the plan (ARC), with certain adjustments if the employer has a net OPEB obligation for past under- or overcontributions. The ARC is defined as the employer's required contributions for the year, calculated in accordance with certain parameters, and y`, includes (a) the normal cost for the year and (b) a component for amortization of the total unfunded actuarial accrued liabilities (or funding excess) of the plan over a period not to exceed thirty years. The parameters include requirements for the frequency and timing of actuarial valuations as well as for the actuarial methods and assumptions that are acceptable for financial reporting. If the methods and assumptions used in determining a plan's funding requirements meet the parameters, the same methods and assumptions are required for financial reporting by bosh a plan and its participating employer{s). However, if a plan's method of financing does not meet the parameters (for example, the plan is financed on a pay-as-you-go basis), the parameters nevertheless apply for financial reporting purposes. For financial reporting purposes, an actuarial valuation is required at least biennially for OPEB plans with a total membership (including employees in active service, terminated employees who have accumulated benefits but are not yet receiving them, and retired employees and beneficiaries currently receiving benefits) of 200 or more, or at least triennially for plans with a total membership of fewer than 200. The projection of benefits should include all benefits covered by the current substantive plan (the plan as understood by the employer and plan members) at the time of each valuation and should take into consideration the pattern of sharing of benefit costs between the employer and plan members to that point, as well as certain legal or contractual caps on benefits to be provided. The parameters require that the selection of actuarial assumptions, ~/ including the healthcare cost trend rate for postemployment healthcare plans, be guided by applicable actuarial standards. Alternative Measurement Metfiod Page 2 of 5 http://www.gasb.org/st/summary/gstsm45.htm1 1 /31 /200£ . Summary of Statement No. 45 A sole employer in a plan with fewer than one hundred total plan members (including employees in active service, terminated employees who have accumulated benefits but are not yet receiving them, and retirees and beneficiaries currently receiving benefits) has the option to apply a simplified altematlve measurement method instead of obtaining actuarial valuations. The option also is available to an agent employer with fewer than one hundred plan members, in circumstances in which the employer's use of the alternative measurement method would not conflict with a requirement that the agent multiple-employer plan obtain an actuarial valuation for plan reporting purposes. Those circumstances are: The plan issues a financial report prepared in conformity with the requirements of Statement 43 but is not required to obtain an actuarial valuation because (a} the plan has fewer than one hundred total plan members (a{I employers) and is eligible to use the alternative measurement method, or (b) the plan is not administered as a qualifying trust, or equivalent arrangement, for which Statement 43 requires the presentation of actuarial information. The plan does not issue a financial report prepared in conformity with the requirements of Statement 43. This altemative method includes the same broad measurement steps as an actuarial valuation (projecting future cash outlays for benefits, discounting projected benefits to present value, and allocating the present value of benefits to periods using an actuarial cost method). However, it permits simplification of certain assumptions to make the method potentially usable by nonspecialists. Net OPEB Obligation-Measurement An employers net OPEB obligation is defined as the cumulative difference between annual OPEB cost and the employer's contributions to a plan, including the OPEB liability or asset at transition, if any. (Because retroactive application of the measurement requirements of this Statement is not required, for most employers the OPEB liability at the beginning of the transition year will be zero.) An employer with a net OPEB obligation is required to measure annual OPEB cost equal to (a) the ARC, (b) one year's interest on the net OPEB obligation, and (c) an adjustment to the ARC to offset the effect of actuarial amortization ~ past under- or overcontributions. Financial Statement Recognition and Disclosure Sole and agent employers should recognize OPEB expense in an amount equal to annual OPEB cost in government-wide financial statements and in the financial statements of proprietary funds and fiduciary funds from which OPEB contributions are made. OPEB expenditures should be recognized on a modified accrual basis in govemmental fund financial statements. Net OPEB obligations, if any, including amounts associated with under- or overcontributions from governmental funds, should be displayed as liabilities (or assets} in govemment-wide financial statements. Similarly, net ~,. OPEB obligations associated with proprietary or fiduciary funds from which contributions are made should be displayed as liabilities (or assets) in the financial statements of those funds. Employers are required to disclose descriptive information about http://vaww. gasb.org/st/summary/gstsm45.htm1 Page 3 of 5 1/31/200 - Summary of Statement No. 45 each defined benefit OPEB plan in which they participate, including the funding policy followed. In addition, sole and agent employers are required to disclose information about contributions made in comparison to annual OPEB cost, changes in the net OPEB ,~ obligation, the funded status of each plan as of the most recent actuarial valuation date, and the nature of the actuarial valuation process and significant methods and assumptions used. Sole and agent employers also are required to present as RSI a schedule of funding progress for the most recent valuation and the two preceding valuations, accompanied by notes regarding factors that significantly affect the identification of trends in the amounts reported. CostSharing Employers Employers participating in cost-sharing multiple-employer plans that are administered as trusts, or equivalent arrangements, in which (a) employer contributions to the plan are irrevocable, (b) plan assets are dedicated to providing benefits to retirees and their beneficiaries in accordance with the terms of the plan, and (c) plan assets are legally protected from creditors of the employers or plan administrator, should report as cost-sharing employers. Employers participating in multiple-employer plans that do not meet those criteria instead are required to apply the requirements of this Statement that are applicable to agent employers. Cost-sharing employers are required to recognize OPEB expense/expenditures for their contractually required contributions to the plan on the accrual or modified accrual basis, as applicable. Required disclosures include identification of the way that the contractually required contribution rate is determined (for example, by statute or contract or on an actuarially determined basis). Employers participating in acost-sharing plan are required to present as RSI schedules of funding progress and employer contributions for the plan as a whole if a plan financial report, prepared in accordance with Statement 43, is not issued and made publicly available and the plan is not included in the financial report of a public employee retirement system or another entity. Other Guidance Employers that participate in defined contribution OPEB plans are required to recognize OPEB expense/expenditures for their required contributions to the plan and a liability for unpaid required contributions on the accrual or modified accrual basis, as applicable, This Statement also includes guidance for employers that finance OPEB as insured benefits (as defined by this Statement) and for special funding situations. Effective Dates and Transition This Statement generally provides for prospective implementation- that is, that employers set the beginning net OPEB obligation at zero as of the beginning of the initial year. Implementation is required in three phases based on a government's total annual revenues in the first fiscal year ending after June 15, 1999. The `rr definitions and cutoff points for that purpose are the same as those in Statement No. 34, Basic Financial Statements-and Managements Discussion and Analysis-for Stafe and Locaf Governments. This Statement is effective for periods beginning after December 15, 2006, for phase f governments (those with total http:1/vrww. gasb.org/st/summary/gstsm45.htm1 Page 4 of 5 1/31/2001 Summary of Statement No. 45 annual revenues of $100 million or more); after December 15, 2007, for phase 2 governments (those with total annual revenues of $10 million or more but less than $100 million); and after December 15, 2008, for phase 3 governments (those with total annual revenues of less than $10 million). Earlier implementation is 'y~,• encouraged. Unless otherwise specified, pronouncements of the GASB apply to financial reports of all state and local governmental entities, including general purpose governments; public benefit corporations and authorities; public employee retirement systems; and public utilities, hospitals and other healthcare providers, and colleges and universities. Paragraphs 4 and 6 discuss the applicability of this Statement. '~r/ irrr+ Page 5 of 5 http://www.gasb.org/st/summary/gstsm45.htm1 1/31/200 ,Gabriel Roeder Smith & Company 5605 N. MacArthur Blvd. 469.524.0000 phone R Consultants & Actuaries Suite 870 469.524.0003 fax Irving, TX 75038-2631 wwwgabrielroedeLCOm MASTER AGREEMENT ~ ~., Q P Pursuant to the award of Joint Actuarial Services by the North Central Texas Council of Governments (NCTCOG), this agreement confirms the terms under which the Kerr county (name of government) hereinafter referred to as `CONTRACTING GOVERNMENT" has engaged Gabriel, Roeder, Smith & Co. hereinafter referred to as "GRS" to perform actuarial consulting services. In as much as this relationship will involve several actuarial reviews and other services that will be governed by the Request for Proposal issued by NCTCOG on May 31, 2006 and our subsequent response to that proposal, we have agreed to establish this "master agreement" defining the general terms and conditions for all work performed. This agreement will not, by itself, authorize the performance of any services. Rather specific services will be authorized through a separate engagement letter that references this master agreement and details the services to be provided and the timeframe and fees required. In the event of an inconsistency between this master agreement and an individual engagement letter, the master agreement will be followed. As described in the above referenced Request for Proposal the following terms apply: A. Tax Exempt Entities. CONTRACTING GOVERNMENT is exempt from manufacturer's federal excise tax and states sales tax. Tax exemption certificates will be issued upon request. B. Role of NCTCOG. NCTCOG has served as a facilitator to the RFP and award process but the contractual relationship is between GRS and the CONTRACTING GOVERNMENT. C. A~~re~ate Information. GRS agrees to supply NCTCOG with the specified results from the valuations and to aggregate that information with that of other governments for the purpose of benchmarking. D. Fees. GRS agrees to follow the attached pricing schedule ("Attachment A") for pricing of its services. I. Review of Charges. CONTRACTING GOVERNMENT has the right to review the supporting documentation for any hourly charges or out of pocket expenses assessed to the CONTRACTING GOVERNMENT under the fee schedule. J. Termination. Both CONTRACTING GOVERNMENT and GRS will have the right to terminate this agreement through written notice. CONTRACTING GOVERNMENT will pay any charges or prorate fees incurred to the date the termination notice is received and actuary will cease any in progress work unless specific stopping points are provided in the letter. I K. Work Product. The final work product will be the property of the CONTRACTING GOVERNMENT to be used as stated in the specific engagement letter. Ancillary use of the product is permitted but GRS. is not responsible for the reliability of those projections. It is understood that all reports are subject to the open records laws of the State of Texas and the contracting jurisdiction. L. Independent Contractor. All the services provided by GRS will be as an independent contractor. None of the terms in the engagement letter will be interpreted to create an agency or employment relationship. M. Biennial Reviews. CONTRACTING GOVERNMENT agrees to provide census data in off years using the same cut off date and delivery dates as used for the year of review. Actuary agrees to review the off year census data and provide CONTRACTING GOVERNMENT with timely feedback regarding deficiencies in the data. N. Term. The term of this master agreement will be governed by the afore referenced NCTCOG RFP and will expire on September 30, 2012. O: Complete Agreement. This letter combined with the specific engagement letter and as clarified by the RFP and Proposal set forth the entire agreement between the CONTRACTING GOVERNMENT and GRS. P. Indemnification. GRS covenants and agrees to indemnify and hold harmless and defend -and does hereby indemnify, hold harmless, and defend NCTCOG and CONTRACTING GOVERNMENTS, its officers and employees, from and against any and all suits or claims for damages or injuries, including death, to persons or property, whether real or asserted, arising out of any negligent act or omission on the part of the contractor, its officers, agents, servants, employees, or subcontractors, and the contractor does hereby assume all liability for injuries, claims or suits for damages to persons, property, or whatever kind of character, whether real or asserted, occurring during or arising out of the performance of a contract as a result of any negligent act or omission on the part of the contractor, i±s officers, agents, servants, employees, or subcontractors to the extent permitted by law. Please review this master agreement letter and the attached schedules and indicate your acceptance by having an official of CONTRACTING GOVERNMENT sign below. Q. Force Maieure. A force majeure event shall be defined to include governmental decrees or restraints, acts of God (except that rain, wind, flood or other natural phenomena normally expected for the locality, shall not be construed as an act of God), work stoppages due to labor disputes or strikes, fires, explosions, epidemics, riots, war, rebellion, and sabotage. If a delay or failure of performance by either party to this contract results from the occurrence of a force majeure event, the delay Gabriel Roeder Smith & Company ~' shall be excused and the time fixed for completion of the work extended by a period equivalent to the time lost because of the event. R. Professional Standards. GRS will provide qualified personnel for each engagement and follow all professional standards ascribed by the American Academy of Actuaries and the Governmental Accounting Standards Board. GABRIEL, ROEDER, SMITH & CO. By: ///C~~- 8~-" Date: b /S~z a© 8 Title: ~x~e.~: ~'~e. !~~-~s~`c%~¢ CONTRACTING GOVERNMENT ..~-- By~--~- - -.... Date: May 27 , 2008 Title: County Jude Gabriel Roeder Smith & Company