OCEAN CITY – An Other Post-Employment Benefits Actuarial Report for the Town of Ocean City has resulted in over $500,000 in reduced retirement costs.
Kevin Binder and Roseanne Calzetta of Bolton Partners, Inc., presented the results of the Town of Ocean City Post-Employment Medical Benefits Actuarial Valuation during the Mayor and City Council’s work session on Tuesday afternoon.
According to the report, the employer contribution for retiree health benefits was decreased from $3,604,000 for Fiscal Year 2014 to $3,083,000 for Fiscal Year 2015. A projected increase in medical cost was more than offset by decreases due to updated demographic data, favorable claims experience and updating the rate of change in per capita health claim costs over time per the Society of Actuaries Long-Run Medical Cost Trend Model. The total reduction in employer contribution is $521,000.
Currently, the town’s benefit is the retiree pays 20 percent of cost and are eligible if hired before July 1, 2005 general employees are the age of 55 and 30 years of service or the age of 65 and 15 years of service, public safety employees are any age and 25 years of service or age of 55 and 15 years of service. If hired after July 1, 2005, general employees are eligible at the age of 55 and 30 years of service or age of 65 and 25 years of service and public safety employees can be any age with 25 years of service. Wastewater employees are part of a closed group that pays 10 percent of premiums. Employees hired after July 1, 2011 and have at least 25 years of service receive a benefit amount of $625 a month increased to a maximum of 3 percent per year until they reach 65.
The report estimated in FY 2014 there are 513 employees and 108 retirees, and in FY 2015 there will be 496 employees and 125 retirees.
Next Finance Administrator Martha Bennett proposed three new funding policies for the Policy and Procedure Manual.
These policies set formal guidelines for funding the Employees of Ocean City Pension Plan, the Public Safety Employees Pension Plan, and Other Post Employment Benefit Trust (OPEB). They were approved by Pension Trustees Ed Koebel of the town’s actuaries, Cavanaugh Macdonald Consulting, LLC, Kevin Binder of Bolton Partners, Inc., and are consistent with the town’s actual practice since establishment of the plans and OPEB Trust.
The new Government Accounting Standards no longer provide guidance on how to calculate an annual required contribution (ARC), which the town previously used to budget the pension plan and retiree health contributions each year.
According to Bennett, it is important to establish a funding policy because it lays out a plan to fund the pension plans and OPEB Trust, with different objectives for each plan; provides guidance in making annual budget decisions; demonstrates prudent financial management practices; reassures bond rating agencies; and shows employees and the public how pensions and OPEB Trust will be funded.
The council voted 5-0 with council members Margaret Pillas and Joe Mitrecic absent to approve the funding policies.