CM-07-03-030CITY OF ROUND ROCK
AGREEMENT FOR PROVISION OF
ACTUARIAL VALUATION CONSULTING SERVICES
WITH HOLMES MURPHY & ASSOCIATES
THIS AGREEMENT to provide actuarial valuation consulti services (hereinafter
refer d .to as "Agreement") is made and entered into on this the day of the month of
, 2007 by and between the CITY OF RO D ROCK, TEXAS, a
home -rule municipal corporation, whose offices are located at 221 East Main Street, Round
Rock, Texas 78664-5299 (hereinafter referred to as the "City"), and Holmes Murphy &
Associates, whose offices are located at 3333 Lee Parkway, Suite 900, Dallas, Texas 75219
(hereinafter referred to as the "Consultant").
RECITALS:
WHEREAS, City desires to contract for Consultant's assistance in providing actuarial
services in the valuation of post -employment benefits for retired employees; and
WHEREAS, the parties desire to enter into this Agreement to set forth in writing their
respective rights, duties and obligations hereunder;
NOW, THEREFORE, WITNESSETH that for and in consideration of the mutual
promises contained herein and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, it is mutually agreed between the parties as follows:
1.01 EFFECTIVE DATE, DURATION, AND TERM
A. This Agreement shall be effective beginning January 1, 2007, and shall remain in
full force and effect unless and until it expires by operation of the term indicated
herein, or is terminated or extended as provided herein.
B. The term of this Agreement shall be from January 1, 2007 through and including
June 14, 2007.
C. There is no provision for automatic renewal of this Agreement.
D. City reserves the right to review Consultant's performance at any time during the
term of this Agreement, and may elect to terminate this Agreement with or
without cause or may elect to continue.
2.01 SCOPE OF SERVICES
The services which are the subject matter of this Agreement are fully described in the
attached Exhibit "A" which is incorporated herein by reference for all purposes as though recited
verbatim.
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3.01 CONSULTING FEE
A. In consideration for the services to be performed by Consultant, City agrees to
pay Consultant the not -to -exceed sum of Nine Thousand Five Hundred and
No/100 Dollars ($9,500.00).
B. No reimbursement for travel expenses or any other costs whatsoever are
authorized hereunder.
4.01 FEE FIXED
The consulting fee recited herein for services shall be firm for the duration of the term of
this Agreement.
5.01 TERMS OF PAYMENT
To receive payment, Consultant shall prepare and submit a series of monthly invoices.
Each invoice shall state and detail the Scope of Services' deliverable(s) accomplished, along
with documentation for each deliverable. All invoices shall include, at a minimum, the
following information: (1) name and address of Consultant; (2) description of services rendered;
(3) original invoice number, if applicable; and (4) delivery dates.
6.01 PROMPT PAYMENT POLICY
In accordance with Chapter 2251, V.T.C.A., Texas Government Code, payment to
Consultant will be made within thirty (30) days of the day on which City receives the
performance and/or deliverables, or within thirty (30) days of the day on which the performance
of services was complete, or within thirty (30) days of the day on which City receives a correct
invoice for the performance and/or deliverables or services, whichever is later. Consultant may
charge a late fee (not greater than that which is permitted by Texas law) for payments not made
in accordance with this Prompt Payment Policy; however, this policy does not apply to payments
made by City in the event:
A. There is a bona fide dispute between City and Consultant concerning the services
performed that causes the payment to be late; or
B. The terms of a federal contract, grant, regulation, or statute prevent City from
making a timely payment with federal funds; or
C. There is a bona fide dispute between Consultant and a subcontractor or between a
subcontractor and its supplier concerning the services performed which causes the
payment to be late; or
D. The invoice is not mailed to City in strict accordance with instructions, if any, on
any purchase order, or this Agreement or other such contractual agreement.
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7.01 NON -APPROPRIATION AND FISCAL FUNDING
This Agreement is a commitment of City's current revenues only. It is understood and
agreed that City shall have the right to terminate this Agreement at the end of any City fiscal year
if the governing body of City does not appropriate funds sufficient to purchase the services as
determined by City's budget for the fiscal year in question. City may effect such termination by
giving Consultant a written notice of termination at the end of its then -current fiscal year.
8.01 INDEPENDENT CONTRACTOR STATUS
Consultant is an independent contractor, not City's employee. Consultant's employees or
subcontractors are not City's employees. This Agreement does not create a partnership
relationship. Neither party has authority to enter into contracts as agent for the other party. The
parties agree to the following rights consistent with an independent contractor relationship:
A. Consultant has the right to perform services for others during the term hereof.
B. Consultant has the sole right to control and direct the means, manner and method
by which services required by this Agreement will be performed.
C. Consultant has the right to hire assistants as subcontractors, or to use employees
to provide the services required by this Agreement.
D. Consultant or Consultant's employees or subcontractors shall perform the services
required by this Agreement. City shall not hire, supervise, or pay any assistants
to help Consultant.
E. Neither Consultant nor Consultant's employees or subcontractors shall receive
any training from City in the skills necessary to perform the services required by
this Agreement.
F. City shall not require Consultant or Consultant's employees or subcontractors to
devote full time to performing the services required by this Agreement.
G. Neither Consultant nor Consultant's employees or subcontractors are eligible to
participate in any employee pension, health, vacation pay, sick pay, or other
fringe benefit plan of City.
9.01 CITY'S DESIGNATION OF AUTHORIZED REPRESENTATIVES
City shall from time to time designate in writing one or more of its employees who shall
be authorized to provide instructions to Consultant under this Agreement.
City at this time hereby designates the following City employee as its authorized
representative:
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Linda Gunther
Human Resources
221 East Main Street
Round Rock, Texas 78664
(512) 218-5491
10.01 PROPRIETARY DATA; CONFIDENTIALITY
A. During the term of this Agreement, each party shall use the information furnished
to it solely for the purpose of performing their respective obligations under the
Agreement. During the term of this Agreement, and for five (5) years thereafter,
neither party shall disclose such information to any person other than to its
directors, officers, employees, lenders, counsel, representatives or affiliates, if
any, who require the information ("Representatives"), or for any purpose other
than as set forth above. If a party desires to disclose the information furnished to it
under this Agreement to a Representative, that party shall first inform the
Representative of the confidential nature of the information and of the
requirement that it not be used for purposes other than as set forth above. In any
event, and without limiting the preceding obligation, the party receiving the
information shall be and remains legally responsible for any breach of this
Agreement, and shall reasonably safeguard the information from unauthorized use
or disclosure by its Representatives. Except as may be required by applicable law,
regulation or stock exchange rules, without the prior written consent of the party
supplying the information, the party receiving the information will not, and will
not permit its Representatives to, disclose to any person either the fact that the
information has been made available to that party, or that the party has inspected
any portion of the information. If a party who has received the information is
requested or required (by oral questions, interrogatories, requests for information
or documents, subpoena, civil investigative demand or similar process) to disclose
any information, that party, to the extent it may legally do sa, will promptly notify
the other party of such request or requirement so that the other party may seek an
appropriate protective order. To the extent the other party is unable to obtain a
protective order and the party receiving the information is legally compelled to
disclose information, the party receiving the information may disclose such of the
information to the party compelling disclosure as is required by law.
B. For the purposes of this agreement, confidential information shall not include: (1)
information that is, or comes, within the public domain through no fault of either
party; (2) information learned by either party from third parties; or (3) information
known to, or disclosed by, either party independent of this Agreement.
C. All records maintained by Consultant under this Agreement are exclusively the
property of City. If, upon termination, City requests a change in the format or
content of the records maintained by Consultant, then City shall be responsible for
payment of any reasonable costs associated with such changes. If City becomes
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aware of any breach of this section or other conditions under which such system,
documentation or other information or any part thereof is lost or comes into
possession of an unauthorized person, firm or organization, City shall promptly
notify Consultant and provide Consultant with information regarding such breach
or improper possession and take reasonable action as necessary to recover the
system, documentation or other information or any part thereof at the request and
cost of Consultant. The obligations of City and Consultant under this section shall
survive the termination of this Agreement.
D. Consultant expressly acknowledges its understanding that City is subject to the
Texas Public Information Act, and that City's duties run in accordance therewith.
Following proper execution of this Agreement, any and all programs, data, or
other materials involved herewith may be subject to release as public information
unless Consultant proves such information to be exempt from the Texas Public
Information Act. Consultant is advised to consult its own legal counsel regarding
disclosure issues, and Consultant is solely responsible for taking appropriate
precautions to safeguard trade secrets or any other proprietary information. City
assumes no obligation or responsibility whatsoever for asserting legal arguments
on behalf of Consultant.
11.01 MATERIALS OWNERSHIP
All work produced under this Agreement, and all rights therein, belongs to and shall be
the sole and exclusive property of City.
12.01 WARRANTIES
Consultant represents that it employs trained, experienced and competent persons to
perform all of the services, responsibilities and duties specified herein, and Consultant warrants
that all services performed under this Agreement shall be performed consistent with generally
prevailing professional or industry standards. City's remedy for breach of the above warranty
shall be the satisfactory re -performance of Consultant's services or as otherwise provided for
herein.
13.01 INDEMNIFICATION
A. This indemnification section shall apply to Consultant and City, and to each of the
party's successors, assigns, officers, employees and elected officials.
B. Each party shall indemnify the other, and hold each other harmless, from any and
all loss, damage, penalty, liability, cost and expense, including without limitation
reasonable attorney's fees and disbursement that may be incurred by, imposed
upon, or asserted by reason of any suit, action, legal proceeding, claim, demand,
regulatory proceeding, or litigation arising from any act done or omitted to be
done by any indemnifying party, excepting only any loss, damage, penalty,
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liability, cost or expenses resulting from negligence or willful misconduct of the
indemnified party. Nothing herein shall be deemed to limit the rights (including
but not limited to the right to seek contribution) of City or Consultant against any
third party who may be liable for an indemnified claim.
C. The parties agree that in no event shall they be liable to the other for any
incidental, indirect, special, punitive, consequential or similar damages of any
kind including without limitation loss of profits, loss of business or interruptions
of business, whether such liabilities are predicated on contract, tort, strict liability
or any other legal theory.
D. The parties agree that the provisions of this section shall survive the termination
of this Agreement.
14.01 ASSIGNMENT AND DELEGATION
The parties bind themselves, successors, assigns and legal representatives to each other
with respect to terms of this Agreement. Neither party may assign, sublet or transfer any rights
or interests under this Agreement without the other party's prior written approval, and neither
may delegate any duties under this Agreement without the other party's prior written approval.
15.01 DISPUTE RESOLUTION
If a dispute arises under this Agreement, the parties agree to first try to resolve the
dispute by appropriate internal means, including referral to each party's senior management. If
the parties cannot reach a mutually satisfactory resolution, then and in that event any such
dispute may be sought to be resolved with the help of a mutually selected mediator. If the parties
cannot agree on a mediator, City and Consultant shall each select a mediator and the two
mediators shall agree upon a third mediator. Any costs and fees, other than attorney fees,
associated with the mediation shall be shared equally by the parties.
City and Consultant hereby expressly agree that no claims or disputes between the parties
arising out of or relating to this Agreement or a breach thereof shall be decided by any arbitration
proceeding, including without limitation, any proceeding under the Federal Arbitration Act (9
USC Section 1-14) or any applicable state arbitration statute.
16.01 RIGHT TO ASSURANCE
Whenever either party to this Agreement, in good faith, has reason to question the other
party's intent to perform hereunder, then demand may be made to the other party for written
assurance of intent to perform. In the event that no written assurance is given within the
reasonable time specified when demand is made, then and in that event the demanding party may
treat such failure as an anticipatory repudiation of this Agreement.
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17.01 DEFAULT
If Consultant cannot or does not provide the services specified herein, City reserves the
right and option to obtain the services from another source.
Consultant shall be declared in default of this Agreement if it does any of the following:
A. Fails to fully, timely and faithfully perform any of its material obligations under
this Agreement;
B. Fails to provide adequate assurance of performance under Section 16.01 herein; or
C. Becomes insolvent or seeks relief under the bankruptcy laws of the United States.
18.01 TERMINATION
This Agreement may be terminated as follows:
A. City has the right to terminate this Agreement, in whole or in part, at any time,
without penalty and with or without cause, with not less than thirty (30) days'
written notice to the other party.
B. City has the right to terminate this Agreement for cause due to a material breach
or default of Consultant in the performance of its responsibilities and obligations
under this Agreement, provided such material breach is not cured to City's
satisfaction within ten (10) days from the date of written notice of such breach or
default, unless immediate termination is permitted under paragraph C.
immediately below.
C. Either party has the right to immediately terminate this Agreement in the event
the other party shall become insolvent, make a general assignment for the benefit
of creditors, suffer or permit the appointment of a receiver for its business or
assets, become subject to any proceeding under any bankruptcy or insolvency law
whether domestic or foreign, or become liquidated, voluntarily or otherwise.
D. Consultant has the right to terminate this Agreement only for cause, that being in
the event of a material and substantial breach by City, or if City fails to pay the
undisputed portion of invoices upon proper presentation for payment and in
accordance with applicable portions of this Agreement dealing with charges and
payment.
E. Upon termination of this Agreement, Consultant shall return all documents,
information and data relating to the Plans of City. Consultant may not retain
input or output materials or data files without City's express written permission.
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Consultant agrees not to disclose such data to any third party unless otherwise
directed by City or as required by law.
F. Save and except for those sums due and payable, or which may later be
determined to be due and payable pursuant to applicable provisions governing
termination, should this Agreement be terminated by either party:
1. If terminated by City, Consultant shall discontinue all services in
connection with the performance of this Agreement and shall proceed to
cancel all existing orders and agreements insofar as such orders or
agreements are chargeable to this Agreement. Within thirty (30) days
after receipt of notice of termination, Consultant shall submit an invoice
showing in detail the satisfactorily performed services under this
Agreement to the date of termination. City shall pay Consultant that
portion of the prescribed undisputed charges. Termination of this
Agreement shall not relieve Consultant of any obligations or liabilities
occurring prior to termination.
2. If terminated by Consultant, Consultant shall discontinue all services in
connection with this Agreement and shall terminate all existing orders and
agreements insofar as such orders and agreements are chargeable to this
Agreement. Within thirty (30) days of date of termination, Consultant
shall submit an invoice showing in detail the satisfactorily performed
services under this Agreement to the date of termination. City shall pay
Consultant that portion of the prescribed undisputed charges. Termination
of this Agreement shall not relieve Consultant of any obligations or
liabilities occurring prior to termination.
G. The parties acknowledge and agree that Consultant shall not be entitled to
compensation for services it would have performed under the remaining term of
this Agreement except as provided above.
19.01 LOCAL, STATE AND FEDERAL TAXES
Consultant shall pay all income taxes, and FICA (Social Security and Medicare taxes)
incurred while performing services under this Agreement. City will not do the following:
A. Withhold FICA from Consultant's payments or make FICA payments on
Consultant's behalf;
B. Make state and/or federal unemployment compensation contributions on
Consultant's behalf; or
C. Withhold state or federal income tax from Consultant's payments.
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Consultant acknowledges its understanding that City is exempt from federal excise and
state sales tax, and acknowledges that such taxes are not to be included in any charges to City.
20.01 GRATUITIES AND BRIBES
City may, by written notice to Consultant, immediately cancel this Agreement without
any liability of any kind to Consultant if it is determined by City that gratuities or bribes in the
form of entertainment, gifts, or otherwise were offered or given by Consultant or its agents or
representatives to any City officer, employee or elected representative with respect to the
performance of this Agreement. In addition, Consultant may be subject to penalties stated in the
Texas Penal Code.
21.01 COMPLIANCE WITH LAWS, CHARTER AND ORDINANCES
Consultant and its agents, employees and subcontractors shall use best efforts to comply
with all applicable federal and state laws, the Charter and ordinances of the City of Round Rock,
as amended, and with all applicable rules and regulations promulgated by local, state and
national boards, bureaus and agencies.
22.01 NOTICES
All notices and other communications in connection with this Agreement shall be in
writing and shall be considered given as follows:
A. When delivered personally to recipient's address as stated herein.
B. Three (3) days after being deposited in the United States mail, with postage
prepaid to recipient's address as stated herein.
Notice to Consultant:
Holmes Murphy & Associates
3333 Lee Parkway, Suite 900
Dallas, TX 75219
Notice to City:
David Kautz
Assistant City Manager,CFO
221 East Main Street
Round Rock, TX 78664
and to:
Stephan L. Sheets
City Attorney
309 East Main Street
Round Rock, TX 78664
Nothing contained in this section shall be construed to restrict the transmission of routine
communications between representatives of City and Consultant.
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23.01 APPLICABLE LAW; ENFORCEMENT AND VENUE
The laws and court decisions of Texas shall govern this Agreement, and it shall be
construed in accordance therewith. Exclusive venue shall lie in Williamson County, Texas.
24.01 ENTIRE AGREEMENT
This is the entire and exclusive Agreement between Consultant and City, and it
supersedes all prior agreements and communications, oral and/or written, between the parties in
relation to the subject matter of this Agreement. Both parties acknowledge that they have read
this Agreement and existing exhibits and attachments, and that they understand it and agree to be
bound by its terms and conditions. The parties further agree that any attachments and exhibits
hereto are hereby incorporated by reference and made a part of this Agreement.
This Agreement may not be amended in any form other than by negotiated written
agreement duly executed by Consultant's authorized representative and by appropriate action of
either the Round Rock City Council or the Round Rock City Manager.
25.01 SEVERABILITY
The invalidity, illegality, or unenforceability of any provision of this Agreement or the
occurrence of any event rendering any portion or provision of this Agreement void shall in no
way affect the validity or enforceability of any other portion or provision of this Agreement.
Any void provision shall be deemed severed from this Agreement, and the balance shall be
construed and enforced as if this Agreement did not contain the particular portion or provision
held to be void. The parties further agree to amend this Agreement to replace any stricken
provision with a valid provision that comes as close as possible to the intent of the stricken
provision. The provisions of this section shall not prevent this entire Agreement from being void
should a provision which is of the essence of this Agreement be determined void.
26.01 FORCE MAJEURE
Neither party shall be liable for failure to perform its obligations hereunder where such
failure results from acts of God, fires, storms, accidents, actions or decrees of governmental
bodies, or other such events beyond its reasonable control. The affected party shall promptly
give notice to the other party, and shall then use its best efforts to timely resume performance.
27.01 MISCELLANEOUS
A. Any waiver by either party of any requirement of this Agreement shall not be
deemed to be a continuing waiver nor a waiver of any other requirement hereof.
B. Any remedies of either party are cumulative, and exercise by a party of one
remedy shall not preclude the party from exercising any other remedy it may have
at law or hereunder.
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C. This Agreement is for the mutual and exclusive benefit of Consultant and City
and shall not be deemed to be for the direct or indirect benefit of clients or
customers of Consultant or City. Clients or customers of Consultant and City
shall not be deemed to be third party beneficiaries of this Agreement nor to have
any other contractual relationship with Consultant or City by reason of this
Agreement.
D. Time is of the essence. Any failure by Consultant to fulfill obligations within
agreed timeframes will constitute a material breach of this Agreement.
Consultant shall be fully responsible for its delays or for failures to use best
efforts in accordance with the terms of this Agreement. Where damage is caused
to City due to Consultant's failure to perform, City may pursue any remedy
available without waiver of any of City's additional legal rights or remedies.
E. This Agreement may be executed in multiple counterparts, any one of which shall
be considered an original of this document, and all of which, when taken together,
shall constitute one and the same instrument.
IN WITNESS WHEREOF, City and Consultant have executed this Agreement on the
dates indicated below.
CITY 1 F ROUND ROCK, TEXAS ATTE . T.
By:
Printe
Title:
Date Signed:
FOR CITY, APPROVED AS 0 FORM:
By: �jV+ _ 111.41L%t
Steph.'1 L. Sheets, City Attorney
HOLMES MURPHY & ASSOCIATES
By:
Printed Name: t &tJ
Title: PRc-S;a t r� t
Date Signed: 4/200.7
By:
Christine R. Martinez, City Secretary
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City of Round Rock
Actuarial Valuation
Scope of Services
Purpose
C070222 •1
The purpose of this document is to outline the scope of service pertaining to the actuarial
valuation for the City of Round Rock effective January 1, 2007. The scope of services
outlined within this document are separate and in addition to the consulting work
currently being performed by Holmes Murphy.
GASB 45 Valuation — Scope of Services
Holmes Murphy has extensive experience providing actuarial services in the valuation of
post employment benefits for retired employees. The scope of work desired for the City
would be best described by going through the steps we take in performing a valuation for
our clients.
2/23/2007
Education
Since GASB is new, the first step we take is to explain to our client the basic
concepts of GASB — how the OPEB obligations and costs are calculated; how the
funding methods work; how the liability is accrued on the books; and, why the
standards board is requiring this accounting. During the discussion, we gather a
sense of the client's level of understanding and their expectations. We inform
them of what they can expect in the process and the data that we will need to
collect from them.
Data Collection
The first step in the actual valuation process is to analyze the data we collect from
the client. The data that we collect is a snapshot census as of the date of the
valuation and month -by -month headcounts and claims. We reconcile the census
with either last year's valuation or in this case, since this is the first year, we
would do a count by tier and make sure that it matches the counts used in other
calculations such as the budget and funding rates.
Develop Claims Cost Assumption
With the claims data, we develop a "per employee per month" claims cost and
match that with what was used in developing the budget. Any discrepancies need
to be reconciled.
EXHIBIT
tIAt.
Holmes Mutphy & Associates, Inc.
1-
0070222 -1
Other Assumptions Development
The next step is to meet with the client and decide on appropriate assumptions for
the valuation. The assumptions fall into two categories: demographic and
economic. To determine the demographic assumptions, we need to collect
additional information from the City such as turnover, retirement, marriage, and
participation experience. The economic assumptions such as the discount rate and
health care trend rate are guided by economic conditions at the time. GASB
describes guidelines for determining these. This is an important step in the
process as the assumptions can have a large impact on the results. As GASB
allows some leeway, we tailor these assumptions to the client's needs taking into
consideration appropriateness (do the assumptions accurately reflect experience?),
business objectives (are the assumptions consistent with the assumptions used in
other operations?), and organizational philosophy (aggressive or conservative?).
Valuation Modeling
We then run the valuation and share the results with the client. Our valuation
system allows us to run results instantaneously so that if an assumption needs to
be changed, we can rerun and see the effect on the results "interactively". For this
type of analysis, we have an interactive, working session with the client in which
we run various scenarios with our system. In our interactive meeting, we discuss
changes, run the system and see the results until the appropriate decision is made.
Many times our clients request screen prints of several scenarios so they can take
them back and study them or share them with others in the organization.
Additional Ideas — Possibilities
As municipalities begin reviewing their retiree medical plans in light of GASB
45, we anticipate that they may require additional services. Holmes Murphy is
well situated to assist with those services. The following would be examples
where additional services might be needed:
• Pre -65 plan design and contribution strategy
1. Design a separate plan or just continue active plan
2. For contributions, do we include active experience or rate retires on a
stand-alone basis?
3. Self -insure or fully -insure?
4. Brokering services
• Post -65 medical plan design and contribution strategy
1. Self -insure or fully -insure?
2. Medicare supplement products
3. Brokering services
2/23/2007 Holmes Murphy & Associates, Inc.
CO70222 -1
• Post -65 Rx plan design and contribution strategy
1. Self -insure or fully -insure?
2. Incorporate in the medical plan or separate?
3. Enhanced or standard prescription drug plans
4. Brokering services
Develop Reports
Once the results are agreed upon, we produce and issue the report. Finally, we
usher the client through the audit process by being available for any questions or
supplying any information the auditors may have.
Timeline
Holmes Murphy will begin working with the City in January of 2007 or another starting
timeframe that is mutually agreed upon. Once all data has been collected, we will need
approximately three weeks to develop the valuation modeling.
Fees
We will perform all scope of services outlined within this document for an annual fee of
$9,500. Fees associated with work not specifically outlined within this document are
subject to mutual agreement. Below we have provided several additional projects for
review should the City of Round Rock choose to pursue further.
Sample Retiree Medical Engagements
One client was interested in converting their defined benefit retirement plan to a defined
contribution plan in which both the employer and employee contribute monthly while the
employee is active. We developed a plan design model that compared the account
balance to the expected lifetime medical cost in retirement. This allowed the employer to
design their contributions to provide a benefit that was equivalent to their current plan.
We also projected cost for 30 years under the current plan and compared that to the 30
years of contributions. Other issues included which groups to grandfather under the
current plan and how to transition employees that are at such an age as to be caught
between the two plans.
The retirees of another employer were complaining that their post -65 medical plan was
not good coverage and had a $50,000 annual cap. The plan was self-insured and
integrated with Medicare on a carve -out basis. We showed the client how the Medicare
integration method had a larger effect on the benefit payout than the actual plan design.
Upon seeing that, they switched to a Medicare supplement plan that was fully -insured.
2/23/2007 Holmes Murphy & Associates, Inc.
CO70222 -1
Consequently, the retirees were placed in a plan that paid superior benefits, had no annual
cap and very little cost increase.
Another employer was a "high-tech" firm that spun off of an "old world" industry and
needed to slowly transition their benefits from "old world" to "high tech". Especially
challenging was their pension and retiree medical plans which had been rich yet needed
to be capped to stay competitive in the high-tech world where most companies don't offer
retiree plans. We offered many different ways in which they could cap their cost and ran
the results. From this they were able to choose the option that best balanced their need to
decrease their retiree medical cost as well as keep the current retirees satisfied and still
offer some benefit to the active employees.
And finally a large Texas employer charged their post -65 retirees the same contribution
amount as their pre -65 retirees even though the post -65 cost was offset by Medicare.
This effectively translated into the post -65 retirees paying the full cost. We did studies to
determine the sensitivity of the FAS 106 liability and expense to the post -65 contribution
levels. Also, since the plan is not actuarially equivalent to the Medicare Part D plan, we
are considering placing them with an enhanced Medicare prescription drug plan.
2/23/2007 Holmes Murphy & Associates, Inc.
BLUE SHEET FORMAT
DATE: March 5, 2007
SUBJECT: City Manager Approval- March 9, 2007
ITEM:
Consider an agreement with Holmes Murphy & Assoc. for actuarial valuation consulting
services.
Department: Finance
Staff Person: Cindy Demers, Director of Finance
Justification:
In order to comply with GASB 45 standards, Holmes Murphy will provide a valuation
model. This model will allow us to quantify the liability associated with post employment
benefits.
Funding:
Cost: $9,500
Source of funds: Health Insurance Fund
Outside Resources: N/A
Background Information:
Under the new GASB 45 standards, state and local government employers must
account for, and report, the cost of Other Post Employment Benefits (OPEB) in the
same way they report pensions. As a result, the OPEB costs for most employers will be
based on actuarially determined amounts rather than the "pay-as-you-go" method.
Governments must use actuarial life expectancy evaluations to determine the
accounting and reporting requirements.
Public Comment:
Blue Sheet Format
Updated 01/20/04