1. Handling GASB 45 Margaret Wallace CTA NOD Department Orange RRC

2. Preparing for Bargaining Talking Points Educate everyone on REAL requirements Do not fuel “crisis” rhetoric Assess current OPEB Actuarial valuation Learn options Bad faith bargaining

3. A Quick Summary What is GASB? Are the new accounting standards mandatory? Will bond ratings fall if employers do not pre-fund now? What should employee organizations expect? What is CHCRS?

4. Union Perspective of GASB 45 /Impact of STRS /OPEB Evolution /OPEB Costs /Health Care Costs

5. Union Perspective of GASB 45 /Less than 50% offer some form of OPEB /Less than 10% offer OPEB on lifetime basis /Over 70% have teachers paying a share of premium /Nearly all OPEB require 10 to 15 years of service /Few chapters are adding to this benefit Current Contracts

6. Walk in their SHOES, but don’t buy them. What are the pressures on employers? –Political –Internal Budget –Bond Vendors –Lawyers –Consultants

7. True or False The new rules do not require actions beyond calculating costs and reflecting them on financial statements. GASB does not require funding action. Employers can take time to make prudent assessments and plans. True

8. GASB Requirement to Calculate and to Report Schedule Applies for fiscal years starting after: If revenue is: Dec 15, 2006Over $100 million Dec 15, 2007 At least $10 million but less than $100 million Dec 15, 2008Less than $10 million

9. Changes in health plan provisions Changes in health care benefit funding management mechanisms Changes in sources of funding for benefits Reducing Liabilities

10. Calculating Cost Assemble documents Census of employees Separate costs for retirees from active employees Separate medical costs for Medicare retirees Engage a qualified actuary to calculate liability Identify OPEB programs

11. The Actuarial Valuation Process Input Data Annual financial statement costs Project benefits/calculate liability An actuarial report can include different projections based on different scenarios with respect to actuarial assumptions and actuarial methods.

12. Common Actuarial Assumptions Economic –Rate of investment return –Health cost increase trend –Current cost of coverage –Plan expenses Demographic –Mortality incidence –Retirement incidence –Employee turnover –Martial status and number of dependents –Coverage selection –Disability

13. CalPERS will offer a range of model assumptions for actuarial valuations used by participants in the CalPERS health care purchasing program. The CalPERS model assumptions should be available in late September or October, 2007, and will be offered as an example for organizations.

14. Be certain that the information and the assumptions that actuaries are using are proper and correct. Watch how employers use financial figures in bargaining. GASB valuations are with respect to the employer share of the premium. Pre-funding advantages and disadvantages. Bonds and how they may affect future options What should you look out for?

15. Possible changes in benefits plans and provisions Be Warned Be Cautious Do your homework Be Open Be Realistic Do your homework

16. Set Aside Options Set dollars aside within existing general fund budgets including pay-as-you-go Set up irrevocable pre-funded trusts Institute individual accounts There are some options that are not recommended by CTA. Please consult with your Primary Contact Staff and NODD Staff prior to any commitment..

17. Financing Options General funds, reserve funds, state contributions Bonds Whole Life Insurance Policy Unused Accumulated Sick Leave Lottery Funds Excess Earnings On-Time State Budget Augmentation to Schools Public Private Partnerships There are some options that are not recommended by CTA. Please consult with your Primary Contact Staff and NODD Staff prior to any commitment..