Monday, October 01, 2007
DOM Releases Postretirement Medical Plan Actuarial Valuation Report
(Des Moines) Today the Iowa Department of Management released the “State of Iowa Postretirement Medical Plan Actuarial Valuation Report” conducted by Deloitte Consulting LLP.
The report shows a Post-Employment Benefit (OPEB) cost of $22.7 million for Fiscal Year 2007, with a total unfunded actuarial accrued liability subsidy for OPEB of $219.7 million. The Fiscal Year 2007 OPEB will be disclosed in the Comprehensive Annual Financial Report (CAFR) of the State of Iowa to be released this fall. A disclosure will then be made in all future CAFRs for future fiscal years.
This report of the Implicit Rate Subsidy is required under Governmental Accounting Standards No. 43 “Financial Reporting for Post-employment Benefit Plans Other Than Pensions Plans (GASB 43) and Government Accounting Standards No. 45 “Accounting and Financial Reporting by Employers for Post-employment Benefits Other Than Pensions “(GASB 45). These standards establish uniform financial reporting for state and local governments for post-employment benefit plans other than pension benefits. The State of Iowa is required to adopt GASB 43 and 45 starting in Fiscal Year 2008 but is choosing to voluntarily adopt the standards for Fiscal Year 2007.
The Implicit Rate Subsidy is the difference between the expected claims for the retiree group and the blended premium. Retirees under the age of 65 (i.e. those not eligible for Medicare) generate higher claims on average than active participants.
The State of Iowa is required under Iowa Code Section 509A.13 to provide state retirees access to the State’s health plans offered to active state employees. The State charges the retirees the same premium as active state employees pay, although the retiree pays 100% of the premium rate whereas the State picks up a majority or all of the active state employees premium. This practice results in a blended premium, with the premium being based upon not only the active participants but also the retirees anticipated health claims.
These amounts are for reporting purposes only and will not require a change in the way the State of Iowa budgets for this subsidy. Since the State pays for health insurance with charges to state agencies for each active participant, it is not required to make any change in the way this Implicit Rate Subsidy is budgeted or funded.