Finance committee reviews OPEB roll‑forward showing small net asset, cautions about sensitivity to discount and health‑cost assumptions

Chair Hill convened the Finance Committee to review a roll‑forward update of the town—s other postemployment benefits (OPEB) actuarial figures for the fiscal year ending June 30, 2025. The presentation, delivered by Roger Burton of Precision Actuarial TrueComp and introduced by staff member Robert, summarized the town—s OPEB liabilities, trust assets and the actuarial assumptions that drive the results.

Burton said the roll‑forward updates the 06/30/2024 full valuation to a one‑year mathematical projection as of 06/30/2025 and does not re‑count the census of employees and retirees. He explained the firm ——mathematically bring[s] results forward a year—— and that the firm updated the discount rate used in the projection to reflect the PARS trust—s investment strategy.

The staff report and presentation show the June 30, 2024 full valuation recorded an OPEB liability of about $8,150,000 and a PARS trust market balance of about $8,600,000, producing a net asset of roughly $530,000. Town contributions to the PARS trust since inception total about $5.8 million, the presentation said. For the one‑year roll‑forward, Burton told the committee the only material change in the projection was the discount rate; that change reduced the measured liability by about $151,000 while actual investment returns in the trust exceeded the projection, raising the market value above the assumed amount.

Committee members asked how retiree plan choices and CalPERS health plan rules affect the valuation. Burton and staff clarified that the actuarial roll‑forward uses the census and benefit elections in place at the valuation date: —We value based on what's in the census at the time,— Burton said. Staff added that a retiree—s insurance plan selection at retirement determines the benefit amount they receive and that enrollees can change plans during annual open enrollment, but the retiree—s benefit allocation is based on the plan and subsidy in effect at the time of retirement.

The committee discussed the GASB 75 concept of an implicit subsidy for pre‑Medicare retirees (retirees pay the same blended premiums as active employees even though retirees tend to have higher per‑person costs). Burton explained the subsidy is included in the GASB 75 liability and is largely a reporting construct: it increases the reported liability but, as he put it, —we will never pay that implicit subsidy— in the sense that the plan and trust are structured to meet actual benefit payments. He noted the implicit subsidy component is amortized over time and can decline as experience is recognized.

Members pressed on sensitivity: the firm—s sensitivity tables (in the full report) show that a one‑percentage‑point increase in health‑care trend could erase most of the town—s reported surplus, and a one‑percentage‑point change in the discount rate moves the liability by hundreds of thousands to low millions of dollars. Burton cautioned that market returns and health‑cost trends can materially change the measured position year to year.

No formal committee vote was recorded on acceptance of the roll‑forward during the discussion; staff said the roll‑forward is presented for review now and the committee will receive the next full actuarial valuation (a full census and recalculation) at the required two‑year interval.

The committee discussed operational matters including continuing to pay retiree health benefits from the trust and providing quarterly PARS statements to the finance committee so members can track performance and distributions between meetings.

The presentation and the full actuarial roll‑forward report were provided to the committee for inclusion in the town—s financial notes. Staff said the town will receive a full actuarial valuation next year that will incorporate census changes and the complete set of actuarial assumptions.