Investment committee reviews Atherton OPEB actuarial report, recommends council acceptance

The Town of Atherton Investment Committee on the meeting’s OPEB item heard a presentation by Roger Burton, the chief actuary who performs GASB 75 valuations for GovInvest, and voted to recommend acceptance of the GovInvest actuarial evaluation to the Town Council.

Burton told the committee the report measures the town’s OPEB liability — retiree health and similar benefits other than pensions — as of June 30, 2024, and explained the elements that go into the GASB 75 valuation: plan provisions, health‑care cost assumptions and trends, discount (interest) rate, and demographic assumptions. “Your total OPEB liability … went from 7.9 to 8.2,” Burton said, referring to the report’s millions‑of‑dollars figures. He said the town’s fiduciary net position (assets in the trust) exceeds that liability, producing a net overfunding position.

The committee discussed how the valuation treats an “implicit subsidy” — the cross‑subsidy that arises when retirees are charged the same premiums as active employees before Medicare eligibility — and how that figure appears in GASB 75 termination and ADC calculations. Burton said the implicit subsidy “is added … but we also give you credit for it,” and that it mainly affects the valuation if the plan were closed or terminated.

Committee members pressed staff and the actuary on several numeric points: the report shows the town’s total OPEB liability rising from about $7.9 million to about $8.15 million; assets in the Section 115 trust exceed the liability by roughly $510,000 in the valuation; retiree health benefit payments in fiscal 2024 were about $424,000; the CalPERS PEMHCA (Public Employees’ Medical and Hospital Care Act) minimum payment is roughly $75,000 per year; and the actuary’s previously calculated actuarially determined contribution (ADC) for fiscal 2023–24 was $119,709. Burton noted that because the plan is currently overfunded the short‑term contribution could be zero or even negative under current assumptions and recommended against making an additional contribution at this time unless the council directs otherwise.

After the presentation and follow‑up questions, a committee member moved to recommend the GovInvest GASB 75 report to the Town Council; the motion received a second and passed unanimously.

Why it matters: GASB 75 valuations drive financial reporting and inform policy choices about whether to prefund retiree health benefits, change plan design, or draw on trust assets. Committee members repeatedly noted the report’s sensitivity to assumptions (discount rate, health care trends, census changes) and the size of the implicit subsidy, which accounts for a substantial portion of the measured liability in the event of plan termination.

The committee requested staff return with any updated numbers or an updated actuarial roll‑forward next cycle and flagged a March timeframe for staff and council discussion about discretionary contributions if the council wishes to consider depositing additional funds into the trust.