Actuarial valuation shows Wauwatosa retiree health liability near $39.3 million; city presents biannual report

City staff and an actuary presented the City of Wauwatosa Financial Affairs Committee with the city's required biannual actuarial valuation of retiree health insurance liabilities on April 8, 2025. Milliman actuary Jack Chmielewski said the valuation (measurement date 01/01/2025, reporting for fiscal years ending 12/30/2024 and 12/30/2025) places the plan's liability at roughly $39.3 million for the 12/30/2024 measurement.

The valuation matters because the liability affects annual GASB-accounting expense and the city's financial statements, and it helps budget for pay-as-you-go health benefit payouts. Director John Mabo told the committee the city is required to complete this officer valuation every two years under accounting standards.

Chmielewski said the valuation takes a snapshot of eligible active employees and current retirees on the valuation date and projects benefit payments forward before discounting them to present value. As of 01/01/2025 the actuary reported 286 active employees included in the valuation and 91 retirees currently receiving medical benefits. Service cost (the value of benefits earned by active employees during the year) was roughly $1.3 million, and interest cost (the present-value effect of benefits being one year closer) was also about $1.3 million.

The report attributes movements in the liability to three main factors: changes in plan experience (claims and retirements), changes in economic assumptions such as the discount rate, and plan design changes. Chmielewski said changes in the discount rate were a large driver: using a 3.26% discount rate for the 12/30/2024 measurement produced the $39.3 million liability; a 1 percentage-point decrease in the discount rate would raise the liability by about $3.0 million, and a 1-point increase would lower it by about $3.0 million. A 1-point change in the medical-inflation assumption would change liability by roughly $3.4 million, the actuary said.

Mabo and Chmielewski noted several plan design changes the city has enacted that are limiting future liability growth: retiree medical coverage was closed to nonrepresented employees hired after 02/2015, and newer police and fire hires receive a defined-contribution approach (a city contribution of $700 per month) rather than a defined-benefit retiree medical plan depending on hire dates and collective-bargaining agreements. Chmielewski said the $700 monthly contribution does not, as of March 2025, fully cover a single retiree premium (March 2025 single premium shown as $820; subscriber-and-spouse premiums just over $2,000).

The actuary emphasized the plan is currently pay-as-you-go (no separate trust), so expected cash flows are useful for budgeting: projected benefit payments increase slightly in the near term and then decline as more participants are on less-generous post-2015 or defined-contribution arrangements. Chmielewski also reported an annual GASB expense (service and interest cost net of amortized gains and losses) on the order of about $3.7 million to $4.0 million, depending on the fiscal year.

Committee members asked clarifying questions about how the $700 defined-contribution amount compares to expected premiums, the effect of Wisconsin Act 10 on bargaining for public safety (staff said Act 10 did not affect police and fire bargaining rights), and how the city compares with peer municipalities. Director Beau (comparables research) and Mabo said the city tracks peer contracts regularly and that many municipalities have taken similar steps to limit future retiree medical exposure.

No formal action or vote was taken; the presentation was informational. Staff and the actuary said they will continue monitoring claims experience, retirement patterns and the assumptions underlying the valuation and will present future valuations as required.