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Actuary reports Mill Valley's net OPEB liability fell to about $8.3 million; council to consider continuing extra contributions
Summary
The actuarial valuation as of June 30, 2024, shows the city's net OPEB liability declined from just under $13 million to about $8.3 million, driven by a $3 million drop in liability, higher trust assets and a benefit change; staff recommended continuing prudent contributions and council asked about discount-rate assumptions and downside risks.
McLeod Watts presented the city's actuarial valuation for Other Post-Employment Benefits (OPEB) as of June 30, 2024, showing a marked improvement in the city's funded position. Cathy McLeod said the estimated past-service liability fell from $30.7 million to $27.7 million and trust assets rose from $17.8 million to $19.4 million, producing a net OPEB liability of about $8.3 million.
McLeod attributed the change to several factors: a benefit change that eliminated a Medicare retiree coverage option (reducing liability by about $1.5 million), favorable plan experience (more eligible active employees left before retirement, reducing liability by roughly $4.4 million) and stronger-than-assumed trust earnings (investment returns above the 5.5% assumed rate). "The net or unfunded amount fell from just under 13,000,000 to about 8.3," McLeod said.
Why it matters: The OPEB valuation determines financial statement disclosures under GASB 75 and informs long-term funding choices. Council members questioned the prudence of the discount-rate assumption (the actuary used a 5.5% trust-rate assumption) and asked how contributions and market variability could change the timeline to full funding; staff said the original amortization had 14 years remaining (through 2039) but that continuing extra contributions could shorten that timetable.
Risks and recommendations: Council members discussed downside scenarios—periods of low investment returns or rising healthcare costs—and asked for scenario analysis. Staff and the actuary recommended ongoing monitoring, regular actuarial updates and consideration of continuing above-recommended contributions to accelerate paydown while being mindful of the irrevocable trust rules.
Next steps: Finance staff will incorporate the valuation into the next budget discussions and return with options on contribution levels and any proposed changes to the amortization schedule.
