OFFICE OF THE ACTUARY 255 GREENWICH STREET • 9TH FLOOR NEW YORK, NY 10007 (212) 442-5775 • FAX: (212) 442-5777 SHERRY S. CHAN CHIEF ACTUARY Tenth Annual Actuarial Valuation Of Other Postemployment Benefits Provided under the New York City Health Benefits Program For Fiscal Year Ended June 30, 2015 Prepared as of June 30, 2014 OFFICE OF THE ACTUARY 255 GREENWICH STREET • 9TH FLOOR NEW YORK, NY 10007 (212) 442-5775 • FAX: (212) 442-5777 SHERRY S. CHAN CHIEF ACTUARY September 17, 2015 Honorable Scott M. Stringer Comptroller The City of New York Municipal Building, Room 530 One Centre Street New York, NY 10007 Re: GASB43/45 Actuarial Valuation Report Dear Comptroller Stringer: This Report presents the results of the June 30, 2014 actuarial valuation of the Other Postemployment Benefits (OPEB) provided under the New York City Health Benefits Program (Program). These results are intended to form the basis for accounting and financial reporting under Governmental Accounting Standards Board (GASB) Statement No. 45 (GASB45) for Fiscal Year 2015 (i.e., July 1, 2014 to June 30, 2015) for the City of New York (City) and certain non-City entities (Component Units). These results also form the basis for financial reporting under GASB Statement No. 43 (GASB43) for the New York City Other Postemployment Benefits Plan (OPEB Plan or Plan). Where these results are applicable under both GASB43 and GASB45, the term GASB43/45 is used. The results shown herein are based upon: • The Office of the Actuary’s (OA) interpretation of GASB43 and GASB45. • The OA’s understanding of the benefits provided to eligible retirees and beneficiaries. Honorable Scott M. Stringer September 17, 2015 Page 2 • Census data used in the June 30, 2014 actuarial valuations of the New York City Retirement Systems (NYCRS)1 to produce Preliminary Fiscal Year 2016 Employer Contributions, supplemental data provided to the OA by the New York City Office of Labor Relations (OLR) and by the Educational Construction Fund (ECF) and data provided to Buck Consultants, LLC (Buck) by the City University of New York (CUNY) for participants in the Teachers Insurance Annuity Association – College Retirement Equities Fund (TIAA-CREF or CUNY TIAA). • Health insurance premium rates and related financial information for Fiscal Year 2015 provided to the OA by OLR. • Welfare Fund contribution rates as of June 30, 2014, June 30, 2013 and June 30, 2012, as well as information about negotiated increases, lump-sum and retroactive payments made on behalf of retirees to Welfare Funds for Fiscal Years 2015, 2014 and 2013, provided to the OA by OLR. • Certain Actuarial Assumptions2 used in the actuarial valuations of the NYCRS that were adopted by the Boards of Trustees during Fiscal Year 2012 (i.e., the Silver Books) for purposes of measuring pension obligations. • Additional OPEB-specific Actuarial Assumptions, as described in Section V and Appendix D of this Report. • An Actuarial Cost Method (ACM), as described in Section V of this Report. • Financial information provided by the Office of Management and Budget (OMB) for City entities and by the administrative offices of the Component Units. • Information on the Stabilization Fund provided by OLR and OMB. 1 New York City Employees’ Retirement System (NYCERS) New York City Teachers’ Retirement System (TRS) New York City Board of Education Retirement System (BERS) New York City Police Pension Fund (POLICE) New York Fire Department Pension Fund (FIRE) 2 See Appendix D – Details of Actuarial Assumptions and Certain Methods. Honorable Scott M. Stringer September 17, 2015 Page 3 The results presented in this Report continue to take into account the current understanding of the Chief Actuary of the NYCRS (the Actuary) of National Health Care Reform (NHCR) (i.e., the Patient Protection and Affordable Care Act (PPACA) signed into law on March 23, 2010 and the Health Care and Education Reconciliation Act (HCERA) signed into law on March 30, 2010). This Report does not include results for the New York City Off-Track Betting Corporation (OTB). It is the understanding of the Actuary that, effective May 26, 2011, neither the City nor the Plan has any OPEB obligation for current or future OTB retirees. The results contained in this Report are not meant for other purposes. In particular, the analysis in this Report is not to be relied upon by employers, retirees or any retiree representatives (such as unions) for any decisions regarding benefit design. Use of this Report for any other purpose or by anyone other than the City, the Component Units or their auditors may not be appropriate and may result in mistaken conclusions due to failure to understand applicable assumptions, methodologies or inapplicability of the Report for that purpose. This Report should not be provided except in its entirety. No one other than the City, Component Units or their auditors may make any representations or warranties based on any statements or conclusions contained in this Report without the written consent of OA. This Report is intended to present the OPEB obligations of the New York City Health Benefits Program as of the valuation date. All costs, obligations and actuarial present values have been determined in accordance with generally accepted actuarial principles and procedures. An Actuarial Certification is included in Section VIII. The Table of Contents, which immediately follows, outlines in more detail the contents of this report. Best Regards, Sherry S. Chan Chief Actuary SSC/srh Honorable Scott M. Stringer September 17, 2015 Page 4 cc: New York City Office of the Actuary Mr. John Gibney Mr. Sam Rumley Mr. Michael Samet Auditors Mr. Joseph Bukzin - KPMG Mr. Glen Friedrich - Deloitte & Touche, LLP Mr. John Potts - Deloitte & Touche, LLP Mr. Warren Rupple – Marks Paneth, LLP Mr. Patrick Yaghdjian - ITC Buck Consultants Ms. Andrea Constantinos Ms. Robin Simon Ms. Claire Wolkoff Component Units Mr. Robert Balducci - WFA Mr. Dan Frydberg - New York City Housing Authority Mr. John Hepburn - School Construction Authority Mr. Julian John - New York City Health and Hospitals Corporation Mr. Jeffrey Pagelson - New York City Housing Authority Ms. Cynthia Wong - ECF Mr. Len Zinnanti - City University of New York New York City Office of the Comptroller Ms. Rosa Charles Ms. Susan Cornwall Ms. Michelle Levine Mr. Tim Mulligan Honorable Scott M. Stringer September 17, 2015 Page 5 New York City Office of the Labor Relations Mr. Michael Babette Mr. Robert Linn New York City Office of Management and Budget Ms. Nicole Fleming Mr. Dean Fuleihan Mr. Ken Godiner Mr. John Grathwol Mr. Omair Hassan Ms. Simone Saywack 520L&R:srh TABLE OF CONTENTS SECTION ITEM PAGE I Executive Summary 1 II Census Data 7 III Assets 15 IV Summary of OPEB Plan Provisions 17 V Actuarial Assumptions and Methods 35 VI Principal Results under GASB43 40 VII Principal Results under GASB45 42 VIII Actuarial Certification 44 TABLE OF APPENDICES APPENDIX ITEM A Net Assets as of June 30, 2015 and June 30, 2014 Table 1 - Statement of Net Assets Table 2 - Statement of Changes in Net Assets B Detailed Census Data C Detailed Results including Required Supplementary Information (RSI) C-1 New York City Educational Construction Fund (ECF) C-2 New York City Health and Hospitals Corporation (HHC) C-3 New York City Housing Authority (NYCHA) C-4 New York City School Construction Authority (SCA) C-5 New York City Municipal Water Finance Authority (WFA) C-6 City of New York (City) - GASB45 C-7 New York City Other Post-Employment Benefits Plan (OPEB Plan) - GASB43 D Details of Actuarial Assumptions and Certain Methods E Educational Construction Fund Actuarial Assumptions and Methods and Plan Provisions F CUNY TIAA Actuarial Assumptions and Methods and Plan Provisions G Acknowledgements TABLE OF TABLES TABLE TITLE PAGE I-1 Summary of Principal GASB45 Results 3 II-1 Comparison of Used vs. Confirmed NYCHA Data 9 II-2 Comparison of Used vs. Estimated SCA Data 10 II-3 Summary of Census Data 14 III-1 Net Assets Available for Benefits 16 IV-1 Components of OPEB Paid by New York City - Fiscal Year 2015 30 IV-2 Components of OPEB Paid by New York City - Fiscal Year 2014 31 VI-1 Principal Results of the GASB43 Valuations 40 VII-1 Principal Results of the GASB45 Valuations 42 Tenth Annual Actuarial Valuation Of Other Postemployment Benefits Provided under the New York City Health Benefits Program For Fiscal Year Ended June 30, 2015 Prepared as of June 30, 2014 SECTION I EXECUTIVE SUMMARY 1. This actuarial report was prepared as of June 30, 2014 and presents the results of an actuarial valuation of the Other Postemployment Benefits (OPEB) provided by the City of New York (City) and certain entities (Component Units) to eligible retirees and beneficiaries through the New York City Health Benefits Program (Program). A comparison with the June 30, 2013 OPEB actuarial valuation results is also provided. For information on the June 30, 2013 OPEB actuarial valuation, see “Report on the Ninth Annual Actuarial Valuation of Other Postemployment Benefits Provided under the New York City Health Benefits Program,” dated September 24, 2014 (Ninth Annual OPEB Report). The OPEB for which the City has financial responsibility are referred to as the OPEB Plan (Plan). The Plan is distinguished from the Program based on which entity has financial responsibility for the OPEB. The purpose of this OPEB actuarial valuation is to determine the Annual Required Contribution (ARC) and measure the Annual OPEB Cost (AOC) for the Plan and certain entities for Fiscal Year 2015 (i.e., July 1, 2014 to June 30, 2015) in accordance with Governmental Accounting Standards Board (GASB) Statement No. 45 (GASB45). This OPEB actuarial valuation also measures the funded status of the Plan and determines the ARC for Fiscal Year 2015 in accordance with GASB Statement No. 43 (GASB43). 2. This OPEB actuarial valuation measures only the total Actuarial Present Value of Benefits, the Actuarial Accrued Liability and the Normal Cost for the New York City Housing Authority (NYCHA) as of June 30, 2014. NYCHA’s financial results are presented on a fiscal year differing from that of the City.