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HomeMy WebLinkAboutRES 05-308Memorandum City of Port Arth ur, Texas Finance Department To: Steve Fitzgibbons, City M ager From: Rebecca Underhill, Directo o ce Date: October 19, 2005 Subject: Proposed Resolution 13301 Proposed Resolution 13301 is presented for the City Counciil consideration and approval. PR 13301 authorizes t:he City Manager to execute a contract with. Milliman, Inc. Consultants and Actuaries to provide actuarial services related to the City's health insurance plan for retirees. The actuarial services required are two-fold. In order to comply with new Medicare requirements, the City must have aar actuarial study of the retiree health insurance .plan. If the plan meets certain criteria, the City will be eligible far a subsidy from Medicare for the prescription drug plan. The second phase of the contract deals with GASB 45. GASB 45 (Government Accounting Standards Board Statement 45) requires the City to study and value the liability of our OPEB (Other Post Employment Benefits). The City's only OPEB is our :retiree health insurance plan. The City is required to have an actuarial study to determine this liability. The contract is for Milliman to provide both of these studies in Phase I and Phase 2 for a total cost of $12,000. Phase 3 of the contract allows the firm to study alternatives to our retiree health plan and the effect of these alternatives on the GASB 45 liabilities. The cost of this service, if requested by the City, will be $6,500. The GASB 45 valuation will be required annually, and the second year cost is $7,500. (This will be paid next year). Funding four this contract is available in the Health Insurance Fund 614. P. R. NO. 13301 JJA: 10/19/05 RESOLUTION NO. Ci~ S A RESOLUTION AUTHORIZI:KG A CONTRACT BETWEEN THE CITY OF PORT ARTHUR AND MILLIMAN, INC. CONSULTANTS AND ACTUARIES TO PERFORM GASB4S/RETIREE MEDICARE PART D DRUG SUBSIDY ATTESTATION SERVICES WHERF;AS, the City provides retiree health and drug coverage through aself-funded medical plan, and; WHERF;AS, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA) provides for a federal subsidy of the prescription drug cost: if the City's plan passes an actuarial equivalence test, and; WHER1:sAS, the regulations require that the City provide an actuarial attestation of the prescription plan, and; WI-I:ERF;AS, the City is also required to prepare a valuation of the post employment benefits provided to retirees to meet Government Accounting Standards Board Statement 45 (GASB 45) requirements. NOW 'THEREFORE BE IT RESOLVED BY THE'. CITY COUNCIL OF THE CITY OF PORT ARTHUR.. Section 1: The facts and opinions in the preamble a~~e true and correct. Section 2:. T'he City Manager is authorized to execute the agreement, attached hereto as Exhibit A, with Milliman Inc. Consultants and Actuaries to perform GASB 45/Retiree :Medicare Part :D Drug Subsidy Attestation Services. NOES :READ, ADOPTED, AND APPROVED, this Z/~ day of October 2005, AD, at a Regular Meeting of'the City Council of the City of Port Arthur, Texas bey the following vote: Mayor ATTEST: Evangeline ~feen, City Secretary APPROVED A~S TO FORM: t r,t~ Mark Soko w, City Attorney CON ~ ~ ~'~'~' APPROVED FOR ADMINISTRATION: ~t ~~ Steve Fitzgibbons, City Manager ,,, fJ Rebecca Underhill, Finance Director Ljenny-old/Fa'oftice~iesolutions/Mifliman, lnc. EXHIBIT "A" N MILIIMAH GLOBAL flpM Mlilliman Con;siultants and Actuaries Consulting Services Agreement Plan Sponsor: City of Port Arthur Contact: Rebecca Underhill Address: 444 4Ra Strvot Port Arthur, TX 77641 Telephone=: {409) 983$1~i1 Fax: Plan Name(s): Posternployment Benefit Plans (other than Pensions) for Employees of the City of Port Arthur Mi3lirnan C)ftice: Houston, Texas Miliiman Service Effective Date: October 15.2005 This Agreement is entered into between Milkman, Inc. (Mihiman) and the City of Port Arthur as of Octobeer 15, 2005. Plan Sponsor has engaged Milliman to perform consulting services as described in Schedule A attached hereto. Such services may be modified from time to time and may also include gener~rl actuarial consulting services. In consideration for Milkman agreeing to perform these services, Plan Sponsor agrees as follows: 1. Engagement Terms Plan Sponsor acknowledges the obligation to pay MilTiman for services rendered, whether arising from Plan Sponsor's request or otherwise necessary as a result of this engagement, at Milkman's standard hourly billing rates for the personnel utilized plus all out-of-pocket expenses incurred. Milkman will bill Plan Sponsor periodically for services rendered and expenses incurred. All invoices aze payable upon receipt. Milkman reserves ithe right to stop all work if any bill goes unpaid for 60 days. Furthermore, Milkman's engagement may be terminated upon 90 days' written notice by Milkman or Plan Sponsor. Regardless of the reason for termination of services, Milkman shall be entitled to payment for services completed prior to such termination, and Milkman shall retain any records it has relating to the Plan Sponsor plans for a period of at least three yeazs from date of termination. If Milkman's assistance is reasonably required past termination, such services shall be provided at Milkman's then-standard hourly rate unless another basis is agreed to by both parties. 2. Handling of Data and Other Confidential Information Milkman shall use reasonable efforts to identify errors in data and obtain corrections to erroneous data, but Milkman cannot warrant the correctness of data supplied by Plan Sponsor or other parties, nor can Milkman be responsible for data not provided. in a timely manner. Any information received from Plan Sponsor will be considered "Confidential Information." However, information received from Plan Sponsor will not be considered Confidential Information if (a) the information is or comes to be generally available to the public during the course of Milkman's work; (b) was independently developed b;y Milliman without resort to information from the Plan Sponsor; or (c) Milliman receives the information from another source who is not under an obligation of confidentiality to Plan Sponsor. Milkman agrees that Co~dential Information shall not be disclosed to any third party. Milkman Page 1 3. Tool Development Milliman shall retain all rights, title, and interest (including, without limitation, all copyrights, patents, service marks, trademarks, trade secret, and other intelleCtua~ prOp21'ly rlghtS} !11 alld t0 i}II tfxhnical or internal designs, methods, ideas, concepts, tcnow-how, techniques, generic documents, and templates that have been previously developed by Milliman or developed during the course of the provision of the Services, provided such generic doc:uments or templates do not contain any Plan Sponsor Confidential Information or proprietary data. Rights and ownership by Milliman of original technical designs, methods, ideas, concepts, know-how, and techniques shall not extend to or include all or any part of the Plan Sponsor's proprietary data or Plan Sponsor Confidential Information. To the extent that Milliman tray include in the materials az~y pre-existing Milliman proprietary information or other protected Milliman materials, Milliman agrees that Plan Sponsor shall be deemed to have a fully paid up license to make copies of the Milliman-owned materials as part of this engagement for its internal business purposes and provided such materials cannot be modified or distributed outside the Plan Sponsor without the written permission of Milliman. 4. Limitation of Liability Milliman will perform all services in accordance with applicable professional standards. The parties agree that Milliman, its officers, directors, agents and employees, shall not be liable to Plan Sponsor, under any theory of law including negligence, tort, breach of contract or otherwise, for any damages in excess of five (5) times the total professional fees paid to Milliman during the 12-month plan-year cycle during which the work in question is performed. In no event shall Milliman be liable for lost profits of Plan Sponsor or any other type of incidental or consequential damages. The foregoing ]imitations shall not apply in the event of the intentional fraud or willful misconduct of Milliman. 'The provisions of this section will survive the expiration or termination of this Agreement. 5,. :Disputes (a} Mediation. In the event of any dispute arising out of or relating to the engagement of Milliman by Plan Sponsor, the parties agree first to try in good faith to settle the dispute voluntarily with the aid of an impartial mediator who will attempt to facilitate negotiations. A dispute will be submitted to mediation by written notice to the other party or parties. The mediator will be selected by agreement by the parties. If the parties cannot agree on a mediator, a mediator will be designated by the American Arbitration Association at the request of a party. 'The mediation will be treated as a settlement discussion and therefore will be confidential. Any applicable statute of limitations will be tolled during the pendency of the mediation. Each party will bear its own costs in the mediation. The fees and expenses of the mediator will be shared equally by the parties. (b) Arbitration. >f the dispute has not been resolved within 60 days after the written notice beginning the mediation process (or a longer period, if the parties agree to extend the Mediation), the mediation will terminate, and the dispute will be resolved by final and binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association. The arbitration will take place in Dallas, Texas, before a panel of three arbitrators. Within 30 days of the commencement of the azbitration, each parry will designate in writing a single neutral and independent azbitrator. The two arbitrators designated by the parties will then select a third arbitrator. The arbitrators will have a sufficient background in either employee benefits, actuarial science, or law to reasonably prepaze them to decide a dispute. The arbitrators will have the authority to permit limited discovery, including depositions, prior to the arbitration hearing, and such discovery will be conducted consistent with the Federal Rules of Civil Procedure. The arbitrators will have no power or authority to award punitive or exemplary damages. The arbitrators may, in their discretion, award the cost of the arbitration, including reasonable attorney fees, to the prevailing party. Any award made may be confirmed in any court having jurisdiction. Any arbitration shall be confidential, and except as required by Millliman Page 2 law, neither party may disclose the content. or results of any arbitration hereunder without the prior written consent of the other parties, except that disclosure is permitted to a party's auditors and legal advisors, 6. No Third-party Distributlort rvlilliman's work is prepazed solely for the internal business use of the Plan Sponsor. Millitnan's work may not be provided to third parties without Milkman's prior written consent. We understand that the Plan Sponsor may want to distribute some of M~illiman's reports to its auditors in connection with the prepazation of the financial statements of the Plan or of the Pian Sponsor. We will consent to such distribution as long as each work product is distributed in its entirety. Milkman does not intend to benefit any third-party recipient of its work product, including the auditor, and does not intend to create any legal duty from Milkman to the auditor even if Milkman's work product is so distributed. In the event that any audit reveals any error or inaccuracy in the data underlying this report, Milkman requests that the auditor notify Milliman as soon as possible. Milkman's work may :include the preparation of certain government forms. Milliman consents is the release of these forms to the applicable agency. Any additional release of any Milliman work product by the Plan Sponsor requires prior written consent by Milliman. 7.. Status of Milliman Milliman will provide the services covered by this Agreement as an independent contractor. No other relationship to the Pfan Sponsor or the Plan is implied or intended. Milliman shall not be deemed to be a "named fiduciary" or "plan administrator" as these terms are defined under ERISA or any similar or successor law. 8. Choice of Law The construction, interpretation, and enforcement of tluis Agreement shall be governed by the substantive contract law of the State of New York without regard to its conflict of laws provisions. In the event any provision of this Agreement is unenforceable as a matter of law, the remaining provisions will stay in full force and effect. PLAN SPONSOR [ havE; :read and agree to the terms and conditions of this Agreement. Accepted bey: Title: MILLiMAN, INC. I have read and agree to the terms and conditions of this Agreement. Accepted by: sate: Tide: Principal gate: Milliman Paga 3 Schedule a Actuarial Services Covered Plan(s): ~ City of Port Arthur Retiree Medical Plan ~ This d~acument provides a description of Milliman's ("Milliman") actuarial consulting services and the framework on which our fees for these services are based.. Unless otherwise indicated, these services are considered "Basic Services°. Charges for these Basic Services are expected to be consistent from year to year. Services outside the scope of Basic Services are "Additional Consulting Services" provided on atime-and-expense basis, and are expected to fluctuate from year to year depending on the type of additional services that are performed. O Millirnan usA City of Port Arthur Actuarial Services Z:WiO9K`!TV ~OF PORf ARTMIRHYfY OF PORE MT}A1iF9ERVICE A()REEMEM•RETIREMEM p~AN.9CHEOVIES.CIOC Description of Actuarial Services ongoing Post employment benefit actuarial capabilities Actuarial Services ~iilliman will perform actuarial valuations of your post employment benefit programs (other than pensions} under GASB 45. Information provided to Nlilliman will includie: ^ Plan provisions ^ Active employee and retiree/beneficiary census information ^ Participant contribution amounts by tier and plan ^ Benefit information. ^ Historical aggregate claims information From that information, Millima.n will perform actuarial valuations to determine financial reporting, disclosure, and funding results. A Milkman health actuary will set appropriate medical assumptions, which include modeled claims cost, h<;alth care cost inflation, and age trend. Iviilliman's retirement actuarial team will estabksh. the additional assumptions, provide system setup and programming of plan provisions, and complete the actuarial valuation. Actuarial valuation process ^ Collection, Reconciliation and Automated Update/Transfer of Data Complete and accurate census data will be provided by Plan Sponsor. Milkman will audit and analyze the data to verify reasonableness and overall quality.. As part of our annual valuation process, Milliman will estabksh timeframes for collection and reconciliation of data to ensure timely completion of res~ilts. ® Milliiman usA City of Port Arthur Actuarial Services -Page I i!1MFD8K:RY OF PORE AFifMJR1CfTY OF PORT ARTHUR-SEAYiCE AOREEMEHf-RFfWE1ENf PIlJ-F9f:HEWIES.I~OC ^ Selection of Assumptions and Methods Milliman will work with Plan Sponsor to select the actuarial assumptions and methods, based on the following criteria: ^ Specific characteristics of the employee population served by each plan ^ Specific objectives of the Plan Sponsor concerning the incidence of funding for the plan (desire for predictable contributions, need for flexibility due to cash-flow volatility, etc.) ^ Market wide trends on economic and demographic assumptions ^ Past experience of the covered employee population (withdrawal, salary progression, et<:.) and the plan (asset performance, changes in funded status, etc.) Milliman will work with Plan Sponsor to make sure you understand the assumptions and methods that ~~re important to your results, and will take care of the oversight and updating on those that do not impact the plan materially. ^ Preliminary Valuation Runs Milliman's actuarial analysts and associates, with input and involvement of the plan actuary, will perform preliminary runs and generate output of individual trace information and summary results. Input variables and custom client-specific coduig output will be reviewed and results will be verified for individual lives and in total. ^ Actuarial Manager Input. and Review The plan actuary will be responsible for verification of results, including detailed review of individual and aggregate results. Trends and issues apparent from the output will be documented and researched. Additional runs will be perforcried based on necessary revisions and/or the desire to see sensitivity to hypothetical changes. O Millirnan usA City of Port Arthur Aehrarial Services -- Page 2 zw~nr of van ,wn«srarr a' rom,wr~x~n-sEancs E~Kr-Aer~uErrt vui+scr~axes-arc ^ Formal Report Part of Millinian's ongoing; support for compliance with the GASB 45 requirements will include the preparation of a formal actuarial valuation report to support the valuation +results each period such valuation is required. The initial GASB 45 valuation, including the review of alternatives, will be for internal discussion purposes to assist City of Port Arthur in your analysis of ;,roar existing plans and how you want them to be structured on an ongoing basis. Once City of Port Arthur has finalized it's plans, Milliman will prepare a template for a formal actuarial report to be used in presenting the results commencing with the first date that your organization is required or elects to comply with the new rules.. The report will reflect all of the decisions you have made based on the preliminary results, and include: ^ Summarized valuation results ^ Discussion of significant issues ^ Exhibits detailing the; results of the actuarial valuation, such as - Participant census sununary statistics - Asset reconciliation - Development of acco+anting reconciliation - Develop of annual expense - Funded status, with comparison of assets to various Liability measures ^ Actuarial methods ^ Actuarial assumptions ^ Summary of plan provisions This report, or addendums to it, will be tailored to your needs. We can provide a sample valuation report upon request. O Milliiman usa, Cily of Port Arthur Actuarial Sarvicas -Page 3 Z\Lg06VCfiY OG POffT ARf FNIiV(XTY OF POFIT AFft1U/45EPYICE AfNiEELEM-fiETIpEMENT PLN45tiMFDlME~~.DOC Special Milkman will perform one-time special actuarial services at the Aetuitrial commencement of this engagement. This will entail a 4 phase Services approach. Phase 1 is the evaluation of your eligibility to receive the prescription drug subsidy, and the provision of the actuarial attestation if applicable, under Medicare Part D. Phase 2 includes the development and presentation of prelinunary valuation results for your current post employment benefit program and pay as you go funding arrangement. Phase 3 includes the development and presentation of 3 to 5 alternatives to the current post employm~-nt benefit program, reflecting revised benefit structures (e.g. deduc;tibles, co pays, caps, freezing, etc.), alternative approaches to coordination with Medicare, and alternative funding arrangements. Phase 4 includes implementation of final plan changes, potential establishment of a Trust or other funding arrangement, and establishment of policies and procedures for the ongoing valuation process. Milkman will assist Plan Sponsor in managing your obligations by explaining how various options impact costs over time. I~filliman will present these preliminary results to help Plan Sponsor in the derision making process, to achieve optimal cost and funding levels, to achieve business objectives, and maintain the ongoing financial viability of the plan. ~.. . . • General actuarial consulting not included in Basic Actuarial Services that may be needed from time to time as approved in advance by the Plan Sponsor. Examples include responding to requests from auditors, benefit plan change analyses, and communication projects. Phase 7 - Evaluation of your eligibility to receive the 54,000 prescription drug subsidy, and the provision of the actuarial attestation if applicable, under Medicare Part D. Phase 2 - Devebpment and presentation of initial 56,000 GASB 45 valuation of current post employment benefit programs. Phase 3 -Development and presentation of GASB 45 56,500 valuations of 3 to 5 alternative (benefit structures, furxfing arrangements, and coordination of medical benefits with Medicare} post empbyment benefit programs. e Millitran usa City of Port Arthur Actuarial Services -Page 4 1: wr+oercm w norm ~srrr+uacm ac voar kmua-eomce ~~rrr-asrw~Er+r nu~sc~xES.i~oc _~ Phase 4 - Implementation of final plan changes, YBD potential establishment of a Trust a other funding arrangement, and estabfishmerut of policies and procedures for the ongoing valuation process. Ongoing Annual Actuarial Valuations GASB 45 Valuation 57,500 The Phase 1-3 fees quoted above anticipate 1 meeting at Ciry of Port Arthur offices, plus additic-nal conferences as needed using h'lilliman's Webex conferencing facilities. ':Gravel expenses are not included. Genearal Provided based on time & expense charges using Milliman's discounted Conasulting as may hourly billing rates. be r~eedad hom times to-time Pricing 1. Participant counts are approximately 580 active: participants and 183 Asstamp#ions and retirees and beneficiaries. Factors 2. Census data will be provided in electronic format, and will require minimal data editing. 3. Fees will be guaranteed for 3 years. Millirnan uses City of Port Arthur Actuarial Services -Page 5 ZVAfb81CITY Of PORT ARfHtJR~CRY OL PORT ARI}UH361VICE AGf~ELEiR•REf~REYEM pLAN.9CHEDlME9 OOC