RETIREE HEALTHCARE PLAN June 30, 2025 GASBS 75 Disclosure Report
 

Staff recommends that the City Council accept and file the OPEB Disclosure Report for Fiscal Year ending June 30, 2025, and approve the contribution to OPEB Trust.   

The City of Hawthorne provides medical insurance for retired employees subject to certain limitations. This type of employee benefit is referred to as Other Post-Employment Benefits (OPEB), other than pensions, that employers provide to their retired employees. The City of Hawthorne is required to measure and disclose an amount for annual OPEB costs. Annual OPEB cost is determined by an actuarial valuation required every two years. Actuarial valuations involve estimates and assumptions about the probability of occurrence of events far into the future.

The City engaged Rael & Letson Actuaries to prepare an actuarial valuation of their post-retirement benefits program as of June 30, 2024. In accordance with GASB, this valuation was used to provide the attached June 30, 2025, GASBS 75 disclosure report. This report was prepared using employee census data, enrollment data, premiums, participant contributions and plan provision information provided by personnel of the City Hawthorne. Rael & Letson did not audit this data, although it was reviewed for reasonability. The results of the valuation are dependent on the accuracy of the data. The purpose of the report is to provide the current funded position of the City’s post-retirement benefits program and related accounting information to be reported in the City’s June 30, 2025, financial statement.
 
Key results:

• Actuarial accrued liability totaled $105,113,362, which represents an increase of $801 thousand from the previous year of $104,312,362.  Considering the OPEB trust Fiduciary Net Position, the Net Liability total decreases to $99,916,552, which is a decrease in liability of $5.2 million.                                                                   
• Annual Benefit Payments for 2023/2024 $3,211,093 and $3,610,395 for 2024-2025.                                                                                                                                              
• Assumption change: 
  • Increase in the discount rate from 4.27% to 4.53% reflects the additional investment earning expected now that the City is partially pre-funding the benefit in a trust.  The higher the discount rate, the lower the liability.
  • All assumptions are based on a partially pre-funded status at the measurement period being July 2023 through June 2024. 
  • The City began pre-funding in the PARS Balanced Strategy with a $3.5 million contribution in November 2022. An additional $1 million contribution was made in April 2024, and $4,850,000 in January 2025.  

Recommendation:
In order to pay down the unfunded actuarial liability over a 17-year period, the City should contribute $4.7 million to the OPEB trust in fiscal year 2025-26. With Council approval, this contribution will be made in February 2025.
   

Create financial stability by reducing long-term liabilities and improving the City’s net position.

 

None.

72 hours posted notice pursuant to the Ralph M. Brown Act.