EGBERT

ELK GROVE UNIFIED SCHOOL DISTRICT

RETIREE HEALTH BENEFITS

EGBERT ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Health Benefit Benefit Task Task Force Force –- March March 16, 16, 2007 2007 CalSTRS

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EGBERT

GOVERNANCE • The Elk Grove Benefits Retiree Trust, EGBERT, was formed in 1995 as an IRS 501(c)9 non-profit trust • EGBERT is a Voluntary Employee Benefits Association (VEBA), a joint labor-management trust • One Co-chair each from labor and management • Directors from each of 5 employee associations and management

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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EGBERT

GOVERNANCE EGBERT CONSULTANTS Trust Attorney Investment Advisor Actuary Audit Firm

9 Trust Agreement 9 Summary Plan Document 9 Formal Investment Policy 9 Annual Actuarial Evaluation 9 Annual Audit/Tax

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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EGBERT

EGBERT RETIREES NUMBER OF RETIREES Number of Retirees

1200

1000

800

600

400

200

0 2000

2001

2002

2003

2004 EGBERT

2005

2006

EGUSD

2007 TOTAL

2008

2009

2010

Linear (EGBERT)

Linear (EGUSD)

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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EGBERT

UNFUNDED LIABILITY The difference between the actuarial cost of providing benefits to present/future retirees and the funding in place to pay for those benefits. $111,361,114 – 2005 $195,154,481 - 2006

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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ARC

EGBERT

Annual Required Contribution

This is the amount we would need to show on the district books. The amount will be recalculated each year. ARC

=

$15,194,524 =

Normal Cost + (Unfunded Liability/30) $8,462,938 +

$6,731,586 - 2005

$22,016,549 = $10,219,799 +

$11,796,750 - 2006

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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EGBERT

ACTUARIAL FACTORS There are several factors which affect the actuarial report and as a result the unfunded liability: • • • • • • • • •

Contribution rates The rate of return on investment earnings Current cost of retiree health benefits “Trend” rate for increases in retiree health benefits Mortality rates that vary by age and gender Employment termination rates Years of service to earn benefits The proportion of employees that retire at each age The proportion of retirees that are expected to collect benefits

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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EGBERT

CONTRIBUTION RATES RATE PER MEMBER PER MONTH 7/1/96-6/30/99 7/1/99 7/1/00 7/1/01 7/1/02 7/1/03 7/1/04

$500 520 540 560 580 900 960

7/1/05

$960+1% of Salary

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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EGBERT

INVESTMENTS ASSET ALLOCATION Equities Domestic International Bond funds

60% 10% 30%

Average rate of return over 1st 10 years 9.07%

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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EGBERT

HEALTH BENEFITS

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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HEALTH BENEFITS

EGBERT

EXPENDITURE TRENDS TOTAL GENERAL FUND—Historical

100%

90%

12%

15%

17%

80%

17%

16%

16%

14%

14%

14%

17%

19%

19%

70%

86%

60%

85%

83%

88%

86%

86%

86%

50%

40%

67%

69%

71%

2000-01

2001-02

2002-03

69%

67%

67%

2004-05

2005-06

30%

20%

10%

0%

Salaries

2003-04

Benefits

Other Expense

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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HEALTH BENEFITS

EGBERT

EXPENDITURE TRENDS TOTAL GENERAL FUND—Projections 100%

12%

13%

12%

12%

21%

21%

22%

23%

90%

80%

70%

60%

88%

87%

88%

88%

50%

40%

67%

66%

66%

65%

2008/09

2009/10

30%

20%

10%

0% 2006/07

2007/08

SALARIES

BENEFITS

OTHER

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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EGUSD

EGBERT

Plan Year

History Of Retiree Health Rates 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 1 2 3 4 5 6 7 8 9 10 11

Under 65 $ 3,937 3,595 3,659 3,789 4,280 4,665 4,970 5,560 6,033 6,637 7,564 $ 9,664 % Increase -9% 2% 4% 13% 9% 7% 12% 8% 10% 14% 28% Co-pays: Office Visit $ 5 $ 5 $ 5 $ 5 $ 5 $ 10 $ 10 $ 15 $ 20 $ 20 $ 20 $ 20 Rx - generic/brand $ 5 $ 5 $ 5 $ 5 $ 5 $ 10 $10/$15 $10/$15 $10/$20 $10/$20 $10/$20 $10/$20

Over 65 $ 1,156 % Increase Co-pays: Office Visit Rx - generic/brand

1,128 -2%

1,030 -9%

1,107 7%

Same as above

1,015 -8%

1,979 95% $ $

5 $ 5 $

2,084 5%

3,943 89%

10 $ 10 10 $10/$15

5,703 45%

5,776 1%

5,829 $ 7,114 1% 22%

Same as above

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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EGBERT

RETIREE PREMIUM COSTS “PAY AS YOU GO” – 2005 $1,934,203

$12,000,000

A n n u a l Pa y m e n t

$10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $1

2

3

4

5

6

7

8

9

10

Years ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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EGBERT

CURRENT FUNDING MODEL 2005 ANNUAL REQUIRED CONTRIBUTION $15,194,524

7,558,879 7,635,645

District Contribution Unfunded

District Contribution Unfunded

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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EGBERT

EGBERT FUNDING CONTRIBUTION COMPARISON - 2005

$9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $June 96

June 97

June 98

June 99

June 00

Normal Cost

June 01

June 02

June 03

June 04

June 05

June 06

Contributions

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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EGBERT

RETIREE PREMIUM COSTS “PAY AS YOU GO” – 2006 $3,683,360

$20,000,000 $18,000,000 A n n u a l Pa y m e n t

$16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $1

2

3

4

5

6

7

8

9

10

Years ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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EGBERT

CURRENT FUNDING MODEL 2006 ANNUAL REQUIRED CONTRIBUTION $22,016,549

7,939,584

14,076,965

District Contribution Unfunded

DistrictUnfunded Contribution

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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EGBERT

EGBERT FUNDING CONTRIBUTION COMPARISON - 2006

$12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $June 96 June 97 June 98 June 99 June 00 June 01 June 02 June 03 June 04 June 05 June 06 Normal Cost

Oct 06

Contributions

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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HEALTH BENEFITS

EGBERT

EXPENDITURE TRENDS TOTAL GENERAL FUND—Normal Cost 100%

12%

13%

12%

12%

21%

22%

23%

24%

90%

80%

70%

60%

88%

87%

88%

88%

50%

40%

67%

65%

65%

65%

2006/07

2007/08

2008/09

2009/10

30%

20%

10%

0%

SALARIES

BENEFITS

OTHER

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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HEALTH BENEFITS

EGBERT

EXPENDITURE TRENDS 100%

TOTAL GENERAL FUND—Annual Required Contribution 12%

13%

12%

12%

24%

24%

25%

26%

90%

80%

70%

60%

88%

50%

87%

88%

88%

40%

30%

64%

63%

63%

62%

2008/09

2009/10

20%

10%

0% 2006/07

2007/08

SALARIES

BENEFITS

OTHER

ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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SUMMARY

EGBERT

¾ Strong relationships between management and labor are key in this type of a trust ¾ Over the last 7 years, actions have been taken to increase contributions, modify eligibility & benefits, maximize investments ¾ Escalating health care costs have continued to dramatically increase the unfunded liability ¾ Directors of the Trust are currently considering further actions ELK GROVE UNIFIED SCHOOL DISTRICT CalSTRS Health Benefit Task Force – March 16, 2007

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