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THE CITY OF PLEASANT LIVING CITY OF SOUTH MIAMI OFFICE OF THE CITY MANAGER INTER-OFFICE MEMORANDUM To: From: Date: Subject: The Honorable Mayor & Members of the City Commission November 21,2017 Agenda Item: 5 Steven Alexander, City Manager A Resolution authorizing the City Manager to contract with Gabriel Roeder Smith & Company to perform Other Post-Employment Benefits (OPE B) valuation required under the GASB for fiscal year 2018 Comprehensive Annual Financial Report (CAFR). BACKGROUND & ANALYSIS State and local government employers provide Other Post-Employment Benefits (OPEB) to retirees in addition to typical pension benefits. OPEB takes form of retiree health insurance, dentat vision, prescription drug, life, or other healthcare benefits. GASB No.7S -Accounting and Financial Reporting by employers for the post-employment benefits other than pension establishes new standards for the recording of OPEB expense and the liabilities in the financial reports of state and local government employers. Furthermore, employers must account for and report the annual cost of OPEB similar to how pensions are reported. Florida State Statues require that the employer make health coverage available to retirees at the employer's group rate. For purpose of GASB 7S, a valuation is an examination of other (than pension) post-employment benefits to assess the cost and liability associated with those benefits. Valuations are typically handled by actuaries with specific qualifications to perform the work. The City obtained three quotes from actuarial firms. The City Manager is requesting to contract with Gabriel Roader Smith & Company, the pension board's current actuary, to perform the Other Post Employment Benefits (OPE B) valuation calculation. Below are a summary of the three quotes. Actuarial and Consulting Firms Florida League of Cities Gabriel Roeder Smith & Company Milliman $7,200 $6,000 $9,000 Page I of 2 AMOUNT A fixed amount not to exceed $6,000 ACCOUNTS 001.1410.513.3210, Finance Auditor's Fee for fiscal year 2018 ATTACHMENTS Resolution for Approval Florida League of Cities/ Southern Actuarial proposal Gabriel Roeder Smith proposal Milliman proposal Page 2 of 2 RESOLUTION NO. ______ _ 2 A Resolution authorizing the City Manager to contract with Gabriel Roeder Smith & 3 Company to perform Other Post-Employment Benefits (OPEB) valuation required 4 under the GASB for fiscal year 2018 Comprehensive Annual Financial Report (CAFR). 5 WHEREAS, the state and local government employers provide Other Post-Employment Benefits 6 (OPEB) to retirees in addition to typical pension benefits. OPEB concerns retiree health insurance, dental, 7 vision, prescription drug, life, or other healthcare benefits; and 8 WHEREAS, in order to comply with Governmental Accounting Standards Board (uGASB n ) 9 provisions it is necessary to comply with GASB Statement No. 75 (uGASB 75 n ). GASB No.75 -Accounting 10 and Financial Reporting by employers for the post-employment benefits other than pension establishes 11 new standards for the recording of OPEB expense and the liabilities in the financial reports of state and 12 local government employers; and 13 WHEREAS, employers must account for and report the annual cost of OPEB similar to how 14 pensions are reported. Florida State Statues require that the employer make health coverage available to 15 retirees at the employer's group rate; and 16 WHEREAS, GASB 75 valuation is an examination ofthe other post-employment benefits to assess 17 the cost and liability associated with those benefits. Valuations are typically handled by actuaries with 18 specific qualifications to perform the work. 19 WHEREAS, NOW THEREFORE BE IT RESOLVED BY THE MAYOR AND CITY COMMISSION OF THE 20 CITY OF SOUTH MIAMI, FLORIDA THAT; 21 Section 1. The City Manager is authorized contract with Gabriel Roeder Smith & Company, the 22 pension board's current actuary, to perform the Other Post-Employment Benefits (OPEB) valuation 23 required under the GASB for fiscal year 2018 Comprehensive Annual Report (CAFR), for a fixed retainer not 24 to exceed $6,000 using account 001.141.513.3210, Finance Auditor's Fee, for fiscal year 2018. 25 Section 2. This resolution shall take effect immediately upon adoption. 26 27 28 29 30 31 32 33 34 35 36 37 38 39 PASSED AND ADOPTED this __ day of ___ -', 2017 ATIEST: CITY CLERK COMMISSION VOTE: READ AND APPROVED AS TO FORM, LANGUAGE, LEGALITY AND EXECUTION THEREOF CITY ATIORNEY APPROVED: MAYOR Mayor Stoddard: Vice Mayor Welsh: Commissioner Harris: Commissioner Liebman: Commissioner Edmond: Retirement Consulting October 11,2017 Mr. Alfredo Riverol Chief Financial Officer City of South Miami 6130 Sunset Drive South Miami, Florida 33143 P: 954.527.1616 I F: 954.525.0083 I www.grsconsulting.com Re: Retiree Health Care Program -Actuarial Valuation as of October 1, 2017 Dear Alfredo: For fiscal years beginning after June 15,2017, Governmental Accounting Standards Board Statement Number 45 (GASB 45) is replaced by Governmental Accounting Standards Board Statement Number 75 (GASB 75). As in prior years, Gabriel, Roeder, Smith & Company (GRS) is pleased to present this Engagement Letter to continue to provide professional actuarial and consulting services induding an Actuarial Valuation as of October 1, 2017 for the City of South Miami Retiree Health Care Program. We are enthusiastic about continuing our existing relationship with the City on this important assignment. We have a long-standing commitment and experience with working on behalf of public sector benefit programs. Our philosophy of developing a partnership with our clients emphasizes the collaborative nature of the GRS working relationship. We strive to earn your trust as your advisor. We will continue to work together with you in the best interest of the interested parties. Description of Services The professional services would be provided under the supervision of Larry Wilson, A.S.A., a Senior Consultant and Actuary with over 25 years of experience in employee benefit plans, Kelly Adams, A.S.A., a Consultant and Actuary with over 15 years of experience with employee benefit plans and Jen Borregard, E.A., a Consultant and Actuary with over 15 years of experience with retirement systems. We will provide education and support in understanding and implementing changes due to GASB 75. Mr. Alfredo Riverol October 11,2017 Page Two Our Report will add value by including: ~ Primer on available funding vehicles and ~ 10-year projections of total program (not allocated by groups) We believe this information will be of great use to the City. These features of our Report distinguish GRS from our competitors. Please review, sign and date the enclosed Business Associate Agreement. GASB 75 Requirements GASB 75 has introduced a measurement date used for determining information reported in the annual financial statements of the employer. The measurement date may not be earlier than the employer's prior fiscal year end and no later than the current fiscal year end consistently applied from period to period. An actuarial valuation may be performed prior to the measurement date and rolled forward to the measurement date. An actuarial valuation is required to be performed at least every two years regardless of the size of the program. The actuarial valuation date can be no more than thirty (30) months and one (1) day earlier than the most recent fiscal year end. The actuarial valuation date can be changed from period to period. If significant changes occur between the actuarial valuation date and the measurement date, such as benefit changes, changes in assumptions or methods or Plan membership, the changes need to be reflected in the process and may even require a new actuarial valuation. The City will need to establish a linkage be~ween actuarial valuation date, measurement date and reporting date. The reporting date is the year end date of the financial statement. GASB 75 also introduced new requirements for determining the discount rate which must . be determined at each measurement date. Under GASB 75 for pay-as-you-go plans with no GASB complaint trust established the discount rate is determined based on the tax-exempt municipal bond rate based on an index of 20-year general obligation bonds with an average AA credit rating as of the measurement date. There is a high likelihood the municipal bond rate will vary enough at each measurement date to require a new measurement. If the discount rate changes from one measurement date to the next our suggested linkage only requires an update in the year where a full valuation is not performed. Other linkages may require the actuarial valuation to be updated or rolled-forward after each measurement date. 11 G RR ~ S Retirem.ent ...., Consulting Mr. Alfredo Riverol October 11,2017 Page Three In order to have information timely and produce the least amount of re-measurements, we suggest the linkage shown in the table below. (Two actuarial valuation cycles are shown below as an example. This Engagement Letter covers only one actuarial valuation cycle.) Reporting Date MeasurementpCite . Actuarial Valuation Date September 30,2018 October 1,2017 October 1, 2017 September 30, 2019 October 1, 2018 October 1, 2017 September 30,2020 October 1, 2019 October 1, 2019 September 30,2021 October 1, 2020 October 1, 2019 The actuarial valuation is provided to assist in the preparation of the financial statements of the employer. These Financial statements are the responsibility of the City, subject to the auditor's review. Therefore we encourage the City to obtain auditor agreement with the suggested linkage prior to providing GRS the information for the current actuarial valuation. The data requested in this Engagement Letter is based on the above linkage. We are available to discuss these new requirements further if needed. Data Requirements Upon engagement, we understand the City will provide census data, medical insurance information, coverage and other information needed generally in electronic (spreadsheet) form via secure file transfer through our secure website, GRS Advantage. We expect information relating to benefit coverage and eligibilities (Plan Documents / member booklets) will be provided electronically or via hard copy. Secure file transfer may be used for these items or alternatively if there is no individual personal data email may be used. • Census Data Requirements Please see the attached request for member census information as of October 1, 2017 needed in order to complete the Actuarial Valuation. • Plan Document and Financial In/ormation Please provide the following information: ~ Current summary plan description (booklet) for each benefit e S ~~~~:~i;;t Mr. Alfredo Riverol October 11,2017 Page Four Fees ~ Whether fully or self insured ~ OPEB initial per-capita cost information -see attached data request ~ Review the attached Summary of Benefits as of October 1,2014 and update for any changes as of October 1, 2017 or indicate that there are no changes. ~ Any changes being considered ~ Schedule of most recent premiums / contributions with their effective date ~ Based on the City's September 30,2016 Annual Financial Report, we understand the City has adopted the pay-as-you-go funding approach. • Please confirm the cost and liabilities should continue to be developed using the pay-as-you-go funding approach. ~ The amount to be reported for each ofthe following items under GASB 45 in the Comprehensive Annual Financial Report (CAFR) for the fiscal year ended September 30,2017 each ofthe following items: • Annual Required Contribution (ARC) for the fiscal year ended September 30,2017 • Net OPEB Obligation (NOO) as of September 30,2017 We anticipate our not-to-exceed fee for the entire project will be as set forth in the following table: . Reporting Date·. . Measu remerit . Actuarial Fee Date Valuation Date . September 30, 2018 October 1, 2017 October 1, 2017 $ 6,000 (same as prior valuation) September 30,2019 * October 1, 2018 October 1, 2017 $ 3,662 * The intermediate year of this engagement presumes a roll-forward, whereby the previous year's valuation would be adjusted for the discount rate as of the appropriate measurement date. GASB Statement No. 75 permits fully compliant valuations every other year unless significant Program changes occur, in which case a new fully compliant valuation may need to be performed with additional fees necessary. At G RR ~ S Retirem.ent ...., Consulting Mr. Alfredo Riverol October 11, 2017 Page Five The roll-forward will be included in the October 1, 2017 Actuarial Valuation Report -if the municipal bond yield or index rate used to set the discbunt rate for the October 1, 2018 measurement date does not produce significantly different results for the total OPES liability as the municipal bond yield or index rate used to set the discount rate for the October 1, 2017 measurement date, the City would incur no additional fees for OPES actuarial services for fiscal yea(ending September 3D, 2019. Otherwise, the above fees will apply for the October 1, 2018 measurement date. If a fully compliant valuation were required due to significant Program changes or requested by the City in the intermediate year, the cost for the valuation would be the same as the cost ofthe October 1,2017 Actuarial Valuation. Please see the attached Scope of Services Exhibit for a detailed explanation of the services that are included in this fee. Our hourly rates are as follows: Title Senior Consultant and Actuary Consultant and Actuary Senior Analyst Analyst Administrative Assistant Hourly Rate $ 360 -$ 395 $ 282 -$ 356 $ 224 -$ 276 $ 176 -$ 206 $ 128 -$ 142 Our hourly rates include the cost of our overhead including computer charges, telephone and the like. Timing The Actuarial Valuation will be delivered within sixty (60) days following direction to proceed and receipt of all necessary member census data, medical insurance information and plan documentation. ~ G RR ~ S Retirem.ent ~ Consulting Mr. Alfredo Riverol October 11,2017 Page Six We look forward to the opportunity to work with you again this year on this important project. Please do not hesitate to contact us should you have any questions or require additional information. Sincerest regards, ~.~.~~ Lawrence F. Wilson, A.S.A. Senior Consultant and Actuary Enclosures .t G RR ~ S Retirem.ent ~ Consulting CITY OF SOUTH MIAMI RETIREE HEALTH CARE PROGRAM DATA REQUEST OPEB Initial Per-Capita Cost Information Please provide all data electronically, where available. 1. Please provide a summary of Retiree Health Care Program Provisions for each health care option. For example, please list co-pays, and deductibles for each PPO option, HMO option, etc. If a summary is not available, a member booklet should suffice. 2. If any portions of retiree health benefits are fully insured, please provide us with the 2015-2016, 2016-2017, and 2017-2018 fully-insured monthly active and retiree premium rates for one-person and two-person coverage. For the retirees, we would like both pre-65 (regular premium rates) and post-65 (complementary premium rates). If available, it would be helpful to have the premium rate broken down by coverage component (i.e., medical, prescription drug, life, and/or vision). For all Rate Sheets submitted, please indicate the full period these rates are effective. Billing statements do not contain the information needed; therefore they are not necessary to 3. Please explain which groups/suffixes are available for future retirees. If more than one group/suffix is available, please explain what would cause a retiree to choose one type of coverage over another. 4. If any portions of retiree health benefits are self-insured, please provide the following health care claims information. Please separate health care claims between active employees and retirees, and then further between claims for pre-65 and post-65 retirees and between medical and Rx claims, if possible. a. Monthly health care claims experience by group/suffix, i. Paid 10/01/14 to 09/30/15 ii. Paid 10/01/15 to 09/30/16 iii. Paid 10/01/16 to 09/30/17 iv. Please note that separate claim reports for regular and comprehensive members should be provided. b. Monthly exposure data by group/suffix for the periods corresponding to the above claim experience periods. c. Please provide the illustrative premiums for the medical groups/suffix. d. Stop loss attachment point as of October 1, 2017. e. Monthly stop loss fee per contract as of October 1, 2017. f. Monthly medical administrative fee per contract as of October 1, 2017. 5. Please explain any major changes that have occurred to the retiree health plan (e.g., changes in co pays, deductibles, change from self-insured to fully-insured, switching to high deductible health plans, etc.) in the past three years. ~ G RR ~ S Retirem.ent ~ Consulting CITY OF SOUTH MIAMI RETIREE HEALTH CARE PROGRAM DATA REQUEST OPEB Initial Per-Capita Cost Information (continued) 6. If your dental plan is self-insured and retirees pay less than 100% of the cost of the dental plan, please provide the following information for all suffixes with dental coverage. a. Monthly dental claims experience by group/suffix, i. Paid 10/01/14 to 09/30/15 ii. Paid 10/01/15 to 09/30/16 iii. Paid 10/01/16 to 09/30/17 iv. Please note that separate claim reports for regular and comprehensive members should be provided. b. Monthly exposure data by group/suffix for the periods corresponding to the above claim experience periods. c. Please provide the illustrative premiums for the dental groups/suffix. 7. If your dental plan is fully-insured and retirees pay less than 100% of the cost, please provide the 2015-2016, 2016-2017 and 2017-2018 fully-insured monthly active and retiree premium rates for one-person and two-person coverage. 8. If retirees pay less than 100% of the cost of your dental plan, please provide the following. a. Monthly dental administrative fee per contract as of October 1. 2017. b. The percentage or amount the City pays toward the retiree benefits 9. For any life insurance benefits, please provide premiums, eligibility conditions, and groups for whom these benefits are available. If the City provides any other retirement benefits please provide premiums, eligibility conditions, and groups for whom these benefits are available. 10. Please provide utilization data for the past three (3) years. This should include a listing of everyone who has retired from the City of South Miami over the past three (3) years. For each retiree, please indicate (a) if the retiree was eligible for health and/or other post-employment benefits, and (2) if they chose to enroll in health or other post-employment benefits. 11. Are retirees required to enroll in Medicare upon reaching age 65? If so, are they required to enroll in Medicare Part A, or both Medicare Parts A and B? 12. For retirees enrolled in health coverage with the City who are currently over age 65, please indicate whether each of them is covered by Medicare Part A, Medicare Part B, both Medicare Parts A and B, or not enrolled in Medicare. ~ G RR· ~ S Retirem.ent ~ Consulting CITY OF SOUTH MIAMI RETIREE HEALTH CARE PROGRAM DATA REQUEST Demographic Data Requirements The actuarial valuation will be performed using data as of October 1,2017 (valuation date). We will be calculating one contribution rate. In the secure file transfer tool of our secure website, GRS Advantage is an Excel© file which contains the active and inactive member census data reported as of October 1, 2014. Please update the data in the Excel© file with the information below for members as of October 1,2017. We would appreciate receiving this information through our secure electronic transfer. 1) For active employees as of the valuation date, please provide an electronic listing including the following information -please include a record layout. • Unique identifier (Le., employee number or Social Security number) • Name • Gender (M or F) • Date of birth • Date of hire • Annual salary • Years and Months of Service (YY/MM) • Employment group (General, Police) • Health group code (if applicable. Please furnish a list of codes.) • Health Plan (HMO, PPO, etc.) • Type of coverage (Le., single, employee plus spouse, family, etc.) • Spouse date of birth • Spouse gender 2) For retired employees and beneficiaries as of the valuation date, please update / review the attached Excel© file including the following information. • Unique identifier (Le., employee number or Social Security number) • Name • Gender (M or F) • Date of birth • Date of retirement • Status (Retiree, Disabled, Beneficiary, etc.) • Employment group (Fire, General, Police) ~ G RR ~ S Retirem.ent ~ Consultmg CITY OF SOUTH MIAMI RETIREE HEALTH CARE PROGRAM DATA REQUEST Demographic Data Requirements (continued) • Health group code (if applicable. Please furnish a list of codes.) • Health Plan (HMO, PPO, etc.) • Type of coverage (retiree only, retiree plus spouse, family, two regular contracts, one complementary contract, etc.) • Does coverage continue for beneficiary after retiree's death? (Y or N) • Beneficiary gender • Beneficiary date of birth • Member contribution • Medicare coverage if over age 65 (Part A only, Part B only, Parts A and B, None) • Life insurance amount and Member Contribution (if applicable) • Dental coverage and Member Contribution member (if retiree pays less than 100% of premium) • Vision coverage and Member Contribution member (if retiree pays less than 100% of premium) 3) For former employees who are not yet retired, but who will be eligible for retiree health care benefits, please provide an electronic listing including the following information -please include a record layout. • Unique identifier (Le., employee number or Social Security number) • Name • Gender (M or F) • Date of birth • Date of hire • Date of termination • Date or age at which person becomes eligible for retiree health care benefits • Employment group (Fire, General, Police) • Health group code (if applicable. Please furnish a list of codes.) • Life insurance amount and Member Contribution (if applicable) • Dental coverage and Member Contribution member (if retiree pays less than 100% of premium) • Vision coverage and Member Contribution member (if retiree pays less than 100% of premium) ~ G RR ~ S Retirem.ent ~ Consultmg SUMMARY OF BENEFITS AS OF OCTOBER 1, 2014 PROGRAM PARTICIPANTS All Employees of the City are eligible to receive retiree health care benefits. NORMAL RETIREMENT BENEFITS Normal retirement eligibility conditions for retiree health care benefits are as follows: Police Officers: 1. Attainment of age 60 and completion of 10 years of credited service or 2. Completion of 25 years of credited service General Employees: 1. Attainment of age 55 and completion of 10 years of credited service All Members Health Care Benefit Provided by Plan Member: Eligible Members are eligible to elect post retirement coverage. Member pays the full blended cost of coverage. Spouse: Eligible Members are eligible to elect spousal coverage which continues for the life of the spouse should the spouse survive the retiree. Member / Spouse pays the full blended cost of spousal coverage. Dependent: Eligible Members are eligible to elect dependent coverage which continues up until age 26. Member / dependent pays full blended cost of dependent coverage. EARLY RETIREMENT BENEFITS Police Officers: 1. Attainment of age 50 and completion of 15 years of service DEATH IN SERVICE RETIREMENT BENEFITS Death retirement eligibility conditions for retiree health care benefits are as follows: Health Care Benefit Eligibility Conditions Immediately. Health Care Benefit Provided by Plan Spouse: Spouse eligible to elect coverage which continues for the life of the spouse. Spouse pays full blended cost of coverage. Dependent: Dependents are eligible to elect coverage which continues to age 26. ~ G RR ~ S Retirem.ent ~ Consultmg SUMMARY OF BENEFITS AS OF OCTOBER 1, 2014 Dependent pays full blended cost of coverage. DISABLED RETIREMENT BENEFITS Disability retirement eligibility conditions for retiree health care benefits are as follows: Health Care Benefit Eligibility Conditions Totally and permanently disabled for a six month period while actively employed. Health Care Benefit Provided by Plan Member: Members are eligible to elect post retirement coverage. Spouse: Members are eligible to elect spousal coverage which continues for the life of the spouse should the spouse survive the retiree. Dependent: Members are eligible to elect dependent coverage which continues up until age 26 of the dependent. BENEFITS FOR SPOUSES OF RETIRED EMPLOYEES Spouses of retired employees are eligible to receive retiree health care benefits. Coverage continues to surviving spouses of deceased retirees. NON-MEDICARE AND MEDICARE-ELIGIBLE PROVISIONS Retirees are not required to enroll in Medicare plans once eligible. If a retiree enrolls in Medicare retiree pays Medicare premiums. VISION COVERAGE Health Care Benefit Eligibility Conditions Members who meet retiree health care eligibility conditions may elect vision benefits. Health Care Benefit Provided by Program Member: Member pays full cost of coverage. DENTAL COVERAGE Health Care Benefit Eligibility Conditions Members who retire meet retiree health care eligibility conditions may receive dental benefits. Health Care Benefit Provided by Plan Member: Member pays full cost of coverage. LIFE INSURANCE COVERAGE Life Insurance coverage is not available to retirees and is not included in this valuation. I.. G RR ~ S Retirem.ent ~ Consultmg SCOPE OF SERVICES A detailed analysis of the work plan for this project. Having performed hundreds of OPEB actuarial valuations under GASB Statement No. 45 (GASB 45), we have a well-established track for the process. The process is the same under GASB Statement No. 75 (GASB 75). Step 1-Collect Employee and Retiree Census Data and Benefit Plan Data Census data will be requested from the City. The City may need to request certain data from its own personnel/payroll system and from the health plan vendor(s). The City may need to massage or supplement the data obtained from these sources (if necessary) to provide clean data files (consolidated) and confirm the completeness and accuracy of the data. Information on the Benefit Plans, loss ratios, renewal reports, experience rating, worksheets, rate charts, etc., will be required from the respective health plan vendors in order to develop the initial per capita retiree claims cost for the benefit types. The quality of this data is the responsibility of the City and we do not audit the data. However, we do conduct a high level reconciliation and review for consistency and reasonableness. We follow-up with any questions arising from our data review. Step 2 -Draft and Approve Substantive Plan Provisions GASB 75 requires the actuarial valuation of City-provided other post-employment benefits, as constituted in the substantive plan -the plan terms as understood by the parties (the City and the members). This may be the most important step of the whole process. Since the program has previously been valued under GASB 45, this may simply involve updating the Summary of Plan Provisions included in our prior Actuarial Valuation Report. This may require us to obtain memoranda, documents, etc., which describe all the benefits provided. We must identify those benefits that qualify as employer-provided other post-employment benefits -and the eligibilities and conditions under which they are made available. We will draft a written version of the substantive plan and request City confirmation before proceeding. Step 3 -Develop Initial Per Capita Claim Costs Each relevant benefit type needs an initial per capita cost for the group. This is the baseline starting point for the project and requires short-term health actuarial expertise. Short-term because the initial per capita claim cost is the total underlying cost (not necessarily the premium) expected for the year following the valuation date for all employees and retirees. SCOPE OF SERVICES Fully insured premiums are blended premiums used for active and pre-age 65 retired members. These premiums are adjusted to reflect differing utilization by age and gender, using the most recent enrollment, into a single composite pre-age 65 retiree cost. This single composite pre-65 retiree cost is then converted to age-and gender-specific retiree costs reflecting morbidity. Fully insured premiums for age 65 and above retired members are adjusted to reflect differing utilization by age and gender, due to the impact of the Medicare program, using the most recent enrollment, into a sihgle composite age-65-and-above retiree cost. This single composite age-65-and-above retiree cost is then converted to age-and gender- specific retiree costs reflecting morbidity. For self-insured programs, actual claims experience over the three year period prior to the valuation date are analyzed to determine the age specific retiree costs reflecting morbidity. The premium developed by the preceding process is appropriate for the unique age and gender distribution currently existing. Over the future years covered by a valuation, the age and gender distribution will most likely change. Therefore, our process distributes the average premium over all age / gender combinations and assigns a unique cost for each combination. This process more accurately reflects health care costs in the retired population over the projection period. To model the impact of aging on the underlying health care costs, GRS relies on the Society of Actuaries' 2013 Study ((Health Care Costs -From Birth to Death". Chart 1 (2010 Aggregate Commercial Costs) is used to model the impact of aging for ages less than 65 and Table 4 (Development of Plan Specific Medicare Age Curve) is used to model the impact of aging for ages 65 and over. To model the rate at which medical costs may increase in the future GRS applies trend rates based on the forecasting model built and published (December 2007 and updated July 31, 2014) in Modeling Long-Term Health Care Cost Trends sponsored by the Society of Actuaries and authored by Prof. Thomas E. Getzen. It is important to note your claim costs will be developed and health care trend rates will be recommended under the direction of a fully qualified dedicated health care actuary - unlike some firms, which may utilize pension actuaries or others for this important step under a simplified model. SCOPE OF SERVICES Step 4 -Calculate All Projected Benefits and Present Values The future years' expected costs for all currently covered retirees and dependents are projected based on select and ultimate health care trend assumpt!ons for each benefit type. We will set up our long-term actuarial modeling system based upon the Summary of Substantive Plan Provisions. Part of this step is recognition of how the City's pension plan plays an integral part in its OPEB obligation. Naturally, we will use all the retirement eligibility requirements of the pension plan for normal, early, duty and non-duty disability and death, as applicable. Initially, we may use all of the demographic actuarial assumptions (such as turnover, retirement, disability and mortality rates) used by the pension plan -it may not be proper to simply pull such rate tables off the shelf since an actuarial experience studies may have been completed for the pension plan to set the rate tables reflecting the City's own demographic experience. Use of the pension plan demographic assumptions should be considered a minimum requirement for a proper actuarial valuation of the City'S OPEB costs and liabilities. In the end, the assumptions and methods employed are the City's assumptions and methods. They are to be adopted by the City because they are the basis for entries in the City's financial statements. We will advise City staff concerning the assumptions and methods. To that end, we will conduct conferences with key staff regarding these actuarial assumptions and methods to be used in the valuation. All future years' benefit costs are projected and taken back to today's dollars in a present value. These actuarial present values of expected benefits payable form the basis for the accounting entries and disclosures required under GASB 75. We will advise officials (particularly those in fi'nance and treasury) concerning how they would be setting the discount rate. Ultimately, all actuarial assumptions and methods are chosen or adopted by the City. Part of our role is to advise City management on such matters. In this step we run the prepared client data through our valuation system and choose multiple test lives (detailed results on an individual basis) to check in depth. We choose test lives based on various factors such as one in each division, a sampling of different age and service, different genders, etc. Step 5 -Calculate Expense and Liabilities We will calculate these expense and liability disclosures under a pay-as-you-go (unfunded) basis and discuss options for advance funding. Step 6 -Prepare Draft Report for Review GRS may prepare a draft version of our Actuarial Valuation Report and submit it to the City for initial review and comments. SCOPE OF SERVICES The draft report will include an Executive Summary, tables or charts presenting the development of the results, a description of all primary actuarial assumptions and methods and a summary of the program benefits. Our report will include the issuance of a Statement of Actuarial Opinion (SAO) in accordance with the Qualification Standards of the American Academy of Actuaries. In addition, GRS will be available to meet with City officials, as necessary, for education, presentation of results, planning and other purposes. We pride ourselves on the effort that we make to deliver reports in plain English, rather than page after page of numbers. Step 7 -Finalize Report After discussion regarding the draft report, we will make changes and issue our formal bound Report along with electronic copy to the City. Various telephone conferences may be required or advisable as the project proceeds - for the purposes of clarification, education (of GRS and City personnel) and decisions by the City as to the use of certain assumptions and methods. Finally, we will present the results in person to staff and/or committees to explain the GASB requirements and implications and to review our Report and any recommendations or options there may be. BUSINESS ASSOCIATE AGREEMENT This BUSINESS ASSOCIATE AGREEMENT (this "Agreement") is entered into by and between GABRIEL, ROEDER, SMITH & COMPANY, a Michigan corporation ("GRS") and The City of South Miami Retiree Health Care Program (the "Plan") (together, the "Parties"), effective as provided below. RECITALS WHEREAS, the Plan is a "covered entity" within the meaning of the Health Insurance Portability and Accountability Act of 1996 and its implementing regulations (45 CFR Parts 160-164) ("HIPAA") and the requirements of the Health Information Technology for Economic and Clinical Health Act, as incorporated in the American Recovery and Reinvestment Act of 2009 (the "HITECH Act"; HIP AA and the HITECH Act are collectively referred to in this Agreement as "HIP AAlHITECH"); and WHEREAS, GRS has entered into an agreement with The City of South Miami acting on behalf of the Plan, to provide certain consulting and/or actuarial services in connection with the Plan (the "Service Agreement"); and WHEREAS, HIP AAlHITECH requires covered entities such as the Plan to obtain and document satisfactory assurances from "business associates" (as defined therein) regarding appropriate safeguarding of certain "protected health information" (as defined therein) received or created by the business associate (a "BA Agreement"); and WHEREAS, GRS, in the performance of its services in connection with the Plan, is a "business associate" within the meaning of HIP AAlHITECH; and WHEREAS, the Parties desire to enter into an agreement intended to satisfy the BA Agreement requirement as and to the extent such requirement may be applicable. NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements herein contained, the Parties agree as follows: AGREEMENT 1. Definitions Capitalized terms not expressly defined in this Agreement shall have the meanings as defined in HIP AAlHITECH. For purposes of this Agreement: (a) "Data Aggregation" shall have the same meaning as the term "data aggregation" in 45 CFR 164.501. . (b) "Designated Record Set" shall have the same meaning as the term "designated record set" in 45 CFR 164.501 in respect of the Plan. (c) "Effective Date" shall have the meaning as set forth in Section 5(a) of this Agreement. (d) "Individual" shall have the same meaning as the term "individual" in 45 CFR 160.103 and shall include a person who qualifies as a personal representative in accordance with 45 CFR 164.502(g). 13743533.2 (e) "Plan Administrator" shall mean the person(s) or office(s) with the discretionary authority to act on behalf of the Plan on matters relating to HIP AA/HITECH and this Agreement. (f) "HIP AAlHITECH" shall have the meaning as set forth in the RECITALS portion of this Agreement. (g) "Protected Health Information" shall have the same meaning as the tenn "protected health information" in 45 CFR 160.103, but limited to the information received or created by GRS from or on behalf of the Plan. (h) "Required by Law" shall have the same meaning as the tenn "required by law" in 45 CFR 164.103, to the extent not preempted by Federal law. (i) "Secretary" shall mean the Secretary of the Department of Health and Human Services or his designee. (j) "Service Agreement" shall have the meaning as set forth in the RECITALS portion of this Agreement. (k) "Significant Breach" shall mean a pattern of activity or practice that constitutes a material breach or violation of this Agreement in the written opinion of legal counsel for the Plan. For purposes hereof, a "pattern of activity or practice" shall consist of at least three (3) discrete acts and/or omissions within a period of not more than 180 consecutive days. 2. Obligations of GRS GRS agrees to: (a) not use or disclose Protected Health Information other than as permitted or required by this Agreement or as Required By Law; (b) use appropriate safeguards and comply, where applicable, with the Security Standards for the Protection of Electronic Protected Health Infonnation set forth in 45 CFR Part 164, Subpart C with respect to electronic protected health infonnation, to prevent use or disclosure of the Protected Health Information other than as provided for by this Agreement; (c) (d) 13743533.2 report to the Plan Administrator any use or disclosure of Protected Health Infonnation not provided for by this Agreement of which it becomes aware, including breaches of unsecured Protected Health Infonnation as required by 45 CFR 164.410; in accordance with 45 CFR 164.502(e)(I)(ii), ensure that any subcontractors that create, receive, maintain, or transmit Protected Health Infonnation on behalf of GRS agrees to the same restrictions and conditions that apply through this Agreement to GRS with respect to such infonnation; provided that the Plan shall not have any right to disapprove any subcontractors of GRS or to review any agreements with such subcontractors, except to the extent specifically provided herein or in the Service Agreement; 2 (e) provide, in a commercially reasonable time and manner, access to Protected Health Information to the Plan Administrator to the extent necessary to meet the requirements under 45 CFR 164.524, provided that (i) such access shall be provided only to the extent such Protected Health Information is in the possession of GRS and maintained in a Designated Record Set and (ii) the Plan shall reimburse to GRS any of the following costs incurred in providing such access: (i) copying (including the cost of supplies and labor); (ii) postage; and (iii) preparation of an explanation or summary of the Protected Health Information; (f) make, in a commercially reasonable time and manner, any amendment(s) to Protected Health Information that the Plan Administrator directs or agrees to pursuant to 45 CFR 164.526, provided that such amendment(s) shall be made only to the extent such Protected Health Information is in the possession of GRS and maintained in a Designated Record Set; (g) make available to the Plan Administrator, in a commercially reasonable time and manner, information in the possession of GRS as and to the extent required for the Plan to respond to a request by an Individual for an accounting of disclosures of Protected Health Information in accordance with 45 CFR 164.528; (h) to the extent GRS is to carry out the Plan's obligations regarding Privacy of Individual Identifiable Health Information set forth in 45 CFR Part 164, Subpart E (the "Privacy Requirements"), comply with the Privacy Requirements that apply to the Plan in GRS' performance of such obligations; and (i) make internal practices, books, and records relating to the use and disclosure of Protected Health Information received from the Plan, or created or received by GRS on behalf of the Plan, available to the Secretary for purposes of the Secretary determining the Plan's complianoe with the Privacy Requirements. 3. Permitted Uses and Disclosures by GRS (a) General Use and Disclosure Provisions. Except as otherwise limited in this Agreement, GRS may use or disclose Protected Health Information to perform its duties, functions, activities, or services for, or on behalf of, the Plan, provided that such use or disclosure would not violate (i) HIP ANHITECH if done by the Plan or (ii) the minimum necessary policies and procedures of the Plan as and to the extent intended to comply with HIP ANHITECH and communicated by the Plan Administrator to GRS. (b) Specific Use and Disclosure Provisions. 13743533.2 (i) GRS may use Protected Health Information for the proper management and administration of GRS or to carry out the legal responsibilities of GRS. (ii) Except as otherwise restricted by this Agreement, GRS may disclose Protected Health Information for the proper management and administration of GRS or to carry out the legal responsibilities of GRS, provided that: (A) disclosures are Required By Law, or 3 (B) GRS obtains reasonable assurances from the person to whom the information is disclosed that it will be held confidentially and used or further disclosed only as Required By Law or for the purpose for which it was disclosed to the person, and the person notifies GRS of any instances of which it is aware in which the confidentiality of the information has been breached. (iii) Except as otherwise limited in this Agreement, GRS may use Protected Health Information to provide Data Aggregation services as permitted by 45 CFR 164.504( e)(2)(i)(B). (iv) GRS may use or disclose Protected Health Information to report violations of law to appropriate Federal and/or State authorities, consistent with 45 CFR 164.502(j). (v) Except as otherwise limited in this Agreement, GRS may disclose Protected Health Information to other "business associates" (within the meaning of HIP AAlHITECH) of the Plan (i) as directed by the Plan Administrator or (ii) to perform its duties under the Service Agreement. Notwithstanding any provision hereof or any other prior agreement by the Parties, it shall be the Plan's sole responsibility (and not GRS's responsibility) to ensure that the Plan has entered into appropriate business associate agreements with (or has obtained similar written assurances from) its business associates. (vi) Except as otherwise limited in this Agreement, GRS may disclose Protected Health Information to the Plan's sponsoring employer(s) as directed by the Plan Administrator; provided that the Plan Administrator shall include in such direction the specific person(s) or official(s) to whom such disclosure shall be made. Notwithstanding any provision hereof or any other prior agreement by the Parties, it shall be the Plan's sole responsibility (and not GRS's responsibility) to ensure that the Plan has, in its official plan document, an appropriate provision regarding disclosures of Protected Health Information to any sponsoring employer of the Plan. 4. Obligations of the Plan and Plan Administrator (a) General. Except as otherwise specifically provided under this Agreement, the Plan shall not request or permit GRS to (and shall not cause the Plan Administrator to request or perrint GRS to) use or disclose Protected Health Information in any manner that may not be permissible under HIP AAlHITECH if done by the Plan. (b) Notification of Privacy Practices and Restrictions. The Plan shall cause the Plan Administrator to promptly notify GRS of: (i) (ii) 13743533.2 the name or office of each person authorized to act as the Plan Administrator for purposes of this Agreement, and any changes thereto; any limitation(s) in the Plan's notice of privacy practices in accordance with 45 CFR 164.520, to the extent that such limitation may affect GRS's use or disclosure of Protected Health Information; 4 (iii) any changes in, or revocation of, permission by an Individual regarding use or disclosure of Protected Health Information relating to that Individual, to the extent that such changes may affect GRS's use or disclosure of Protected Health Information; (iv) any restriction to the use or disclosure of Protected Health Information that the Plan has agreed to in accordance with 45 CFR 164.522, to the extent that such restriction may affect GRS's use or disclosure of Protected Health Information; and (v) any policies and procedures of the Plan to the extent that such policies or procedures may affect GRS' use or disclosure of Protected Health Information. 5. Term and Termination (a) Term. The term of this Agreement shall be for a period commencing as of the later of (i) October 2, 2017 or (ii) the first date as of which HIP AAlHITECH applies to the Plan (the "Effective Date"), and ending when all of the Protected Health Information provided by the Plan to GRS, or created or received by GRS on behalf of the Plan, is destroyed, returned to the Plan or further protected in accordance with the termination provisions in this Section 5. (b) Termination for Cause. Upon the Plan Administrator's knowledge of a Significant Breach of GRS's obligation under this Agreement and subject to Section 5(c) hereof, the Plan Administrator may commence termination of this Agreement by providing a notice of termination to GRS. Notwithstanding the foregoing, this Agreement shall be considered to have been terminated pursuant to this Section 5(b) only if, prior to such notice of termination: (c) 13743533.2 (i) the Plan Administrator shall have given to GRS written notice describing with specificity the Significant Breach; (ii) a period of 60 days from and after the giving of such notice shall have elapsed without GRS' s having substantially cured or remedied such reason for termination during such 60-day period, unless such reason for termination cannot be substantially cured or remedied within 60 days, in which case the period for remedy or cure shall be extended for a reasonable time (not to exceed 60 days), provided that GRS has made and continues to make a diligent effort to effect such remedy or cure; and (iii) a final determination shall have been made by the Plan Administrator that the Significant Breach persists, following a meeting at which GRS shall be entitled to appear and contest the determination. Condition Precedent. Upon receipt of a notice of termination pursuant to Section 5(b) hereof, or for termination of this Agreement for any other reason, GRS shall return or destroy all Protected Health Information received from the Plan, or created or received by GRS on behalf of the Plan, that GRS still maintains in any form, and shall retain no copies of such information, except that if GRS determines that such return or destruction is not feasible, GRS shall extend the protections of this Agreement to such Protected Health Information and limit further uses and disclosures of such Protected Health Information to those purposes that make the return or destruction infeasible. 5 (d) Report to Secretary of HHS. If, in the reasonable determination of the Plan Administrator, termination of the Agreement pursuant to Section 5(b) hereof is not feasible, the Plan Administrator shall report the Significant Breach to the Secretary. 6. Other Provisions (a) (b) (c) (d) (e) (f) (g) (h) (i) 13743533.2 Separate from Service Agreement. Notwithstanding anything herein to the contrary, this Agreement shall not be construed, and is not intended, to be a part of any Service Agreement or to otherwise impose on GRS any duties, responsibilities, obligation whatsoever in respect of the administration of the Plan, including any duties, responsibilities or obligation of the Plan pursuant to HIP AAlHITECH. No Liability. To the fullest extent permitted by law, GRS shall be under no liability for any use or disclosure made in accordance with the directions of the Plan Administrator or other Plan representatives. No Duty to Question. Notwithstanding anything herein to the contrary, GRS shall not be under any duty to question any directions received from the Plan Administrator, nor to review in any respect the manner in which any fiduciary of the Plan exercises its authority and discharges its duties with respect to the Plan. Amendment. The Parties agree to take such action to amend this Agreement from time to time as is necessary for the Plan to comply with the requirements of HIP AAlHITECH. Ambiguities. Any ambiguity in this Agreement shall be resolved in a manner that is consistent with the applicable requirements under HIP AAlHITECH. Notice. Any notice required to be given hereunder shall be in writing and delivered by hand or sent by facsimile, registered or certified mail, return receipt requested, or by air courier, to the address (or fax number) cited in the signature block of this Agreement or to such other address (or fax number) as shall be specified by like notice by either Party, and shall be deemed given only when received. Headings. The title, headings, and subheadings of this Agreement are solely for the convenience of the Parties and do not affect the meaning or interpretation of any provision of this Agreement. Governing Law. Except to the extent preempted by Federal law, this Agreement shall be governed by and enforceable in accordance with the laws of the State of Michigan without giving effect to the principles of conflict of laws thereof. Arbitration. Any controversy or claim arising out of this Agreement, or the breach or violation thereof, shall be settled by binding arbitration in the City of Southfield, Michigan, in accordance with the rules then obtaining of the American Arbitration Association, and the arbitrator's decision shall be binding and final, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. Entire Agreement. This Agreement contains the entire understanding between the Plan and GRS with respect to the subject matter hereof and, except as specifically provided herein, cancels and supersedes any and all other agreements between the Plan and GRS with respect to the subject matter hereof. Any amendment or modification of this Agreement shall not be binding unless in writing and signed by both the Plan and GRS. 6 (k) Severability. In the event that any provision of this Agreement is determined to be invalid or unenforceable, the remaining terms and conditions of this Agreement shall be unaffected and shall remain in full force and effect, and any such determination of invalidity or unenforceability shall not affect the validity or enforceability of any other provision of this Agreement. (1) No Benefit to Others. The representations, covenants and agreements contained in this Agreement are for the sole benefit of the Parties, and they shall not be construed as conferring, and are not intended to confer, any rights on any other persons. (m) Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the Parties have entered into this Business Associate Agreement, effective as of the Effective Date. Date: --------------------------- Date: October 2,2017 --------~------------------- THE CITY OF SOUTH MIAMI RETIREE HEALTH CARE PROGRAM By: ____________________________ __ Name: ______________________________ _ Title: ____________________________ _ Address: ----------------------------- Fax Number: -------------------------- GABRIEL, ROEDER, SMITH & COMPANY By: __ ~_·~ ___ _ Name: Christine Scheer Title: Corporate Secretary . Address: One Towne Square, Suite 800 Southfield, Michigan 48076 Fax Number: (248) 799-9020 13743533.2 7 November 2, 2017 GASB 75 Analysis MILLIMAN PROPOSA.L FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL Milliman 10000 N. Central Expressway Suite 1500 Dallas, Texas 75231 Tel +1 2148635500 Fax +1 2148635501 milliman.com Table of Contents Proposal A) Milliman's Actuarial Consulting Services ...................................... 3 B) GASB 75 Analysis -Project Steps ........................ : ....................... 5 C) Project Team ................................................................................ 7 D) Fee Schedule ............................................................................... 9 Exhibits Exhibit 1 -2017 Milliman Fact Sheet Exhibit 2 -Sample Client List Exhibit 3 -Requested Information Exhibit 4 -Service Agreement Exhibit 5 -Business Associate Agreement (HIPAA Compliance) rJ Milliman November 2, 2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 2 A) Milliman's Actuarial Consulting Services Milliman differentiates itself in the delivery of actuarial consulting services by seeking out and developing professionals who are not only technically sound, but who can also communicate complex actuarial and accounting concepts in an understandable way. As a result, we bring measurable value to our client's ability to make sound decisions. Public Sector Experience Milliman is nationally recognized for our substantial commitment to the public sector, which includes publication of our PERiScope newsletter, active participation in national meetings and advisory committees, and the funding of specialized research. With one of the largest groups of public-sector clients in the U.S., our consultants are extremely well versed in the GASB standards relating to post-employment benefit arrangements. They are also mindful of the impact that state and local law has on public employer benefit plans as they consider and analyze the effect that applicable law may have on current and future liabilities. Milliman actuaries have performed GASB 45 valuations since the accounting standard was adopted in 2006. The new GASB 75 accounting standards will be required to replace GASB 45 no later than for fiscal years beginning after June 15, 2017, but can be adopted earlier. Our actuaries are experts on both pension and OPEB and perform a large number of valuations each year. We have been retained by numerous public employers to perform OPEB valuations and consult on issues related to GASB 74 and 75. We have included a Representative Client List as Exhibit 2. Milliman also provides a broad range of other services to public plan sponsors, including actuarial services, benefits consulting, compliance, recordkeeping, employee communication and investment advisory services. Health and Welfare Expertise For many years, our Health Practice has been considered the premier provider of health actuarial services in the U.S. This expertise and experience are particularly important since employers' GASB liability is highly dependent on the cost structure of the health plan offered to its retirees and due to anticipated medical inflation. In addition to serving as actuary for some of the nation's larger healthcare providers, Milliman's healthcare group publishes the Healthcare Cost Guidelines, an invaluable tool for developing per capita claims costs and medical inflation assumptions for post- employment medical benefit valuations. The Guidelines were first developed in 1954 as a result of Milliman's continuing research on healthcare costs. The publication has been updated and expanded annually ever since, and The Guidelines are continually monitored as they are utilized in measuring the experience and evaluating the rates of our clients, and comparing the information to other data sources. The Guidelines also provide a flexible but consistent basis for the determination of claim costs for a wide variety of health benefit plans and may be used to estimate future claim levels, set provider budgets, set service category budgets, evaluate past experience, and establish interrelationships between different health coverages. Milliman has clients across the entire spectrum of public sector organizations, including: • City, County & State Governments • School Districts • Law Enforcement Agencies • Hospital Districts • Transportation Authorities • Power & Utilities Organizations • Milliman November 2, 2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 3 Independence Recognized as an industry leader, Milliman is an independent firm of consultants and actuaries. We are not affiliated with other organizations that might impair our objectivity or our focus on your needs. We deliver top-quality service because our flexible internal structure allows us to assemble collaborative project teams that provide broad expertise under the guidance of an assigned consultant who understands the City of South Miami, FL ("the City") and your unique needs. Extensive GASB Valuation Experience Milliman's extensive experience with GASB valuations allows our consultants to effectively analyze and maintain data, produce valuation results and project anticipated future GASB costs. Because no two plans are alike, our approach to each system is flexible. Accordingly, we are equipped to serve all types of clients with a broad spectrum of plan designs. Client Commitment We have worked hard to earn the trust of our public-sector clients by being very approachable and accessible, using technology to simplify and support all services, and by delivering on our commitments. We intend to continue the same client service model for the City, earning the same high level of trust. Thought Leadership and Legislative Updates Milliman is already working with our clients on alerting them to the required changes as a result of the new GASB 74/75 standards and will partner with the City to illustrate how the new standards will impact your financial statements as well as your reporting requirements for the OPEB plan. Milliman November 2, 2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 4 B) GASB 75 Analysis -Project Steps Assess Your Needs The GASB 75 Analysis is expected to accomplish the following objectives: 1) Data Collection We will gather requested information from the City related to other post- employment benefits (OPEBs) offered to retirees. This will include the prior actuarial valuation report, so that we may assess the reasonability of the baseline assumptions and valuation results. Upon the review of the prior valuation, we will discuss any proposed changes in advance of completing the updated results. 2) Valuation We will perform calculations in accordance with GASB guidance and current actuarial standards of practice. Key computations under GASB 75 will include the Total OPEB liability and OPEB expense (under GASB 75), and projected future benefit payments. 3) Sensitivity Analysis We will provide sensitivity analysis to demonstrate the impact of variation in the assumed discount rate and other key assumptions. This information will be valuable in identifying the key drivers of expected cost associated with providing OPEBs to retirees. 4) Meeting to Present Results We will meet with you via WebEx or conference call to present valuation results and discuss important issues. 5) Financial Statement Preparation We will assist your auditors, as necessary, to review the GASB 75 section of the financial statement to assure that the disclosed information is consistent with our valuation results. Strategy and Implementation Based on conclusions drawn from the valuation, we will be ready to discuss next steps. Those next steps typically include analysis of strategies you may want to explore prior to disclosing GASB 75 information in employer financial statements. Key considerations. may include: » The effect of potential plan design changes on GASB cost » The impact of changes in employee cost-sharing provisions » Whether advance funding of benefits in a trust is appropriate Ongoing Reporting After completion of the valuation and additional analysis, as needed, we will be well- positioned to provide OPEB valuations on an ongoing basis as required under GASB 75. The steps involved in performing ongoing valuations will be similar to the steps described above for this valuation, except in the case where a more simplified approach may be used for interim valuations. Following completion of the valuation, • Milliman November 2, 2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 5 we will meet with you to discuss results and follow with issuance of a formal valuation report. Services Agreement A service agreement is provided as Exhibit 4. If you wish to engage us to provide the GASB 75 consulting services as described herein, please sign this document and return the agreement to us. We will then sign the agreement, provide a copy to you and begin work on the project. To complete your valuation, we will need certain census and plan information. The enclosed Exhibit 3 provides a list of this information. Timing for Completion of Valuation From the time we receive the requested information and a completed service agreement, we expect to complete your valuation within six to eight weeks and schedule a meeting to discuss the results with you. GASB Analysis Timeline ; 1 ! i • • • i Data Collection i • Valuation i • • • Sensitivity Analysis , , , • Meeting to Present Results i i ... o 2 3 4 5 6 7 8 9 WEEKS Il Milliman November 2, 2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 6 C) Milliman Project Team Lead Actuary Ben Upchurch is a Principal and Consulting Actuary with the Atlanta office of Milliman. He joined the firm in 1990. As a principal in Atlanta's Employee Benefits practice, he is the lead consultant for a variety of private, public, and multi-employer plan sponsors of pension and savings plans. His consulting activities focus on the administration, design, and funding of these plans. Ben has been a consultant for over 30 years in the employee benefits field. In addition to pension and savings plans, he also has extensive experience with post- retirement medical plans. He is a frequent participant in pension workshops and panels for professional groups. Professional Designations » Fellow, Society of Actuaries (FSA) » Member, American Academy of Actuaries (MAAA) » Enrolled Actuary under ERISA (EA) Degrees » BS, Management Science, Georgia Institute of Technology » MAS, Georgia State University Consulting Actuary Sebastian Jaramillo is a consulting actuary with the Atlanta office of Milliman. He practices in the employee benefits field, working with defined benefit and post- retirement medical plans. In addition to preparing and analyzing actuarial valuations, Sebastian assists pension and post-retirement medical plan sponsors in quantifying the financial risk associated with such plans. Professional Designations » Associate, Society of Actuaries (ASA) » Member, American Academy of Actuaries (MAAA) » Enrolled Actuary under ERISA (EA) Degrees » BA (Mathematics), Tulane University Ben Upchurch FSA, MAAA, EA Relationship Manager and Consulting Actuary Sebastian Jaramillo ASA,MAAA,EA Consulting Actuary • Milliman November 2, 2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 7 Health Actuary Stephanie Peterson is an Actuarial Consultant with the Employee Benefits Health and Welfare practice in the Houston office. As a credentialed actuary, Stephanie is responsible for actuarial reports and analysis for medical, dental, life, disability, paid time off, and other ancillary plans. Stephanie's main responsibility is direct consulting to large employers. She also assists on our platform of services for fully insured plans. In her current position as an Actuarial Consultant, Stephanie specializes in the following: » Large, complex actuarial projects such as HP Assist, FSA Assist » Calculating IBNR reserves » Benchmarking plan designs and recommending changes » Calculating the value of plan design changes using Milliman's proprietary actuarial cost model, Health Cost Guidelines and Dental Cost Guidelines » Performing retiree medical valuations (FASB I GASB) » Evaluating the feasibility of self-insurance » Performing Medicare Part D Attestations Professional Designations » Fellow, Society of Actuaries (FSA) » Chartered Enterprise Risk Analyst (CERA) » Member, American Academy of Actuaries (MAAA) Education » BS, Biology I Chemistry I Mathematics, College of Saint Mary, Omaha, NE Stephanie Peterson FSA,CERA,MAAA Consulting Actuary • Milliman November 2, 2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 8 D) Fee Schedule Fee Assumptions The estimated fees are based on the following assumptions: » There are approximately 132 active employees » There are approximately 7 retirees and beneficiaries » There are three medical options available to retirees, as well as vision and dental. » Data provided is usable without audit or significant follow up » Travel and other out-of-pocket expenses are billed separately. Estimated Fees Phase Fee Initial GASB 75 valuation for Fiscal Reporting Year Ending 9/30/2017 GASB 75 roll-forward valuation for Fiscal Reporting Year Ending 9/30/2018 (using participant data and claims information from the prior year) GASB 75 valuation for Fiscal Reporting Year Ending 9/30/2019 GASB 75 roll-forward valuation for Fiscal Reporting Year Ending 9/30/2020 (using participant data and claims information from the prior year) *If you prefer that Milliman make an on·site final presentation, our fees will be an additional $1,000, Plan Design and Funding Analysis $9,000 $2,000 $9,000 $2,000 Provided as needed and based on scope If a material difference in fees becomes evident due to a change in the scope of the assignment, we will advise you. • Milliman November 2, 2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 9 Exhibit 1 -Milliman Facts 2017 Milliman is among the world's largest independent actuarial and consulting firms. With more than 3,400 employees and revenues of $940 million in 2016, the firm serves the full spectrum of business, governmental, and financial organizations. Milliman was founded in 1947 and today has offices in principal cities worldwide, covering markets in North America, Latin America, Europe, Asia and the Pacific, and the Middle East. Organization Milliman is owned and managed by approximately 400 principals, who have been elected in recognition of their technical, professional, and business achievements. Leadership Stephen A. White, President and CEO Kenneth P. Mungan, Chairman Firm Highlights Milliman consultants have served in leading roles in the actuarial profession, including as presidents and board members of the following organizations: » American Academy of Actuaries » Society of Actuaries in Ireland » Brazilian Institute of Actuaries » The Actuarial Foundation » Casualty Actuarial Society » Actuarial Standards Board » Institute of Actuaries » Institute of Actuaries of India » Royal Dutch Actuarial Association » Italian National Council of Actuaries » Society of Actuaries » Staple Inn Actuarial Society Milliman is the leading provider of actuarial and related products and services to insurance markets worldwide. Employee Benefits » Milliman's pension research provides industry-leading information for corporate (annual Pension Funding Study and monthly Pension Funding Index), multiemployer (Multiemployer Pension Funding Index) and public (PubliC Pension Funding Study) plan sponsors. » Milliman's administrative services are nationally recognized and rewarded, including: -DC services recognized in the 2016 PLANSPONSOR magazine DC survey as one of the top record keepers in the industry with a Silver award for the large plan market and 31 overall best-in-class awards; 214 best-in-class awards since 2012 covering areas such as industry knowledge, staff consistency, fee transparency, cost vs. value, and participant communications. -DB pension administration outsourcing among the Top 10 providers with a focus on plans between 1,000 to 200,000 participants. Primary Practice Areas • Employee benefits, investment, and compensation consulting services • Health consulting services • Life and financial consulting services • Property and casualty consulting services • Milliman November 2, 2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 10 » Milliman continually provides innovative solutions to its clients, including Sustainable Income Plans (SIP) designs, health program designs, financial management solutions, communication campaigns, surveys, and research. Health » Milliman has consulted on health issues to clients in more than 30 countries on six continents, and has more actuaries who focus specifically on health issues than any other firm in the world. » Milliman actuaries certified approximately 45% of the Medicare Advantage and Medicare Part 0 bids for 2017 and certified Affordable Care Act premium rate filings for clients in 47 states and Puerto Rico. » The firm's disability actuaries consult to more than two-thirds of individual disability insurers, and its long-term care (LTC) actuaries consult to more than 80% of major LTC insurers in the United States. » Milliman manages and organizes medical claim data for more than 275 clients and 90 million members-encompassing more than 9 billion total healthcare records-through its Medlnsight® data warehouse software package. » The Milliman Advanced Risk Adjusters™ tools have higher predictive value for health costs than other industry products. Life and Financial Services » Milliman's life and financial services practice is the largest in the United States and one of the market leaders across Europe, Asia, and the emerging economies. Relationships with our clients span decades, and our consultants are proud to have worked with 44 of the top 50 insurers globally. » Milliman is a global leader in major life insurance company mergers and acquisitions and has been an advisor in more than 80% of U.S. transactions since 2000. » Milliman Financial Risk Management LLC is a global leader in financial risk management to the retirement savings industry. Milliman FRM provides investment advisory, hedging, and consulting services on over $143 billion in assets. Established in 1998, the practice includes more than 150 professionals operating from three trading platforms around the world (Chicago, London, and Sydney). » Milliman has worked with clients in Europe and North America to fully industrialize their modeling and financial reporting processes using cloud-based technology. We continue to win accolades for tools built to improve time efficiency and allow actuaries to focus on strategic, high-value problem solving. In particular, we were named best tech vendor for actuarial modelling by Risk.net Buy Side Awards 2016 and awarded best actuarial software by the Actuarial Post in 2015. » Milliman has long standing relationships with local regulatory entities across the globe. Our consultants are able to draw on this experience to provide a complete range of operational, strategic, and financial risk management solutions and tools. • Milliman November 2, 2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 11 Property and Casualty » Milliman's Property and Casualty practice is among the largest in the world, providing actuarial, underwriting, and claims consulting services to insurers, corporations, and government agencies. Its mortgage insurance, title insurance, captive insurance, and M&A experts are recognized leaders in their respective fields. » Milliman's property and casualty reserving software is relied on by approximately 1,000 professionals at more than 200 insurers and agencies globally. The firm's Arius® solution combines Milliman's 20+ years of providing the most widely used deterministic tools with its research into using multiple models to simulate loss distributions and reserve variability. » Milliman's actuarial and risk management experts are helping leading P&C insurers adapt to the technical demands of Solvency II and ORSA regulations throughout the world. » The Milliman Risk Institute provides thought leadership and market research on best practices for global enterprise risk management for all major industry sectors, including insurance, energy, healthcare, and banking. » Milliman was selected as the actuarial firm of the year by Captive Review at the 2015 U.S. Captive Services Awards, honoring the firm for demonstrating the highest level of service in meeting clients' needs. Milliman November 2, 2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 12 Exhibit 2 -Representative Client List ALABAMA City of Athens City of Florence ARKANSAS Arkansas Tech University FLORIDA Bay County City of Apopka City of Dania Beach City of Eustis City of Haines City GEORGIA Camden County City of Smyma LOUSIANA 16th Judicial District Court Acadia Parish School Board Allen Parish Police Jury Allen Parish School Board Allen Parish Sheriffs' Office Assumption Parish Sheriffs Office Bayou Lafourche Freshwater District Caddo Parish School Board Calcasieu Parish School Board Calcasieu Parish Sheriffs Office Caldwell Parish School Board Cameron Parish Sheriffs Office City of Abbeville City of Baton Rouge/ E. Baton Rouge Parish City of Bunkie City of DeRidder City of DeQuincy City of Lake Charles City of Leesville City of Scott City of Ville Platte Claiborne Parish Schools Concordia Parish School Board DeSoto Parish Schools DeSoto Parish Police Jury TENNESSEE City of Millington City of Gadsden City of Montgomery City of Port St. Lucie Franklin County Miami Beach Fraternal Order of Police Putnam County Santa Rosa County School Board Georgia Ports Authority Gordon County City of Scottsboro Montgomery County Southwest FL Water Mgmt. State of Florida Sumter Count Union County School Board Troup County East Baton Rouge Parish Sheriffs Office Plaquemines Parish Sheriff's Office East Carroll Parish School Board Rapides Parish Library East Feliciana Parish Sheriffs Office Rapides Parish Police Jury Evangeline Parish Assessor's Office Red River Parish Sheriffs Office Evangeline Parish School Board Richland Parish School Board Evangeline Parish Sheriffs Office Richland Parish Sheriff's Office Franklin Parish School Board St. Charles Parish Sheriffs Office Grant Parish School Board St. Helena Parish School Board Greater New Orleans Expwy Commission St. James Parish Sheriffs Office Iberia Parish Sheriffs Office St. John the Baptist Parish Sheriff Iberville Parish Sheriff's Office St. Landry Parish Sheriffs Office Jackson Parish School Board St. Martin Parish Schools Lafayette Parish Clerk of Court St. Mary Parish School Board Lafayette Parish School System St. Tammany Parish School Board Lafayette Parish Sheriffs Department St. Charles Parish Sheriffs Office Lake Charles Harbor & Terminal District Tangipahoa Parish Con. GO Dist 1 LaSalle Parish School Board Tangipahoa Parish Government Lincoln Parish School Board Tensas Parish School Board Livingston Parish Sheriffs Office Terrebonne Parish Sheriff's Office LA Assessor's Association (50 offices) Union Parish School Board Madison Parish School Board Vernon Parish Clerk of Court Madison Parish Sheriffs Office Vernon Parish Government Monroe City Schools Morehouse Parish School Board Ouachita Parish Police Jury Vernon Parish School Board West Carroll Parish School Board Winn Parish School Board • Milliman November 2, 2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 13 TEXAS Bowie County City of Plano Brazos County City of Webster Burleson County Cameron County Cameron County Collin County City of Allen Fort Bend County City of Brenham Gulf Coast Waste Disposal City of Denton Hays County City of Euless Jefferson County City of Jasper Lower Neches Valley Authority City of Katy Metropolitan Transit Authority of Harris County City of Laredo North Texas Municipal Water District City of Mount Pleasant Port of Houston Authority Potter County San Jacinto River Authority Tarrant Appraisal District Texarkana Water Utilities Travis County Peces County Port of Corpus Christi Authority Trinity River Authority Williamson County Winkler County • Milliman November 2, 2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 14 Exhibit 3 -Requested Information Data is preferred in an Excel format whenever possible. 1) Employee I Retiree Information (see layout below) ACTIVE EMPLOYEE DATA ' Milliman November 2,2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 15 2) Summary of plan provisions and any plan changes over past three years. » Type of Insurance: self-insured, fully insured or partially insured (ASO agreement) Please note if the type of insurance is different for actives, pre-65 retirees and post-65 retirees » Medical benefits (for each medical plan) Deductible Co-insurance Office visit co-pay Out-of-pocket maximum » Prescription drug benefits (for each Rx plan) Co pay Other » Other post-employment benefits (other than retirement), including life insurance, vision, dental, etc. » For Medicare eligible retirees -Are all post-65 retirees required to enroll in Medicare Parts A and B? Part D? How does the Plan coordinate with Medicare? Do retirees over 65 continue to receive health, life insurance, vision, dental, etc.? -Are post-65 retirees on a Medicare Advantage Plan? 3) Contribution Schedule (for actives, pre·65 retirees, and post·65 retirees as applicable) » Include both the employer and participant rates separately as well as the total monthly rate 4) Claims information -24·36 months needed (if self·insured) » Employee groups -active and retirees/beneficiaries » Is the group rated as one entity or are actives and retirees rated separately? » Type of benefit -medical, prescription drug, other » Time period -information for the most recent full year needed; claims information for prior three years preferred » Data should include: Monthly/annual employee counts or membership Claim lags (groups over 2000) or annual paid claims State if claims are net of stop loss recoveries Specific and Aggregate Stop Loss premiums and recoveries (if not adjusted in claims) Administrative expenses 5) Groups not covered by Medicare -if any 6) Most recent pension valuation report (if available) 7) Anticipated plan design changes (if applicable) 8) Name and Contact information of your Auditor • Milliman November 2, 2017 MILLIMAN PROPOSAL FOR GASB 75 ANALYSIS Prepared for the City of South Miami, FL 16 Exhibit 4 Consultin Services A reement Company: City of South Miami, FL Contact: Address: Telephone: Fax: Milliman Office: CSA Effective Date: ---------------------------------------------------------------- This Agreement is entered into between Milliman, Inc. ("Milliman") and City of South Miami, FL ("Company") as of Effective Date Month Day, Year. Such services may be modified from time to time and may also include general consulting services. These terms and conditions will apply to all subsequent engagements of Milliman by Company unless specifically disclaimed in writing by both parties prior to the beginning of the engagement. Subject to the terms of this Agreement, Company hereby engages Milliman to provide the Services described herein for the plans set forth in the attached Schedule of Services, and Milliman hereby accepts such engagement. In consideration for Milliman agreeing to perform these services, Company agrees as follows. Terms and Conditions 1. 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 Company, under any theory of law including negligence, tort, and breach of contract or otherwise, for any damages which exceed three million dollars ($3,000,000). In no event shall Milliman be liable for lost profits of Company or any other type of incidental or consequential damages. The foregoing limitations shall not apply in the event of the intentional fraud or willful misconduct of Milliman. 2. Disputes. In the event of any dispute arising out of or relating to the engagement of Milliman by the Company, the parties agree that the dispute will be resolved by final and binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall take place before a panel of three arbitrators. Within 30 days of the commencement of the arbitration, each party shall designate in writing a single neutral and independent arbitrator. The two arbitrators designated by the parties shall then select a third arbitrator. The arbitrators shall have a background in either insurance, actuarial science or law. The arbitrators shall have the authority to permit limited discovery, including depositions, prior to the arbitration hearing, and such discovery shall be conducted consistent with the Federal Rules of Civil Procedure. The arbitrators shall 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 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. 3. Choice of Law. The construction, interpretation, and enforcement of this 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 shall stay in full force and effect. 4. No Third Party Distribution. Milliman's work is prepared solely for the internal business use of the Company. Milliman's work may not be provided to third parties without Milliman's prior written consent. Milliman does not intend to benefit any third party recipient of its work product, even if Milliman consents to the release of its work product to such third party. 17 5. Use of Name. Company agrees that it shall not use Milliman's name, trademarks or service marks, or refer to Milliman directly or indirectly in any media release, public announcement or public disclosure, including in any promotional or marketing materials, customer lists, referral lists, websites or business presentations without Milliman's prior written consent for each such use or release, which consent shall be given in Milliman's sole discretion. 6. Indemnification. Company agrees that it will be responsible for satisfying any losses, claims, damages, judgments, liabilities or reasonable expenses (including reasonable attorneys' fees and expenses) of or against Milliman and its respective officers, employees and agents, resulting from or arising in connection with (i) inaccurate data provided by Company, or (ii} Company's gross negligence or willful misconduct. Milliman agrees that it will be responsible for satisfying any losses, claims, damages, judgments, liabilities, reasonable expenses (including reasonable attorneys' fees and expenses) of or against Company, its affiliates and its respective officers, employees and agents, or the Plan resulting from or arising in connection with Milliman's gross negligence or willful misconduct. The term "affiliate" means any member of a controlled group of corporations or a group or trades or businesses under common control, within the meaning of Sections 414(b) and 414(c) of the Internal Revenue Code. This provision survives the termination of this Agreement. 7 .. Terms of Agreement. This Agreement will become effective upon the signature of both parties, and will remain in effect until terminated by either party as prOVided herein. Either party may terminate this Agreement upon ninety (90) days prior written notice. Milliman will retain any records it has relating the Services provided under this Agreement for a period of three years following the termination of this Agreement. 8. Payment of Fees and Expenses. For the Services provided on or after the CSA Effective Date, Company will payor cause to be paid to Milliman the fees and expenses specified for such Services. Milliman will invoice Company or the Plan monthly, and all invoices will be paid within thirty (30) days of its receipt of the invoice. 9. Direct Expenses. Unless otherwise excepted, Milliman's fee schedule is exclusive of direct expenses, including reasonable travel expenses, printing, shipping, and express mail cha rges, all of which are charged at cost; provided, however, that all such out-of-pocket expenses will be limited to reasonable costs and airline travel expenses will be limited to non-restricted coach fares. 10. Additional Fees. Milliman may assess additional fees for any Services requested by Company which are beyond the scope ofthe Services described in the attached schedule(s). Such fees will be determined based on standard hourly rates unless another basis is agreed to by Company; Milliman may assess additional fees at standard hourly rates for Services it performs as a result of inaccurate or incomplete data that is provided to Milliman by or on behalf of Company. This Service Agreement will take effect upon the signature of both parties below. CITY OF SOUTH MIAMI, FL MILLIMAN, INC. I have read and agree to the terms and conditions I have read and agree to the terms and conditions o/this Agreement. 0/ this Agreement. Accepted by: Accepted by: Printed Name: Printed Name: Title: Date: Title: PrinciRal Date: 18 Schedule A Actuarial Services Included Entities: City of South Miami, FL This document provides a description of Milliman's actuarial consulting services and the framework on which our fees for these services are based. Unless otherwise indicated, these services are considered "Basic Services" and are provided for the fees outlined in the fee schedule that applies to these Services. Services outside the scope of Basic Services are "Additional Consulting Services" provided on a time-and-expense basis and are not included in the fees provided for Basic Consulting Services. CONTENTS I. Description of Actuarial Consulting Services II. Fees for Actuarial Consulting Services 19 I. Description of Actuarial Consulting Services • We will gather requested information from the City of South Miami related to other post-employment benefits (OPEBs) offered to retirees. This will include the prior actuarial valuation report, so that we may assess the reasonability of the baseline assumptions and valuation results. Upon the review of the prior valuation, we will discuss any proposed changes in advance of completing the updated results. 2) Valuation • We will perform calculations in accordance with GASB guidance and current actuarial standards of practice. Key computations will include the OPEB liability, the annual required contribution, and projected future benefit payments. 3) Sensitivity Analysis • We will provide sensitivity analysis to demonstrate the impact of variation in the assumed discount rate and other key assumptions. This information will be valuable in identifying the key drivers of expected cost of associated with providing OPEBs to retirees. 4) Meeting to Present Results • We will meet with you via WebEx or conference call to present valuation results and discuss important issues. 5) Financial Statement Preparation We will assist your auditors, as necessary, to review the GASB 75 section of the financial statement to assure that the disclosed information is consistent with our valuation results. B. Additional Consulting Services Additional actuarial consulting not included in our Basic Services that may be needed from time to time as approved in advance by Client. Examples include responding to requests from auditors, benefit plan change analyses, funding alternatives, other financial projections, and communication projects. 20 II. Fees for Actuarial Consulting Services This is a not-to-exceed fee project based on the Basic Consulting Services listed in Section I. Description of Actuarial Consulting Services. Milliman will notify the Client of any change in this fee schedule prior to such change becoming effective in the event out-of-scope work is anticipated. The fee is due, in full, once the report has been presented and finalized. Fee Assumptions The estimated fees are based on the following assumptions: » There are approximately 132 active employees » There are approximately 7 retirees and beneficiaries » There are three medical option available to retirees, as well as vision and dental. » Data provided is usable without audit or significant follow up » Travel and other out-of-pocket expenses are billed separately. Estimated Fees Phase Fee Initial GASB 75 valuation for Fiscal Reporting Year Ending 9/30/2017 GASS 75 roll-forward valuation for Fiscal Reporting Year Ending 9/30/2018 (using participant data and claims information from the prior year) GASS 75 valuation for Fiscal Reporting Year Ending 9/30/2019 GASS 75 roll-forward valuation for Fiscal Reporting Year Ending 9/30/2020 (using participant data and claims information from the prior year) *If you prefer that Milliman make an on-site final presentation, our fees will be an additional $1,000. Plan Design and Funding Analysis $9,000 $2,000 $9,000 $2,000 Provided as needed and based on scope 21 Exhibit 5 -Business Associate Agreement (HIPAA Compliance) MILLIMAN, INC. BUSINESS ASSOCIATE AGREEMENT This BUSINESS ASSOCIATE AGREEMENT ("Agreement") is entered into effective the day of , 201 ("Effective Date") by and between ("Company") and Milliman, Inc.~ on behalf of itself and its Affiliates 77(""M"7"irrlli"T"im-an---"""')-. -- RECITALS A. Company is a Covered Entity as defined under the Health Insurance Portability and Accountability Act of 1996 ("HIP AA") and is therefore subject to HIP AA, as amended by the Health Information Technology for Economic and Clinical Health Act, enacted as part of the American Recovery and Reinvestment Act of 2009 ("HITECH"), and the privacy standards adopted by the U.S. Department of Health and Human Services ("HHS"), 45 C.F.R. parts 160 and 164, Subparts A and E ("Privacy Rule"), the security standards adopted by the HHS, 45 C.F.R. parts 160 and 164, Subparts A and C ("Security Rule"), and the breach notification standards adopted by HHS, 45 C.F .R. part 164 Subpart D ("Breach Notification Standards"), as each may be amended from time to time (collectively, HIPAA, HITECH, the Privacy Rule, Security Rule and Breach Notification Standards shall be referred to herein as the "HIP AA Regulations"). B. Protected Health Information received from Company or created or received by Milliman on behalf of Company ("PHI") may be needed for Milliman to perform the services (the "Services") requested by Company and described in any underlying agreement between the parties (the "Underlying Agreement"). C. To the extent Milliman needs to access PHI to perform the Services, it will be acting as a Business Associate of Company and will be subject to certain provisions of the HIP AA Regulations. D. Milliman and Company wish to set forth their understandings with regard to the use and disclosure of PHI by Milliman so as to comply with the HIPAA Regulations. AGREEMENTS as follows: In consideration of the Recitals and the mutual agreements below, the parties agree 1. Defined Terms. (a) Affiliates. As used herein, "Affiliates" means Milliman and each legal entity that is directly or indirectly controlled by, controlling or under common control with Milliman ("control" means the ownership, direct or indirect, of the power to vote 50% or more of any class of voting securities of a corporation or limited liability company, or the ownership of any general partnership interest in any general or limited partnership) on or after the Effective Date and 22 for so long as such entity remains directly or indirectly controlled by, controlling or under common control with Milliman. (b) All other capitalized terms used, but not otherwise defined, in this Agreement shall have the same meaning as those terms in the HIPAA Regulations. 2. Milliman's Obligations and Permitted Activities. (a) Milliman agrees to not use or further disclose PHI other than as required to perform the Services, requested by Company or Required By Law, or as otherwise permitted herein. Milliman may not use or disclose PHI in a manner that would violate the Privacy Rule if done by Company, except for the specific uses and disclosures set forth in Sections 2(i) and 20) herein. (b) Milliman agrees to use reasonable and appropriate safeguards to prevent use or disclosure of PHI other than as provided for by this Agreement, and shall develop,implement, maintain and use appropriate administrative procedures, and physical and technical safeguards, in accordance with the Security Rule, to reasonably preserve and protect the confidentiality, integrity, and availability of electronic PHI. (c) Milliman agrees to report to Company, without unreasonable delay and in no case later than five (5) business days following actual knowledge by Milliman: (i) Any use or disclosure of PHI not provided for by this Agreement. (ii) Any Security Incident of which Milliman becomes aware; provided, however, that the parties acknowledge and agree that this section constitutes notice by Milliman to Company of the ongoing existence and occurrence of attempted but Unsuccessful Security Incidents of which no additional notice to Company shall be required. Unsuccessful Security Incidents shall include, but not be limited to, pings and other broadcast attacks on Milliman's firewall, port scans, unsuccessful log-on attempts, denials of service and any combination of the above, so long as such incidents do not result in unauthorized access, use or disclosure of Company's electronic PHI. (iii), Any Breach of Unsecured PHI, as defined in 45 C.F.R. 164.402. Following the initial notification of any such Breach, Milliman shall provide a report to Company that includes, to the extent possible: [A] a brief description of what happened, including the date of occurrence and the date of the discovery by Milliman; [B] a description of the PHI affected, including the names of any Individuals whose PHI has been or is reasonably believed to have been accessed, acquired or disclosed and the types of PHI involved (such as full name, social security number, date of birth, home address, account numbers, etc.); and [C] a brief description of what Milliman has done to investigate the Breach, to mitigate harm to Individuals, and to protect against any further Breaches. Milliman also shall provide to Company any other available information Company is required to include in its notification to affected Individual(s). 23 (d) Milliman agrees to ensure that any subcontractors that create, receive, maintain, or transmit PHI on behalf of Milliman agree to substantially the same restrictions and conditions as those that apply to Milliman with respect to such PHI. (e) Milliman shall make its internal policies, procedures and records relating to the use and disclosure of PHI reasonably available to the Secretary if necessary or required to assess Milliman's or the Company's compliance with the HIPAA Regulations. (f) It is not anticipated that Milliman will maintain a Designated Record Set on behalf of Company; however, if Milliman maintains a Designated Record Set on behalf of Company, Milliman agrees to, at Company's written request: (i) provide access to such PHI in order to assist Company in meeting its obligations under the Privacy Rule, and (ii) make any amendment(s) to such PHI as Company so directs or agrees to pursuant to the Privacy Rule. (g) So that Company may meet its disclosure accounting obligations under the HIP AA Regulations, Milliman agrees to document disclosures of PHI made by Milliman which are not excepted from disclosure accounting requirements under the HIP AA Regulations and to provide such an accounting to Company at Company's written request. (h) To the extent that Milliman is engaged to carry out one or more of Company's obligations under the Privacy Rule, Milliman shall comply with such requirements that apply to Company in the performance of such obligations. (i) Milliman may use PHI for Milliman's proper management and administration or to carry out its legal responsibilities. Milliman may disclose PHI for Milliman's proper management and administration, provided that: (i) Milliman obtains reasonable assurances from the person to whom PHI is disclosed that it will remain confidential and used or further disclosed only as Required By Law or for the purpose for which it was disclosed to the person; and (ii) the person notifies Milliman of any instances of which it is aware in which the confidentiality of PHI has been breached. Milliman also may make disclosures that are Required By Law. G) Milliman may use PHI to provide Data Aggregation services to Company as permitted by the Privacy Rule. (k) Milliman may de-identify PHI in accordance with the requirements of the Privacy Rule; provided that all identifiers are destroyed in accordance with this Agreement. (I) Milliman may create a Limited Data Set for the purpose of providing the Services, provided that Milliman: (i) Does not use or further disclose PHI contained in the Limited Data Set except as necessary to provide the Services or as provided for in this Agreement or otherwise Required By Law; (ii) Uses appropriate safeguards to prevent the use or disclosure of PHI contained in the Limited Data Set other than as provided for by this Agreement; 24 (iii) Reports to Company any use or disclosure of PHI contained in the Limited Data Set of which Milliman becomes aware that is not provided for by this Agreement; (iv) Ensures that any agents or subcontractors to whom it provides access to the Limited Data Set agree to substantially the same restrictions and conditions that apply to Milliman under this Agreement; and (v) Does not re-identify PHI or contact the Individuals whose information is contained within the Limited Data Set. (m) Milliman agrees to mitigate, to the extent practicable, any harmful effect that is known to Milliman of a use or disclosure of PHI by Milliman in violation of this Agreement. 3. Company's Obligations. (a) Company shall not request Milliman to use or disclose PHI in any manner that would not be permissible under the Privacy Rule or the Security Rule if done by Company, except as otherwise permitted herein for purposes of Data Aggregation. (b) Company shall clearly and conspicuously designate all PHI as such before providing it to Milliman. ( c) Company acknowledges and agrees that it shall be solely responsible for tracking and providing Individuals an accounting of any disclosures made by Company to Milliman. (d) Company acknowledges and agrees that the provisions of Section 2(1) of this Agreement shall constitute a Data Use Agreement between the parties. 4. Term and Termination. (a) Term. This Agreement shall be effective as of the date first written above, and shall terminate when all PHI is destroyed or returned to Company. If Milliman determines, in accordance with Section 4( c) below, that it is infeasible to return or destroy PHI, the protections of this Agreement with respect to such PHI shall remain in effect until such PHI is returned or destroyed. (b) Termination. Upon Company's knowledge of a material breach or violation of Milliman's obligations under this Agreement, Company shall either: (i) Provide an opportunity for Milliman to cure the breach or end the violation and terminate this Agreement if Milliman does not cure the breach or end the violation within the time specified by Company; or (ii) Immediately terminate this Agreement if Milliman has breached a material term of this Agreement and cure is not possible. 25 (c) Obligations of Milliman Upon Termination. Upon termination of this Agreement, for any reason, Milliman shall: (i) Retain only that PHI which is necessary for Milliman to continue its proper management and administration or to carry out its legal responsibilities; (ii) Return to Company or destroy the remaining PHI that Milliman still maintains in any form ("Remaining PHI"); (iii) Continue to use appropriate safeguards and comply with Subpart C of 45 C.F.R. Part 164 with respect to electronic PHI to prevent use or disclosure of the PHI, other than as provided for in this Section 4( c), for as long as Milliman retains the PHI; (iv) Not use or disclose the PHI retained by Milliman other than for the purposes for which such PHI was retained and subject to the same conditions set out at Section 2(i) above which applied prior to termination; and (v) Return to Company or destroy the PHI retained by Milliman when it is no longer needed by Milliman for its proper management and administration or to carry out its legal responsibilities. (d) Infeasibility of Return or Destruction. If Milliman determines that returning or destroying the Remaining PHI is infeasible, the protections of this Agreement shall continue to apply to such PHI, and Milliman shall limit further uses and disclosures of PHI to those purposes that make the return or destruction infeasible, for so long as Milliman maintains such PHI. 5. Miscellaneous. (a) Regulatory References. A reference in this Agreement to a section in the HIP AA Regulations means the section as in effect or as amended, and for which compliance is required. (b) Amendment. The parties agree to take such action as is necessary to amend this Agreement from time to time in order to ensure compliance with the requirements of the HIPAA Regulations and any other applicable law. (c) Independent Contractors. Milliman and Company are independent contractors and this Agreement will not establish any relationship of partnership, joint venture, employment, franchise or agency between Milliman and Company. Neither Milliman nor Company will have the power to bind the other or incur obligations on the other party's behalf without the other party's prior written consent, except as otherwise expressly provided in this Agreement. (d) Conflicts. In the event that any terms of this Agreement are inconsistent with the terms of the Underlying Agre~ment, then the terms of this Agreement shall control. 26 ( e) Entire Agreement. This Agreement shall constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, oral or written, and all other communications between the parties hereto relating to such subject matter. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above. MILLIMAN, INC., on behalf of itself and its Affiliates By ____________________________ __ Title ------------------------------ City of South Miami, FL By __________________________ __ Title ------------------------------ 27 FLORIDA LEAGUE OF CITIES, INC. 301 South Bronaugh Street, Suite 300 • Post Office Box 1757 • Tallahassee, FL 32302-1757 (850) 222-9684 • Fax (850) 222-3806 • Web site: www.flcities.com October 23, 2017 Alfredo Riverol City of South Miami Re: Preparation of GASB 75 Disclosures for the City of South Miami Dear Mr. Riverol: Pursuant to your request, I have set forth below our fee to provide the actuarial calculations required by -Governmental Accounting Standards Board Statement No. 75 (GASB 75). It is my understanding that: (i) we are to use a measurement date of October 1, 2017; (ii) there are approximately 0 individuals who are receiving post-employment benefits and 131 employees who may become eligible for post-employment benefits in the future; (iii) the post-employment healthcare benefits are fully insured; (iv) retirees may choose from two health plan(s); (v) there is no trust fund from which post- employment benefits are paid; (vi) subsidized post-employment life insurance is not provided; and (vii) there is zero unites) for which costs and liabilities must be separately disclosed. Based on the information above, I have prepared the following fee quotation. Our fixed retainer fee will be $7,200 for the following services: 1. Performance of an actuarial valuation pursuant to the provisions of GASB 75 and preparation of an actuarial valuation report as of the cited measurement date, complete with all necessary calculations, information, and disclosures as required by GASB 75 and other applicable actuarial professional standards; 2. Miscellaneous telephone calls between the actuary, the relevant employees of the Florida League of Cities, and any City of South Miami employees or other professionals connected with the cited work, including conference telephone calls as needed to discuss the assumptions used in the calculations and to explain the results of the valuation to City of South Miami officials. Note that, previously under GASB 45, we were able to provide two years' of valuation results in a single report. However, because under GASB 75 the valuation must be re-run as of each measurement date to reflect an updated return on 20-year municipal bonds, we can no longer provide two years' of valuation results in a single report. Therefore, the valuation described above must be performed as of each distinct measurement date, which means that, for most employers, a separate GASB 75 valuation will be required each fiscal year. The report will be provided on a first-come, first-served basis as of the date on which we receive all necessary information, including, but not limited to, employee and retiree data, claims experience (if applicable), retiree premiums, City of South Miami contributions and/or premiums, and other information set forth in our standard data request letter. We anticipate that a GASB 75 valuation report will be available in as little as three weeks from this date during the summer season, but that the processing time for a GASB 75 valuation report may stretch to as long as 10 weeks from this date during the winter season due to the fact that most Florida public employers operate on an October 1 fiscal year. Therefore, we encourage you to submit the necessary data and information as soon as possible and to submit the information in the late spring of each year to avoid a lengthy wait for your GASB 75 report. If you agree to this proposal, please have this signed and dated by the appropriate official and send a copy to me. Signature Printed Name Sincerely, Jeff Blomeley Investment and Retirement Services Manager Florida League of Cities, Inc. P.O. Box 1757 Tallahassee, FL 32302 800-616-1513 x 3614 Title Date FLORIDA LEAGUE OF CITIES, INC. 301 South Bronough Street, Suite 300 • Post Office Box 1757 • Tallahassee, FL 32302-1757 (850) 222-9684 • Suncom 278-5331 • Fax (850) 222-3806 • Web site: www.flcities.com Thank you for choosing the Florida League of Cities and Southern Actuarial Services, Inc. to perform your GASB 75 valuation. The data collection process can be difficult, but remember the more information you are able to provide, the more accurate of a valuation number you will receive. Please feel free to add additional lines if you require more space to explain your answers below. If you have any question~ at all during the data collection process, please call Nicolle Bournival at 850-701-3630 or email atnbournival@flcities.com. If you need to send any paper brochures, send them to this address: Florida League of Cities, Inc. c/o Nicolle Bournival PO Box 1757 Tallahassee, FL 32302-1757 Benefit Information Please list all post-employment benefits which are currently provided or which are scheduled to be provided to employees or former employees after their employment has terminated. You may exclude any benefits that are prOVided through a defined benefit plan or COBRA. (Le. Medical, Dental, Vision, Hearing, Life Insurance, Long/Short Term Disability, Long Term Care, Legal, Other) (if Other, please explain) Is there a choice between different plans? If so, please explain and provide any other relevant benefit information below: If available, please send an employee benefit brochure/package with information to the FMPTF address at the top of this page. Valuation Information When did you originally implement GASB 75? (should be September 3D, xxxx) When do you want the valuation performed as of? (this is the first day of any quarter that your data is valid as of, i.e. April 1, 2010) We assume that any post-employment benefits being offered are not being pre-funded through a Trust arrangement. If this is not the case, please provide relevant information related to the benefit Trust. Specifically, please provide the closing September 30 balance for the prior fiscal year. If you have not funded, do you have any plans to fund this liability in a Trust or set aside any funds in general? Provide information concerning any monthly or annual administrative expenses of providing the post- employment benefits to the extent such expenses are separately accounted for. Do you want your valuation broken into groups for specific employee groups? You should have been asked this question as part of your quote, as it can increase the costs involved. If yes, please list the employee groups, and make sure your employee data spreadsheet notes the group that each employee is in. *** REQUIRED *** If you reported your OPEB/GASB 75 disclosures on your CAFR, please include the text of the disclosure when you return all your paperwork. *** REQUIRED *** Plan Information List the designated retirement ages for the following employees of your municipality: General Employees: Police: Fire: Are you fully-insured or self-insured? For each other post-employment benefit plan that you have available, who are the benefits offered to? (just retiree, retiree & spouse, other) If other, please explain in detail: What do current retirees pay to receive benefits in each post-employment plan they are allowed to enroll in? Please list each plan separately and the cost associated with that plan for the retiree. Do any of the above costs change after the retiree becomes age 65 (Medicare eligible)? If yes, please explain in detail. What does your municipality pay on behalf of active or former employees for benefits? Please list each plan separately and the cost associated with that plan for your municipality. Please include a rate schedule if available. Do any of the above costs change after the retiree becomes age 65 (Medicare eligible)? If yes, please explain in detail. Are you aware of any increases or decreases in scheduled costs of premiums for retirees? Are there any changes on the horizon that could affect the costs for your municipality or for retirees? (i.e. changing insurance providers, shifting costs to retirees, changing coverage, etc.) Insurance Information In order for the actuary to project the number of retirees that will participate in your post-employment benefit plans, he is depended on the data that you provide. Otherwise he will use an assumption that may not be reflective of the actual participation rates. In the available space below, explain the type of benefits (medical, dental, etc) and any more information (HMO, PPO, etc) that h~lps explain the type of insurance and benefits provided. In the 'Retired Employees' and 'Active Employees' sections, fill in the dollar amount of claims paid for each group, along with the number of claims paid for the group, and the number of claims paid for their dependents (if applicable). The last section is the average number of each group that are covered. If you are fully-insured, your insurance provider may not provide detailed claims information. It is not necessary, but does help provide a more accurate valuation number. Please duplicate this page for each available post-employment benefit plan. Type of Insurance: I Plan 10: Retired Employees Year # of Retiree # of Dependent Average # of Retirees Average # of Dependents Total % of Retirees Claims Claims Covered per Month Covered per Month Participating 2016 2015 2014 Type of Insurance: I Plan 10: Active Employees Year # of Active # of Dependent Average # of Actives Average # of Dependents Total % of Actives Claims. Claims Covered per Month Covered per Month Participating 2016 2015 2014