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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Notes & Samples

NOTE 11 – Post Employment Health Care and Life Insurance Benefits (UT, A&M, TRS and ERS only)
Sample (Illustrative, may not tie to exhibits)

Note: This is an example of the disclosures that must be included by the University of Texas System and Texas A&M University System. The disclosures are required per GASB 45.

Also, in order for the Comptroller’s office to prepare the state’s CAFR, TRS and ERS are expected to follow the requirements contained in GASB 45.

Additionally, all administering agencies are required to include Medicare Part D information.

Plan Description

In addition to providing pension benefits, the state of Texas contributes to a plan that provides health care and life insurance benefits for retired System employees. These other postemployment benefits (OPEB) are authorized by statute. Benefit provisions for the single-employer defined benefit Sample System Employee Group Insurance Plan (Plan) are established and amended by the Texas Insurance Code, Chapter 1601. Retiree eligibility for insurance continuation is determined by the Legislature and is subject to change.

Funding Policy

The System and member contribution rates are determined annually based on the recommendations of the employee benefits office and consulting actuaries. The contribution rates are based on the benefit and administrative costs expected to be incurred, the funds appropriated for the Plan and the funding policy established by the Legislature in connection with benefits provided through the Plan. The Plan is operated on a pay-as-you-go basis.

System contribution requirements are established and may be amended by the Legislature. The retiree contributes any premium over and above the System contributions. The required contribution rates for employer and plan members for the System’s self-funded plan as of Aug. 31, 20CY, are presented below.

Required Contribution Rates
Retiree Health and Basic Life Premium
For the Fiscal Year Ended Aug. 31, 20CY

Sample System
Level of Coverage Employer Plan
Retiree Only $   462 $       -
Retiree/Spouse 705 199
Retiree/Children 617 208
Retiree/Family 861 392

The three-year history of employer contributions and annual OPEB costs is presented in the table below.

Three-Year Trend Information
(Amounts entered in dollars and cents)
Fiscal Year Ending Employer Contribution Annual OPEB Cost Percentage of Annual OPEB Cost Contributed Net OPEB Obligation
08/31/CY $ 99,892.56 $ 522,570.60 19.1% $ 1,027,270.66
08/31/PY $ 95,675.42 $ 515,476.72 18.6% $ 604,592.62
08/31/PPY $ 90,465.34 $ 510,936.95 17.7% $ 420,471.61

Annual OPEB Cost and Net OPEB Obligation

The annual OPEB cost of the Plan is calculated and based on the annual required contribution (ARC). The ARC is an amount actuarially determined in accordance with the parameters of GASB 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities over a period of years, not to exceed 30 years. The following table presents the components of the annual OPEB cost for the year and the net OPEB obligation as of Aug. 31, 20CY for the System:

Annual OPEB Cost and Net OPEB Obligation
(Amounts entered in dollars and cents)

Annual OPEB Cost and Net OPEB Obligation Amount
Annual Required Contribution (ARC) $  522,570.60
Interest on Net OPEB Obligation  
Adjustment to ARC  
Annual OPEB Cost 522,570.60
Employer Contributions Made 99,892.56
Increase in Net OPEB Obligation 422,678.04
Net OPEB Obligation, 09/01/CY 604,592.62
Net OPEB Obligation, 08/31/CY $1,027,270.66

The schedule of funding progress in the Required Supplementary Information (RSI) section immediately following the notes to the financial statements presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Since there are no plan assets for the System’s employee group insurance plan, the actuarial accrued liability for the Plan continues to increase.

Schedules of Funding Progress

Below is the schedule of funding progress for the System’s plan:

Schedule of Funding Progress
(Amounts entered in dollars and cents)

Actuarial Valuation Date Actuarial Value of Assets
Actuarial Accrued Liability (AAL)
Unfunded AAL
(b) – (a)
Funded Ratio
Covered Payroll
UAAL as a Percentage of Covered Payroll
12/31/CY $0 $5,014,217.27 $5,014,217.27 0.0% $4,312,904.23 116.3%
12/31/PY 0 4,975,698.62 4,975,698.62 0.0% 4,169,853.55 119.3%
12/31/PPY 0 4,587,963.95 4,587,963.95 0.0% 4,004,758.42 114.6%

Actuarial Methods and Assumptions

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. The actuarially determined amounts are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future.

Projections of benefits for financial reporting purposes are based on the types of benefits provided under the substantive plan (the plan as understood by the employer and plan members) at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point.

Actuarial calculations reflect a long-term perspective. Consistent with that perspective, the methods and assumptions used in the actuarial valuation include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets.

The table below presents the actuarial methods and significant assumptions used in the System’s plan valuation.

Summary of Actuarial Methods and Assumptions
Actuarial Valuation Date 12/31/CY
Actuarial Cost Method Entry Age Normal
Amortization Method Level Percent, Open
Remaining Amortization Period 30 years
Asset Valuation Method Market
Actuarial Assumptions:
Projected Salary Increases 3.5%
Investment Rate of Return 7%
Includes Inflation at 4%
Heath Care Cost Trend Rates 8% Initial, 6% Ultimate
Mortality Tables RP 2000 applied on a gender-specific basis

Medicare Part D

In fiscal 20CY the System received payments from the federal government pursuant to the retiree drug subsidy provisions of Medicare Part D. These payments were recognized as revenue in accordance with GASB Technical Bulletin 2006-1 for the prescription drug benefit costs the System incurred. In fiscal 20CY the System received $6.2 million of Medicare Part D payments from the federal government.

Glenn Hegar
Texas Comptroller of Public Accounts
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