An outside audit has recommended the Galt Joint Union Elementary School District contribute more than $300,000 to its retirement account annually to make up for a lack of funding in years past and plan for future costs.
"As we move into better economic times, we will need to make a determination as to how we would like to fund the retiree benefit liability for the future," chief business officer Debbie Schmidt said in a report to school board trustees. "We are not required to fund it any differently than we do now, but the liability continues to grow each year."
Due to the last six years of declining revenue, the district has not funded the liability for the future, but instead used a "pay-as-you-go" approach each year to cover current retirees, according to Schmidt.
The 2012 cost for retiree benefits is approximately $127,974. However, the unfunded liability grows each year that the district does not direct any funding towards the future.
There are currently 22 eligible retirees districtwide, according to auditor Total Compensation Systems, Inc.
The company's actuarial study approved at last Wednesday's school board meeting indicates that the district should contribute $314,632 annually for the future cost of retiree benefits. This amount would replace the current pay-as-you-go cost.
Superintendent Karen Schauer said very few districts are funding their future retirement accounts during these years of economic crisis. They are not required to fund them, but only to report the liability as part of their annual audits, she said.
The elementary district currently pays five years worth of benefits for most employees (and their spouses) with at least 20 years of service and up to 65 years old. Classified management and certificated management employees hired before 1992 receive lifetime benefits.
"The liability may or may not come to pass as it changes each year," Schauer said. "As the economy rebounds, we will look at ways to begin to fund the liability."
The audit also recommended the district maintain a retiree database that includes — in addition to date of birth, gender and employee classification — retirement date and (if applicable) dependent date of birth, relationship and gender.
Governmental Accounting Standards Board 45 standard requires school districts of more than 200 eligible employees to secure an actuarial study every two years.
It analyzes the district's liability for post-employment health benefits, known as "retiree benefits," and indicates both the funded and unfunded liability, along with an estimated annual contribution to fund future liability for retiree benefits.
The last study was adopted on July 23, 2010, according to Schmidt.
Contact reporter Jennifer Bonnett at firstname.lastname@example.org.