Audit for Fiscal Year Ending June 30, 2017

CITY OF SPENCER NOTES TO FINANCIAL STATEMENTS - Continued JUNE 30, 2017

7. MUNICIPAL FIRE AND POLICE RETIREMENT SYSTEM OF IOWA (MFPRSI) - Continued

Sensitivity of City's Proportionate Share of the Net Pension Liability to Changes in the Discount Rate - The following presents the City's proportionate share of the net pension liability calculated using the discount rate of 7.50%, as well as what the City's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1% lower (6.50%) or 1% higher (8.50%) than the current rate.

1% Decrease (6.50%)

Discount Rate (7.50%)

1% Increase (8.50%)

City's proportionate share of the net pension liability

$4,937,368

$1,654,034

$3,145,925

Pension Plan Fiduciary Net Position - Detailed information about the MFPRSI's fiduciary net position is available in the separately issued MFPRSI financial report which is available on MFPRSI's website at www.mfprsLorg.

8. OTHER POSTEMPLOYMENT BENEFITS (OPEB)

Plan Description The City operates a single-employer retiree benefit plan which provides medical/prescription drug benefits for employees and retirees and their spouses. There are 78 active and 5 retired members in the plan. PartiCipants must be age 55 or older at retirement. The medical/prescription drug benefits are provided through a fully-insured plan with Employee Benefit Systems (EBS). Retirees under age 65 pay the same premium for the medical/prescription drug benefits as active employees. Funding Policy The contribution requirements of plan members are established and may be amended by the City. The City currently finances the retiree benefit plan on a pay-as-you-go basis. The most recent active member monthly premiums for the City and plan members are approximately $707 for single coverage and $1,671 for family coverage. The same monthly premiums apply to retirees. For the year ended June 30, 2017, the City contributed $998,357 (for active members only); and plan members eligible for benefits contributed $227,947 (both active and retired members) to the plan. In addition, Clay County contributed $9,817 to the plan for communication center employees. The City is a member in the Iowa Communities Assurance Pool, as allowed by Chapter 670.7 of the Code of Iowa. The Iowa Communities Assurance Pool (Pool) is a local government risk-sharing pool whose 753 members include various governmental entities throughout the State of Iowa. The Pool was formed in August 1986 for the purpose of managing and funding third-party liability claims against its members. The Pool provides coverage and protection in the following categories: general liability, automobile liability, automobile physical damage, public officials liability, police professional liability, property, inland marine, and bOiler/machinery. There have been no reductions in insurance coverage from prior years. Each member's annual casualty contributions to the Pool fund current operations and provide capital. Annual casualty operating contributions are those amounts necessary to fund, on a cash basis, the Pool's general and administrative expenses, claims, claims expenses and reinsurance expenses estimated for the fiscal year, plus all or any portion of any deficiency in capital. Capital contributions are made during the first six years of membership and are maintained at a level determined by the Board not to exceed 300% of basis rate.

9. RISK MANAGEMENT

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