City of Dearborn General Employees Retirement System

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1 City of Dearborn General Employees Retirement System Summary Annual Report To Members June 30, 2015 Dear Retirement System Member: The Retirement System, which is managed by the Retirement Board, is designed to help you meet your financial needs should you become disabled, retire or die. The City also supports a Retiree Health Insurance Program, which is separate from the Retirement System. The Retirement Board's fiduciary responsibility to you is to supervise the general administration of the System and invest its assets. Our Board retains professional advisors to assist us in fulfilling these duties. We have prepared this summary report to give you a brief overview of the Retirement System and how it operates. We hope you will find it useful and informative. However, a summary cannot cover all the details of the System, which is governed by the provisions of the City's charter, the City's retirement ordinance and the Retirement Board's official rules and regulations. Additional information about the System and its financial operation is available in the Finance Department. Respectfully submitted, Retirement Board Investment Fiduciaries City of Dearborn General Employees Retirement System i Vanguard Carl Meyers, Chairman i Baird Core Bond Fund Don Cundy, Vice-Chairman i Prudential Real Estate Investors Robert E. Guerin, Jr., Employee Member i Wells Capital Management Margaret Schaefer, Civil Service Board i Pictet Asset Management. William Irving, Employee Member i Windhaven Investment Management i Brandywine Asset Management i Grantham, Mayo, Van Otterloo LLC i Blackrock, Inc. i DeRoy and Devereaux i Wellington Management i Loomis, Sayles & Co. LP i World Asset Management i Capital Guardian i J.P. Morgan Asset Management Master Trust Custodian i Comerica Bank Investment Consultant i New England Pension Consultants Actuary i Gabriel, Roeder, Smith & Company Secretary i James J. O Connor Legal Advisor i Jeremy Romer Pension Administrator i Wendy K. Orcutt 1

2 Summary Results of Actuarial Valuation Your retirement system's financial objective is to establish and receive contributions, which will remain approximately level from year to year and will not have to be increased for future generations of taxpayers. Contribution levels are expressed in terms of percents of the city's active member payroll. To determine an appropriate Employer contribution level for the ensuing year and to gauge how the system's funding is meeting this fundamental objective, an independent firm of actuaries and employee benefit consultants, Gabriel, Roeder, Smith & Company, conducts annual actuarial valuations. These valuations are based on your System's past experience, information about current participation and financial markets, and assumptions concerning the System s future demographic and economic activity. The results of the June 30, 2015 valuation, based on the established funding objective, are summarized below: Fiscal year 2017 Employer Contribution Rates As a Percentage of Active Member Payroll Contributions for All Members Normal Cost of Benefits 11.81% Accrued Liabilities Member Portion Computed Employer Rate 34.5 % The System received the required employer contributions for the year covered by this report. Funded Status $ Millions i Actuarial accrued liabilities $ i Applied assets (smoothed market value) i % Funded 83.2 % Number of Active Members Inactive Vested Members Number of Retirees and Beneficiaries Average Annual Retirement Allowance $20,239 Total Annual Retirement Allowances. $11,382,627 Weighted Average of Member Contributions 4% non-refundable contribution Valuation Payroll... $10,574,476 Total Soft Dollar Expenditures... No soft dollar expenditures Itemized Budget and Expenditures... See Attached Assumed Rate of Investment Return % Assumed Rate of Long Term Wage Inflation 3.0% Smoothing Method... 5 Year Smoothed Market... 80%/120% Corridor Amortization Method and Period... Level Dollar/19 Years Actuarial Cost Method... Entry Age Normal Investment Performance Net of Fees on rolling calendar-year basis: 1 Year (2.6)% 3 Year 4.2% 5 Year 5.0% 7 Year 7.9% 10 Year 5.3% 2

3 SUMMARY OF CURRENT ASSET INFORMATION Revenues & Expenditures Operating Revenues: Employee Contributions $ 505,681 Employer Contributions 3,804,508 Other Income 0 Interest and dividends 2,741,703 Net decrease in value of investments (1,451,794) Total Operating Revenues 5,600,098 Operating Expenses: Annuities 11,382,627 Employee refunds 50,841 Administrative Expenses 613,934 Total Operating Expenses 12,047,402 Net Income (Loss) (6,447,304) Fund Balance, July 1, ,547,251 Fund Balance, June 30, 2015 $ 143,099,947 Investments Stock and equity mutual funds... 61% Bonds Cash and equivalents... 2 Real Estate Total 100% The market rate of return on system assets for the year ended June 30, 2015 was.5 %. SUMMARY OF PROVISIONS 1. Voluntary Retirement. A member may retire after either: completing 25 years and attaining age 55 (age 50 for Police Dispatch members); or attaining age 60 and completing 10 years of service. Department Heads and the Mayoral Assistant need 24 years of service to qualify at age Age & Service Annuity For Service & Later. An annuity equal to (a) 2.50% of final average earnings times the first 26 years of credited service plus 1.75% of final average earnings times the next three years of credited service, plus 2.25% of final average earnings which are rendered after 7/1/74. 3

4 Final Average Earnings means the average of the member's highest annual pays received during any 3 consecutive years of service contained within the last 10 years of credited service. 3. Age & Service Annuity For Service Before An annuity equal to: 2.75% of indexed average final pay times the first 30 years of credited service rendered before , with a maximum of $27,729 annually for retirements from July 1, 2014 to June 30, Deferred Annuity. A member with 10 or more years of service who leaves City employment before retirement receives an annuity computed in the manner as an age and service annuity, payments beginning upon application at voluntary retirement age. Effective for members who defer after January 1, 2002 and die before reaching voluntary retirement age, the surviving spouse is eligible to receive the annuity on the voluntary retirement date the member would have received the annuity. 5. Duty Disability Annuity. A member who becomes totally and permanently disabled from dutyconnected causes before attaining age 60 receives, subject to offsetting for worker's compensation, Social Security, and other remuneration, a duty disability annuity computed in the same manner as and age service annuity, including service credit for the period from disability to age Non-Duty Disability Annuity. A member with 10 or more years of service who becomes totally and permanently disabled from other than duty-connected causes receives a non-duty disability annuity computed in the same manner as a service annuity. 7. Death-in-Service Benefits. Upon the death of a member, the surviving dependents receive, subject to offsetting for worker's compensation and Social Security, the following benefits: (a) The spouse receives an annuity equal to the Option B-100 annuity (joint and 100% survivor actuarial equivalent benefit) which would have been payable had the deceased member retired at the time of death and elected Option B-100. The minimum annuity payable to the spouse is 20% of the member's final average earnings. (b) The dependent children under 18 (23 if they are full-time students) each receive an annuity of 15% of the member's final average earnings until they reach age 18 (23.) If there are 4 or more dependent children, each child receives an equal share of 50% of the member's final average pay until they reach the above ages. (c) If there are neither a spouse or children, each dependent parent receives an annuity equal to 15% of final average earnings. 8. Annuity Withdrawal. Upon retirement a member may withdraw a lump sum not to exceed the accumulated member contributions. (Other provisions apply to withdrawal of contributions prior to retirement.) 9. Optional Benefit Forms. Retiring members may elect to receive a reduced retirement allowance with the provision that a portion (100%, 75%, or 50%) of the reduced amount will continue to a beneficiary after the death of the retiree. The reduction amount is based upon 7.25% interest, the RP 2000 Mortality Table projected to 2020 using projection scale BB with an 85% Unisex blend, and the ages of the retiree and beneficiary on the member's voluntary retirement date. If a member elects an optional form and the beneficiary predeceases the member, the amount payable to the member "pops-up" to the amount that would have been payable it the optional form had not been elected. This "pop-up" benefit is provided at no cost to the retiring member. 10. Member Contributions. Effective January , pursuant to settled labor agreements, members will make a 4% non-refundable pension contribution to the Retirement System. If a member terminates employment and will not receive an annuity, then accumulated contributions are refunded. 11. Employer Contributions. The city contributes the amounts necessary to finance the Retirement System. 4

5 12. Effective July 1, 2002, The General Employees Retirement System became a closed plan. No new employees are permitted to be part of the Retirement System. 5