City of. icipal Police 30, 2019

Transcription

1 City of Eustis Mun icipal Police Officers Pension and Retirement System Actuarial Valuation Report as of October 1, 2017 Annual Employer Contribu ution for the Fiscal Year Ending September 30, 2019

2 April 6, 2018 Board of Trustees City of Eustis Police Officers Pension and Retirement System Eustis, Florida Dear Board Members: The results of the October 1, 2017 Actuarial Valuation of thee City of Eustis Municipal Police Officers Pension and Retirement System are presented in this report. This report was prepared at the request of the Board and is intended forr use by the Retirement System and those designated or approved by the Board. This report may be provided to parties other than the System only in its entirety and only with the permission of the Board. GRS is not responsible for unauthorized use of this report. The purpose of the valuation is to measure the System s funding progress, to determine the employer contribution rate for the fiscal year ending September 30, 2019, and to present the actuarial information for Governmental Accounting Standards Board (GASB) Statement No. 67 for the fiscal year ending September 30, This report should not bee relied on for any purpose other than the purposes described herein. Determinations of financial results associated with the benefits described in this report, for purposes other than those identified above may be significantly different. The computed contribution rate shown on page 1 may be considered as a minimumm contribution rate that complies with the Board s funding policy. Users of this reportt should be aware that contributions made at that rate do not guarantee benefit security. Given the importance of benefit security to any retirement system, we suggest that contributions to the System in excess of those presented in this report be considered. The contribution rate in this report is determined using thee actuarial assumptions and methods disclosed in Section B of this report. This report does not include an assessment of the risks of future experience not meeting the actuarial assumptions, as assessment of these risks was outside the scope of this assignment. We encourage a review and assessment of investment and other significant risks that may have a material effect on the Plan s financial condition. The findings in this report are based on data or other information through September 30, Future actuarial measurements may differ significantly from the currentt measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economicc or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these

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5 TABLE OF CONTENTS Section Title Page A Discussion of Valuation Results 1. Discussion of Valuation Results 1 2. Chapter Revenue 4 B Valuation Results 1. Participant Data 5 2. Actuarially Determined Contribution 6 3. Actuarial Value of Benefits and Assets 7 4. Calculation of Employer Normal Cost 8 5. Liquidation of the Unfunded Actuarial Accrued Liability 9 6. Actuarial Gains and Losses Recent History of Valuation Results Recent History of Required and Actual Contributions Actuarial Assumptions and Cost Method Glossary of Terms 22 C Pension Fund Information 1. Summary of Assets Pension Fund Income and Disbursements Actuarial Value of Assets Investment Rate of Return 28 D Financial Accounting Information 1. FASB No GASB No E Miscellaneous Information 1. Reconciliation of Membership Data Active Participant Distribution Inactive Participant Distribution 38 F Summary of Plan Provisions 39

6 SECTION A DISCUSSION OF VALUATION RESULTS

7 DISCUSSION OF VALUATION RESULTS Comparison of Required Employer Contributions The following is a comparison of required contributions developed in this year's and the last actuarial valuations. For FYE 9/30/2019 Based on 10/1/2017 Valuation For FYE 9/30/2018 Based on 10/1/2016* Valuation Increase (Decrease) Required Employer/State Contribution $ 1,237,286 $ 1,227,742 $ 9,544 As % of Covered Payroll % % (0.84) % Estimated State Contribution $ 123,898 $ 123,898 ** $ 0 As % of Covered Payroll 5.19 % 5.32 % (0.13) % Required Employer Contribution $ 1,113,388 $ 1,103,844 $ 9,544 As % of Covered Payroll % % (0.71) % *From June 22, 2017 Actuarial Impact Statement. ** We have updated the amount shown in the June 22, 2017 Actuarial Impact Statement to reflect the State Contribution received in If the results above are used beyond the 2019 fiscal year, we recommend the Employer contribution be equal to the greater of $1,237,047 or 51.85% of covered payroll less the actual State contribution used to fund the plan. The contributions have been adjusted for interest on the basis that employer contributions are made monthly. The required employer contribution has been computed under the assumption that the amount to be received from the State on behalf of police officers in 2018 and 2019 that can be used to fund the plan will be equal to $123,898. If the actual payment from the State that can be used to fund the plan falls below this amount, then the City must increase its contribution by the difference. The actual Employer and State contributions for the year ending September 30, 2017 were $997,323 and $123,898, respectively, for a total of $1,121,221. The required contribution was $1,109,352 on a percentage of payroll basis (51.69% of actual pensionable payroll during the year of $2,146,164). Revisions in Benefits There have been no changes in plan provisions since the previous valuation. 1

8 Revisions in Actuarial Assumptions and Methods There have been no changes in actuarial assumptions or methods since the previous valuation. Actuarial Experience There was a net actuarial experience gain of $345,453 for the year, which means the actual experience was more favorable than expected. The actuarial gain was primarily due to lower than expected salary increases (1.6% actual versus 7.0% expected). The actuarial gain was partially offset by a slightly unfavorable recognized investment return of 7.0% (on the smoothed actuarial value of assets) versus the assumed rate of 7.5%. Based on the market value of assets, the investment return during the year ending September 30, 2017 was 10.2%. The net actuarial gain decreased the required employer contribution by 1.29% of covered payroll. Funded Ratio The funded ratio as of October 1, 2017 is 77.3% compared to 74.5% as of October 1, The funded ratio is equal to the actuarial value of assets divided by the actuarial accrued (past service) liability. Analysis of Change in Employer Contribution The components of change in the actuarially required City contribution are as follows: Contribution rate last valuation % Changes in benefits 0.00 Changes in assumptions/methods 0.00 Amortization Payment on UAAL (0.27) Experience gain/loss (1.29) Normal Cost Rate (0.08) Change in administrative expenses 0.80 Change in State revenue 0.13 Contribution rate this valuation Variability of Future Contribution Rates The Actuarial Cost Method used to determine the contribution rate is intended to produce contribution rates which are generally level as a percent of payroll. Even so, when experience differs from the assumptions, as it often does, the employer s contribution rate can vary significantly from year toyear. Over time, if the year to year gains and losses offset each other, the contribution rate would be expected to return to the current level, but this does not always happen. 2

9 The Market Value of Assets exceeds the Actuarial Value of Assets by $37,252 as of the valuation date (see Section C). This difference will be recognized over the next few years in the absence of offsetting losses. This is expected to slightly decrease the employer contribution rate. Relationship to Market Value If the Market Value of Assets had been the basis for this valuation, the City contribution rate would have been 46.52% and the funded ratio would have been 77.5%. In the absence of other gains and losses, the City contribution rate should decrease towards that level over the next few years. The funded ratio on a Market Value basis was 72.5% last year. Conclusion The remainder of this Report includes detailed actuarial valuation results, financial information, miscellaneous information and statistics, and a summary of plan provisions. 3

10 CHAPTER REVENUE The Base Amount is the amount of Premium Tax Revenue received for calendar year This amount must be used to fund Chapter minimum benefits. The Gap Amount is the difference between the amounts of Premium Tax Revenue received for calendar year 2002 and calendar year This amount must be used to fund the cost of benefits that are in excess of Chapter minimum benefits. The Growth Amount is revenue in excess of the amount received for calendar year This amount must be shared 50% 50% between Share Plan accounts and the cost to fund the Plan. Actuarial Confirmation of the Use of State Chapter Money 1. Base Amount (2002 Premium Tax Revenue (PTR)) $ 86, PTR Received for Calendar year , Gap Amount: (2) (1) 22, PTR Received for Previous Plan Year 138, Growth Amount for Previous Plan Year: (4) (2) 30, Accumulated Excess at Beginning of Previous Year 0 7. Prior Excess Used to Reduce UAAL: 50% of (6) 0 8. Amount Used to Fund Share plan Accounts: 50% of [(5) + (6)] 15, Amount Used to Fund Plan: (1) + (3) + 50% of (5) 123, Accumulated Excess as of Valuation Date 0 4

11 SECTION B VALUATION RESULTS

12 PARTICIPANT DATA October 1, 2017 October 1, 2016 ACTIVE MEMBERS Number Covered Annual Payroll $ 2,316,776 $ 2,262,256 Average Annual Payroll $ 57,919 $ 58,007 Average Age Average Past Service Average Age at Hire RETIREES & BENEFICIARIES Number Annual Benefits $ 527,307 $ 508,848 Average Annual Benefit $ 32,957 $ 31,803 Average Age DISABILITY RETIREES Number 8 8 Annual Benefits $ 265,213 $ 258,517 Average Annual Benefit $ 33,152 $ 32,315 Average Age TERMINATED VESTED MEMBERS Number Annual Benefits $ 123,872 $ 119,588 Average Annual Benefit $ 12,387 $ 10,872 Average Age

13 ACTUARIALLY DETERMINED CONTRIBUTION (ADC) A. Valuation Date October 1, 2017 After October 1, 2016* B. ADC to Be Paid During Fiscal Year Ending 9/30/2019 9/30/2018 C. Assumed Dates of Employer Contributions Monthly Monthly D. Annual Payment to Amortize Unfunded Actuarial Liability $521,807 $543,470 E. Employer Normal Cost 634, ,567 F. ADC if Paid on the Valuation Date: D + E 1,155,857 1,147,037 G. ADC Adjusted for Frequency of Payments 1,201,248 1,192,081 H. ADC as % of Covered Payroll 51.85% 52.69% I. Assumed Rate of Increase in Covered Payroll to Contribution Year 3.00% 3.00% J. Covered Payroll for Contribution Year 2,386,279 2,330,124 K. ADC for Contribution Year: H x J 1,237,286 1,227,742 L. Estimate of State Revenue in Contribution Year 123, ,898 ** M. Required Employer Contribution (REC) in Contribution Year 1,113,388 1,103,844 N. REC as % of Covered Payroll in Contribution Year 46.66% 47.37% *From June 22, 2017 Actuarial Impact Statement **We have updated the amount shown in the June 22, 2017 Actuarial Impact Statement to reflect the State Contribution received in

14 ACTUARIAL VALUE OF BENEFITS AND ASSETS A. Valuation Date October 1, 2017 After October 1, 2016* B. Actuarial Present Value of All Projected Benefits for 1. Active Members a. Service Retirement Benefits $14,881,085 $14,009,454 b. Vesting Benefits 1,046,413 1,033,493 c. Disability Benefits 1,049,523 1,061,854 d. Preretirement Death Benefits 208, ,529 e. Return of Member Contributions 53,624 50,730 f. Total 17,239,346 16,361, Inactive Members a. Service Retirees & Beneficiaries 7,959,518 7,790,975 b. Disability Retirees 3,927,242 3,874,767 c. Terminated Vested Members 1,441,971 1,341,081 d. Total 13,328,731 13,006, Total for All Members 30,568,077 29,367,883 C. Actuarial Accrued (Past Service) Liability (Entry Age Normal) 24,777,424 23,559,435 D. Actuarial Value of Accumulated Plan Benefits per FASB No ,670,409 20,202,032 E. Plan Assets 1. Market Value 19,202,260 17,074, Actuarial Value 19,165,008 17,545,771 F. Unfunded Actuarial Accrued Liability 5,612,416 6,013,664 G. Actuarial Present Value of Projected Covered Payroll 20,541,365 20,553,411 H. Actuarial Present Value of Projected Member Contributions 821, ,136 I. Accumulated Member Contributions 626, ,115 *From June 22, 2017 Actuarial Impact Statement 7

15 CALCULATION OF EMPLOYER NORMAL COST A. Valuation Date B. Normal Cost for October 1, 2017 After Assumption October 1, 2016* 1. Service Retirement Benefits $493,637 $484, Vesting Benefits 75,935 72, Disability Benefits 70,260 69, Preretirement Death Benefits 9,170 8, Return of Member Contributions 9,837 9, Total for Future Benefits 658, , Assumed Amount for Administrative Expenses 67,882 48, Total Normal Cost 726, , Total as a % of Covered Payroll 31.37% 30.68% C. Expected Member Contribution 92,671 90,490 D. Employer Normal Cost: B8 C 634, ,567 E. Employer Normal Cost as a % of Covered Payroll 27.37% 26.68% *From June 22, 2017 Actuarial Impact Statement 8

16 LIQUIDATION OF THE UNFUNDED ACTUARIAL ACCRUED LIABILITY UAAL Amortization Period and Payments Original UAAL Current UAAL Amortization Period Years Date (Years) Amount Remaining Amount Payment 10/1/ $ 3,079, $ 2,882,594 $ 276,270 10/1/ , ,021 28,491 10/1/ , ,828 14,858 10/1/ , ,398 35,678 10/1/ (144,922) 21 (143,650) (12,832) 10/1/ , ,058 26,893 10/1/ (51,226) 21 (51,399) (4,591) 10/1/ , , /1/ ,180, ,184, ,829 10/1/ , ,321 31,482 10/1/ , ,655 43,778 10/1/ (15,415) 23 (15,231) (1,311) 10/1/ (136,002) 23 (134,374) (11,567) 10/1/ , ,702 15,729 10/1/ , ,510 1,060 10/1/ (345,453) 25 (345,453) (28,829) $ 5,831,297 $ 5,612,416 $ 521,807 The Unfunded Actuarial Liability above is being amortized as a level dollar amount over the number of years remaining in the amortization period. Amortization Schedule Year Expected UAAL 2017 $ 5,612, ,472, ,321, ,160, ,986, ,799, ,631, ,955, ,

17 ACTUARIAL GAINS AND LOSSES The assumptions used to anticipate mortality, employment turnover, investment income, expenses, salary increases, and other factors have been based on long range trends and expectations. Actual experience can vary from these expectations. The variance is measured by the gain and loss for the period involved. If significant long term experience reveals consistent deviation from what has been expected and that deviation is expected to continue, the assumptions should be modified. The net actuarial gain (loss) for the past year is computed as follows: 1. Last Year's UAAL* $ 6,013, Last Year's Employer Normal Cost 603, Last Year's Contributions 1,121, Interest at the Assumed Rate on: a. 1 and 2 for one year 496,292 b. 3 from dates paid 34,433 c. a b 461, This Year's Expected UAAL (before any changes in benefits or assumptions): c 5,957, This Year's Actual UAAL (before any changes in benefits or assumptions) 5,612, Net Actuarial Gain (Loss): , Gain (Loss) due to Investments (82,574) 9. Gain (Loss) from Other Sources 428,027 *From June 22, 2017 Actuarial Impact Statement 10

18 The fund earnings and salary increase assumptions have considerable impact on the cost of the Plan so it is important that they are in line with the actual experience. The following table shows the actual fund earnings and salary increase rates compared to the assumed rates for the last few years: Investment Return Year Ending Actual Assumed Actual Salary Increases Assumed 9/30/ % 7.5 % N/A % 7.0 % 9/30/ N/A 7.0 9/30/ /30/ N/A 7.0 9/30/ N/A 7.0 9/30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/2002 (2.7) /30/2003 (0.3) /30/ /30/ /30/ /30/ /30/ /30/ (0.5) 7.0 9/30/ /30/2011 (0.9) 8.0 (0.1) 7.0 9/30/ /30/ /30/ /30/ /30/ /30/ Averages 7.5 % 5.9 %* * Average calculated beginning with plan year ended September 30, The actual investment return rates shown above are based on the actuarial value of assets. The actual salary increase rates shown above are the increases received by those active members who were included in the actuarial valuations both at the beginning and the end of each year. 11

19 History of Investment Return Based on Actuarial Value of Assets 16% 16% 12% 12% 8% 8% 4% 4% 0% 0% 4% 4% Plan Year End Actual Assumed History of Salary Increases 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% 5% 5% Plan Year End Compared to Previous Year Actual Assumed 12

20 Actual (A) Compared to Expected (E) Decrements Among Active Employees Number Added During Service Disability Terminations Active Members Year Year Retirement Retirement Death Vested Other Totals End of Ended A E A E A E A E A A A E Year 9/30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ Yr Totals * * Totals are through current Plan Year only. 13

21 HISTORY OF VALUATION RESULTS Valuation Date Active Members Number of Inactive Members Covered Annual Payroll Actuarial Value of Assets Actuarial Accrued Liability Entry Age UAAL Entry Age Funded Ratio Employer Normal Cost Amount % of Payroll 10/1/ $ 769,195 $ 2,586,946 $ 1,134,983 $ (1,451,963) % $ % 10/1/ ,742 3,288,256 1,920,952 (1,367,304) , /1/ ,124,123 4,127,374 2,406,428 (1,720,946) , /1/ ,329,784 5,216,061 3,400,606 (1,815,455) /1/ ,725,354 5,731,253 5,436,025 (295,228) , /1/ ,776,351 6,811,480 9,890,772 3,079, , /1/ ,972,351 7,647,616 11,078,285 3,430, , /1/ ,215,755 8,700,546 12,226,809 3,526, , /1/ ,257,667 9,445,235 13,308,396 3,863, , /1/ ,175,013 10,012,620 13,759,212 3,746, , /1/ ,232,881 10,628,484 14,659,344 4,030, , /1/ ,110,250 12,918,572 18,006,362 5,087, , /1/ ,139,979 14,354,809 20,340,377 5,985, , /1/ ,191,425 15,963,387 21,856,612 5,893, , /1/ ,262,256 17,545,771 23,559,435 6,013, , /1/ ,316,776 19,165,008 24,777,424 5,612, ,

22 HISTORY OF REQUIRED AND ACTUAL CONTRIBUTIONS Plan Year Fiscal Year Ending Employer & State Estimated Amount % of Payroll Required Contributions Estimated State Net Employer Actual Contributions % of % of Amount Payroll Amount Payroll Employer State Total 10/1/1984 9/30/1985 $48, % $24, % $23, % $34,569 $24,030 $58,599 10/1/1984 9/30/ ,113 31,206 64,319 10/1/1984 9/30/ ,815 36,569 73,384 10/1/1987 9/30/1988 7, , ,235 41,542 82,777 10/1/1987 9/30/ ,872 48,521 93,393 10/1/1987 9/30/ ,386 50, ,350 10/1/1990 9/30/1991 2, , ,521 50,521 10/1/1990 9/30/ ,195 50,195 10/1/1992 9/30/ , , ,337 50,337 10/1/1992 9/30/ , ,432 49,432 10/1/1992 9/30/ , ,264 53,264 10/1/1995 9/30/ , , ,572 58,572 10/1/1995 9/30/ , ,621 62,621 10/1/1997 9/30/ , , ,875 68,875 10/1/1997 9/30/ , ,675 65,675 10/1/1999 9/30/ , ,875 68,875 10/1/1999 9/30/ , ,304 71,304 10/1/1999 9/30/ , ,452 74,452 10/1/2002 9/30/ , , , ,322 74, ,774 10/1/2002 9/30/ , , , ,465 74, ,917 10/1/2002 9/30/ , , , ,398 74, ,850 10/1/2002 9/30/ , , , , , ,010 10/1/2005 9/30/ , , , , , ,088 10/1/2006 9/30/ , , , , , ,082 10/1/2007 9/30/ , , , , , ,173 10/1/2008 9/30/ , , , , , ,124 10/1/2009 9/30/ , , , , , ,407 10/1/2010 9/30/ , , , , , ,322 10/1/2010 9/30/ , , , , , ,671 10/1/2010 9/30/ , , , , , ,199 10/1/2013 9/30/ , , , , , ,534 10/1/2014 9/30/2016 1,112, , , , ,094 1,104,852 10/1/2015 9/30/2017 1,166, , ,039, , ,898 1,121,221 10/1/2016 9/30/2018 1,227, , ,103, /1/2017 9/30/2019 1,237, , ,113,

23 Valuation Methods ACTUARIAL ASSUMPTIONS AND COST METHOD Actuarial Cost Method Normal cost and the allocation of benefit values between service rendered before and after the valuation date were determined using an Individual Entry Age Normal Actuarial Cost Method having the following characteristics: (i) the annual normal cost for each individual active member, payable from the date of employment to the date of retirement, is sufficient to accumulate the value of the member s benefit at the time of retirement; (ii) each annual normal cost is a constant percentage of the member s year by year projected covered pay. Actuarial gains/(losses), as they occur, reduce (increase) the Unfunded Actuarial Accrued Liability. Financing of Unfunded Actuarial Accrued Liabilities Unfunded Actuarial Accrued Liabilities (full funding credit if assets exceed liabilities) were amortized by level (principal & interest combined) dollar contributions over a reasonable period of future years. Actuarial Value of Assets The Actuarial Value of Assets phase in the difference between the expected investment earnings and actual investment earnings at the rate of 25% per year. The Actuarial Value of Assets will be further adjusted to the extent necessary to fall within the corridor whose lower limit is 80% of the Market Value of plan assets and whose upper limit is 120% of the Market Value of plan assets. During periods when investment performance exceeds the assumed rate, Actuarial Value of Assets will tend to be less than Market Value. During periods when investment performance is less than assumed rate, Actuarial Value of Assets will tend to be greater than Market Value. Valuation Assumptions The actuarial assumptions used in the valuation are shown in this Section. Economic Assumptions The investment return rate assumed in the valuation is 7.5% per year, compounded annually (net after investment expenses). The Wage Inflation Rate assumed in this valuation was 3% per year. The Wage Inflation Rate is defined to be the portion of total pay increases for an individual that are due to macro economic forces including productivity, price inflation, and labor market conditions. The wage inflation rate does not include pay changes related to individual merit and seniority effects. 16

24 The Price Inflation Rate assumed in this valuation is 2.50% per year. The Price Inflation Rate is defined to be the expected long term rate of increases in the prices of goods and services. The assumed real rate of return over price inflation is defined to be the portion of total investment return that is more than the assumed price inflation rate. Considering other economic assumptions, the 7.5% investment return rate translates to an assumed real rate of return over price inflation of 5.0%. The cost of living allowance assumption used for members employed on or after October 1, 2003 is 3.0%, compounded each October 1 following retirement. The rate of salary increase used for individual members is 7% per year. This assumption is used to project a member s current salary to the salaries upon which benefits will be based. Reported base pay for new hires is increased by 15% to allow for up to 300 hours of overtime pay in the first year of employment. The assumed rate of increase in covered payroll from the current year to the contribution year is 3% per year. Demographic Assumptions The mortality table is the RP 2000 Combined Healthy Participant Mortality Tables (for pre retirement mortality) and the RP 2000 Mortality Table for Annuitants (for post retirement mortality), with mortality improvements projected to all future years after 2000 using Scale BB. For males, the base mortality rates include a 90% blue collar adjustment and a 10% white collar adjustment. For females, the base mortality rates include a 100% white collar adjustment. These are the same rates used for Special Risk Class members of the Florida Retirement System (FRS), as required under Florida Statutes, Chapter FRS Healthy Mortality for Special Risk Class Members Sample Probability of Future Life Attained Dying Next Year Expectancy (years) Ages (in 2017) Men Women Men Women % 0.23 % This assumption is used to measure the probabilities of each benefit payment being made after retirement. 17

25 FRS Healthy Pre Retirement Mortality for Special Risk Class Members Sample Probability of Future Life Attained Dying Next Year Expectancy (years) Ages (in 2017) Men Women Men Women % 0.15 % This assumption is used to measure the probabilities of active members dying prior to retirement. For disabled retirees, the mortality table used was the 60% of the RP 2000 for Disabled Annuitants with ages set back 4 years for males and set forward 2 years for females, and 40% of the RP 2000 Annuitant Mortality Table with a White Collar adjustment with no age setback, both with no provision being made for future mortality improvements. These are the same rates currently used for Special Risk Class members of the Florida Retirement System (FRS), as required under Florida Statutes, Chapter FRS Disabled Mortality for Special Risk Class Members Sample Probability of Future Life Attained Dying Next Year Expectancy (years) Ages Men Women Men Women % 0.91 % The rates of retirement used to measure the probability of eligible members retiring during the next year are as follows: Number of Years After First Eligibility Probability of for Normal Retirement Normal Retirement 0 60 % 1 40 % 2 40 % 3 40 % 4 40 % % 18

26 It was assumed that the probability of early retirement is 5% for every year of eligibility. Rates of separation from active membership were as shown below (rates do not apply to members eligible to retire and do not include separation on account of death or disability). This assumption measures the probabilities of members separating from employment for reasons other than death, disability, or retirement. Sample Years of % of Active Members Ages Service Separating Within Next Year ALL % % % 3 8.0% 4 6.0% 20 5 & Over 8.0% % % % % % % % % % Rates of disability among active members (67% of disabilities are assumed to be service connected). Sample Ages 20 % Becoming Disabled within Next Year 0.14 % % % % % % % 19

27 MISCELLANEOUS AND TECHNICAL ASSUMPTIONS Administrative & Investment Expenses Benefit Service Decrement Operation Decrement Timing Eligibility Testing Forfeitures Incidence of Contributions Liability Load Marriage Assumption Normal Form of Benefit The investment return assumption is intended to be the return net of investment expenses. Annual administrative expenses are assumed to be equal to the average of the prior two years expenses. Assumed administrative expenses are added to the Normal Cost. Exact fractional service is used to determine the amount of benefit payable. Disability and mortality decrements operate during retirement eligibility. Decrements of all types are assumed to occur at the beginning of the year. Eligibility for benefits is determined based upon the age nearest birthday and service nearest whole year on the date the decrement is assumed to occur. For vested separations from service, it is assumed that 0% of members separating will withdraw their contributions and forfeit an employer financed benefit. It was further assumed that the liability at termination is the greater of the vested deferred benefit (if any) or the member s accumulated contributions. Employer contributions are assumed to be made in equal installments at the end of each month. Member contributions are assumed to be received continuously throughout the year based upon the computed percent of payroll shown in this report, and the actual payroll payable at the time contributions are made. To allow for the inclusion of the lump sum payment of unused leave pay in average final compensation, projected benefits for active members hired before July 1, 2011 are increased by the calculated percentage based on each member s accrued unused leave hours as of July 1, 2011 divided by 10,400 hours (equal to 2,080 hours for each year in 5 year averaging period). 100% of males and 100% of females are assumed to be married for purposes of death in service benefits. Male spouses are assumed to be three years older than female spouses for active member valuation purposes. A 10 year certain and life annuity is the normal form of benefit. 20

28 Pay Increase Timing Service Credit Accruals Beginning of fiscal year. This is equivalent to assuming that reported pays represent amounts paid to members during the year ended on the valuation date. It is assumed that members accrue one year of service credit per year. 21

29 GLOSSARY Actuarial Accrued Liability (AAL) Actuarial Assumptions Actuarial Cost Method Actuarial Equivalent Actuarial Present Value (APV) Actuarial Present Value of Future Benefits (APVFB) Actuarial Valuation Actuarial Value of Assets Actuarially Determined The difference between the Actuarial Present Value of Future Benefits, and the Actuarial Present Value of Future Normal Costs. Assumptions about future plan experience that affect costs or liabilities, such as: mortality, withdrawal, disablement, and retirement; future increases in salary; future rates of investment earnings; future investment and administrative expenses; characteristics of members not specified in the data, such as marital status; characteristics of future members; future elections made by members; and other items. A procedure for allocating the Actuarial Present Value of Future Benefits between the Actuarial Present Value of Future Normal Costs and the Actuarial Accrued Liability. Of equal Actuarial Present Value, determined as of a given date and based on a given set of Actuarial Assumptions. The amount of funds required to provide a payment or series of payments in the future. It is determined by discounting the future payments with an assumed interest rate and with the assumed probability each payment will be made. The Actuarial Present Value of amounts which are expected to be paid at various future times to active members, retired members, beneficiaries receiving benefits, and inactive, non retired members entitled to either a refund or a future retirement benefit. Expressed another way, it is the value that would have to be invested on the valuation date so that the amount invested plus investment earnings would provide sufficient assets to pay all projected benefits and expenses when due. The determination, as of a valuation date, of the Normal Cost, Actuarial Accrued Liability, Actuarial Value of Assets, and related Actuarial Present Values for a plan. An Actuarial Valuation for a governmental retirement system typically also includes calculations of items needed for compliance with GASB. The value of the assets as of a given date, used by the actuary for valuation purposes. This may be the market or fair value of plan assets or a smoothed value in order to reduce the year to year volatility of calculated results, such as the funded ratio and the actuarially determined contribution (ADC). The employer s periodic required contributions, expressed as a dollar 22

30 Contribution (ADC) amount or a percentage of covered plan compensation. The ADC consists of the Employer Normal Cost and Amortization Payment. Amortization Method Amortization Payment Amortization Period Closed Amortization Period Employer Normal Cost Equivalent Single Amortization Period Experience Gain/Loss A method for determining the Amortization Payment. The most common methods used are level dollar and level percentage of payroll. Under the Level Dollar method, the Amortization Payment is one of a stream of payments, all equal, whose Actuarial Present Value is equal to the UAAL. Under the Level Percentage of Pay method, the Amortization Payment is one of a stream of increasing payments, whose Actuarial Present Value is equal to the UAAL. Under the Level Percentage of Pay method, the stream of payments increases at the rate at which total covered payroll of all active members is assumed to increase. That portion of the plan contribution or ADC which is designed to pay interest on and to amortize the Unfunded Actuarial Accrued Liability. The period used in calculating the Amortization Payment. A specific number of years that is reduced by one each year, and declines to zero with the passage of time. For example if the amortization period is initially set at 25 years, it is 24 years at the end of one year, 23 years at the end of two years, etc. The portion of the Normal Cost to be paid by the employer. This is equal to the Normal Cost less expected member contributions. For plans that do not establish separate amortization bases (separate components of the UAAL), this is the same as the Amortization Period. For plans that do establish separate amortization bases, this is the period over which the UAAL would be amortized if all amortization bases were combined upon the current UAAL payment. A measure of the difference between actual experience and that expected based upon a set of Actuarial Assumptions, during the period between two actuarial valuations. To the extent that actual experience differs from that assumed, Unfunded Actuarial Accrued Liabilities emerge which may be larger or smaller than projected. Gains are due to favorable experience, e.g., the assets earn more than projected, salaries do not increase as fast as assumed, members retire later than assumed, etc. Favorable experience means actual results produce actuarial liabilities not as large as projected by the actuarial assumptions. On the other hand, losses are the result of unfavorable experience, i.e., actual results that produce Unfunded Actuarial Accrued Liabilities which are larger than projected. 23

31 Funded Ratio GASB GASB No. 67 and GASB No. 68 Normal Cost Open Amortization Period Unfunded Actuarial Accrued Liability Valuation Date The ratio of the Actuarial Value of Assets to the Actuarial Accrued Liability. Governmental Accounting Standards Board. These are the governmental accounting standards that set the accounting rules for public retirement systems and the employers that sponsor or contribute to them. Statement No. 68 sets the accounting rules for the employers that sponsor or contribute to public retirement systems, while Statement No. 67 sets the rules for the systems themselves. The annual cost assigned, under the Actuarial Cost Method, to the current plan year. An open amortization period is one which is used to determine the Amortization Payment but which does not change over time. In other words, if the initial period is set as 25 years, the same 25 year period is used in determining the Amortization Period each year. In theory, if an Open Amortization Period is used to amortize the Unfunded Actuarial Accrued Liability, the UAAL will never completely disappear, but will become smaller each year, either as a dollar amount or in relation to covered payroll. The difference between the Actuarial Accrued Liability and Actuarial Value of Assets. The date as of which the Actuarial Present Value of Future Benefits are determined. The benefits expected to be paid in the future are discounted to this date. 24

32 SECTION C PENSION FUND INFORMATION

33 Statement of Plan Assets at Market Value Item September A. Cash and Cash Equivalents (Operating Cash) $ 24,211 $ 14,424 B. Receivables 1. Member Contributions $ $ 2. Employer Contributions 131, , State Contributions 4. Investment Income and Other Receivables 35,677 38, Total Receivables $ 167,588 $ 189,221 C. Investments 1. Short Term Investments $ 1,111,025 $ 865, Domestic Equities 10,333,142 9,143, International Equities 2,035,777 1,281, Domestic Fixed Income 5,316,713 5,479, International Fixed Income 244, , Real Estate 7. Private Equity 8. Total Investments $ 19,041,369 $ 16,879,582 D. Liabilities 1. Benefits/Refunds Payable $ $ 2. Accrued Expenses and Other Payables (6,724) 3. Total Liabilities $ (6,724) $ E. Total Market Value of Assets Available for Benefits $ 19,226,444 $ 17,083,227 F. State Contribution Reserve $ $ G. Share Plan Account $ 24,184 $ 9,127 H. Market Value Net of Reserves $ 19,202,260 $ 17,074,100 I. Allocation of Investments 1. Short Term Investments 5.8% 5.1% 2. Domestic Equities 54.3% 54.2% 3. International Equities 10.7% 7.6% 4. Domestic Fixed Income 27.9% 32.5% 5. International Fixed Income 1.3% 0.6% 6. Real Estate 0.0% 0.0% 7. Private Equity 0.0% 0.0% 8. Total Investments 100.0% 100.0% 25

34 Reconciliation of Plan Assets Item September A. Market Value of Assets at Beginning of Year $ 17,083,227 $ 15,439,714 B. Revenues and Expenditures 1. Contributions a. Employee Contributions $ 85,846 $ 85,492 b. Employer Contributions 997, ,758 c. State Contributions 138, ,094 d. Other e. Total $ 1,222,124 $ 1,190, Investment Income a. Interest, Dividends, and Other Income $ 508,135 $ 383,990 b. Net Realized Gains/(Losses) 434, ,970 c. Net Unrealized Gains/(Losses) 930, ,337 d. Investment Expenses (116,028) (108,244) e. Net Investment Income $ 1,757,433 $ 1,286, Benefits and Refunds a. Refunds $ (8,689) $ (3,567) b. Regular Monthly Benefits (746,614) (774,591) c. Disability Claim Settlement d. Total $ (755,303) $ (778,158) 4. Administrative and Miscellaneous Expenses $ (81,037) $ (54,726) 5. Transfers $ $ C. Market Value of Assets at End of Year $ 19,226,444 $ 17,083,227 D. State Contribution Reserve $ $ E. Share Plan Account Balance $ 24,184 $ 9,127 F. Market Value Net of Reserves $ 19,202,260 $ 17,074,100 26

35 Development of Actuarial Value of Assets Valuation Date September A. Actuarial Value of Assets Beginning of Year $ 15,963,387 $ 17,554,898 B. Market Value End of Year 17,083,227 19,226,444 C. Market Value Beginning of Year 15,439,714 17,083,227 D. Non Investment/Administrative Net Cash Flow 357, ,784 E. Investment Income E1. Actual Market Total: B C D 1,286,053 1,757,433 E2. Assumed Rate of Return 7.50% 7.50% 7.50% 7.50% 7.50% E3. Assumed Amount of Return 1,210,659 1,331,084 E4. Amount Subject to Phase In: E1 E3 75, ,349 F. Phased In Recognition of Investment Income F1. Current Year: 0.25 x E4 18, ,587 F2. First Prior Year (320,205) 18,849 $ 106,587 F3. Second Prior Year 112,198 (320,205) 18,849 $ 106,587 F4. Third Prior Year 212, ,195 (320,206) 18,847 $ 106,588 F5. Total Phase Ins 23,392 (82,574) (194,770) 125, ,588 G. Actuarial Value of Assets End of Year G1. Preliminary Actuarial Value of Assets End of Year: A+D+E3+F5 $ 17,554,898 $ 19,189,192 G2. Upper Corridor Limit: 120%*B 20,499,872 23,071,733 G3. Lower Corridor Limit: 80%*B 13,666,582 15,381,155 G4. Actuarial Value of Assets End of Year 17,554,898 19,189,192 G5. State Contribution Reserve G6. Share Plan Account Balance 9,127 24,184 G7. Final Actuarial Value of Assets End of Year 17,545,771 19,165,008 H. Difference between Market and Actuarial Value of Assets (471,671) 37,252 I. Actuarial Rate of Return 7.64% 7.03% J. Market Value Rate of Return 8.23% 10.17% K. Ratio of Actuarial Value of Assets to Market Value % 99.81% The Actuarial Value of Assets recognizes assumed investment return (line E3) fully each year. Differences between actual and assumed investment income (Line E4) are phased in over a closed 4 year period. During periods when investment performance exceeds the assumed rate, Actuarial Value of Assets will tend to be less than Market Value. During periods when investment performance is less than the assumed rate, Actuarial Value of Assets will tend to be greater than Market Value. If assumed rates are exactly realized for 4 consecutive years, Actuarial Value of Assets will become equal to Market Value. 27

36 Year Ending September 30 Investment Rate of Return Market Value Basis* Actuarial Value Basis 1982 N/A 10.9 % 1983 N/A N/A N/A N/A N/A N/A N/A N/A % (0.7) (9.6) (5.9) (2.7) (0.3) (10.9) (1.6) (5.0) (0.9) (1.2) Average Returns: Last 5 Years 8.5 % 8.2 % Last 10 Years 4.6 % 5.2 % All Years 6.7 % 7.5 % * Net of investment expenses after The above rates are based on the retirement system s financial information reported to the actuary. They may differ from figures that the investment consultant reports, in part because of differences in the handling of administrative and investment expenses, and in part because of differences in the handling of cash flows. 28

37 SECTION D FINANCIAL ACCOUNTING INFORMATION

38 FASB NO. 35 INFORMATION A. Valuation Date October 1, 2017 October 1, 2016 B. Actuarial Present Value of Accumulated Plan Benefits 1. Vested Benefits a. Members Currently Receiving Payments $ 11,886,760 $ 11,665,742 b. Terminated Vested Members 1,441,971 1,341,081 c. Other Members 7,702,941 6,601,950 d. Total 21,031,672 19,608, Non Vested Benefits 638, , Total Actuarial Present Value of Accumulated Plan Benefits: 1d ,670,409 20,202, Accumulated Contributions of Active Members 626, ,115 C. Changes in the Actuarial Present Value of Accumulated Plan Benefits 1. Total Value at Beginning of Period 20,202,032 18,789, Increase (Decrease) During the Period Attributable to: a. Plan Amendment 0 0 b. Change in Actuarial Assumptions 0 (4,737) c. Latest Member Data, Benefits Accumulated and Decrease in the Discount Period 2,223,680 2,194,972 d. Benefits Paid (755,303) (778,158) e. Net Increase 1,468,377 1,412, Total Value at End of Period 21,670,409 20,202,032 D. Market Value of Assets 19,202,260 17,083,227 E. Actuarial Assumptions See page entitled Actuarial Assumptions and Methods 29

39 SCHEDULE OF CHANGES IN THE EMPLOYER S NET PENSION LIABILITY AND RELATED RATIOS GASB Statement No. 67 Fiscal year ending September 30, Total Pension Liability Service Cost $ 638,591 $ 600,310 $ 516,884 Interest 1,771,204 1,673,595 1,510,598 Benefit Changes 9,127 Difference between actual & expected experience 209, , ,421 Assumption Changes 20,577 (150,513) 573,884 Benefit Payments (746,614) (774,591) (639,735) Refunds (8,689) (3,567) (22,876) Other 15,057 Net Change in Total Pension Liability 1,909,033 1,541,996 2,377,176 Total Pension Liability Beginning 23,351,746 21,809,750 19,432,574 Total Pension Liability Ending (a) $ 25,260,779 $ 23,351,746 $ 21,809,750 Plan Fiduciary Net Position Contributions Employer $ 997,323 $ 977,758 $ 802,667 Contributions Employer (from State) 138, , ,867 Contributions Non Employer Contributing Entity Contributions Member 85,846 85,492 81,598 Net Investment Income 1,757,433 1,286,053 (178,588) Benefit Payments (746,614) (774,591) (639,735) Refunds (8,689) (3,567) (22,876) Administrative Expense (81,037) (54,726) (43,013) Other Net Change in Plan Fiduciary Net Position 2,143,217 1,643, ,920 Plan Fiduciary Net Position Beginning 17,083,227 15,439,714 15,321,794 Plan Fiduciary Net Position Ending (b) $ 19,226,444 $ 17,083,227 $ 15,439,714 Net Pension Liability Ending (a) (b) 6,034,335 6,268,519 6,370,036 Plan Fiduciary Net Position as a Percentage of Total Pension Liability % % % Covered Payroll $ 2,146,150 $ 2,137,300 $ 2,039,950 Net Pension Liability as a Percentage of Covered Payroll % % % 30

40 SCHEDULE OF THE EMPLOYER S NET PENSION LIABILITY GASB Statement No. 67 Total Plan Net Position Net Pension Liability FY Ending Pension Plan Net Net Pension as a % of Total Covered as a % of Covered September 30, Liability Position Liability Pension Liability Payroll Payroll 2014 $ 19,432,574 $ 15,321,794 $ 4,110, % $ 2,069, % ,809,750 15,439,714 6,370, % 2,039, % ,351,746 17,083,227 6,268, % 2,137, % ,260,779 19,226,444 6,034, % 2,146, % 31

41 NOTES TO THE SCHEDULE OF THE EMPLOYER S NET PENSION LIABILITY GASB Statement No. 67 Valuation Date: October 1, 2016 Measurement Date: September 30, 2017 Methods and Assumptions Used to Determine Net Pension Liability: Actuarial Cost Method Entry Age Normal Inflation 3.0% Salary Increases 7.0% per year Investment Rate of Return 7.5% Retirement Age Experience based table of rates that are specific to the type of eligibility condition. Mortality RP 2000 Combined Healthy Participant Mortality Table for active employees and the RP 2000 Mortality Table for Annuitants for inactive members, both with mortality improvements projected to all future years after 2000 using Scale BB. For males, the base mortality rates include a 90% blue collar adjustment and a 10% white collar adjustment. For females, the base mortality rates include a 100% white collar adjustment. These are the same rates used for Special Risk Class members of the Florida Retirement System (FRS) as of July 1, Other Information: Notes See Discussion of Valuation Results in the October 1, 2016 Actuarial Valuation Report for a summary of the changes in actuarial assumptions that are reflected as of the September 30, 2017 Measurement Date. 32

42 SCHEDULE OF CONTRIBUTIONS GASB Statement No. 67 Actuarially Contribution Actual Contribution FY Ending Determined Actual Deficiency Covered as a % of Covered September 30, Contribution Contribution (Excess) Payroll Payroll 2014 $ 681,594 $ 692,199 (10,605) $ 2,069, % , ,534 (6,432) 2,039, % ,078,482 1,104,852 (26,370) 2,137, % ,109,345 1,121,221 (11,876) 2,146, % 33

43 NOTES TO SCHEDULE OF CONTRIBUTIONS GASB Statement No. 67 Valuation Date: October 1, 2015 Notes Actuarially determined contribution rates are calculated as of October 1, which is two years prior to the end of the fiscal year in which contributions are reported. Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Amortization Method Level Dollar, Closed Remaining Amortization Period 22 years (single equivalent period) Asset Valuation Method 4 year smoothed market Inflation 3.0% Salary Increases 7.0% per year Investment Rate of Return 7.5% Retirement Age Experience based table of rates that are specific to the type of eligibility condition. Mortality RP 2000 Mortality Table for Annuitants, with mortality improvements projected to all future years after 2000 using Scale BB. For males, the base mortality rates include a 90% blue collar adjustment and a 10% white collar adjustment. For females, the base mortality rates include a 100% white collar adjustment. These are the same rates used for Special Risk Class members of the Florida Retirement System (FRS) as of July 1, Other Information: Notes See Discussion of Valuation Results in the October 1, 2015 Actuarial Valuation Report for a summary of the changes in actuarial assumptions effective as of October 1,