MICHIGAN BAC PENSION PLAN LANSING, MICHIGAN. Actuarial Valuation Report For Plan Year Commencing May 1, 2017

Transcription

1 MICHIGAN BAC PENSION PLAN LANSING, MICHIGAN Actuarial Valuation Report For Plan Year Commencing May 1, 2017

2 August 17, 2017 Board of Trustees Lansing, Michigan Dear Trustees: We have been retained by the Board of Trustees of the to perform annual actuarial valuations of the pension plan. This report presents the results of our actuarial valuation for the plan year beginning May 1, The valuation results contained herein are based on current plan provisions summarized in Appendix A, the actuarial assumptions and methods listed in Appendix B and on financial statements audited by Benda, Grace, Stulz & Company, P.C. Participant data was provided by TIC International Corporation. While we have reviewed the data for reasonableness in accordance with Actuarial Standards of Practice No. 23, we have not audited it. The data was relied on as being both accurate and comprehensive. This report has been prepared in order to (1) assist the Trustees in evaluating the current actuarial position of the plan, (2) determine the minimum required and maximum deductible contribution amounts under Internal Revenue Code 431 and 404, (3) provide the fund s auditor with information necessary to comply with Accounting Standards Codification 960, and (4) document the plan s certified status under Internal Revenue Code 432 for the current year and provide the basis to certify such status for the subsequent year. In addition, information contained in this report will be used to prepare Schedule MB of Form 5500 that is filed annually with the IRS and could be used to calculate employer withdrawal liability. We are not responsible for the use of, or reliance upon, this report for any other purpose. We have prepared this report in accordance with generally accepted actuarial principles and practices and have performed such tests as we considered necessary to assure the accuracy of the results. The results have been determined on the basis of actuarial assumptions that, in our opinion, are appropriate for the purposes of this report, are individually reasonable and in combination represent our best estimate of anticipated experience under the plan. Actuarial assumptions may be changed from previous valuations due to changes in mandated requirements, plan experience resulting in changes in expectations about the future, and/or other factors. An assumption change does not indicate that prior assumptions were unreasonable when made. For purposes of current liability calculations, assumptions are prescribed by regulation or statute. By relying on this valuation report, the Trustees confirm they have accepted the assumptions contained in the report. The results are based on our best interpretation of existing laws and regulations and are subject to revision based on future regulatory or other guidance. Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions, changes in economic or demographic assumptions, increases or decreases expected as part of the natural North Meridian Street, Suite 610 Carmel, Indiana (317) Fax (317)

3 Board of Trustees -3- August 17, 2017 operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan s funded status), and changes in plan provisions or applicable law. United Actuarial Services, Inc. does not provide, nor charge for, investment, tax or legal advice. None of the comments made herein should be construed as constituting such advice. We are not aware of any direct or material indirect financial interest or relationship that could create a conflict of interest that would impair the objectivity of our work. The undersigned actuaries meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained in this report. We are available to respond to any questions you may have about this report. UNITED ACTUARIAL SERVICES, INC. Enrolled Actuary Consultant Kathryn A. Garrity, FSA, EA, MAAA Chief Actuary Andrew T. Smith, FCA, ASA, EA President

4 TABLE OF CONTENTS PART I: SUMMARY OF RESULTS Year Summary of Valuation Results Year Summary of Demographics 7 Changes From Prior Study 8 History of Major Assumptions 9 Experience vs. Assumptions 10 Plan Maturity 11 Unfunded Vested Benefits/Employer Withdrawal Liability 12 Contribution Allocation 13 Funding Standard Account Projection 14 Funded Ratio Projection 15 PPA Funding Status Report 16 Ultimate Funded Status 17 Stress and Sensitivity Analysis 18 PART II: SUPPLEMENTAL STATISTICS 19 Participant Data Reconciliation 20 Hours Worked During Plan Year 21 Contributions Made During Plan Year 22 Active Information 23 Inactive Vested Information 24 Retiree Information 25 PART III: ASSET INFORMATION 27 Market and Actuarial Fund Values 28 Flow of Funds 29 Investment Gain and Loss 30 Rate of Return on Fund Assets 31 PART IV: ENROLLED ACTUARY S REPORT 32 Normal Cost/Actuarial Liability 33 Actuarial Liability Reconciliation/Projection 34 Funded Ratios 35 Funding Period 36 Current Liability 37 Funding Standard Account 38 Full Funding Limit 39 Minimum Required Contribution and Full Funding Credit 40 Maximum Deductible Contribution 41 History of Unfunded Vested Benefits 42 Termination by Mass Withdrawal 43 ASC 960 Information 44 APPENDICES Plan Provisions Actuarial Assumptions and Methods Minimum Funding Amortization Bases Summary of Endangered and Critical Status Rules Glossary of Common Pension Terms Appendix A Appendix B Appendix C Appendix D Appendix E

5 PART I: SUMMARY OF RESULTS Page 5

6 Summary of Results 5 - YEAR SUMMARY OF VALUATION RESULTS Actuarial Study as of May 1, PPA funded status Endngrd Endngrd Endngrd Endngrd Critical Progress under FIP/RP Yes Yes n/a n/a n/a Improvements restricted* Yes Yes Yes Yes Yes Funded ratio PPA certification 75.2% 76.4% 78.6% 78.6% 75.7% Valuation report (AVA) 76.0% 75.7% 78.3% 78.5% 76.2% Valuation report (MVA) 72.2% 66.2% 73.5% 73.4% 68.7% Date of first projected funding deficiency PPA certification None 4/30/31 None 4/30/27 4/30/19 Valuation report None None None None 4/30/19 Net investment return On market value 13.21% -4.60% 6.43% 11.65% 12.34% On actuarial value 3.92% 2.30% 5.74% 7.33% 6.24% Asset values ($ 000) Market 125, , , , ,219 Actuarial 132, , , , ,192 Accum. ben. ($ 000) 174, , , , ,324 * Benefit improvement restrictions due to fund being in endangered or critical status (2013). Restrictions in place until plan is in the safe zone again. Page 6

7 Summary of Results 5 - YEAR SUMMARY OF DEMOGRAPHICS Actuarial Study as of May 1, Demographics Active Inactive vested Receiving benefits Total 2,633 2,625 2,573 2,479 2,486 Unrecorded dates of birth Average entry age Average attained age History of Hours Page 7

8 Summary of Results CHANGES FROM PRIOR STUDY Changes in Plan Provisions The plan provisions underlying this valuation differ from those underlying the prior valuation in the following respects: The benefit accrual rate for contributions after August 1, 2017 was increased from 1.0% to 2.0% for any portion of any contribution related to a contribution rate increase that exceeds the increase required by the funding improvement plan and was effective on or after January 1, Changes in Actuarial Assumptions and Methods The actuarial assumptions and methods used in this valuation differ from those used in the prior valuation in the following respects: A pro-rated portion of the 2017 non-credited contribution rate increase equal to 2.55% of the rate in effect under the specific agreement as of July 31, 2013 was recognized. The remaining portion of the 2016 contribution rate increase was also recognized. The assumed operational expenses were increased from $450,000 to $475,000 to reflect our best estimate of future expenses based on recent plan experience. The assumed mortality rates were changed from 115% of the RP-2014 Blue Collar Mortality Table for employees and healthy annuitants adjusted backward to 2006 with the MP-2014 projection scale and projected forward using the MP-2015 projection scale to 110% of the RP-2014 Blue Collar Mortality Table for employees and healthy annuitants adjusted backward to 2006 with the MP-2014 projection scale and projected forward using the MP-2016 projection scale. This change was made in order to better reflect anticipated improvements in mortality rates for each future year due to medical advances and lifestyle changes. The assumed retirement rates were changed according to the schedule in Appendix B to represent our best estimate of future retirement patterns based on recent plan experience. The current liability interest rate was changed from 3.22% to 3.05%. The new rate is within established statutory guidelines. Page 8

9 Summary of Results HISTORY OF MAJOR ASSUMPTIONS Actuarial Study as of May 1, Assumption Future rate of net investment return 7.50% 7.50% 7.50% 7.50% 7.50% Mortality table RP2014 RP2014 RP2000 RP2000 RP2000 Adjustment 110% 115% 1 yr. sf 1 yr. sf 1 yr. sf Projection Scale MP-2016 MP-2015 AA AA AA Future expenses $475,000 $450,000 $450,000 $450,000 $450,000 Average future hourly contribution rate* Credited $4.47 $4.09 $4.52 $4.47 $4.50 Non-credited Total $8.06 $7.84 $8.05 $7.63 $6.52 Average future annual hours Vested 1,400 1,400 1,200 1,200 1,200 Non-vested Average expected retirement age** Actives Inactive vested * Actual average derived from application of assumptions specified in Appendix B. ** Resulting from the application of the retirement probabilities shown in Appendix B to active participants. Page 9

10 Summary of Results EXPERIENCE VS. ASSUMPTIONS Comparing the prior year s experience to assumptions provides indications as to why overall results may differ from those expected Actuarial assumptions are used to project certain future events related to the pension plan (e.g. deaths, withdrawals, investment income, expenses, etc.). While actual results for a single plan year will rarely match expected experience, it is intended that the assumptions will provide a reasonable long term estimate of developing experience. The following table provides a comparison of expected outcomes for the prior plan year with the actual experience observed during the same period. This display may provide insight as to why the plan s overall actuarial position may be different from expected. Plan Year Ending April 30, 2017 Expected Actual Decrements Terminations 210 less: Rehires 62 Terminations (net of rehires) Retirements Disabilities Deaths - pre-retirement Deaths - post-retirement Asset assumptions Rate of net investment return on actuarial value 7.50% 3.92% Net expenses $ 450,000 $ 470,456 Other demographic assumptions Average retirement age from active (new retirees) Average retirement age from inactive (new retirees)* Average entry age (new entrants) Hours worked per vested active 1,400 1,473 Hours worked per non-vested active Total hours worked (valuation assumption) 815, ,150 Total hours worked (PPA certification assumption) 900, ,150 Unfunded liability (gain)/loss (Gain)/loss due to asset experience $ 4,599,318 (Gain)/loss due to liability experience 1,600,278 Total (gain)/loss $ 6,199,596 * Expected average based on the average for the total group of participants. Page 10

11 Summary of Results PLAN MATURITY Measures of plan maturity can play a part in understanding risk and a plan s ability to recover from adverse experience When a new pension plan is first established, its liabilities are typically limited to active plan participants. However, as people become vested and retire, a plan begins to develop liabilities attributable to inactive participants. The process of adding inactive liabilities (often referred to as maturing ) is a natural outgrowth of the operation of the plan. As a plan matures, its liabilities tend to balloon in relation to its contribution base, making it more difficult to correct for adverse outcomes by increasing contribution rates or reducing future benefit accruals. We generally consider a plan with an active to retiree headcount ratio of less than 1.0, or an active to inactive headcount ratio of less than 0.5, to be mature. Actuarial Study as of May 1, Active/retiree headcount ratio Active/inactive headcount ratio Liabilities of Actives, Retirees, and Inactive Vesteds Total Liabilities: $174,115,492 Page 11

12 Summary of Results UNFUNDED VESTED BENEFITS/EMPLOYER WITHDRAWAL LIABILITY An employer withdrawing during the coming year may have withdrawal liability The following table shows a history of the plan s unfunded vested benefits (UVB) required to compute a specific employer withdrawal liability under the presumptive method. If all unfunded vested benefits since the inception of the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) are zero ($0) or less, there will be no withdrawal liability assessed to a withdrawing employer. Otherwise, an employer may be assessed withdrawal liability payments pursuant to MPPAA. The display does not reflect adjustments for prior employer withdrawals. In accordance with IRC Section 432(e)(9)(A) and PBGC Technical Update 10-3, the impact of reducing adjustable benefits is reflected by adding the unamortized portion of the value of affected benefits (VAB) to the most recent year s unfunded vested benefits pool. Presumptive Method ($ 000) April 30, Vested benefits interest 7.50% 7.50% 7.50% 7.50% 7.50% Vested benefits 172, , , , ,341 less: Asset value* 132, , , , ,192 UVB 40,453 31,255 24,786 24,502 30,149 Unamortized VAB 7,207 7,651 8,064 8,449 3,516 UVB + VAB 47,660 38,906 32,850 32,951 33,665 * Actuarial value ** Includes VAB Page 12

13 Summary of Results CONTRIBUTION ALLOCATION These graphs show how the contributions are being spent The following allocation charts illustrate how the expected contribution rate for the coming plan year will be spent to pay for benefits being earned in the current year, plan expenses, and funding of past unfunded liabilities. Contribution Allocation as of May 1, 2017 Total Average Expected Contribution Rate $8.06 Contribution Allocation as of May 1, 2016 Total Average Expected Contribution Rate $7.84 Page 13

14 Summary of Results FUNDING STANDARD ACCOUNT PROJECTION The funding standard account projection is a major driver of PPA status The funding standard account (FSA) was established by ERISA as a means of determining compliance with minimum funding standards. The FSA is hypothetical in the sense that it does not represent actual assets held by a custodian. Rather, a positive FSA balance (called a credit balance ) means that the plan has exceeded minimum funding standards on a cumulative basis, while a negative balance (called a funding deficiency ) means that the plan has fallen short of such standards. Actuaries must project the plan s credit balance each year in order to determine PPA status. If the credit balance is projected to be negative in a future year, the plan could be forced into yellow (endangered) or red (critical) status depending how far into the future the projected funding deficiency is. The plan s credit balance projection appears below. As a rule of thumb, UAS recommends that non-critical status plans maintain a projected credit balance of at least one year s contributions (shown as an orange dotted line in the graph below) in each future year. Maintaining a cushion in the Funding Standard Account helps minimize the risk of a surprise funding deficiency at the end of a non- Critical status plan year. Such a deficiency could trigger an excise tax payable directly by employers. If the Plan is in Critical status at the start of plan year, it is protected from these excise taxes so long as scheduled progress has been satisfied in at least one of the past three plan years. Page 14

15 Summary of Results FUNDED RATIO PROJECTION The plan s funded ratio is a major driver of PPA status The funded ratio is defined as the actuarial value of plan assets divided by the plan s liabilities for accrued benefits. Along with the funding standard account projection, funded ratio is one of the two major drivers of PPA funded status. In order for a plan to enter the green zone (also called safe or not endangered or critical ) the funded ratio must be at least 80%. The projection of the funded ratio appears below. Page 15

16 Summary of Results The plan is in Endangered status for 2017 PPA FUNDING STATUS REPORT The Pension Protection Act of 2006 (PPA), as amended by the Multiemployer Pension Reform Act of 2014 ( MPRA ), requires all multiemployer pension plans to obtain an annual status certification. The possible statuses are: Endangered, Seriously Endangered, Critical, Critical and Declining or none of these. As the plan s actuary, we must complete the status certification within 90 days of the beginning of the plan year, and we must also certify whether or not the plan has made scheduled progress if its funding improvement or rehabilitation period has begun. The criteria for these determinations are outlined in Appendix D. Due to the timing requirement affecting PPA certifications, they are performed based on data different from that used in this report (see certification letter for additional details). The results are summarized below. Description Values Used for PPA Certification Funded ratio 75.2% 76.4% Date of first projected funding deficiency None 4/30/2031 Years of benefit payments in assets Certified PPA status Endangered Endangered Making progress under FIP/RP Yes Yes Projected PPA Status Page 16

17 Summary of Results ULTIMATE FUNDED STATUS Ultimate funded status is a snapshot measure of contribution sufficiency An actuarial valuation deals primarily with the ability of the plan to meet Internal Revenue Code requirements now and in the near future. As such, it is heavily focused on current plan assets and liabilities. But it is also important to keep in mind the true purpose of the plan funding that is, to accumulate sufficient assets to pay the benefits that the plan has promised to its participants. The chart below looks at this longterm funding adequacy. To the current plan assets we add the present value of all future contributions expected to be made for the current plan participants. To the value of the plan s liabilities for benefits that have been previously earned we add the present value of all the future benefits the current plan participants are expected to earn through their future service. Ideally these ultimate asset and liability values will be approximately equal. Neither of these amounts reflect the effect of future new participants or future contribution rate increases to the plan. Generally new entrants generate greater future contributions than benefits, so they represent a net positive to the actual future funding shown here. Page 17

18 Summary of Results STRESS AND SENSITIVITY ANALYSIS The table below illustrates the impact on the plan when experience varies from key assumptions Currently the funding improvement plan (FIP) requires non-credited contribution rate increases of 2.55% of the rate in effect under the specific agreement as of July 31, Such increases are to be effective in 2017, 2018, 2019, 2020 and The FIP also lowers the asset return assumption to 7.25% per year until April 30, Considering that experience rarely follows our assumptions exactly, we developed the table below to show how key projections respond to variations in the main assumptions. We considered the hours assumption to be at the baseline as stated on page B-7 of the report, 10% lower, or 10% higher than the baseline. We also considered the asset return for the plan year to be 10.0%, 7.25%, 4%, or 0%. Return for PY (7.50% Thereafter)* Hours Assumption Funding Stats 10.00% 7.25% 4.00% 0.00% 10% Lower 810,000 per year Baseline 900,000 per year 10% Higher 990,000 per year Green Year: No UVB: Valid FIP? Green Year: No UVB: Valid FIP? Green Year: No UVB: Valid FIP? No Yes Yes No No Yes * The assumed return is 7.25% for the first 10 years and 7.50% thereafter No No No After 2041 After 2041 No No No Page 18

19 PART II: SUPPLEMENTAL STATISTICS Page 19

20 Supplemental Statistics PARTICIPANT DATA RECONCILIATION The participant data reconciliation table below provides information as to how the plan s covered population changed since the prior actuarial study. Such factors as the number of participants retiring, withdrawing and returning to work have an impact on the actuarial position of the pension fund. Participants Valued As Active Inactive Vested Receiving Benefits Total Valued May 1, ,625 Change due to: New hire Rehire 62 (29) - 33 Termination (210) 30 - (180) Disablement Retirement (16) (9) 25 - Death (2) (6) (51) (59) Cash out - (1) - (1) New beneficiary Certain pd. expired - - (1) (1) Data adjustment* - 3 (4) (1) Net change 26 (12) (6) 8 May 1, ,633 * Includes two disabled now inactive vested, two retirees that had separate records that have been combined, two new inactive vesteds previously thought to be nonvested, and a previous inactive vested who was found not to be vested. Page 20

21 Supplemental Statistics HOURS WORKED DURING PLAN YEAR Hours Worked Per Participant Plan Year Ending April 30, 2017 Number Hours Worked Average Hours Worked Actives Vested ,235 1,473 Non-vested, continuing ,307 1,206 Non-vested, new entrant , Total active ,497 1,112 Others 8 4, Total for plan year ,150 1,107 History of Total Actual and Expected Hours Worked (Thousands) Plan Year Ending April 30, Expected hours valuation Expected hours PPA cert Actual hours worked n/a History of Average Actual and Expected Hours Worked per Participant Page 21

22 Supplemental Statistics CONTRIBUTIONS MADE DURING PLAN YEAR Employer Credited Contributions Reported in Employee Data Plan Year Ending April 30, 2017 Number Credited Contributions Reported Actives Vested 485 $ 3,232,385 Non-vested, continuing ,632 Non-vested, new entrant ,535 Total valued as active 829 4,063,552 Others 8 22,613 Total for plan year 837 $ 4,086,165 Average credited hourly contribution rate $ 4.41 Comparison with Audited Employer Contributions Employer non-credited contributions reported in data $ 3,263,493 Total employer contributions reported $ 7,349,658 Total audited employer contributions $ 7,454,043 Percent reported 99% History of Actual and Expected Total Contributions Received Page 22

23 Supplemental Statistics ACTIVE INFORMATION Active Participants by Age and Service as of May 1, 2017 Years of Service Age < Total < Totals Unrecorded DOB Total Active Lives Page 23

24 Supplemental Statistics INACTIVE VESTED INFORMATION Inactive Vested Participants by Age as of May 1, 2017 Age Group Number Estimated Deferred Vested Benefits* < 30 2 $ , , , , , , , , ,307 Totals ,699 Unrecorded birth date - - Total inactive vested lives 931 $ 565,699 * Amount payable at assumed retirement age as used in the valuation process. Page 24

25 Supplemental Statistics RETIREE INFORMATION Benefits Being Paid by Form of Payment as of May 1, 2017 Monthly Benefits Being Paid* Form of Payment Number Total Average Smallest Largest Life only 210 $ 198,980 $ 948 $ 15 $ 3,590 Certain & life 68 63, ,913 Joint & survivor ,708 1, ,291 Disability** 27 5, ,034 Beneficiaries , ,708 Totals 873 $ 782,314 $ 896 $ 3 $ 4,291 * There are also $27,706 in benefits being paid to 62 participants that had accruals eligible to be paid at a different time. Since some of these benefits have different forms, they are excluded from the table. ** Three disabled participants are also receiving a separate retirement benefit. Retirees by Age and Form of Payment as of May 1, 2017 Form of Benefits Being Paid Age Group Life Only Certain & Life Joint & Survivor Disability Total < Totals plus: Beneficiaries 199 Total receiving benefits 873 Page 25

26 Supplemental Statistics RETIREE INFORMATION (CONT.) Age of Participants Retired During Last 5 Plan Years (excludes beneficiaries and disability retirements) Age at Plan Year Ending April 30, Retirement < Totals History of Average Retirement Ages (excludes beneficiaries and disability retirements) Retirement During Plan Year Ending In: Number Average Retirement Age Page 26

27 PART III: ASSET INFORMATION Page 27

28 Asset Information MARKET AND ACTUARIAL FUND VALUES Asset information extracted from the fund s financial statements audited by Benda, Grace, Stulz & Company, P.C. Market/Actuarial Value of Fund Investments as of April 30, Invested assets Common stocks $ 23,542,962 $ 22,704,165 $ 23,416,974 Mutual funds 64,572,066 49,015,875 52,577,624 Limited partnership 24,732,847 26,670,503 28,854,495 Common/collective trust 142, , ,217 Real estate fund 7,335,128 7,940,079 7,082,206 Corp. bonds and notes 3,612,392 5,205,958 8,255,616 Other 1,279,649 1,211,805 1,196, ,217, ,901, ,878,292 Net receivables* 471, , ,494 Market value $ 125,688,981 $ 113,546,409 $ 122,083,786 Fund assets - Actuarial value Market value $ 125,688,981 $ 113,546,409 $ 122,083,786 less: Deferred investment gains and (losses) (6,586,330) (16,364,553) (7,859,116) Actuarial value $ 132,275,311 $ 129,910,962 $ 129,942,902 Actuarial value as a percentage of market value % % % * Equals receivables, less any liabilities Page 28

29 Asset Information FLOW OF FUNDS Asset information extracted from the fund s financial statements audited by Benda, Grace, Stulz & Company, P.C. Plan Year Ending April 30, Market value at beginning of plan year $ 113,546,409 $ 122,083,786 $ 118,305,172 Additions Employer contributions 7,454,043 7,215,263 6,017,700 Net investment income* 14,821,758 (5,552,281) 7,484,466 Other income 15,675 13,341 9,514 22,291,476 1,676,323 13,511,680 Deductions Benefits paid 9,678,448 9,756,001 9,332,271 Net expenses* 470, , ,795 10,148,904 10,213,700 9,733,066 Net increase (decrease) 12,142,572 (8,537,377) 3,778,614 Adjustment Market value at end of plan year $ 125,688,981 $ 113,546,409 $ 122,083,786 Cashflow Contr.-ben.-exp. (2,694,861) (2,998,437) (3,715,366) Percent of assets -2.14% -2.64% -3.04% Estimated net investment return On market value 13.21% -4.60% 6.43% On actuarial value 3.92% 2.30% 5.74% * Investment expenses have been offset against gross investment income. Page 29

30 Asset Information INVESTMENT GAIN AND LOSS Investment Gain or Loss Plan Year Ending April 30, 2017 Expected market value at end of plan year Market value at beginning of plan year $ 113,546,409 Employer contributions and non-investment income 7,469,718 Benefits and expenses paid (10,148,904) Expected investment income (at 7.50% rate of return) 8,415, ,282,734 Actual market value at end of plan year 125,688,981 less: Expected market value 119,282,734 Investment gain or (loss) $ 6,406,247 History of Gains and (Losses) Plan Year Ending April 30, Investment Gain or (Loss) 2017 $ 6,406, (14,596,624) 2015 (1,249,452) ,476, (33,488,333) Deferred Investment Gains and (Losses)* Plan Year Ending Amount of Gain or (Loss) Deferred as of April 30, April 30, $ 5,124,998 $ 3,843,748 $ 2,562,499 $ 1,281, (8,757,974) (5,838,650) (2,919,325) (499,781) (249,890) , (3,348,833) Totals $ (6,586,330) $ (2,244,792) $ (356,826) $ 1,281,249 * Gains and (Losses) for the plan years ending 2010, 2011, 2012, and 2013 have been fully recognized. Page 30

31 Asset Information RATE OF RETURN ON FUND ASSETS Historical Rates of Net Investment Return Average Rates of Net Investment Return (dollar weighted) Return on Market Value Return on Actuarial Value Period Ending April 30, Period Ending April 30, Period One year 13.21% -4.60% 3.92% 2.30% 5 years 7.71% 5.17% 5.15% 5.08% 10 years 3.85% 3.87% 4.79% 5.19% 15 years 5.03% 4.19% 4.56% 4.64% 20 years 5.18% 5.13% 5.59% 5.77% Page 31

32 PART IV: ENROLLED ACTUARY S REPORT Page 32

33 Enrolled Actuary s Report NORMAL COST/ACTUARIAL LIABILITY Normal Cost as of May 1, Active participants - service prior to valuation date $ - $ - Active participants - service after valuation date 1,445,309 1,093,507 Anticipated administrative expenses (beg. of year) 457, ,735 Total normal cost $ 1,903,140 $ 1,527,242 Unfunded Actuarial Liability as of May 1, Actuarial liability Participants currently receiving benefits $ 89,895,572 $ 88,080,806 Inactive vested participants 36,801,514 35,076,634 Active participants - service prior to val. date 47,418,406 48,350,646 Active participants - service after val. date ,115, ,508,086 less: Fund assets (actuarial value) 132,275, ,910,962 Unfunded actuarial liability (not less than 0) $ 41,840,181 $ 41,597,124 Page 33

34 Enrolled Actuary s Report ACTUARIAL LIABILITY RECONCILIATION/PROJECTION Reconciliation of Unfunded Actuarial Liability Expected unfunded actuarial liability as of April 30, 2017 Unfunded actuarial liability as of May 1, 2016 $ 41,597,124 Normal cost (including expenses) 1,527,242 Actual contributions (7,454,043) Interest to end of plan year 2,954,798 38,625,121 Increase (decrease) due to: Experience (gain) or loss 6,199,596 Plan amendment - Change in actuarial assumptions (2,984,536) Change in actuarial method - Net increase (decrease) 3,215,060 Unfunded actuarial liability as of May 1, 2017 $ 41,840,181 Projection of Actuarial Liability to Year End Actuarial liability as of May 1, 2017 $ 174,115,492 Expected increase (decrease) due to: Normal cost (excluding expenses) 1,445,309 Benefits paid (10,821,104) Interest on above (297,393) Interest on actuarial liability 13,058,662 Net expected increase (decrease) 3,385,474 Expected actuarial liability as of April 30, 2018 $ 177,500,966 Page 34

35 Enrolled Actuary s Report FUNDED RATIOS Present Value of Accumulated Benefits/ Funded Ratios Actuarial Study as of May 1, Present value of vested accumulated benefits Participants currently receiving benefits $ 89,895,572 $ 88,080,806 Inactive vested participants 36,461,964 34,666,007 Active participants 46,370,166 38,419,257 Total 172,727, ,166,070 Nonvested accumulated benefits 1,387,790 10,342,016 Present value of all accumulated benefits $ 174,115,492 $ 171,508,086 Market value of assets $ 125,688,981 $ 113,546,409 Funded ratios (Market value) Vested benefits 72.8% 70.5% All accumulated benefits 72.2% 66.2% Actuarial value of assets $ 132,275,311 $ 129,910,962 Funded ratios (Actuarial value used for PPA) Vested benefits 76.6% 80.6% All accumulated benefits 76.0% 75.7% Interest rate used to value benefits 7.50% 7.50% Page 35

36 Enrolled Actuary s Report FUNDING PERIOD The funding period is the approximate number of years that would be required to completely fund the unfunded entry age normal actuarial liability if future plan experience occurs according to the assumptions. The funding period is an indicator of the long term financial soundness of the plan. Historically, funds often targeted a maximum funding period of up to 20 years. Today, asset losses are being paid off over a maximum of 15 years and are the primary driver for ERISA minimum funding. An ultimate target of no more than 10 years is recommended. A lower, more conservative funding period target can be chosen. As the funding period drops, the risk of having future funding issues also diminishes. Funding Period Calculation Actuarial Study as of May 1, Unfunded actuarial liability Actuarial liability $ 182,994,863 $ 177,540,111 less: Fund assets (actuarial value) 132,275, ,910,962 50,719,552 47,629,149 Funds available to amortize unfunded Anticipated contributions (beg. of yr.) 6,459,424 6,165,533 less: Normal cost (including expenses) 968, ,806 $ 5,490,968 $ 5,270,727 Funding period (years) Page 36

37 Enrolled Actuary s Report CURRENT LIABILITY Current Liability as of May 1, 2017 Vested current liability Participants currently receiving benefits $ 132,961,685 Inactive vested participants 76,880,295 Active participants 103,046, ,888,690 Nonvested current liability Inactive vested participants 419,290 Active participants 1,596,647 2,015,937 Total current liability $ 314,904,627 Projection of Current Liability to Year End Current liability as of May 1, 2017 $ 314,904,627 Expected increase (decrease) due to: Benefits accruing 3,446,896 Benefits paid (10,821,104) Interest on above (59,892) Interest on current liability 9,604,591 Net expected increase (decrease) 2,170,491 Expected current liability as of April 30, 2018 $ 317,329,347 Page 37

38 Enrolled Actuary s Report FUNDING STANDARD ACCOUNT Funding Standard Account Plan Year Ending April 30, 2018 (Projected) 2017 (Final) Charges Prior year funding deficiency $ - $ - Normal cost (including expenses) 1,903,140 1,527,242 Amortization charges (see Appendix C) 12,334,613 12,565,248 Interest on above 1,067,835 1,056,939 Total charges 15,305,588 15,149,429 Credits Prior year credit balance 16,911,368 19,034,143 Employer contributions 7,250,436 7,454,043 Amortization credits (see Appendix C) 3,910,354 3,595,833 Interest on above 1,833,523 1,976,778 ERISA full funding credit - - Total credits 29,905,681 32,060,797 Credit balance (credits less charges) $ 14,600,093 $ 16,911,368 Page 38

39 Enrolled Actuary s Report FULL FUNDING LIMIT Projection of Assets for Full Funding Limit Market Value Actuarial Value Asset value as of May 1, 2017 $ 125,688,981 $ 132,275,311 Expected increase (decrease) due to: Investment income 9,003,070 9,497,044 Benefits paid (10,821,104) (10,821,104) Expenses (475,000) (475,000) Net expected increase (decrease) (2,293,034) (1,799,060) Expected value as of April 30, 2018* $ 123,395,947 $ 130,476,251 * Ignoring expected employer contributions (as required by regulation). Full Funding Limit as of April 30, 2018 For Minimum Required For Maximum Deductible ERISA full funding limit (not less than 0) Actuarial liability $ 177,500,966 $ 177,500,966 less: Assets (lesser of market or actuarial) 123,395, ,395,947 plus: Credit balance (w/interest to year end) 18,179,721 n/a 72,284,740 54,105,019 Full funding limit override (not less than 0) 90% of current liability 285,367, ,367,606 less: Assets (actuarial value) 130,476, ,476, ,891, ,891,355 Full funding limit (greater of ERISA limit and full funding override) $ 154,891,355 $ 154,891,355 Page 39

40 Enrolled Actuary s Report MINIMUM REQUIRED CONTRIBUTION AND FULL FUNDING CREDIT Minimum Required Contribution Plan Year Beginning May 1, 2017 Minimum funding cost Normal cost (including expenses) $ 1,903,140 Net amortization of unfunded liabilities 8,424,259 Interest to end of plan year 774,556 11,101,955 Full funding limit 154,891,355 Net charge to funding std. acct. (lesser of above) 11,101,955 less: Credit balance with interest to year end 18,179,721 Minimum Required Contribution (not less than 0) $ - Full Funding Credit to Funding Standard Account Plan Year Ending April 30, 2018 Full funding credit (not less than 0) Minimum funding cost (n.c., amort., int.) $ 11,101,955 less: full funding limit 154,891,355 $ - Page 40

41 Enrolled Actuary s Report MAXIMUM DEDUCTIBLE CONTRIBUTION The maximum amount of tax-deductible employer contributions made to a pension plan is determined in accordance with Section 404(a) of the Internal Revenue Code. For a multiemployer pension plan, Section 413(b)(7) of the Internal Revenue Code and IRS Announcement 98-1 provide that, if anticipated employer contributions are less than the deductible limit for a plan year, then all employer contributions paid during the year are guaranteed to be deductible. If anticipated employer contributions exceed the deductible limit, the Trustees have two years from the close of the plan year in question to retroactively improve benefits to alleviate the problem. Maximum Deductible Contribution Plan Year Beginning May 1, 2017 Preliminary deductible limit Normal cost (including expenses) $ 1,903, year limit adjustment (using fresh start alternative) 5,670,256 Interest to end of plan year 568,005 8,141,401 Full funding limit 154,891,355 Maximum deductible contribution override 140% of vested current liability projected to April 30, ,063,401 less: Actuarial value of assets projected to April 30, ,476, ,587,150 Maximum deductible contribution* $ 310,587,150 Anticipated employer contributions $ 6,701,652 * Equals the lesser of the preliminary deductible limit and the full funding limit, but not less than the maximum deductible contribution override. Page 41

42 Enrolled Actuary s Report HISTORY OF UNFUNDED VESTED BENEFITS Presumptive Method April 30, Vested Benefits Interest Rate Value of Vested Benefits Asset Value* Unfunded Vested Benefits Unamortized Portion of VAB % 32,516,497 45,737,946 (13,221,449) % 39,216,582 56,716,773 (17,500,191) % 53,006,294 63,518,634 (10,512,340) % 63,465,458 71,101,037 (7,635,579) % 68,812,988 78,758,188 (9,945,200) % 80,046,791 82,740,131 (2,693,340) % 91,953,220 86,370,484 5,582, % 100,923,177 91,852,498 9,070, % 105,725,681 98,513,962 7,211, % 123,972, ,046,333 16,925, % 132,700, ,030,161 18,670, % 141,096,354 98,148,304 42,948, % 136,551, ,803,080 22,748,788 2,932, % 141,124, ,976,705 22,147,572 2,820, % 148,417, ,570,176 28,847,022 2,699, % 152,340, ,192,184 30,148,791 3,515, % 150,997, ,494,874 24,502,384 8,448, % 154,728, ,942,902 24,786,079 8,064, % 161,166, ,910,962 31,255,108 7,650, % 172,727, ,275,311 40,452,391 7,206,575 * Actuarial value effective in 1997; contract value of assets held by insurance company plus market value of other assets prior to Records indicate the UVBs for the period are all negative. Therefore, there will generally be no Employer Withdrawal Liability for any employer who withdraws prior to May 1, However, this analysis does not recognize the possibility of a plan merged into the BAC Plan with positive UVBs on a pre-merger basis Page 42

43 Enrolled Actuary s Report TERMINATION BY MASS WITHDRAWAL If all employers were to cease to have an obligation to contribute to the plan, the plan would be considered terminated due to mass withdrawal. In this event, the Trustees would have the option of distributing plan assets in satisfaction of all plan liabilities through the purchase of annuities from insurance carriers or payment of lump sums. If assets are insufficient to cover liabilities, a special actuarial valuation pursuant to Section 4281 of ERISA would be performed as of the end of the plan year in which the mass withdrawal occurred. If the Section 4281 valuation indicates the value of nonforfeitable benefits exceeds the value of plan assets, employer withdrawal liability would be assessed. The ERISA Section 4281 valuation described above uses required actuarial assumptions that are typically more conservative than those used for valuing an on-going plan. In order to illustrate the impact of the mass withdrawal assumptions, we performed an illustrative Section 4281 valuation as if mass withdrawal had occurred during the prior plan year. The value of assets used below is market value without any adjustments for outstanding employer withdrawal liability claims. As required by regulation, interest rates of 2.15% for the first 20 years and 2.60% for each year thereafter and the GAM 94 Basic Table projected to 2027 mortality table were used. Illustrative Section 4281 Valuation as of April 30, 2017 Value of nonforfeitable benefits Participants currently receiving benefits $ 148,440,978 Inactive vested participants 90,276,921 Active participants 125,944,588 Expenses (per Section 4281 of ERISA) 2,162, ,825,038 less: Fund assets (market value) 125,688,981 Value of nonforfeitable benefits in excess of (less than) fund assets $ 241,136,057 Page 43

44 Enrolled Actuary s Report ASC 960 INFORMATION The following displays are intended to assist the fund s auditor in complying with Accounting Standards Codification 960. The results shown are not necessarily indicative of the plan s potential liability upon termination. Present Value of Accumulated Benefits Actuarial Study as of May 1, Present value of vested accumulated benefits Participants currently receiving benefits $ 89,895,572 $ 88,080,806 Other participants 82,832,130 73,085, ,727, ,166,070 Nonvested accumulated benefits 1,387,790 10,342,016 Present value of all accumulated benefits $ 174,115,492 $ 171,508,086 Market value of plan assets $ 125,688,981 $ 113,546,409 Interest rate used to value benefits 7.50% 7.50% Changes in Present Value of Accumulated Benefits Present value of accumulated benefits as of May 1, 2016 $ 171,508,086 Increase (decrease) due to: Plan amendment - Change in actuarial assumptions (2,984,536) Benefits accumulated and experience gain or loss 2,407,284 Interest due to decrease in discount period 12,863,106 Benefits paid (9,678,448) Net increase (decrease) 2,607,406 Present value of accumulated benefits as of May 1, 2017 $ 174,115,492 Page 44

45 APPENDICES

46 Appendix A - Plan Provisions PLAN HISTORY Chapter Entered BAC Prior Plan Total Contribution Rate * 31 Lansing Bricklayer Yes $ 9.26 (08/2016) 7-Saginaw Bricklayer Cement Finisher 40-Traverse City Bricklayer/Plasterer Cement Finisher Yes Yes $ 8.28 $ 8.03 (08/2016) (08/2016) No No $ 7.11 $ 7.31 (08/2016) (08/2016) 17-Kalamazoo Yes $ 7.72 (08/2016) 1-Grand Rapids/ Muskegon Bricklayer Cement Finisher (GR) (M) Yes Yes $ 5.29 $ 5.45 (08/2016) (08/2016) 6 Escanaba No $ 9.47 (05/2016) 3 Adrian No $ 9.12 (08/2016) 12 Flint Yes $ 9.54 (08/2016) 14(15) Ann Arbor Yes $ (08/2016) 9 BAC Refractory $ 6.27 (05/2016) * Includes non-credited contribution rates. In general, the following non-credited contribution rate increases have been made since 2009: Eff. Date Non-Credited Increase 1/1/ /hour 10/1/ /hour 8/1/ /hour 8/1/ /hour 8/1/2013 $1.14/hour % of 7/31/2013 rate % of 7/31/2013 rate % of 7/31/2013 rate % of 7/31/2013 rate Page A-1

47 Appendix A - Plan Provisions SUMMARY OF PLAN PROVISIONS Plan year The 12-month period beginning May 1 and ending April 30. Effective date Construction Masons 31 Pension Plan May 1, 1965 Saginaw Valley Bricklayers Pension Plan May 1, 1970 May 1, 1989 Participation Vesting service Break in service Benefit accrual Normal retirement benefit Eligibility 600 hours of work in a 12-month period. ½ credit for Plan Years with hours of work. 1 credit for Plan Years with 600 or more hours of work. Plan Year with less than 300 hours. No accrual for Plan Years with less than 300 hours of work. Half accrual for Plan Years with hours of work. Full accrual for Plan Years with 600 or more hours of work. Age 65 or 5 th anniversary of participation, if later. Monthly amount Period Monthly Amount Prior to 4/30/ % of contributions 5/1/2004 through 4/30/2006 5/1/2006 through 12/31/2008 1/1/2009 through 9/30/ /1/2009 through 9/30/ % of contributions 2.00% of contributions 2.00% of credited contributions Accruals frozen 10/1/2011 and later 1.00% of credited contributions 8/1/2017 and later 1.00% of credited contributions plus an extra 1.00% on any money contributed above the rate required by the FIP Page A-2

48 Appendix A - Plan Provisions SUMMARY OF PLAN PROVISIONS (CONT.) Monthly amount Early retirement benefit Eligibility Monthly amount Amount from previous page plus benefits accrued under merged plans (with applicable increases), if any. Payable for life. Age 56, 10 years of service. Normal reduced by ½ of 1% for each month under age 63. Benefits accrued prior to 5/1/93 under Zone 17 Plan are reduced from age 62. Benefits for disabled participants receive the same reduction as actives. Benefits for inactive participants are actuarially reduced from age 65. Reduction is calculated from age 60 if 30 or more years of service. Eligibility Monthly amount Total and permanent disability benefit Eligibility Monthly amount Eligibility Monthly amount Grandfathered exception: At least age 56 with 25 years of service as of November 1, Normal reduced by ½ of 1% for each month under age 58. Disabled from working in any capacity at the trade while active participant, 10 years of service. Greater of $100 or Pre-Merger accrued benefit payable until the earlier of age 63, recovery or death. Eligible for normal retirement benefit at age 63. Disabled from working in any capacity at the trade while active participant, 5 to 9 years of service. Greater of total contributions or equivalent of vested benefit, payable as single sum; or vested benefit at age 65, payable for life. Page A-3

49 Appendix A - Plan Provisions SUMMARY OF PLAN PROVISIONS (CONT.) Total and permanent disability benefit (Cont.) Eligibility Monthly amount Vested benefit Eligibility Monthly amount Optional forms of payment Pre-retirement period certain death benefit Eligibility Disabled while active participant, less than 5 years of service. Total contributions, payable as single sum. 5 years of service, termination of employment. Deferred normal or early with full actuarial reduction for each month under age 65, if eligible. Payable for life. Joint and 50% survivor Joint and 2/3 survivor Joint and 75% survivor Joint and 100% survivor Life with 5 years certain Life with 10 years certain Life with 15 years certain Death of married participant before eligible for normal or early with 10 years of service. Monthly amount 50% of normal at 10 years of service grading up to 100% of normal at 15 years of service. Payable for 60 monthly payments to surviving spouse. Spouse may elect in lieu of survivor form. Pre-retirement deferred surviving spouse benefit Eligibility Monthly amount Death of vested, married participant. 50% of participant s qualified joint and 50% survivor payable to spouse over spouse s lifetime commencing at participant s earliest retirement date. Page A-4

50 Appendix A - Plan Provisions SUMMARY OF PLAN PROVISIONS (CONT.) Pre-retirement single sum death benefit Eligibility Death of active participant or former participant. Lump sum amount Total contributions made on participant s behalf, maximum $3,000. Single sum payment to beneficiary. Page A-5

51 Appendix A - Plan Provisions HISTORICAL PLAN MODIFICATIONS Vested benefit Effective date May 1, 1998 Adoption date December 3, 1997 Provisions Vesting schedule was changed from graded for 5-10 years of service to 100% at 5 years of service. Addition of Local 14 (Ann Arbor) Effective date September 1, 1998 Notice to PBGC date June 19, 1998 Provisions Participants in the Trowel Trades Local No. 14 (Ann Arbor) Pension Plan are merged with the BAC Plan. Early retirement benefit Effective date May 1, 1999 Adoption date December 1, 1998 Provisions Active Participant may receive his BAC and Local 14 (Ann Arbor) benefits unreduced at age 58 with 25 years of service. Normal retirement benefit Effective date May 1, 1999 Adoption date December 1, 1998 Provisions Multiplier increase from 3.75% to 3.80%. Retiree increase Effective date May 1, 1999 Adoption date December 1, 1998 Provisions All benefits in pay status prior to May 1, 1999 except flat $100 per month disability benefit increased 5%. Page A-6

52 Appendix A - Plan Provisions HISTORICAL PLAN MODIFICATIONS (CONT.) Early retirement benefit Effective date May 1, 1999 Adoption date December 7, 1999 Provisions Active Participant may receive his BAC and any premerger benefits unreduced at age 58 with 25 years of service. Pre-merger benefits Effective date May 1, 1999 Adoption date December 7, 1999 Provisions All pre-merger plan benefits were increased by %. Early retirement age Effective date May 1, 1999 Adoption date December 7, 1999 Provisions The age requirement for early retirement was reduced from 60 to 56. Definition of disability Effective date May 9, 2000 Adoption date May 9, 2000 Provisions Condition for qualifying for total and permanent disability was changed from gainful employment to working in any capacity at the trade. Normal retirement benefit Effective date May 1, 2004 Adoption date September 10, 2003 Provisions Multiplier decreased from 3.80% to 2.60% for contributions made on or after May 1, Page A-7