CITY OF PINELLAS PARK FIREFIGHTERS PENSION FUND ACTUARIAL VALUATION AS OF OCTOBER 1, 2016

Transcription

1 CITY OF PINELLAS PARK FIREFIGHTERS PENSION FUND ACTUARIAL VALUATION AS OF OCTOBER 1, 2016 CONTRIBUTIONS APPLICABLE TO THE PLAN/ FISCAL YEAR ENDED SEPTEMBER 30, 2018

2 January 30, 2017 Board of Trustees City of Pinellas Park Firefighters Pension Board P. O. Box 1100 Pinellas Park, FL Re: City of Pinellas Park Firefighters Pension Fund Dear Board: We are pleased to present to the Board this report of the annual actuarial valuation of the City of Pinellas Park Firefighters Pension Fund. The valuation was performed to determine whether the assets and contributions are sufficient to provide the prescribed benefits and to develop the appropriate funding requirements for the applicable plan year. Please note that this valuation may not be applicable for any other purposes. The valuation has been conducted in accordance with generally accepted actuarial principles and practices, including the applicable Actuarial Standards of Practice as issued by the Actuarial Standards Board, and reflects laws and regulations issued to date pursuant to the provisions of Chapters 112, and 175, Florida Statutes, as well as applicable federal laws and regulations. In our opinion, the assumptions used in this valuation, as adopted by the Board of Trustees, represent reasonable expectations of anticipated plan experience. Future actuarial measurements may differ significantly from the current measurements presented in this report for a variety of reasons including: changes in applicable laws, changes in plan provisions, changes in assumptions, or plan experience differing from expectations. In conducting the valuation, we have relied on personnel, plan design, and asset information supplied by the City of Pinellas Park and the Board of Trustees, financial reports prepared by the custodian bank, and the actuarial assumptions and methods described in the Actuarial Assumptions section of this report. While we cannot verify the accuracy of all this information, the supplied information was reviewed for consistency and reasonableness. As a result of this review, we have no reason to doubt the substantial accuracy of the information and believe that it has produced appropriate results. This information, along with any adjustments or modifications, is summarized in various sections of this report Parker Commons Blvd., Suite 104 Fort Myers, FL (239) Fax (239)

3 The undersigned is familiar with the immediate and long-term aspects of pension valuations, and meets the Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinions contained herein. All of the sections of this report are considered an integral part of the actuarial opinions. To our knowledge, no associate of Foster & Foster, Inc. working on valuations of the program has any direct financial interest or indirect material interest in the City of Pinellas Park, nor does anyone at Foster & Foster, Inc. act as a member of the Board of Trustees of the City of Pinellas Park Firefighters Pension Fund. Thus, there is no relationship existing that might affect our capacity to prepare and certify this actuarial report. If there are any questions, concerns, or comments about any of the items contained in this report, please contact me at Respectfully submitted, Foster & Foster, Inc. By: Patrick T. Donlan, MAAA, ASA Enrolled Actuary # PTD\tb Enclosures

4 TABLE OF CONTENTS Section Title Page I Introduction a. Summary of Report 5 b. Changes Since Prior Valuation 7 c. Comparative Summary of Principal Valuation Results 8 II Valuation Information a. Reconciliation of Unfunded Actuarial Accrued Liabilities 14 b. Detailed Actuarial (Gain)/Loss Analysis 17 c. Actuarial Assumptions and Methods 18 d. Valuation Notes 20 e. Partial History of Premium Tax Refunds 21 f. Share Account Activity 22 III Trust Fund 23 IV Member Statistics a. Statistical Data 29 b. Age and Service Distribution 30 c. Valuation Participant Reconciliation 31 V Summary of Current Plan 32 VI Governmental Accounting Standards 35 Board Disclosure Information City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 4

5 SUMMARY OF REPORT The regular annual actuarial valuation of the City of Pinellas Park Firefighters Pension Fund, performed as of October 1, 2016, has been completed and the results are presented in this Report. The contribution amounts set forth herein are applicable to the plan/fiscal year ended September 30, The contribution requirements, compared with those developed in the October 1, 2015 actuarial valuation report, are as follows: Valuation Date 10/1/ /1/2015 Applicable Fiscal Year 9/30/2018 9/30/2017 Total Required Contribution $3,220,335 $2,960,545 Expected Member Contributions $434,305 $408,832 Required City and State Contr. $2,786,030 $2,551,713 Applicable State Contribution ¹ $229,066 $229,066 Balance From City ² $2,556,964 $2,322,647 ¹ Frozen per traditional interpretation of 99-1, Florida Statutes. ² Please note that the City needs to make an additional one-time deposit of $50, as a result of a shortfall in fiscal 2016, as shown on Page 28. This is in addition to the amounts shown above. Overall there was net favorable actuarial experience during the past year. The primary components of favorable experience included a 10.61% investment return (Actuarial Asset basis) that exceeded the assumed rate, average increases in pensionable earnings that were less than the assumed rate and the granting of Cost-of-Living Adjustments for some Retirees of less than the 3.0% assumed rate because CPI increase was lower than 3.0%. These gains were partially offset by the effect of less than expected inactive mortality. City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 5

6 The balance of this Report presents additional details of the actuarial valuation and the general operation of the Fund. The undersigned would be pleased to meet with the Board of Trustees in order to discuss the Report and any pending questions concerning its contents. Respectfully submitted, FOSTER & FOSTER, INC. By: Patrick T. Donlan, ASA, EA, MAAA City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 6

7 CHANGES SINCE PRIOR VALUATION Plan Changes There have been no plan changes since the prior valuation. Actuarial Assumption/Method Changes As a result of Chapter , Laws of Florida, the assumed rates of mortality were changed from the RP-2000 Combined Healthy Table to the assumptions used by the Florida Retirement System for special risk employees in their July 1, 2015 valuation report.. City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 7

8 COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS A. Participant Data New Assump Old Assump 10/1/ /1/ /1/2015 Actives Service Retirees DROP Retirees Beneficiaries Disability Retirees Terminated Vested Total Total Annual Payroll $4,552,464 $4,552,464 $4,285,450 Payroll Under Assumed Ret. Age 4,552,464 4,552,464 4,285,450 Annual Rate of Payments to: Service Retirees 2,650,847 2,650,847 2,598,684 DROP Retirees 384, , ,803 Beneficiaries 162, , ,956 Disability Retirees 226, , ,184 Terminated Vested 40,182 40,182 40,182 B. Assets Actuarial Value (AVA) ¹ 54,845,249 54,845,249 49,843,911 Market Value (MVA) ¹ 54,954,227 54,954,227 50,709,147 C. Liabilities Present Value of Benefits Actives Retirement Benefits 30,211,920 29,464,929 27,113,226 Disability Benefits 1,684,706 1,839,624 1,845,230 Death Benefits 1,222, , ,995 Vested Benefits Refund of Contributions 70,394 70,713 67,908 Service Retirees 37,716,483 35,186,260 35,293,221 DROP Retirees¹ 7,217,548 6,965,574 6,888,831 Beneficiaries 1,982,483 1,780,864 1,714,917 Disability Retirees 3,172,622 3,044,323 3,066,559 Terminated Vested 453, , ,455 Share Balances 1,616,320 1,616,320 1,420,850 Total 85,348,554 80,918,506 78,361,192 City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 8

9 New Assump Old Assump C. Liabilities - (Continued) 10/1/ /1/ /1/2015 Present Value of Future Salaries 42,948,898 43,491,158 42,604,387 Present Value of Future Member Contributions 3,865,401 3,914,204 3,834,395 Normal Cost (Retirement) 1,226,637 1,201,466 1,125,165 Normal Cost (Disability) 108, , ,072 Normal Cost (Death) 76,962 31,457 29,401 Normal Cost (Vesting) Normal Cost (Refunds) 10,927 10,949 10,828 Total Normal Cost 1,422,961 1,362,981 1,278,466 Present Value of Future Normal Costs 13,470,571 13,022,860 12,713,605 Accrued Liability (Retirement) 18,526,939 17,929,935 15,902,797 Accrued Liability (Disability) 658, , ,683 Accrued Liability (Death) 519, , ,081 Accrued Liability (Vesting) Accrued Liability (Refunds) 13,597 13,605 14,193 Accrued Liability (Inactives) ¹ 50,542,897 47,414,041 47,406,983 Share Balances 1,616,320 1,616,320 1,420,850 Total Actuarial Accrued Liability (AL) 71,877,983 67,895,646 65,647,587 Unfunded Actuarial Accrued Liability (UAAL) 17,032,734 13,050,397 15,803,676 Funded Ratio (AVA / AL) 76.3% 80.8% 75.9% City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 9

10 D. Actuarial Present Value of New Assump Old Assump Accrued Benefits 10/1/ /1/ /1/2015 Vested Accrued Benefits Inactives ¹ 50,542,897 47,414,041 47,406,983 Share Balances 1,616,320 1,616,320 1,420,850 Actives 8,753,180 8,329,680 6,658,088 Member Contributions 2,956,713 2,956,713 2,664,347 Total 63,869,110 60,316,754 58,150,268 Non-vested Accrued Benefits 2,337,894 2,040,550 2,145,122 Total Present Value Accrued Benefits (PVAB) 66,207,004 62,357,304 60,295,390 Funded Ratio (MVA / PVAB) 83.0% 88.1% 84.1% Increase (Decrease) in Present Value of Accrued Benefits Attributable to: Plan Amendments 0 0 Assumption Changes 3,849,700 0 New Accrued Benefits 0 1,129,256 Benefits Paid 0 (3,318,463) Interest 0 4,251,121 Other 0 0 Total 3,849,700 2,061,914 City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 10

11 New Assump Old Assump Valuation Date 10/1/ /1/ /1/2015 Applicable to Fiscal Year Ending 9/30/2018 9/30/2018 9/30/2017 E. Pension Cost Normal Cost ² $1,508,339 $1,444,760 $1,355,174 Administrative Expenses ² 49,547 49,547 52,750 Payment Required to Amortize Unfunded Actuarial Accrued Liability over 30 years (as of 10/1/2016) ² 1,662,449 1,337,264 1,552,621 Total Required Contribution 3,220,335 2,831,571 2,960,545 Expected Member Contributions ² 434, , ,832 Expected City and State Contribution 2,786,030 2,397,266 2,551,713 F. Past Contributions Plan Years Ending: 9/30/2016 City and State Requirement 2,568,880 Actual Contributions Made: City 2,339,814 State 229,066 ³ Total 2,954,537 G. Net Actuarial (Gain)/Loss (2,173,061) ¹ The asset values and liabilities for DROP Members include accumulated DROP Balances as of 9/30/2016 and 9/30/2015. The asset values also include the accumulated Share Balances at each valuation date. ² Contributions developed have been adjusted to account for assumed salary increases. An October 1st deposit is assumed. ³ Reflects traditional interpretation of Chapter 99-1, Florida Statutes. City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 11

12 H. Schedule Illustrating the Amortization of the Total Unfunded Actuarial Accrued Liability as of: Year Projected Unfunded Actuarial Accrued Liability ,032, ,585, ,185, ,267, ,045, ,213, I. (i) 3 Year Comparison of Actual and Assumed Salary Increases Actual Assumed Year Ended 9/30/ % 6.00% Year Ended 9/30/ % 6.00% Year Ended 9/30/ % 6.00% (ii) 3 Year Comparison of Investment Return on Actuarial Value Actual Assumed Year Ended 9/30/ % 7.25% Year Ended 9/30/ % 7.25% Year Ended 9/30/ % 7.75% (iii) Average Annual Payroll Growth (a) Payroll as of: 10/1/2016 $4,552,464 10/1/2006 5,119,020 (b) Total Increase % (c) Number of Years (d) Average Annual Rate -1.17% City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 12

13 STATEMENT BY ENROLLED ACTUARY This actuarial valuation was prepared and completed by me or under my direct supervision, and I acknowledge responsibility for the results. To the best of my knowledge, the results are complete and accurate, and in my opinion, the techniques and assumptions used are reasonable and meet the requirements and intent of Part VII, Chapter 112, Florida Statutes. There is no benefit or expense to be provided by the plan and/or paid from the plan's assets for which liabilities or current costs have not been established or otherwise taken into account in the valuation. All known events or trends which may require a material increase in plan costs or required contribution rates have been taken into account in the valuation. Patrick T. Donlan, EA, ASA, MAAA Enrolled Actuary # Please let us know when the report is approved by the Board and unless otherwise directed we will provide copies of the report to the following offices to comply with Chapter 112 Florida Statutes: Mr. Keith Brinkman Bureau of Local Retirement Systems Post Office Box 9000 Tallahassee, FL Ms. Sarah Carr Municipal Police and Fire Pension Trust Funds Division of Retirement Post Office Box 3010 Tallahassee, FL City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 13

14 RECONCILIATION OF UNFUNDED ACTUARIAL ACCRUED LIABILITIES (1) Unfunded Actuarial Accrued Liability as of October 1, 2015 $15,803,676 (2) Sponsor Normal Cost developed as of October 1, ,776 (3) Expected administrative expenses for the year ended September 30, ,764 (4) Expected interest on (1), (2) and (3) 1,212,297 (5) Sponsor contributions to the System during the year ended September 30, ,568,880 (6) Expected interest on (5) 166,175 (7) Expected Unfunded Actuarial Accrued Liability as of September 30, 2016 (1)+(2)+(3)+(4)-(5)-(6) 15,223,458 (8) Change to UAAL due to Assumption Change 3,982,337 (9) Change to UAAL due to Actuarial (Gain)/Loss (2,173,061) (10) Unfunded Actuarial Accrued Liability as of October 1, ,032,734 Type of Date Years 10/1/2016 Amortization Base Established Remaining Amount Amount E 1/1/ ,473 74,473 F 1/1/ (1,095,877) (172,780) G 1/1/ ,903 5,030 H 1/1/ ,515 46,802 I 1/1/ ,514, ,714 J 1/1/ (44,487) (5,601) Benefit Change (1) 1/1/ ,286 4,332 Assum Change (2) 10/1/ (1,688,512) (182,730) Benefit Change (3) 10/1/ ,789, ,708 Benefit Change (4) 10/1/ ,012 13,417 Method Change (5) 10/1/ (390,362) (39,170) Prior Gains (6) 10/1/ (390,071) (39,141) Loss 10/1/ ,788, ,802 Benefit Change (7) 10/1/ ,443, ,560 Loss 10/1/ ,328, ,764 Assum Change (8) 10/1/ (405,588) (34,901) Benefit Change (9) 10/1/ (38,809) (3,567) Loss 10/1/ ,050, ,479 City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 14

15 Type of Date Years 10/1/2016 Amortization Base Established Remaining Amount Amount Loss 10/1/ ,265 81,767 Gain 10/1/ (1,216,571) (106,799) Loss 10/1/ ,577, ,732 Benefit Change (10) 10/1/ ,353 10,873 Loss 10/1/ ,756, ,894 Loss 10/1/ ,871 54,910 Assum Change (11) 10/1/ ,032,200 85,763 Benefit Change (12) 10/1/ (1,762,833) (146,469) Loss 10/1/ ,443, ,092 Loss 10/1/ ,179,355 95,142 Assum Change (13) 10/1/ ,452, ,189 Gain 10/1/ (354,197) (28,205) Software Change (14) 10/1/ (1,657,157) (131,962) Gain 10/1/ (2,034,510) (160,085) Assum Change (15) 10/1/ ,137, ,852 Gain 10/1/ (512,893) (39,914) Gain 10/1/ (2,173,061) (167,401) Assum Change (16) 10/1/ ,982, ,778 17,032,734 1,568,348 City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 15

16 (1) Added DROP Plan (2) Increased investment return assumption from 7.5% to 8.0% (3) Increased Benefit Rate for future service to 3.25% (4) Included Fire Inspectors in Plan (5)(6) Changed From FIL to Entry Age Normal Funding Method. It is assumed that 50% of the cost method change base from 2002 was attributable to favorable actuarial experience prior to that date. (7) Adopted Chapter 175 Minimums plus extended period to which 2.5% applies and increased member contribution rate. (8) Hurricane-related pay issue and payroll growth assumption change (9) Member contribution rate changed from 6.73% to 6.22% (10) Member contribution rate changed from 6.22% to 9.00% and adopted a Share Program. (11) Amended assumed mortality rates from the 1983 GAM Table to the RP2000 Table. (12) Amended COLA for future retirees to be a fixed 2.0% beginning at age 65. Also Implemented Senate Bill 1128 limits on overtime and lump sum sick and vacation payouts. Also amended benefit accrual rate for service after December 28, 2011 from 3.25% to 3.0%. (13) Lowered investment return assumption from 8.0% to 7.75% net of fees. (14) Changed software platform to ProVal. (15) Lowered investment return assumption from 7.75% to 7.25% net of fees. (16) Changed mortality assumption to match that of FRS for City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 16

17 DETAILED ACTUARIAL (GAIN)/LOSS ANALYSIS (1) Unfunded Actuarial Accrued Liability (UAAL) as of October 1, 2015 $15,803,676 (2) Expected UAAL as of October 1, ,223,458 (3) Summary of Actuarial (Gain)/Loss, by component: Investment Return (Actuarial Asset Basis) (1,670,720) Salary Increases (300,589) Active Decrements (77,140) Inactive Mortality 313,483 CPI COLA less than 3.0% (516,170) Other 78,075 Increase in UAAL due to (Gain)/Loss (2,173,061) Assumption Changes 3,982,337 (4) Actual UAAL as of October 1, 2016 $17,032,734 City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 17

18 ACTUARIAL ASSUMPTIONS AND METHODS Mortality Rate Healthy Lives: Female: RP2000 Generational, 100% Annuitant White Collar, Scale BB Male: RP2000 Generational, 10% Annuitant White Collar / 90% Annuitant Blue Collar, Scale BB Disabled Lives: Female: 60% RP2000 Disabled Female set forward two years / 40% Annuitant White Collar with no setback, no projection scale Male: 60% RP2000 Disabled Male setback four years / 40% Annuitant White Collar with no setback, no projection scale It is assumed that 75% of deaths are duty related. The above assumption rates were mandated by Chapter , Laws of Florida. This law mandates the use of the assumptions used in either of the two most recent valuations of the Florida Retirement System (FRS). The above rates are those outlined in Milliman s July 1, 2015 FRS valuation report for special risk employees. We feel this assumption sufficiently accommodates future mortality improvements. (Previously RP 2000 (Sex Distinct) - no projection - Disabled lives set forward 5 years). Interest Rate 7.25% per year compounded annually, net of investment related expenses. This is supported by the target asset allocation of the trust and the expected long-term return by asset class. Retirement Age One year after the earlier of 1) Age 55 and the completion of 10 years of service, or 2) the completion of 25 years of service, regardless of age. Also, any member who has reached the above criteria is assumed to continue employment for one additional year. We believe this assumption is reasonable given the plan provisions. Disability Rate Termination Rate See table below (1205). These rates are consistent with other Firefighter plans in the State. See table below (1301). These rates are consistent with other Firefighter plans in the State. City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 18

19 Salary Increases Early Retirement Cost-of-Living Adjustment 6.0% per year until the assumed retirement age; see table below. Projected salary in the year of retirement is individually projected based upon current accruals of sick and vacation time. This assumption is consistent with other Firefighter plans in the State. Commencing at eligibility for Early Retirement, members are assumed to retire with an immediate benefit at the rate of 1% per year. Members eligible for Normal Retirement 12/27/11: 3% per year beginning at the first October 1st following age 65 (immediate if service > 25 years or line of duty death or disability). All others: 2.0% per year beginning at the first October 1 st following the earlier of age 65 or 5 years after commencement of benefits. Administrative Expenses Payroll Growth Funding Method Asset Valuation Method $46,742 annually, based on the prior year s expense. None. Entry Age Normal Actuarial Cost Method. Each year, the prior Actuarial Value of Assets is brought forward utilizing the historical geometric 5-year average Market Value return. It is possible that over time this technique will produce an insignificant bias above or below Market Value. % Becoming Disabled % Terminating Current Salary as % of Age During the Year During the Year Salary at Age % 3.0% 17.4% City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 19

20 VALUATION NOTES Total Annual Payroll is the projected annual rate of pay for the fiscal year following the valuation date of all covered Members. Present Value of Benefits is the single sum value on the valuation date of all future benefits to be paid to current Members, Retirees, Beneficiaries, Disability Retirees and Vested Terminations. Total Required Contribution is equal to the Normal Cost plus an amount sufficient to amortize the Unfunded Accrued Liability over no more than 30 years. The required amount is adjusted for interest according to the timing of contributions during the year. Entry Age Normal Cost Method - Under this method, the normal cost is the sum of the individual normal costs for all active participants. For an active participant, the normal cost is the participant s normal cost accrual rate, multiplied by the participant s current compensation. (a) The normal cost accrual rate equals (i) the present value of future benefits for the participant, determined as of the participant s entry age, divided by (ii) the present value of the compensation expected to be paid to the participant for each year of the participant s anticipated future service, determined as of the participant s entry age. (b) In calculating the present value of future compensation, the salary scale is applied both retrospectively and prospectively to estimate compensation in years prior to and subsequent to the valuation year based on the compensation used for the valuation. (c) The accrued liability is the sum of the individual accrued liabilities for all participants and beneficiaries. A participant s accrued liability equals the present value, at the participant s attained age, of future benefits less the present value at the participant s attained age of the individual normal costs payable in the future. A beneficiary s accrued liability equals the present value, at the beneficiary s attained age, of future benefits. The unfunded accrued liability equals the total accrued liability less the actuarial value of assets. (d) Under this method, the entry age used for each active participant is the participant s age at the time he or she would have commenced participation if the plan had always been in existence under current terms, or the age as of which he or she first earns service credits for purposes of benefit accrual under the current terms of the plan. City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 20

21 PARTIAL HISTORY OF PREMIUM TAX REFUNDS Received During Increase from Fiscal Year Amount Previous Year , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 21

22 SHARE ACCOUNT ACTIVITY September 30, 2015 to September 30, /30/2015 Balance 1,420, Plus Additions 136, Investment Return Earned 138, Less Expenses (1,500.00) Less Distributions (77,375.66) 09/30/2016 Balance 1,616, City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 22

23 STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2016 ASSETS COST VALUE MARKET VALUE Cash and Cash Equivalents: Short Term Investments 2,326, ,326, Total Cash and Equivalents 2,326, ,326, Receivables: Additional City Contributions 50, , Investment Income 71, , Total Receivable 122, , Investments: U. S. Bonds and Bills 2,306, ,378, Federal Agency Guaranteed Securities 4,608, ,767, Corporate Bonds 4,784, ,820, Municipal Obligations 99, , Stocks 10,637, ,318, Mutual Funds: Fixed Income 3,463, ,194, Equity 14,067, ,951, Pooled/Common/Commingled Funds: Hedge Fund 2,900, ,746, Real Estate 1,823, ,225, Total Investments 44,690, ,505, Total Assets 47,138, ,954, LIABILITIES Total Liabilities NET POSITION RESTRICTED FOR PENSIONS 47,138, ,954, City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 23

24 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2016 Market Value Basis ADDITIONS Contributions: Member 385, City 2,339, State 365, Total Contributions 3,090, Investment Income: Net Realized Gain (Loss) 911, Unrealized Gain (Loss) 2,698, Net Increase in Fair Value of Investments 3,609, Interest & Dividends 1,089, Less Investment Expense¹ (179,721.06) Net Investment Income 4,519, Total Additions 7,610, DEDUCTIONS Distributions to Members: Benefit Payments 3,013, Lump Sum DROP Distributions 177, Lump Sum Share Distributions 77, Refunds of Member Contributions 49, Total Distributions 3,318, Administrative Expense 46, Total Deductions 3,365, Net Increase in Net Position 4,245, NET POSITION RESTRICTED FOR PENSIONS Beginning of the Year 50,709, End of the Year 54,954, ¹Investment related expenses include investment advisory, custodial and performance monitoring fees. City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 24

25 ACTUARIAL ASSET VALUATION SEPTEMBER 30, 2016 Actuarial Assets for funding purposes are developed by increasing the Actuarial Assets used in the most recent actuarial valuation of the Fund by the average annual market value rate of return (net of investment related expenses) for the past five years. Actuarial Assets shall not be less than 80% nor greater than 120% of Market Value of Assets. Details of the derivation are set forth as follows: Plan Year End Rate of Return¹ 09/30/ % 09/30/ % 09/30/ % 09/30/ % 09/30/ % Annualized Rate of Return for prior five (5) years: 10.61% (A) 10/01/2015 Actuarial Assets: $49,843, (I) Net Investment Income: 1. Interest and Dividends 1,089, Realized Gains (Losses) 911, Change in Actuarial Value 3,454, Investment Related Expenses (179,721.06) Total 5,275, (B) 10/01/2016 Actuarial Assets: $54,845, Actuarial Asset Rate of Return = 2I/(A+B-I): 10.61% 10/01/2016 Limited Actuarial Assets: $54,845, /01/2016 Market Value of Assets: $54,954, Actuarial Gain/(Loss) due to Investment Return (Actuarial Asset Basis) $1,670, ¹Market Value Basis, net of investment related expenses. City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 25

26 CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS SEPTEMBER 30, 2016 Actuarial Asset Basis REVENUES Contributions: Member 385, City 2,339, State 365, Total Contributions 3,090, Earnings from Investments: Interest & Dividends 1,089, Net Realized Gain (Loss) 911, Change in Actuarial Value 3,454, Total Earnings and Investment Gains 5,455, EXPENDITURES Distributions to Members: Benefit Payments 3,013, Lump Sum DROP Distributions 177, Lump Sum Share Distributions 77, Refunds of Member Contributions 49, Total Distributions 3,318, Expenses: Investment related¹ 179, Administrative 46, Total Expenses 226, Change in Net Assets for the Year 5,001, Net Assets Beginning of the Year 49,843, Net Assets End of the Year² 54,845, ¹Investment related expenses include investment advisory, custodial and performance monitoring fees. ²Net Assets may be limited for actuarial consideration. City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 26

27 DEFERRED RETIREMENT OPTION PLAN ACTIVITY October 1, 2015 to September 30, 2016 Beginning of the Year Balance 1,055, Plus Additions 393, Investment Return Earned 65, Less Distributions (177,814.92) End of the Year Balance 1,336, City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 27

28 RECONCILIATION OF CITY'S SHORTFALL/(PREPAID) CONTRIBUTION FOR THE FISCAL YEAR ENDED (FYE) SEPTEMBER 30, 2016 (1) Required City and State Contributions $2,568, (2) Less Allowable State Contribution (229,066.45) (3) Required City Contribution for Fiscal ,339, (4) Less 2015 Prepaid Contribution 0.00 (5) Less Actual City Contributions (2,288,939.96) (6) Equals City's Shortfall/(Prepaid) Contribution as of $50, September 30, 2016 City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 28

29 STATISTICAL DATA ¹ 10/1/ /1/ /1/ /1/2016 Actives Number Average Current Age Average Age at Employment Average Past Service Average Annual Salary $63,200 $62,360 $64,931 $65,978 Service Retirees Number Average Current Age N/A Average Annual Benefit $38,665 $42,857 $41,914 $42,756 DROP Retirees Number Average Current Age N/A Average Annual Benefit $62,025 $56,181 $56,972 $54,884 Beneficiaries Number Average Current Age N/A Average Annual Benefit $21,166 $21,547 $21,851 $20,291 Disability Retirees Number Average Current Age N/A Average Annual Benefit $30,874 $30,579 $32,026 $32,373 Terminated Vested Number Average Current Age N/A Average Annual Benefit $5,426 $14,144 $20,091 $20,091 ¹ Prior to 10/1/2015, averages were salary weighted. City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 29

30 AGE AND SERVICE DISTRIBUTION PAST SERVICE AGE Total Total City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 30

31 VALUATION PARTICIPANT RECONCILIATION 1. Active lives a. Number in prior valuation 10/1/ b. Terminations i. Vested (partial or full) with deferred benefits 0 ii. Non-vested or full lump sum distribution received (3) c. Deaths i. Beneficiary receiving benefits 0 ii. No future benefits payable 0 d. Disabled 0 e. Retired 0 f. DROP (1) g. Continuing participants 62 h. New entrants 7 i. Total active life participants in valuation Non-Active lives (including beneficiaries receiving benefits) Service Retirees, Vested Receiving Receiving Receiving DROP Death Disability Vested Benefits Benefits Benefits Benefits Deferred Total a. Number prior valuation Retired 1 (1) DROP Vested Deferred Death, With Survivor (1) Death, No Survivor Disabled Refund of Contributions Rehires Expired Annuities Data Corrections b. Number current valuation City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 31

32 SUMMARY OF CURRENT PLAN (Through Ordinance 3961) Effective Date of Initial Plan Restatement November 13, 1971 Latest Amendment September 25, 2015 Eligibility Salary Full-time firefighters participate as a condition of employment (includes Fire Inspectors/Investigators after March 20, 2002 if certified pursuant to Florida Statutes, Section ). Members eligible for Normal Retirement 12/27/11: Gross earnings, including overtime pay, but excluding bonuses. Fixed remuneration for Firefighters hired after October 1, All Others: Fixed remuneration including holiday pay, lump sum payout for Employees at the top of their pay grade, incentive payments and overtime pay up to 300 hours per year, but excluding bonuses and lump sum sick and vacation payouts attributable to service after December 27, Fixed remuneration for Firefighters hired after October 1, Average Final Compensation (AFC) Credited Service One twelfth of the average of the 3 best years of Salary during the final 5 years of service (5 best of the last 10, if higher). Years and completed months of service with the City as a Firefighter (with Member contributions when required). Normal Retirement Date The earlier of: 1) age 55 and the completion of 10 years of Credited Service, or 2) the completion of 25 years of Credited Service, regardless of age. Benefit Average Final Compensation times the sum of: Service Prior to 10/1/78: 2.0% times Credited Service Service From 10/1/78 9/30/02: 2.5% times Credited Service Service From 10/1/02 9/30/03: 3.0% times Credited Service Service From 10/1/03 12/27/11: 3.25% times Credited Service Service After 12/27/11: Members eligible for Normal Retirement 12/27/11: 3.25% times Credited Service All Others: 3.00% times Credited Service 3.0% of Average Final Compensation times Credited Service for Firefighters hired after October 1, City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 32

33 Form of Benefit Life Annuity, with 120 payments guaranteed (options available). Cost-of-Living Adjustment Members eligible for Normal Retirement 12/27/11: Beginning on the November 1 following attainment of age 65, the benefit is increased annually by the change in the Consumer Price Index from April 1 of the prior year through March 31, but not to exceed 3.0%. Disability retirees and their Beneficiaries, as well as service retirees with 25 years of service at retirement, as well as Beneficiaries of Members who die in line of duty, receive adjustments on the first November 1 following retirement. Early Retirement All Others: Beginning on the November 1 following attainment of age 65, the benefit is increased annually by 2.0%. Disability retirees and their Beneficiaries, as well as service retirees with 25 years of service at retirement, as well as Beneficiaries of Members who die in line of duty, receive adjustments on the first November 1 following 5 years of retirement, but not later than age 65. Date Benefit Form of Benefit Completion of 10 years of Credited Service. Determined as for Normal Retirement and reduced 3.0% per year. Life Annuity, with 120 payments guaranteed, subject to cost-of-living adjustments described above. Disability Benefit Eligibility Benefit Duration Total and permanent as determined by the Board (medical proof required.) Five (5) years of Credited Service required for Non- Service incurred benefits. Benefit accrued to date of disability. Minimum benefit for Service Incurred is 42% of AFC, for Non-Service Incurred is 25% of AFC. Payable for life, with 120 payments guaranteed, or until recovery (as determined by the Board; optional forms of income are available). Death Benefit Pre-Retirement Non-Service Related Not Vested Refund of Member Contributions City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 33

34 Vested Service Related Post-Retirement Actuarial equivalent of participant's accrued benefit payable to designated beneficiary. Spouse receives ½ of Member s salary for life, or Non-Service related death benefit at Spouse s election. If no Spouse, beneficiary receives Non-Service benefit. According to optional form of benefit selected. Termination of Employment Benefit Less than 10 years Refund of Member Contributions without interest. 10 or more Refund of Contributions or Accrued benefit payable at retirement age. Member Contributions Amount 6.22% of Salary (effective October 1, 2007). 9.00% of Salary (effective October 1, 2009). Deferred Retirement Option Plan Eligibility Satisfaction of Normal Retirement requirements (earlier of 1) Age 55 with 10 years of Credited Service, or 2) 25 years of Credited Service). May not enter DROP if Credited Service exceeds 35 years. Participation Rate of Return Not to exceed 36 months (60 months if eligible for Normal Retirement on December 28, 2011), or the attainment of a total of 35 years of combined DROP Service and Credited Service, whichever comes first. At member s election: a. 6.0% annual rate (not available if entered DROP after December 28, 2011), or b. Actual net rate of investment return (total return net of brokerage commissions, management fees, and transaction costs) [subject to a minimum of --.75% and maximum of 0.75% per quarter for those who entered DROP after December 28, 2011]. Form of Distribution Share Program Cash lump sum (options available) at termination of employment. Effective December 31, 2008, the Excess State Monies are being allocated to the Members in a Share Program. City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 34

35 GASB 67 STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2016 ASSETS Cash and Cash Equivalents: Short Term Investments Total Cash and Equivalents Receivables: Additional City Contributions Investment Income Total Receivable Investments: U. S. Bonds and Bills Federal Agency Guaranteed Securities Corporate Bonds Municipal Obligations Stocks Mutual Funds: Fixed Income Equity Pooled/Common/Commingled Funds: Hedge Fund Real Estate Total Investments Total Assets Total Liabilities NET POSITION RESTRICTED FOR PENSIONS MARKET VALUE 2,326,306 2,326,306 50,874 71, ,528 2,378,279 4,767,241 4,820, ,098 11,318,727 3,194,109 17,951,495 4,746,053 3,225,064 52,505,393 54,954, ,954,227 City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 35

36 GASB 67 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2016 Market Value Basis ADDITIONS Contributions: Member 385,657 City 2,339,814 State 365,376 Total Contributions 3,090,847 Investment Income: Net Increase in Fair Value of Investments 3,609,543 Interest & Dividends 1,089,616 Less Investment Expense¹ (179,721) Net Investment Income 4,519,438 Total Additions 7,610,285 DEDUCTIONS Distributions to Members: Benefit Payments 3,013,716 Lump Sum DROP Distributions 177,815 Lump Sum Share Distributions 77,376 Refunds of Member Contributions 49,556 Total Distributions 3,318,463 Administrative Expense 46,742 Total Deductions 3,365,205 Net Increase in Net Position 4,245,080 NET POSITION RESTRICTED FOR PENSIONS Beginning of the Year 50,709,147 End of the Year 54,954,227 ¹Investment related expenses include investment advisory, custodial and performance monitoring fees. City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 36

37 GASB 67 NOTES TO THE FINANCIAL STATEMENTS (For the Year Ended September 30, 2016) Plan Description Plan Administration The Plan is a single-employer defined benefit pension plan administered by the Plan's Board of Trustees comprised of: Two City residents appointed by the City Council, two Firefighters elected by majority of covered Members, and a fifth Member elected by other four and appointed by City Council (as a ministerial duty). Plan Membership as of October 1, 2015: Inactive Plan Members or Beneficiaries Currently Receiving Benefits 83 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 2 Active Plan Members Benefits Provided The Plan provides retirement, termination, disability and death benefits. Normal Retirement: Date: Earlier of: 1) Age 55 and completion of 10 years of Credited Service, 2) Age 52 and the completion of 25 years of Credited Service, or 3) the completion of 30 years of Credited Service, regardless of age. Benefit: Average Final Compensation times the sum of: Service Prior to 10/1/78: 2.0% times Credited Service Service From 10/1/78 9/30/02: 2.5% times Credited Service Service From 10/1/02 9/30/03: 3.0% times Credited Service Service From 10/1/03 12/27/11: 3.25% times Credited Service Service After 12/27/11: Members eligible for Normal Retirement 12/27/11: 3.25% times Credited Service. All Others: 3.00% times Credited Service. 3.0% of Average Final Compensation times Credited Service for Firefighters hired after October 1, Cost-of-Living Adjustment: Members eligible for Normal Retirement 12/27/11: Beginning on the November 1 following attainment of age 65, the benefit is increased annually by the change in the Consumer Price Index from April 1 of the prior year through March 31, but not to exceed 3.0%. Disability retirees and their Beneficiaries, as well as service retirees with 25 years of service at retirement, as well as Beneficiaries of Members who die in line of duty, receive adjustments on the first November 1 following retirement. All Others: Beginning on the November 1 following attainment of age 65, the benefit is increased annually by 2.0%. Disability retirees and their Beneficiaries, as well as service retirees with 25 years of service at retirement, as well as Beneficiaries of Members who die in line of duty, receive adjustments on the first November 1 following 5 years of retirement, but not later than age 65. Early Retirement: Date: Completion of 10 years of Credited Service. Benefit: Determined as for Normal Retirement and reduced 3.0% per year. Disability: Eligibility: Total and permanent as determined by the Board (medical proof required.) Five years of Credited Service required for Non-Service incurred benefits. Benefit: Benefit accrued to date of disability. Minimum benefit for Service Incurred is 42% of AFC, for Non-Service Incurred is 25% of AFC. City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 37

38 GASB 67 Pre-Retirement Death Benefits: Non-Service Related: Not Vested: Refund of Member Contributions Vested: Actuarial equivalent of participant's accrued benefit payable to designated beneficiary. Service Related: Spouse receives ½ of Member s salary for life, or Non-Service related death benefit at Spouse s election. If no Spouse, beneficiary receives Non-Service benefit. Termination of Employment: Benefit: Less than 10 years: Refund of Member Contributions without interest. 10 or more: Refund of Contributions or Accrued benefit payable at retirement age. Share Program: Effective December 31, 2008, the Excess State Monies are being allocated to the Members in a Share Program. Contributions Member: 6.22% of Salary (effective October 1, 2007). 9.00% of Salary (effective October 1, 2009). City and State: Remaining amount required in order to pay current costs and amortize unfunded past service cost, if any, as provided in Chapter 112, Florida Statutes. Investments Investment Policy: The following was the Board's adopted asset allocation policy as of September 30, 2016: Asset Class Target Allocation Domestic Equity 40% International Equity 10% Domestic Fixed Income 25% Global Fixed Income 5% Real Estate 10% Alternative Investments 10% Total 100% Concentrations: The Plan did not hold investments in any one organization that represent 5 percent or more of the Pension Plan's Fiduciary Net Position. Rate of Return: For the year ended September 30, 2016, the annual money-weighted rate of return on Pension Plan investments, net of Pension Plan investment expense, was 8.79 percent. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. Deferred Retirement Option Program Eligibility: Satisfaction of Normal Retirement requirements (earlier of (1) Age 55 with 10 years of Credited Service, or (2) 25 years of Credited Service). May not enter DROP if Credited Service exceeds 35 years. Participation: Not to exceed 24 months (60 months if eligible for Normal Retirement on December 28, 2011), or the attainment of a total of 35 years of combined DROP Service and Credited Service, whichever comes first. Rate of Return: At member s election: a. 6.0% annual rate (not available if entered DROP after December 28, 2011), or b. Actual net rate of investment return (total return net of brokerage commissions, management fees, and transaction costs) [subject to a minimum of -0.75% and maximum of 0.75% per quarter for those who entered DROP after December 28, 2011]. The DROP balance as September 30, 2016 is $1,336,455. City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 38

39 GASB 67 NET PENSION LIABILITY OF THE SPONSOR The components of the Net Pension Liability of the Sponsor on September 30, 2016 were as follows: Total Pension Liability $ 72,331,389 Plan Fiduciary Net Position $ (54,954,227) Sponsor's Net Pension Liability $ 17,377,162 Plan Fiduciary Net Position as a percentage of Total Pension Liability 75.98% Actuarial Assumptions: The Total Pension Liability was determined by an actuarial valuation as of October 1, 2015 updated to September 30, 2016 using the following actuarial assumptions: Inflation 3.00% Salary Increases 6.00% Discount Rate 7.25% Investment Rate of Return 7.25% Mortality Rate Healthy Lives: Female: RP2000 Generational, 100% Annuitant White Collar, Scale BB. Male: RP2000 Generational, 10% Annuitant White Collar /90% Annuitant Blue Collar, Scale BB. Mortality Rate Disabled Lives: Female: 60% RP2000 Disabled Female set forward two years / 40% Annuitant White Collar with no setback, no projection scale. Male: 60% RP2000 Disabled Male setback four years / 40% Annuitant White Collar with no setback, no projection scale. The most recent actuarial experience study used to review the other significant assumptions was dated April 11, The Long-Term Expected Rate of Return on Pension Plan investments was determined using a building-block method in which bestestimate ranges of expected future real rates of return (expected returns, net of Pension Plan investment expenses and inflation) are developed for each major asset class. For 2016 the inflation rate assumption of the investment advisor was 2.50%. These ranges are combined to produce the Long-Term Expected Rate of Return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the Pension Plan's target asset allocation as of September 30, 2016 are summarized in the following table: Long Term Expected Real Asset Class Rate of Return Domestic Equity 7.5% International Equity 8.5% Domestic Fixed Income 2.5% Global Fixed Income 3.5% Real Estate 4.5% Alternative Investments 5.0% City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 39

40 GASB 67 Discount Rate: The Discount Rate used to measure the Total Pension Liability was 7.25 percent. The projection of cash flows used to determine the Discount Rate assumed that Plan Member contributions will be made at the current contribution rate and that Sponsor contributions will be made at rates equal to the difference between actuarially determined contribution rates and the Member rate. Based on those assumptions, the Pension Plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the Long-Term Expected Rate of Return on Pension Plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. 1% Decrease Current Discount Rate 1% Increase 6.25% 7.25% 8.25% Sponsor's Net Pension Liability $ 26,449,423 $ 17,377,162 $ 9,920,003 City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 40

41 GASB 67 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS Last 10 Fiscal Years 09/30/ /30/ /30/2014 Total Pension Liability Service Cost 1,288,555 1,237,208 1,325,457 Interest 4,725,868 4,631,459 4,540,575 Share Plan Allocation 136, , ,125 Changes of benefit terms Differences between Expected and Actual Experience (30,018) (1,389,700) - Changes of assumptions 3,974, Benefit Payments, including Refunds of Employee Contributions (3,318,463) (3,473,029) (5,921,641) Net Change in Total Pension Liability 6,776,329 1,173, ,516 Total Pension Liability - Beginning 65,555,060 64,381,499 64,263,983 Total Pension Liability - Ending (a) $ 72,331,389 $ 65,555,060 $ 64,381,499 Plan Fiduciary Net Position Contributions - Employer 2,339,814 2,253,269 2,418,899 Contributions - State 365, , ,192 Contributions - Employee 385, , ,177 Net Investment Income 4,519,438 1,130,249 4,560,486 Benefit Payments, including Refunds of Employee Contributions (3,318,463) (3,473,029) (5,921,641) Administrative Expense (46,742) (49,764) (54,419) Net Change in Plan Fiduciary Net Position 4,245, ,071 1,774,694 Plan Fiduciary Net Position - Beginning 50,709,147 50,085,076 48,310,382 Plan Fiduciary Net Position - Ending (b) $ 54,954,227 $ 50,709,147 $ 50,085,076 Net Pension Liability - Ending (a) - (b) $ 17,377,162 $ 14,845,913 $ 14,296,423 Plan Fiduciary Net Position as a percentage of the Total Pension Liability 75.98% 77.35% 77.79% Covered Employee Payroll¹ $ 4,285,073 $ 4,665,300 $ 4,101,967 Net Pension Liability as a percentage of Covered Employee Payroll % % % Notes to Schedule: ¹ The Covered Employee Payroll numbers shown are in compliance with GASB 82, except for the 09/30/2015 measurement period which includes DROP payroll. Changes of assumptions: For measurement date 09/30/2016, as a result of Chapter , Laws of Florida, the assumed rates of mortality were changed to the assumptions used by the Florida Retirement System for special risk employees. City of Pinellas Park Firefighters' Pension Fund FOSTER & FOSTER, INC. 41