CITY OF HOMESTEAD POLICE OFFICERS RETIREMENT PLAN ACTUARIAL VALUATION AS OF OCTOBER 1, 2015

Transcription

1 CITY OF HOMESTEAD POLICE OFFICERS RETIREMENT PLAN ACTUARIAL VALUATION AS OF OCTOBER 1, 2015 ANNUAL EMPLOYER CONTRIBUTION IS DETERMINED BY THIS VALUATION FOR THE PLAN YEAR ENDING SEPTEMBER 30, 2017

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4 TABLE OF CONTENTS I Introduction a. Discussion... 1 b. Financial Soundness of the Plan... 4 c. Recent History of Changes... 9 II Valuation Results a. Comparative Summary of Valuation Results b. Derivation of Normal Cost & Present Value of Projected Benefits c. Liquidation of the Unfunded Actuarial Accrued Liability d. Actuarial Gains & Losses e. Chapter Revenue f. Recent History of Valuation Results g. Schedule of Funding Progress h. FASB Information i. GASB Information j. Actuarial Cost Methods and Assumptions k. Miscellaneous and Technical Assumptions l. Glossary of Terms III Pension Fund Information a. Statement of Assets b. Income and Disbursements c. Reconciliation of DROP Accounts d. Actuarial Value of Assets e. Investment Rate of Return IV Member Statistics a. Statistical Data b. Reconciliation of Membership Data c. Age and Service Distribution V Summary of Retirement Plan Provisions Appendix State Requirements

5 SECTION I INTRODUCTION

6 1 DISCUSSION TOTAL REQUIRED CONTRIBUTION The required City contribution for the fiscal year ending September 30, 2017, along with the required contribution for the two earlier fiscal years is shown in the following table: Contribution for FYE For FYE 9/30/2017 Based on the 10/1/2015 Valuation For FYE 9/30/2016 Based on the 10/1/2014 Valuation For FYE 9/30/2015 Based on the 10/1/2013 Impact Statement Required City and State Contributions 4,321,511 4,051,435 4,076,435 As % of Covered Payroll % % % Expected State Contribution (Premium Tax Refund) 324, , ,642 As % of Covered Payroll 4.63 % 5.16% % 5.54 % Remaining City Contribution 3,996,869 3,726,793 3,751,793 As % of Covered Payroll % % % The contribution developed in this valuation has been calculated as though payments are made at the end of each quarter. The required City contributions also assume that the amounts to be received from the State in 2016 and 2017 will equal the lesser of the base amount or the amount received in If the actual payment from the State is less than $324,642 then the City must increase its contribution to make up the difference. This year s contribution reflects the expiration of one change base with a final amortization payment of about $46,000. EXPERIENCE Experience during the past year was less favorable overall than that anticipated by the actuarial assumptions. This loss was primarily due to vested and nonvested members returning as active members and fewer terminations than expected.

7 2 The loss was largely offset by an investment gain due to delayed recognition of gains from the plan years ending in 2012 and The return on a net market value basis was 0.7% for the plan year ending in However, the loss is being spread over four years, while portions of experience from the previous three years are being recognized this year. The result was an investment return on a valuation asset basis of 10.1% as compared to the assumed rate of 7.8%, producing an experience gain due to investments, but leaving an overall experience loss for the year. CHANGES IN ACTUARIAL METHODS AND ASSUMPTIONS There were three changes made in connection with the current actuarial valuation. 1. The investment return rate was changed from 7.8% per year, compounded annually, net of investment expenses, to 7.7% per year, compounded annually, net of investment expenses. 2. The assumed rates of future pay increases were changed from a select and ultimate table with rates ranging from 9.90% in the early years to an ultimate rate of 5.90% to a select and ultimate table with rates ranging from 9.85% in the early years to an ultimate rate of 5.85%. 3. The amortization period was for new bases was reduced by one year. CHANGES IN BENEFITS There were no changes in benefits since the prior actuarial valuation. FUNDED RATIO The funded ratio, one measure of the Plan s financial health, is equal to the actuarial value of assets divided by the actuarial accrued (past service) liability. The funded ratio is 76.8% this year compared to 75.4% last year. The funded ratio before reflecting the assumption changes described above was 77.7%. VARIABILITY OF FUTURE CONTRIBUTION RATES The Actuarial Cost Method used to determine the contribution rate is intended to produce contribution rates which are generally level as a percent of payroll. Even so, when experience differs from the assumptions, as it often does, the employer s contribution rate can vary significantly from year-to-year. Over time, if the

8 3 year-to-year gains and losses offset each other, the contribution rate would be expected to return to the current level, but this does not always happen. RELATIONSHIP TO MARKET VALUE The Actuarial Value of Assets exceeds the Market Value of Assets by $477,629 as of the valuation date. If Market Value had been the basis for the valuation, the funded ratio would have been 76.3%, and the required City contribution would have increased by approximately 0.6% of covered payroll to $4,041,725. In the absence of other gains and losses, assumption changes, or plan changes, the City contribution rate should move in that direction over the next few years. RECOMMENDATIONS The actuarial accrued liability was 76.8% funded as of the October 1, 2015 valuation date using the current actuarial assumptions. As of October 1, 2015, assets were $67.8 million, and the liability for inactive members was $59.5 million. We strongly recommend that steps be taken to fully fund the actuarial accrued liability in a reasonable period of time. Continuing to reduce the amortization period will be necessary to this process. We also recommend further strengthening of the assumptions on an annual basis. The assumed rate of return and the assumed rate of salary increases should be further reduced. Beginning with the next actuarial valuation the mortality assumption will be the one used by the Florida Retirement System. Finally, we recommend that no further benefit changes or improvements be adopted until the accrued liability is funded. CONCLUSION The remainder of this Report covers detailed actuarial valuation results, financial information, other information and statistics, a summary of plan provisions, and annual filings required by law.

9 4 FINANCIAL SOUNDNESS OF THE PLAN The purpose of this Section of the Report is to provide certain measures which indicate the financial soundness of the program. These measures relate to short term solvency, long term solvency and level funding. The various percentages listed in this Section as of a single valuation date are not overly significant standing alone. What is more significant is the trend of the rates over a period of years. It is also important to keep in mind that each time the benefits or assumptions are revised, actuarial liabilities are created or diminished. Any newly created liabilities are financed systematically over a period of future years. All actuarially computed values in this analysis are based on the actuarial assumptions utilized in the respective years' actuarial valuations. SHORT TERM SOLVENCY The ultimate test of financial soundness is the program's ability to pay all promised benefits when due. The program's progress in accumulating assets to pay all promised benefits can be measured by comparing the market value of assets with: 1. Accumulated contributions of active members of the program, 2. The actuarial present value (APV) of projected benefits payable to those already receiving benefits and to vested terminations, and 3. The employer-financed portion of the actuarial present value of accrued benefits payable to active participants. This amount is based on benefits earned to date without future credited service or salary increases. The total of the first two items should generally be fully covered by assets. The portion of the third item covered by assets should increase over time. Increases in benefits will, of course, adversely affect the trend in the years when such increases are first reflected in the actuarial values.

10 5 Although different actuarial assumptions might be used in the event of a termination of the program, this test shows how much of the benefits accrued to date might be covered by assets in the event of a plan termination using the valuation assumptions. Valuation Date Market Value of Assets* Actuarial Present Value (APV) of All Accrued Benefits* Assets as % of APV 10/1/15 $ 76,560,428 $ 91,610, % 10/1/14 67,863,176 76,991, /1/13 57,729,352 72,413, /1/12 50,956,792 69,890, /1/11 42,812,736 66,798, *Including DROP Reserve in assets and in liabilities beginning 10/1/15 Ratio of Market Value of Assets to Present Value of Accrued Benefits Millions $100.0 $90.0 $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $ % 50% 0% Ratio Actuarial Valuation Date Market Value of Assets PV of Accrued Benefits Ratio LONG TERM SOLVENCY Over the longer term, the solvency of an ongoing plan can be measured by comparing the actuarial value of assets to an amount known as the Actuarial Accrued Liability (AAL) under the Entry Age Actuarial Cost

11 6 Method. This item has often been called the "past service liability". Its derivation differs from the short-term solvency value derivation in several ways, but mainly due to the fact that future salary increases are included in the AAL. As in the case of the short-term solvency values, the AAL is affected immediately by any revisions in benefits or assumptions. The accumulation of assets to equal the AAL can be considered a long-range funding goal. Largely because of periodic benefit increases, very few retirement programs have attained this goal. Valuation Date Actuarial Value of Assets Actuarial Accrued Liability (AAL) % of AAL Covered by Assets 10/1/15 $ 68,229,502 $ 88,849, % 10/1/14 61,736,764 81,919, /1/13 54,805,306 76,988, /1/12 48,804,755 75,468, /1/11 43,445,413 71,903, Ratio of Actuarial Value of Assets to Actuarial Accrued Liability $ % $90.0 $ % Millions $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 60% 40% 20% 0% Ratio Actuarial Valuation Date Actuarial Assets Accrued Liability Ratio

12 7 LEVEL CONTRIBUTION RATES The actuarial assumptions and cost methods have been chosen with the intent of producing required employer contributions which remain fairly level as a percentage of covered payroll. If this goal is attained, future employer contribution rates will not have to be raised materially in order to make up for the past. For many employers, this measure of the program's soundness is the most important of all. Employer Contribution Rates As a % of Payroll Valuation Date Normal Cost Amortization of UFAAL Total Required Contribution Total City Contribution 10/1/ % % % % 10/1/ /1/ /1/ /1/ Required City Contribution As % of Payroll 80% 70% 60% Contribution 50% 40% 30% 20% 10% 0% Actuarial Valuation Date

13 8 A major factor affecting the stability of the percentages just shown is how well the actual plan experience is faring compared to the actuarial assumptions. The value of the difference between what actually occurred and what was assumed to occur is called the actuarial gain or loss. Gains tend to lower the subsequent cost of the program while losses tend to cause subsequent costs to rise. A summary of the actuarial gains and losses of the Plan is in the next Section. Analysis of all the benchmarks listed above over a period of years will provide an indication of whether the program is becoming financially stronger or weaker.

14 9 RECENT HISTORY OF CHANGES IN PLAN, ASSUMPTIONS AND METHODS 1. Effective October 1, 2012, assumption changes were made in the assumed rates of mortality, investment return, and salary increases. The assumed mortality rates were changed from the 1994 Group Annuity Mortality Table for males and females, sex distinct tables, with no provision for future mortality improvement, to the RP-2000 Combined Healthy Participant Mortality Tables for males and females, sex distinct tables, using projection Scale BB to anticipate future mortality improvements, set back five years for disabled lives. As approved by the Board, the change in the mortality table is being phased in. The updated table was used with ages set ahead three years for the October 1, 2012 actuarial valuation as a preliminary step. The investment return rate was changed from 8.0% per year, compounded annually, net of investment expenses, to 7.9% per year, compounded annually, net of investment expenses. The assumed rates of future pay increases were changed from a select and ultimate table with rates ranging from 10% in the early years to an ultimate rate of 6% to a select and ultimate table with rates ranging from 9.95% in the early years to an ultimate rate of 5.95% 2. Effective for the October 1, 2013 valuation, based on a post valuation impact statement, the definition of Average Final Compensation was amended by Ordinance No , adopted May 27, Amend the definition of Average Final Compensation for employees eligible to retire or enter the DROP on or before September 30, 2012 to exclude payment for leave accumulated after September 30, Amend the definition of Average Final Compensation for employees who are not eligible to retire or enter the DROP on or before September 30, 2012 to exclude payment for all accumulated leave. 3. Effective with the October 1, 2014 valuation, the investment return rate was changed from 7.9% per year, compounded annually, net of investment expenses, to 7.8% per year, compounded annually, net of investment expenses. The assumed rates of future pay increases were changed from a select and ultimate table with rates ranging from 9.95% in the early years to an ultimate rate of 5.95% to a select and ultimate table with rates ranging from 9.90% in the early years to an ultimate rate of 5.90%. And the maximum amortization period was reduced to 25 years for bases currently amortized over a longer period. 4. Effective with the October 1, 2015 valuation, the investment return rate was changed from 7.8% per year, compounded annually, net of investment expenses, to 7.7% per year, compounded annually, net of investment expenses. The assumed rates of future pay increases were changed from a select and ultimate table with rates ranging from 9.90% in the early years to an ultimate rate of 5.90% to a select and ultimate table with rates ranging from 9.85% in the early years to an ultimate rate of 5.85%. And the amortization period for new bases was reduced to 24 years.

15 SECTION II VALUATION RESULTS

16 10 COMPARATIVE SUMMARY OF RECOMMENDED VALUATION RESULTS As of October 1 Covered Group 2015 After Changes 2015 Before Changes A. Participants Active Participants Retirees, Disabilities, Beneficiaries, & Vested Terminations Total Covered Annual Payroll Long Range Cost $ 6,739,052 $ 6,742,213 $ 6,052,845 B. Actuarial Present Value of Projected Benefits $ 104,008,534 $ 102,725,417 $ 95,281,492 C. Actuarial Present Value of Future Normal Costs 15,158,694 14,869,630 13,362,392 D. Actuarial Accrued Liability (AAL): B-C 88,849,840 87,855,787 81,919,100 E. Valuation Assets 68,229,502 68,229,502 61,736,764 F. Unfunded AAL (UAAL): D-E 20,620,338 19,626,285 20,182,336 Current Cost G. Payment Required to Amortize UAAL $ 2,074,647 $ 2,000,377 $ 2,043,920 As % of Payroll 30.79% 29.67% 33.77% H. Total Normal Cost (for current year) 2,387,417 2,348,853 2,117,565 As % of Payroll 35.43% 34.84% 34.98% I. Expected Member Contribution 515, , ,043 As % of Payroll 7.65% 7.65% 7.65% J. Required City/State Contribution on Val Date 3,946,527 3,833,451 3,698,442 As % of Payroll 58.56% 56.86% 61.10% K. Fiscal Year to which Contributions Apply 2016/2017 N/A 2015/2016 L. Expected Increase in Covered Payroll 4% 4% 4% M.Covered Payroll in Contribution Year 7,008,614 7,011,902 6,294,958 N. Required City/State Contribution if Paid Quarterly in the FY shown in K. 4,321,511 4,200,830 4,051,435 As % of Payroll 61.66% 59.91% 64.36% O. Estimate of State Contribution* 324, , ,642 As % of Payroll 4.63% 4.63% 5.16% P. Remaining City Contribution 3,996,869 3,876,188 3,726,793 As % of Payroll 57.03% 55.28% 59.20% * The lesser of the base state contribution amount or the actual State contribution received during the fiscal year.

17 11 DERIVATION OF NORMAL COST AS OF OCTOBER After Changes 2015 Before Changes A. Entry Age Normal Cost for Benefits 1. Service Retirement Benefits $ 2,039,476 $ 2,004,996 $ 1,803, Vesting Benefits 93,828 91,315 82, Disability Benefits 125, , , Preretirement Death Benefits 4,165 4,116 3, Return of Contributions 40,529 40,520 36, Total 2,303,862 2,265,298 2,038,250 B. Normal Cost for Administrative Expense 83,555 83,555 79,315 C. Total Normal Cost: A + B 2,387,417 2,348,853 2,117,565 PRESENT VALUE OF PROJECTED BENEFITS AS OF OCTOBER 1, 2015 After Changes 2015 Before Changes A. Present Value of Future Salaries $ 45,144,475 $ 45,070,903 $ 40,246,781 B. Present Value Future Member Contributions 3,453,552 3,447,924 3,078,879 C. Present Value of Projected Benefits 1. Active Members a. Service Retirement Benefits 41,943,107 41,317,271 37,555,769 b. Vesting Benefits 1,369,769 1,334,102 1,230,603 c. Disability Benefits 972, , ,874 d. Preretirement Death Benefits 61,580 60,791 55,859 e. Return of Contributions 153, , ,884 f. Total 44,500,553 43,825,071 39,858, Inactive Members a. Service Retirees 33,195,626 32,882,622 29,603,056 b. DROP Members 22,869,118 22,605,005 22,108,262 c. Disability Retirees 2,927,958 2,904,131 3,062,688 d. Beneficiaries 264, , ,506 e. Terminated Vested 250, , ,991 f. Total 59,507,981 58,900,346 55,422, Grand Total 104,008, ,725,417 95,281,492

18 12 LIQUIDATION OF THE UNFUNDED ACTUARIAL ACCRUED LIABILITY The Unfunded Actuarial Accrued Liability (UAAL) is being amortized as a level dollar amount over the number of years remaining in the amortization period. Details relating to the UAAL are as follows: Original UAAL Current UAAL Date & Source Amort. Period Amount Years Left Amount Payment 10/1/97 EANC 25 $ 4,227,158 7 $ 1,787,377 $ 315,498 10/1/99 Asset Method Change 30 (90,275) 14 (60,173) (6,659) 10/1/99 Assumption Change 30 (2,792,967) 14 (1,861,725) (206,037) 10/1/99 Amendment 30 4,179, ,786, ,341 10/1/00 Amendment 30 2,456, ,689, ,882 10/1/01 (Gain) / Loss , ,364 45,003 10/1/02 (Gain) / Loss 30 2,066, ,491, ,783 10/1/02 Amendment , ,383 17,696 10/1/03 (Gain) / Loss , ,115 69,284 10/1/04 (Gain) / Loss , ,949 70,382 10/1/04 Amendment , ,010 59,035 10/1/05 (Gain) / Loss 30 2,181, ,696, ,834 10/1/06 (Gain) / Loss , ,358 36,713 10/1/06 Amendment 30 (34,991) 21 (27,863) (2,524) 10/1/06 Assumption Change 30 2,363, ,881, ,441 10/1/07 (Gain) / Loss 30 1,821, ,552, ,966 10/1/08 (Gain) / Loss 30 6,645, ,767, ,854 10/1/09 (Gain) / Loss 30 (680,789) 24 (604,717) (52,001) 10/1/10 (Gain) / Loss 30 2,959, ,682, ,712 10/1/11 (Gain) / Loss 30 2,995, ,743, ,896 10/1/12 (Gain) / Loss 30 (2,527,464) 24 (2,336,127) (200,888) 10/1/12 Assumption Change 30 1,209, ,118,262 96,162 10/1/13 (Gain) / Loss 30 (2,959,388) 24 (2,792,092) (240,098) 10/1/13 Amendment 30 (636,892) 24 (600,886) (51,671) 10/1/14 (Gain) / Loss 30 (1,695,333) 24 (1,649,556) (141,849) 10/1/14 Assumption Change , ,014 76,104 10/1/15 (Gain) / Loss , ,695 32,307 10/1/15 Assumption Change , ,053 85,481 20,620,338 2,074,647

19 13 Amortization Schedule Illustration Year Ended Projected UAAL 2015 $ 20,620, ,973, ,277, ,527, ,719, ,351, ,298, ,049,

20 14 ACTUARIAL GAINS AND LOSSES The assumptions used to anticipate mortality, employment turnover, investment income, expenses, salary increases, and other factors have been based on long-range trends and expectations. Actual experience can vary from these expectations. The variance is measured by the gain and loss for the period involved. If significant long-term experience reveals consistent deviation from what has been expected and that deviation is expected to continue, the assumptions should be modified. The net actuarial gain (loss) for the previous year has been as follows: DEVELOPMENT OF ACTUARIAL GAIN / (LOSS) Plan Year Ending 9/30/15 A. Derivation of Actuarial Gain / (Loss) 1. Unfunded Actuarial Accrued Liability (UAAL) Previous Valuation (After Impact Statement) $ 20,182, Normal Cost (NC) Previous Valuation 1,654, City/State Contributions Previous Year 4,140, Interest on: a. UAAL and NC 1,703,275 b. Contributions 148,825 c. Net Total: (a) - (b) 1,554, Expected UAAL Current Year Before Changes: (1) + (2) - (3) + (4) 19,250, Actual UAAL Current Year Before Changes 19,626, Actuarial Gain / (Loss): (5) - (6) (375,695) B. Approximate Portion of Gain / (Loss) Due to Investments C. Approximate Portion of Gain / (Loss) Due to Liabilities: (A) - (B) 1,623,234 (1,998,929) D. Change in UAAL due to Benefit Changes 0 E. Change in UAAL due to Assumption Changes 994,053 F. UAAL After Changes 20,620,338

21 15 The net actuarial gains (losses) for the previous years have been as follows: Year Ending Actuarial Gain (Loss) 9/30/15 $ (375,695) 9/30/14 1,695,333 9/30/13 2,959,388 9/30/12 2,527,464 9/30/11 (2,995,732) Millions $4 $2 $0 ($2) ($4) ($6) ($8) ($10) ($12) ($14) ($16) POLICE OFFICERS Actuarial Gain (+) or Loss (-) Plan Year End Gain or Loss Cumulative

22 16 The fund earnings and salary increase assumptions have considerable impact on the cost of the Plan so it is important that they be in line with the actual experience. The following table shows the actual fund earnings and salary increase rates compared to the assumed rates for the last few years: Investment Rate of Return Salary Increases Year Ended Actual Assumed Actual Assumed 9/30/ % 7.8 % 6.1 % 6.6 % 9/30/ /30/ /30/ /30/ /30/ /30/ /30/08 (11.1) /30/ /30/ * 5.5 *Revised to reflect annualized salaries for new entrants. The actual investment return rates shown above are based on the actuarial value of assets. The actual salary increase rates shown above are the increases received by those active members who were included in the actuarial valuation both at the beginning and end of each year.

23 17 History of Investment Return Based on Actuarial Value of Assets 15% 10% 5% 0% -5% -10% -15% Plan Year End Actual Assumed History of Salary Increases 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Plan Year End Compared to Previous Year Actual Assumed

24 18 CHAPTER REVENUE Increments in Chapter revenue over that received in 1998 must first be used to fund the cost of compliance with minimum benefits. As of the valuation date, there were no cost-related changes that needed to be made to the Pension Plan to comply with minimum benefit requirements. Actuarial Confirmation of the Used of State Chapter Money Base Amount Previous Plan Year $ 324,642 $ 324, Amount Received for Previous Plan Year 528, , Benefit Improvements Made in Previous Plan Year Excess Funds for Previous Plan Year: (2) - (1) - (3) 204, , Accumulated Excess at Beginning of Previous Year 350, , Prior Excess Used in Previous Plan Year Accumulated Excess as of Valuation Date (Available for Benefit Improvements): (4) + (5) - (6) 554, , Base Amount This Plan Year: (1) + (3) 324, ,642 The Accumulated Excess shown in line 7 is being held in reserve and is subtracted from Plan assets for purposes of determining the Plan funding requirements.

25 19 RECENT HISTORY OF VALUATION RESULTS Valuation Date Members Active Inactive Covered Annual Payroll Actuarial Value of Assets Unfunded Actuarial Accrued Liability Employer Normal Cost Amount % of Payroll 10/1/ $ 6,739,052 $ 68,229,502 $ 20,620,338 $ 1,871, % 10/1/ ,052,845 61,736,764 20,182,336 1,654, /1/ ,636,539 54,805,306 22,183,141 1,505, /1/ ,511,249 48,804,755 26,664,057 1,527, /1/ ,155,417 43,445,413 28,458,198 1,489, /1/ ,487,400 41,655,498 25,874,064 1,495, /1/ ,189,814 39,349,352 23,506,704 1,482, /1/ ,801,259 33,614,765 24,817,135 1,382, /1/ ,624,995 35,918,611 18,441,086 1,348, /1/ ,862,281 31,868,464 17,797,099 1,070, SCHEDULE OF FUNDING PROGRESS Actuarial Valuation Date Actuarial Value of Assets (a) Entry Age Actuarial Accrued Liability (AAL) (b) Unfunded AAL (UAAL) (b)-(a) Funded Ratio (a)/(b) Covered Payroll (c) UAAL As % of Covered Payroll [(b)-(a)]/(c) 10/1/15 $ 68,229,502 $ 88,849,840 $ 20,620, % $ 6,739, % 10/1/14 61,736,764 81,919,100 20,182, ,052, /1/13 54,805,306 76,988,447 22,183, ,636, /1/12 48,804,755 75,468,812 26,664, ,511, /1/11 43,445,413 71,903,611 28,458, ,155, /1/10 41,655,498 67,529,562 25,874, ,487, /1/09 39,349,352 62,856,056 23,506, ,189, /1/08 33,614,765 58,431,900 24,817, ,801, /1/07 35,918,611 54,359,697 18,441, ,624, /1/06 31,868,464 49,665,563 17,797, ,862,

26 20 FASB NO. 35 INFORMATION AS OF OCTOBER A. Statement of Accumulated Plan Benefits 1. Vested Benefits a. Participants currently receiving benefits, including DROP $59,257,648 $54,896,512 b. Terminated Vested Members 250, ,991 c. DROP Reserve 8,254,151 d. Other participants 20,589,302 17,158,826 e. Total 88,351,434 72,581, Non-Vested Benefits 3,258,860 4,409, Total Actuarial Present Value of Accumulated Plan Benefits: (1d) + (2) 91,610,294 76,991, Accumulated Contributions of Active Members 3,905,209 3,679,398 B. Statement of Change in Accumulated Plan Benefits 1. Total Value at Beginning of Year 76,991,036 72,178, Increase (Decrease) During Period attributable to: a. Plan Amendment 0 235,001 b. Change in Assumptions/Methods 954, ,964 Include DROP Reserve (one time change) 8,254,151 c. Latest Member Data, Benefits Accumulated, and Decrease in the Discount Period 10,860,559 7,868,146 d. Benefits Paid (5,450,397) (4,165,856) e. Net Increase 14,619,258 4,812, Total Value at End of Period 91,610,294 76,991,036 D. Assumed rate of return 7.70% 7.80% E. Market Value of Assets 76,560,428 67,863,176 F. Funded Ratio 83.57% 88.14% *Market value of assets is listed here. However, the plan or the employer may choose to use a value of assets other than market value in its disclosures.

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28 22 SCHEDULE OF CHANGES IN THE EMPLOYER S NET PENSION LIABILITY AND RELATED RATIOS GASB Statement No. 67 Fiscal year ending September 30, 2016* 2015 Total pension liability Service Cost $ 2,303,862 $ 2,038,250 Interest 7,503,088 6,996,689 Benefit Changes - - Difference between actual & expected experience 2,137, ,413 Assumption Changes 994, ,574 Benefit Payments (5,003,700) (5,450,397) Refunds (35,419) - Net Change in Total Pension Liability 7,899,195 4,962,529 Total Pension Liability - Beginning 94,527,031 89,564,502 Total Pension Liability - Ending (a) $ 102,426,226 $ 94,527,031 Plan Fiduciary Net Position Contributions - Employer $ 3,726,793 $ 3,816,076 Contributions - Non Employer Contributing Entity 324, ,645 Contributions - Member 515, ,028 Net Investment Income 5,873, ,007 Benefit Payments (5,003,700) (5,450,397) Refunds (35,419) - Administrative Expense (86,753) (84,733) Other - - Net Change in Plan Fiduciary Net Position 5,314,735 (112,374) Plan Fiduciary Net Position - Beginning 76,560,428 76,672,802 Plan Fiduciary Net Position - Ending (b) $ 81,875,163 $ 76,560,428 Net Pension Liability - Ending (a) - (b) 20,551,063 17,966,603 Plan Fiduciary Net Position as a Percentage of Total Pension Liability % % Covered Employee Payroll** $ 6,739,052 $ 7,145,922 Net Pension Liability as a Percentage of Covered Employee Payroll % % * These figures are estimates only. Actual figures will be provided after the end of the fiscal year. ** Covered Employee Payroll was calculated by dividing total member contributions for the fiscal year by the member contribution rate of 7.65%.

29 23 SCHEDULE OF THE EMPLOYER S NET PENSION LIABILITY GASB Statement No. 67 Total Plan Net Position Covered Liability FY Ending Pension Plan Net Net Pension as a % of Total Employee as a % of Covered September 30 Liability Position Liability Pension Liability Payroll* Employee Payroll 2016** $ 102,426,226 $ 81,875,163 $ 20,551, % $ 6,739, % ,527,031 76,560,428 17,966, % 7,145, % ,564,502 76,672,802 12,891, % 9,628, % SCHEDULE OF CONTRIBUTIONS GASB Statement No. 67 Actuarially Contribution Covered Actual Contribution FY Ending Determined Actual Deficiency Employee as a % of Covered September 30, Contribution Contribution (Excess) Payroll* Employee Payroll 2016** $ 4,051,435 $ 4,051,435 $ - $ 6,739, % ,076,435 4,140,718 (64,283) 7,145, % ,381,884 4,518,880 (136,996) 6,411, % ,473,462 4,473,462-5,511, % ,206,690 4,206,690-6,155, % ,944,843 3,951,659 (6,816) 6,487, % ,914,738 3,929,387 (14,649) 6,189, % ,820,578 3,962,325 (141,747) 5,801, % ,139,504 3,139,504-5,624, % ,775,756 3,623,786 (848,030) 4,862, % * Prior to fiscal year ending September 30, 2014, valuation payroll is shown. Covered Employee Payroll for fiscal years ending on or after September 30, 2014 was calculated by dividing total member contributions for the fiscal year by the member contribution rate of 7.65%. ** These figures are estimates only. Actual figures will be provided after the end of the fiscal year.

30 24 NOTES TO SCHEDULE OF CONTRIBUTIONS GASB Statement No. 67 Valuation Date: October 1, 2014 Notes Actuarially determined contributions are calculated as of the October 1 which is two years prior to the end of the fiscal year in which contributions are reported. Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Amortization Method Level Dollar, Closed Remaining Amortization Period 25 years Asset Valuation Method 4-year smoothed market Inflation 2.5% Salary Increases 5.90% to 9.90% depending on service Investment Rate of Return 7.8% Retirement Age Upon Eligibility Mortality RP-2000 Combined Healthy Participant Mortality Table for males and females using projection Scale BB to anticipate future mortality improvements, set back five years for disabled lives. As approved by the Board, this mortality table is being phased in, with the ages set ahead three years for the October 1, 2012 actuarial valuation as a preliminary step. Other Information: Notes See Discussion of Valuation Results on Page 1 of the October 1, 2014 Actuarial Valuation Report dated June 10, 2015.

31 25 SINGLE DISCOUNT RATE GASB Statement No. 67 A single discount rate of 7.7% was used to measure the total pension liability. This single discount rate was based on the expected rate of return on pension plan investments of 7.7%. The projection of cash flows used to determine this single discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between the total actuarially determined contribution rates and the member rate. Based on these 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 (7.7%) was applied to all periods of projected benefit payments to determine the total pension liability. Regarding the sensitivity of the net pension liability to changes in the single discount rate, the following presents the plan s net pension liability, calculated using a single discount rate of 7.7%, as well as what the plan s net pension liability would be if it were calculated using a single discount rate that is 1-percentagepoint lower or 1-percentage-point higher: Sensitivity of the Net Pension Liability to the Single Discount Rate Assumption* Current Single Discount 1% Decrease Rate Assumption 1% Increase 6.70% 7.70% 8.70% $32,204,945 $20,551,063 $11,000,570 * These figures are estimates only. Actual figures will be provided after the end of the fiscal year.

32 26 ACTUARIAL COST METHODS AND ASSUMPTIONS AS OF OCTOBER 1, 2015 Valuation Assumptions The covered group is too small to provide statistically significant experience on which to base certain demographic assumptions. Mortality is based on a commonly used fully generational mortality table and projection scale. The retirement age assumption tracks the eligibility requirements for normal retirement. Note that a member must be eligible for normal retirement in order to enter the DROP. We recommend that an experience study be prepared, with particular attention to assumed rates of withdrawal and retirement, as well as to the salary scale. Economic Assumptions The investment return rate assumed in the valuation is 7.7% per direction from the Board of Trustees based on information from their investment consultant. The 7.7% is per year, compounded annually, net of investment expenses. The wage inflation rate assumed in this valuation was 2.5% per year. The Wage Inflation Rate is defined to be the portion of total pay increases for an individual that are due to macro-economic forces including productivity, price inflation, and labor market conditions. The wage inflation rate does not include pay changes related to individual merit and seniority effects. The assumed real rate of return over wage inflation is defined to be the portion of total investment return that is more than the assumed wage inflation rate. Considering other economic assumptions, the 7.7% investment return rate translates to an assumed real rate of return over wage inflation of 5.2%. Payroll growth The active member population is assumed to remain constant. For purposes of financing the unfunded liabilities, total payroll is assumed to grow at 0% per year. However, for purposes of projecting the contribution to the following year, total payroll is assumed to grow at 4.0% per year. Administrative Expenses paid out of the fund are assumed to be the average of actual expenses over the previous two years. Pay increase assumptions for individual active members are shown below. Part of the assumption for each age for merit and/or seniority increase, and the other 2.5% recognizes wage inflation, including price inflation, productivity increases, and other macro-economic forces. The rates of salary increase used are select and ultimate table with rates ranging from 9.85% in the early years to an ultimate rate of 5.85%, as shown in the following table. Years of Service Rate % % 7&Up 5.85%

33 27 Demographic Assumptions The mortality table The RP-2000 Combined Healthy Participant Mortality Tables for males and females, using projection Scale BB to anticipate future mortality improvements, set back five years for disabled lives. As approved by the Board, the change in the mortality table is being phased in. The updated table was used with ages set ahead three years beginning with the October 1, 2012 actuarial valuation as a preliminary step. This assumption is used to measure the probabilities of members dying before retirement and the probabilities of each benefit payment being made after retirement. For disabled retirees, the regular mortality tables are set forward five years to reflect impaired longevity. Sample Rates with ages set ahead three years: Sample Ages in % Mortality During the Year Future Life Expectancy (years) 2015 Men Women Men Women % 0.21% % 0.35% % 0.64% % 1.12% % 1.92% % 3.14% % 5.22% Ref: 506 x x Sample Rates with no age adjustments: Sample Ages in % Mortality During the Year Future Life Expectancy (years) 2015 Men Women Men Women % 0.16% % 0.25% % 0.43% % 0.81% % 1.40% % 2.35% % 3.83% Ref: 506 x x The rates of retirement are used to measure the probability of eligible members retiring during the next year. It was assume that eligible members retire upon eligibility. Assumed eligibility is age 55 and 10 years of service, 20 years of service regardless of age, or Rule of 64. Any actuarial losses due to early retirement are assumed to be offset by gains due to eliminating future salary increases. Any actuarial losses due to delayed retirement are assumed to be offset by gains due to delaying the benefit commencement date.

34 28 Rates of separation from active membership were as shown below (rates do not apply to members eligible to retire and do not include separation on account of death or disability). This assumption measures the probabilities of members remaining in employment. Sample Ages % of Active Members Separating from Service within the Next Year % Rates of disability among active members were as shown below (75% of disabilities are assumed to be serviceconnected). This assumption measures the probability of members retiring with a disability benefit. Sample Ages % of Active Members Becoming Disabled within the Next Year % Valuation Methods Actuarial Cost Method - Normal cost and the allocation of benefit values between service rendered before and after the valuation date were determined using an Individual Entry-Age Actuarial Cost Method having the following characteristics: (i) the annual normal cost for each individual active member, payable from the date of employment to the date of retirement, is sufficient to accumulate the value of the member s benefit at the time of retirement; (ii) each annual normal cost is a constant percentage of the member s year by year projected covered pay. Actuarial gains/(losses), as they occur, reduce (increase) the Unfunded Actuarial Accrued Liability. Financing of Unfunded Actuarial Accrued Liabilities - Unfunded Actuarial Accrued Liabilities (full funding credit if assets exceed liabilities) were amortized by level (principal & interest combined) dollar contributions over a reasonable period of future years. Actuarial Value of Assets - The Actuarial Value of Assets phases in the difference between the expected return on the actuarial value of assets and the actual return on the market of assets at the rate of 25% per year. The Actuarial Value of Assets is further adjusted to the extent necessary to fall within the corridor whose lower limit is 80% of the Market Value of plan assets and whose upper limit is 120% of the Market Value of plan assets. During periods when investment performance exceeds the assumed rate, Actuarial Value of Assets will tend to be less than Market Value. During periods when investment performance is less than assumed rate, Actuarial Value of Assets will tend to be greater than Market Value.

35 29 MISCELLANEOUS AND TECHNICAL ASSUMPTIONS Administrative Expenses Benefit Service Decrement Operation Decrement Timing Eligibility Testing Incidence of Contributions Marriage Assumption Normal Form of Benefit Option Factors Pay Increase Timing Reemployment, Transfers, Service Purchases Service Credit Accruals Technical Adjustments Vested Terminated Members Expenses paid out of the fund, other than investment expenses, are assumed to be equal to the average of actual amounts for the previous two years. Years and completed months of service are used to determine the benefit payable. Turnover does not operate during Normal Retirement eligibility. Decrements are assumed to occur at the beginning of the year. Eligibility for benefits is determined based upon the age nearest birthday and service nearest whole year on the date the decrement is assumed to occur. Member Contributions are assumed to be received monthly throughout the year. City Contributions are assumed to be received quarterly. 100% of employees are assumed to be married for purposes of deathin-service benefits. Male spouses are assumed to be three years older than female spouses for active member valuation purposes. 10 years certain and life thereafter. Valuation assumptions. Beginning of (fiscal) year. No assumption. One year of service credit is assumed accrued per year. The actuarial present value of projected vested terminated benefits and service retirement benefits are increased by 17.0% to anticipate the effect of adding overtime to final average compensation. Receive the greater value of a refund of accumulated member contributions, with interest if applicable, or the vested deferred benefit.

36 30 GLOSSARY OF TERMS Actuarial Accrued Liability (AAL) Actuarial Assumptions Actuarial Cost Method Actuarial Equivalent Actuarial Present Value (APV) Actuarial Present Value of Future Benefits (APVFB) Actuarial Valuation Actuarial Value of Assets The difference between the Actuarial Present Value of Future Benefits, and the Actuarial Present Value of Future Normal Costs. Assumptions about future plan experience that affect costs or liabilities, such as: mortality, withdrawal, disablement, and retirement; future increases in salary; future rates of investment earnings; future investment and administrative expenses; characteristics of members not specified in the data, such as marital status; characteristics of future members; future elections made by members; and other items. A procedure for allocating the Actuarial Present Value of Future Benefits between the Actuarial Present Value of Future Normal Costs and the Actuarial Accrued Liability. Of equal Actuarial Present Value, determined as of a given date and based on a given set of Actuarial Assumptions. The amount of funds required to provide a payment or series of payments in the future. It is determined by discounting the future payments with an assumed interest rate and with the assumed probability each payment will be made. The Actuarial Present Value of amounts which are expected to be paid at various future times to active members, retired members, beneficiaries receiving benefits, and inactive, nonretired members entitled to either a refund or a future retirement benefit. Expressed another way, it is the value that would have to be invested on the valuation date so that the amount invested plus investment earnings would provide sufficient assets to pay all projected benefits and expenses when due. The determination, as of a valuation date, of the Normal Cost, Actuarial Accrued Liability, Actuarial Value of Assets, and related Actuarial Present Values for a plan. An Actuarial Valuation for a governmental retirement system typically also includes calculations of items needed for compliance with GASB No. 67. The value of the assets as of a given date, used by the actuary for valuation purposes. This may be the market or fair value of plan assets or a smoothed value in order to reduce the year-to-year volatility of calculated results, such as the funded ratio and the actuarially determined employer contributions (ADEC).

37 31 Amortization Method Amortization Payment Amortization Period Actuarially Determined Employer Contributions (ADEC) Closed Amortization Period Employer Normal Cost Equivalent Single Amortization Period Experience Gain/Loss Funded Ratio GASB GASB No. 67 and GASB No. 68 A method for determining the Amortization Payment. The most common methods used are level dollar and level percentage of payroll. Under the Level Dollar method, the Amortization Payment is one of a stream of payments, all equal, whose Actuarial Present Value is equal to the UAAL. Under the Level Percentage of Pay method, the Amortization Payment is one of a stream of increasing payments, whose Actuarial Present Value is equal to the UAAL. Under the Level Percentage of Pay method, the stream of payments increases at the rate at which total covered payroll of all active members is assumed to increase. That portion of the plan contribution or ARC which is designed to pay interest on and to amortize the Unfunded Actuarial Accrued Liability. The period used in calculating the Amortization Payment. The employer s periodic required contributions, expressed as a dollar amount or a percentage of covered plan compensation. The ADEC consists of the Employer Normal Cost and Amortization Payment. A specific number of years that is reduced by one each year, and declines to zero with the passage of time. For example if the amortization period is initially set at 25 years, it is 24 years at the end of one year, 23 years at the end of two years, etc. The portion of the Normal Cost to be paid by the employer. This is equal to the Normal Cost less expected member contributions. For plans that do not establish separate amortization bases (separate components of the UAAL), this is the same as the Amortization Period. For plans that do establish separate amortization bases, this is the period over which the UAAL would be amortized if all amortization bases were combined upon the current UAAL payment. A measure of the difference between the normal cost rate from last year and the normal cost rate from this year. The ratio of the Actuarial Value of Assets to the Actuarial Accrued Liability. Governmental Accounting Standards Board. These are the governmental accounting standards that set the accounting rules for public retirement systems and the employers that sponsor or contribute to them. Statement No. 67 sets the accounting rules for the employers that sponsor or contribute to public retirement systems, while Statement No. 68 sets the rules for the systems themselves.

38 32 Normal Cost Unfunded Actuarial Accrued Liability Valuation Date The annual cost assigned, under the Actuarial Cost Method, to the current plan year. The difference between the Actuarial Accrued Liability and Actuarial Value of Assets. The date as of which the Actuarial Present Value of Future Benefits are determined. The benefits expected to be paid in the future are discounted to this date.

39 SECTION III PENSION FUND INFORMATION

40 32 STATEMENT OF ASSETS AT MARKET VALUE AS OF OCTOBER 1, Investments Cash & Short Term Investments $ 3,353,820 $ 2,300,062 U.S. Government & Agency Securities 22,232,764 18,195,556 Corporate and Foreign Bonds 14,704,709 17,215,273 Mortgage Backed Securities 17,852 28,958 Equity Investments 36,269,826 38,133,919 Sub-Total 76,578,971 75,873,768 Other 4,334 4,781 Receivables & Accruals Accrued Interest & Dividends 288, ,797 Employer Contributions 528, ,526 Employee Contributions or Buybacks 27,941 9,678 Other 1, Payables/Prepaid Accounts Payable 60, ,387 DROP Benefit Payable 808,381 5,003 Net Assets Total 76,560,428 76,672,802

41 Market Value of Fund at Beg. of Year $ 76,672,802 $ 57,942,757 Post-Valuation Adjustment for DROP* N/A 8,366,754 Adjusted Market Value of Fund at Beg. of Year $ 76,672,802 $ 66,309,511 Income Contributions Members 580, ,063 State 528, ,638 City 3,816,076 4,057,242 City -- Prior Prepaid Amount** N/A 46,429 Total 4,924,749 5,245,372 Other Revenue Investment Income Interest & Dividends 2,170,880 1,737,621 Realized Gains/(Losses) 2,158,459 *** Unrealized Gains/(Losses) (3,560,849) *** Total Realized and Unrealized Gains/(Losses) (1,402,390) 9,042,845 Investment Expense (270,691) (260,431) Total 497,799 10,520,035 Total Income 5,422,756 15,765,407 Disbursements INCOME AND DISBURSEMENTS FOR THE YEAR ENDED SEPTEMBER 30 Benefits Retirement Benefits & DROP Distributions 5,450,397 5,292,181 Refunds 0 27,559 Administrative Expenses 84,733 82,376 Total 5,535,130 5,402,116 Net Increase (Decrease) in Fund (112,374) 10,363,291 Market Value of Fund at End of Year 76,560,428 76,672,802 Reserve for DROP Accounts 8,254,151 8,459,225 Reserve for Excess State Money 554, ,401 Market Value of Fund at End of Year, Net of Reserves 67,751,873 67,863,176 * One-time adjustment to reflect the DROP reserve in the total value of the fund. ** One-time adjustment of $46,429 to reflect Prepaid Employer Contribution in total value of the fund. *** Breakdown of Realized and Unrealized Gains/(Losses) was not provided for 2014.

42 34 Reconcilliation of DROP Accounts for the Year Ended September 30, 2015 Preliminary Beginning Balance $ 8,459,225 Adjustment 9,760 8,468,985 Additions 1,672,946 Earnings 1,008,803 Distributions 2,896,583 Ending Balance 8,254,151

43 35 ACTUARIAL VALUE OF ASSETS SEPTEMBER A. Valuation Assets at Beginning of Year $ 70,546,390 $ 55,018,711 Reserve for DROP Accounts, one time adjustment N/A 8,366,753 Adjusted Valuation Assets at Beginning of Year 70,546,390 $ 63,385,464 B. Contributions and Miscellaneous Income 4,924,749 5,245,372 C. Benefit Payments and Non-Investment Expenses 5,535,130 5,402,116 D. Actual Investment Earnings Net Investment Expenses 498,007 10,520,035 E. Expected Net Investment Earnings 5,478,814 5,001,260 F. Excess of Actual over Expected Investment Earnings: D-E (4,980,807) 5,518,775 G. Recognition of Excess Earnings Over 4 Years 1. From This Year (1,245,202) 1,379, From One Year Ago 1,379, , From Two Years Ago 498, , From Three Years Ago 990,154 (552,026) 5. Total 1,623,234 2,316,410 H. Prelim Valuation Assets at End of Year = A+B-C+E+G5 77,038,057 70,546,390 I. Valuation Assets must be within the range of 80% to 120% of Market Value 1. 80% of Market Value 61,248,342 61,338, % of Market Value 91,872,514 92,007, Valuation Assets 77,038,057 70,546,390 J. Adjustment for Reserves 1. DROP Reserves 8,254,151 8,459, Reserve for Excess State Money 554, , Total Reserves 8,808,555 8,809,626 K. Net Actuarial Value of Assets 68,229,502 61,736,764 L. Investment earnings recognized in Valuation Assets 7,102,048 7,317,670