Michigan Department of Treasury Office of Revenue and Tax Analysis P0 Box Lansing Ml 48909

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1 EVIP III 2014 Compliance Report - City of Flint /2014 Michigan Department of Treasury Office of Revenue and Tax Analysis P0 Box Lansing Ml RE: Compliance Form Category 3 Unfunded Accrued Liability Plan for City of Flint The City of Flint is pleased to submit form 5074 with the required documents per Public Act 59 Economic Vitality Incentive Program (EVIP) for category 3. The City of Flint has chosen to track and display this data using Munetrix to make the information readily available to the public and other local units of government. All documentation necessary to comply with the EVIP requirements are included with this letter, and we look forward to continue receiving these important funds from the State of Michigan. Please contact me if you need any further information or clarification. rnell Earley ICMA-CM, MPA Emergency Manager Generated via Munetrix Munetrix, LLC. All rights reserved. 1/4

2 EVIP III 2014 Compliance Report - City of Flint 05/28/2014 Michigan Department of Treasury (Recreated) 5074 (Rev 09-13) Economic Vitality Incentive Program/County Incentive Program Certification of Unfunded Accrued Liability Plan Issued under authority of 2013 Public Act 59. Filing is mandatory to qualify for payments. Each city/village/township/county applying for Unfunded Accrued Liability Plan payments must: 1. Certify to the Michigan Department of Treasury (Treasury) that the local unit listed below has produced and made readily available to the public Unfunded Accrued Liability Plan. The plan shall be made available for public viewing in the clerk s office or posted on a publicly accessible Internet site as required by 2013 Public Act Submit to Treasury Unfunded Accrued Liability Plan, if selecting Option 1 of part 2 below. city/village/township: This certification, along with Unfunded Accrued Liability Plan, must be received by June 1, 2014 to receive the June and August payments or on or before July 31, 2014 to receive the August payment. Post mark dates will not be considered. For questions, call (517) County: This certification, along with Unfunded Accrued Liability Plan, must be received by June 1, 2014 (or the first day of a payment month) in order to qualify for that month s payment. Post mark dates will not be considered. For questions, call (517) PART 1: LOCAL UNIT INFORMATION Local unit Name Local Unit county Name City of Flint Genesee County Local unit code contact Address gambrose@cityofflint.com contact Name contact Title :contact Phone Number ~Extension Gera!d Ambrose Finance Director (810) , Website Address, if reports are available online Date of Last Audited Financial Report PART 2: STATEMENT OF UNFUNDED ACCRUED LIABILITIES Indicate the option that pertains to your local unit: 1. Unfunded Accrued Liabilities Exist A local unit who has unfunded accrued liabilities pertaining to pensions or other post-employment benefits must attach a plan as required by 2013 Public Act 59. D ANolocal Unfunded unit whoaccrued does notliabilities have any unfunded Exisit accrued liabilities pertaining to pensions or other post-employment benefits must provide, in the box below, an explanation of why the local unit does not have any unfunded accrued liabilities. See notes on Page 3 PART 3: CERTIFICATION In accordance with 2013 Public Act 59, the undersigned hereby certifies to Treasu,y that the above mentioned local unit has produced an Unfunded Accrued Liability Plan and has made them available for public viewing in the city, village, township, or county clerk s office or has posted them on a publicly accessible Internet site. The Unfunded Accrued Liability Plan, if required is attached to this signed certification. Chie - strative Officer Signature fined in MCL b) Printed Name of chief Administrative ;;;;~2~a!t.c:e 4~:: ~:~~/ Officer (as defined in MCL 14L422b) Trtle Date Emergency Manager May 28, 2014 Completed and signed form (including required attachments) should be ed to: TreasRevenuesharing@michigan.gov If you are unable to submit via , fax to (517) or mail the completed form and required attachments to: Michigan Department of Treasury Office of Revenue and Tax Analysis P0 Box Lansing Ml TREASURY USE ONLY Evip/clp Certification Received EVIP/CIP Notes Y N Final Certification Plan Received Generated via Munetrix Munetrix, LLC. All rights reserved. 2/4

3 EVIP III 2014 Compliance Report - City of Flint 05/ Unfunded Liability Notes PREVIOUS ApION TAKEN TO REDUCE UNFUNDED ACCRUED LIABILITIES Unfunded Accrued Liability Type Pension Previous Action Taken City transferred pension fund management from the Flint Employees Retirement System (FERS) to the Michigan Employees Retirement System (MERS) in This action was based on both improving annual returns and improving service to retirees. Liability reduction from this action unknown, but investment earnings are anticipated to be greater and cost of administration less. This has the potential of reducing the employer contribution. New employees hired after April, 2012 will be enrolled in a MERS hybrid pension plan, with a cap on the employer contribution of 10%, instead of enrolling them in a traditional defined benefit program. In the long term, accrued pension liabilities 2. Pension will be significantly less, as the current defined benefit programs require an employer contribution of more than 50% in some cases. However, current employees continue in the traditional DB plans. The estimated liability reduction is unknown as MERS has not yet completed its first full valuation. New employees hired after April, 2012 will be enrolled in Retiree Medical Savings 3. OPEB Accounts, with an employer contribution of $1,500. These employees will not have employer paid healthcare in retirement, so the liability for these employees is $-0-. Beginning in FY13, all City retirees were given into the same healthcare plan options as active employees, thus reducing costs and eliminating the burden of administering some 20 plans. As a result, co-pays and deductibles were imposed, and beginning in FY14 premium co-pays were assessed. The actions taken to change retiree health care reduced the City s OPEB liability from $862 million to 4. OPEB $320 million. However, the City s actions have been challenged in federal court and the City is currently under an injunction which requires continuation of former plans or payment for reimbursement for additional costs until the lawsuit is resolved. At this time, should the healthcare lawsuit be lost, the City projects that it will need to increase its FY15 budget for retiree health care from the FY14 level of $15 million to as much as $25 million. Accumulated Absences The City is beginning to transition from traditional accumulations of sick, vacation, and other paid time off to a Paid Time Off (PTO)system. Accumulations are reduced and a 300 hour maximum cap is established. It is projected that when fully implemented, the amount of compensated absences ($5.3 million at the end of FY13) will be reduced by more than 50% over time, although initially the reduction will be much less, since current banks are being frozen, not eliminated. Generated via ~4un~iix Munetrix, LLC. All rights reserved. 314

4 EVIP III 2014 Compliance Report - City of Flint 05/28/2014 How Will The Local Unit Continue To Implement And Maintain Previous Actions Taken Now a part of MERS, the City will be gradually reducing its amortization period from 30 years to 20 years, along with other members of MERS, ultimately strengthening the system. Effective July 1, 2015, the City intends that for new retirees who are not Medicare eligible, the City s contribution for retiree health care will be limited to the amount the City pays for Medicare eligible retirees. This is estimated to reduce the City s annual cost by approximately 10%. The City is in the process of incorporating all of these changes into labor contracts. Under the direction of an Emergency Manager, these changes can be imposed if they are not negotiated. At this time, at least one bargaining unit has agreed to these changes. One has not and the steps to impose are underway. The City intends that all necessary contract language will be in place by July 1, 2014 to assure that these changes continue. The City continues to use the services of a health care consultant to evaluate and implement future changes in health care which will be beneficial to the City and the retiree. And as a member of MERS, the City will have access to qualified retirement system consultants for the same purpose. Additional Actions That Could Be Implemented Note: Actuarial assumption changes and issuance of debt instruments do not qualify as new action. 1. Prevailing in the retiree health care lawsuit is essential if the City is to restore financial solvency. State support in this endeavor is critical. 2. For new employees, there is no promise of City provided health care at retirement, and the employer s contribution to pension is limited to 10%. The accumulated liability for paid time off has been reduced significantly. It is difficult to envision what additional changes can be made to the compensation structure for new employees which will allow the City to be competitive as it seeks to attract and retain qualified employees. 3. The remaining courses of action would be to eliminate the pension benefit and retiree health care benefit for current employees who are not vested. This would have a negative impact on morale and would affect a relatively small number of employees. Extending this to all employees - vested or not - would certainly be challenged. Generated via Munetrix Munetrix, LLC. All rights reserved. 4/4

5 City of Flint GASB 45 Actuarial Valuation Fiscal Year Ending June 30, 2013 PRELIMINARY #2 Prepared by: Nyhart 8415 Allison Pointe Blvd., Suite 300 Indianapolis, IN Ph: (317)

6 Table of Contents Page Certification 1 Executive Summary 2 GASB Disclosures Development of Annual Required Contribution (ARC) 5 Development of Annual OPEB Cost and Net OPEB Obligation 6 Schedule of Funding Progress 7 Schedule of Employer Contributions 7 Historical Annual OPEB Cost 7 Reconciliation of Actuarial Accrued Liability (AAL) 8 Employer Contribution Cash Flow Projections 9 Substantive Plan Provisions 10 Actuarial Methods and Assumptions 13 Summary of Plan Participants 18 Appendix 21 Comparison of Participant Demographic Information 22 Glossary 23 Decrements Exhibit 24 Retirement Rates Exhibit 25 Illustrations of GASB Calculations 26 Definitions 28

7 November 1, 2013 Gerald Ambrose 1101 S. Saginaw St. Flint, MI This report summarizes the GASB actuarial valuation for the City of Flint 2012/13 fiscal year. To the best of our knowledge, the report presents a fair position of the funded status of the plan in accordance with GASB Statement No. 45 (Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions). The valuation is also based upon our understanding of the plan provisions as summarized within the report. The information presented herein is based on the information furnished to us by the Plan Sponsor that has been reconciled and reviewed for reasonableness. We are not aware of any material inadequacy in employee census provided by the Plan Sponsor. We have not audited the information at the source, and therefore do not accept responsibility for the accuracy or the completeness of the data on which the information is based. The actuarial assumptions were selected by the Plan Sponsor with the concurrence of Nyhart. In our opinion, the actuarial assumptions are individually reasonable and in combination represent our estimate of anticipated experience of the Plan. All computations have been made in accordance with generally accepted actuarial principles and practice. To our knowledge, there have been no significant events prior to the current year's measurement date or as of the date of this report that could materially affect the results contained herein. Neither Nyhart nor any of its employees has any relationship with the plan or its sponsor that could impair or appear to impair the objectivity of this report. Should you have any questions please do not hesitate to contact us. Randy Gomez, FSA, MAAA Evi Laksana, ASA, MAAA Consulting Actuary Valuation Actuary 1 P a g e

8 City of Flint GASB Valuation Executive Summary For Fiscal Year Ending June 30, 2013 Summary of Results Presented below is the summary of GASB 45 results for the fiscal year ending June 30, 2013 compared to the prior fiscal years as shown in the City s Notes to Financial Statement. As of July 1, 2011 As of July 1, 2012 Actuarial Accrued Liability $ 366,832,597 $ 320,180,757 Actuarial Value of Assets $ 0 $ 166,903 Unfunded Actuarial Accrued Liability $ 366,832,597 $ 320,013,854 Funded Ratio 0.0% 0.1% FY 2011/12 FY 2012/13 Annual Required Contribution $ 24,760,942 $ 21,789,244 Annual OPEB Cost $ 22,105,830 $ 18,952,618 Annual Employer Contribution $ 20,415,284 $ 17,016,014 As of June 30, 2012 As of June 30, 2013 Net OPEB Obligation $ 158,284,670 $ 158,901,701 As of July 1, 2011 As of July 1, 2013 Active Participants Total Retiree Participants 1,550 1,833 The active participants number above includes active employees with coverage only. 2 P a g e

9 City of Flint GASB Valuation Executive Summary For Fiscal Year Ending June 30, 2013 Below is a breakdown of total GASB 45 liabilities allocated to past, current, and future service as of July 1, 2012 compared to the prior year. As of July 1, 2011 As of July 1, 2012 Present Value of Future Benefits $ 390,166,454 $ 339,762,108 Active Employees 103,958,032 84,386,493 Retired Employees 286,208, ,375,615 Actuarial Accrued Liability $ 366,832,597 $ 320,180,757 Active Employees 80,624,175 64,805,142 Retired Employees 286,208, ,375,615 Normal Cost 1 $ 3,013,463 $ 2,435,276 Future Normal Cost $ 20,320,394 $ 17,146,075 Present Value of Future Benefits is the amount needed as of July 1, 2012 to fully fund the City s retiree health care subsidies for existing and future retirees and their dependents assuming all actuarial assumptions are met. Actuarial Accrued Liability is the portion of PVFB considered to be accrued or earned as of July 1, This amount is a required disclosure in the Required Supplementary Information section. Normal Cost is the portion of the total liability amount that is attributed and accrued for current year s active employee service by the actuarial cost method. Future Normal Cost is the portion of the total liability amount that is attributed to the future employee service by the current year s valuation by the actuarial cost method. 1 Before reduction for employee contributions to the VEBA Trust 3 P a g e

10 City of Flint GASB Valuation Executive Summary For Fiscal Year Ending June 30, 2013 Below is a breakdown of total GASB 45 Actuarial Accrued Liability (AAL) allocated to pre and post Medicare eligibility. The liability shown below includes explicit (if any) and implicit subsidies. Refer to the Substantive Plan Provisions section for complete information on the Plan Sponsor s GASB subsidies. Actuarial Accrued Liability (AAL) As of July 1, 2011 As of July 1, 2012 Active Pre-Medicare $ 26,412,737 $ 21,915,316 Active Post-Medicare 54,211,438 42,889,826 Total Active AAL $ 80,624,175 $ 64,805,142 Retirees Pre-Medicare $ 52,630,541 $ 49,172,916 Retirees Post-Medicare 233,577, ,202,699 Total Retirees AAL $ 286,208,422 $ 255,375,615 Total AAL $ 366,832,597 $ 320,180,757 Millions $350 $300 $250 $200 $150 $100 $50 $0 Change in AAL $288 $249 $79 $71 Pre-Medicare Cost Post-Medicare Cost July 1, 2011 July 1, P a g e

11 City of Flint GASB Valuation GASB Disclosures For Fiscal Year Ending June 30, 2013 Development of Annual Required Contribution (ARC) Required Supplementary Information 2011/ /13 Actuarial Accrued Liability as of beginning of year $ 366,832,597 $ 320,180,757 Millions $30 $25 $20 Cash vs Accrual Accounting Actuarial Value of Assets as of beginning of year 0 (166,903) Unfunded Actuarial Accrued Liability (UAAL) $ 366,832,597 $ 320,013,854 Covered payroll 2 $ 39,339,842 $ N/A $15 $10 $25 $22 $20 $17 UAAL as a % of covered payroll 982% N/A $5 Annual Required Contribution 2011/ /13 Normal cost as of beginning of year 3 $ 2,780,204 $ 2,287,965 Amortization of the UAAL 20,971,299 18,612,988 $0 ARC Pay-go cost 2011/ /13 Total normal cost and amortization payment $ 23,751,503 $ 20,900,953 Interest to end of year 1,009, ,291 Total Annual Required Contribution (ARC) $ 24,760,942 $ 21,789,244 Annual Required Contribution (ARC) is the annual expense recorded in the income statement under GASB 45 accrual accounting. It replaces the cash basis method of accounting recognition with an accrual method. The GASB 45 ARC is higher than the pay-as-you-go cost because it includes recognition of employer costs expected to be paid in future accounting periods /12 covered payroll is based on 2010/11 covered payroll ($36,252,274) increased by the payroll growth assumption (3.0%). 3 The 2012/13 normal cost is after reduction for employee contributions of $147,311 to the VEBA Trust. 5 P a g e

12 City of Flint GASB Valuation GASB Disclosures For Fiscal Year Ending June 30, 2013 Development of Annual OPEB Cost and Net OPEB Obligation Net OPEB Obligation 2011/ /13 ARC as of end of year $ 24,760,942 $ 21,789,244 Interest on Net OPEB Obligation (NOO) to end of year 6,599,598 6,671,447 NOO amortization adjustment to the ARC (9,254,710) (9,518,192) Annual OPEB cost $ 22,105,830 $ 18,942,499 Annual employer contribution for pay-go cost (20,415,284) (17,016,014) Annual employer contribution for pre-funding 0 0 Change in NOO $ 1,690,546 $ 1,926,485 NOO as of beginning of year 155,284, ,975,216 NOO as of end of year $ 156,975,216 $ 158,901,701 Pay-as-you-go Cost is the expected total employer cash cost for the coming period based on all explicit and implicit subsidies. It is also the amount recognized as expense on the Income Statement under pay-as-you-go accounting. Net OPEB Obligation is the cumulative difference between the annual OPB cost and employer contributions. This obligation will be created if cash contributions are less than the current year expense under GASB 45 accrual rules. The net obligation is recorded as a liability on the employer s balance sheet which will reduce the net fund balance. The value of implicit subsidies is considered as part of cash contributions for the current period. Other cash expenditures that meet certain conditions are also considered as contributions for GASB 45 purposes. Breakdown of Actual Pay-go Costs 2012/13 Premium payments for fully-insured plans $ 2,381,236 Premium payments for Medicare Advantage plan 683,233 Retirees paid claims net of stop-loss reimbursements 13,037,252 Retirees administrative expenses 914,293 Retiree contributions 0 Total pay-go cost $ 17,016,014 6 P a g e

13 City of Flint GASB Valuation GASB Disclosures For Fiscal Year Ending June 30, 2013 Summary of GASB 45 Financial Results Presented below is the summary of GASB 45 results for the fiscal year ending June 30, 2013 and prior fiscal years as shown in the City s Notes to Financial Statements. Schedule of Funding Progress As of Actuarial Accrued Liability (AAL) Actuarial Value of Assets (AVA) Unfunded Actuarial Accrued Liability (UAAL) Funded Ratio Covered Payroll UAAL as % of Covered Payroll A B C = A - B D = B / A E F = C / E July 1, 2012 $ 320,180,757 $ 166,903 $ 320,013, % N/A N/A July 1, 2011 $ 366,832,597 $ - $ 366,832, % $ 37,339, % July 1, 2010 $ 862,302,934 $ - $ 862,302, % $ 36,252,274 2,379% Schedule of Employer Contributions FYE Employer Contributions Annual Required Contribution (ARC) % of ARC Contributed A B C = A / B June 30, 2013 $ 17,016,014 $ 21,789, % June 30, 2012 $ 20,415,284 $ 24,760, % June 30, 2011 $ 19,683,009 $ 63,294, % Historical Annual OPEB Cost As of Annual OPEB Cost % of Annual OPEB Cost Contributed Net OPEB Obligation June 30, 2013 $ 18,942, % $ 158,901,701 June 30, 2012 $ 22,105, % $ 156,975,216 June 30, 2011 $ 61,351, % $ 155,284,670 7 P a g e

14 City of Flint GASB Valuation Reconciliation of Actuarial Accrued Liability For Fiscal Year Ending June 30, 2013 The Actuarial Accrued Liability (AAL) is expected to change on an annual basis as a result of expected and unexpected events. Under normal circumstances, it is generally expected to have a net increase each year. Below is a list of the most common events affecting the AAL and whether they increase or decrease the liability. Expected Events Increases in AAL due to additional benefit accruals as employees continue to earn service each year Increases in AAL due to interest as the employees and retirees age Decreases in AAL due to benefit payments Unexpected Events Increases in AAL when actual premium rates increase more than expected. A liability decrease occurs when premium rates increase less than expected. Increases in AAL when more new retirements occur than expected or fewer terminations occur than anticipated. Liability decreases occur when the opposite outcomes happen. Increases or decreases in AAL depending on whether benefit provisions are improved or reduced. 2011/ /13 4 Actuarial Accrued Liability as of beginning of year $ 366,832,597 $ 320,180,757 Normal cost as of beginning of year 3,013,463 2,435,276 Expected benefit payments during the year (13,745,757) (11,450,940) Interest adjustment to end of year 15,424,377 13,470,381 Expected Actuarial Accrued Liability as of end of year $ 371,524,680 $ 324,635,474 Actuarial (gain) / loss due to experience (65,211,408) 0 Actuarial (gain) / loss due to provisions / assumptions changes 13,867,485 0 Actual Actuarial Accrued Liability as of end of year $ 320,180,757 $ 324,635,474 Reconciliation of AAL shows what the actuary expects the actuarial accrued liability to be at the beginning of the following fiscal year based on current assumptions and plan provisions. The expected end of year AAL will change as actual plan experience varies from assumptions. Generally, the AAL is expected to have a net increate each year. 4 Actuarial Accrued Liability (AAL) as of beginning of year was actuarially rolled-back from end of year AAL on a no gain/loss basis. 8 P a g e

15 City of Flint GASB Valuation Employer Contribution Cash Flow Projections For Fiscal Year Ending June 30, 2013 The below projections show the actuarially estimated employer-paid contributions for retiree health benefits for the next ten years. Results are shown separately for current /future retirees and gross claim costs/retiree contributions. These projections include explicit and implicit subsidies. FYE Current Retirees Future Retirees 5 Total 2013 $ 11,289,514 $ 161,426 $ 11,450, $ 12,305,571 $ 175,955 $ 12,481, $ 12,696,032 $ 362,216 $ 13,058, $ 13,045,466 $ 516,715 $ 13,562, $ 13,341,698 $ 682,546 $ 14,024, $ 13,538,950 $ 918,848 $ 14,457, $ 13,755,507 $ 1,128,566 $ 14,884, $ 13,933,758 $ 1,422,009 $ 15,355, $ 14,023,806 $ 1,723,593 $ 15,747, $ 14,112,089 $ 2,029,914 $ 16,142,003 FYE Estimated Claims Costs Retiree Contributions Net Employer- Paid Costs 2013 $ 13,491,693 $ 2,040,753 $ 11,450, $ 14,705,947 $ 2,224,421 $ 12,481, $ 15,762,912 $ 2,704,664 $ 13,058, $ 16,715,926 $ 3,153,745 $ 13,562, $ 17,585,159 $ 3,560,915 $ 14,024, $ 18,437,439 $ 3,979,641 $ 14,457, $ 19,239,325 $ 4,355,252 $ 14,884, $ 20,046,361 $ 4,690,594 $ 15,355, $ 20,703,727 $ 4,956,328 $ 15,747, $ 21,314,696 $ 5,172,693 $ 16,142,003 Millions Millions $18 $15 $12 $9 $6 $3 $0 $25 $20 $15 $10 $5 $0 Projected Employer Pay-go Cost Current Retirees Future Retirees Projected Employer Pay-go Cost Retiree Contributions Net Employer Paid Costs 5 Projections for future retirees do not take into account future new hires. 9 P a g e

16 City of Flint GASB Valuation Substantive Plan Provisions For Fiscal Year Ending June 30, 2013 Eligibility Local 1600 & 1799 Regular employees hired prior to April 25, 2012 are eligible for lifetime retiree health care coverage once they satisfy the following requirements: 1. Earlier of 25 years of service or age 55 with 10 years of service for employees hired on/before September 26, Age 55 with 10 years of service for employees hired after September 26, 1984 and on/before June 30, Earlier of age 59 with 10 years of service or age 55 with 30 years of service for employees hired on/after July 1, 1997 Employees hired on or after April 25, 2012 are eligible for contributions to a Retiree Medical Savings Account (RMSA) account while employed. They will not be eligible for healthcare coverage at retirement. Fire Local 352 Regular employees hired prior to April 16, 2012 are eligible for lifetime retiree health care coverage once they attain 23 years of service or age 55 with 10 years of service. Employees hired on or after April 16, 2012 are eligible for contributions to a RMSA account while employed. They will not be eligible for healthcare coverage at retirement. Police Officers Association All police officers hired prior to April 24, 2012 are eligible for lifetime retiree health care coverage once they satisfy the following requirements: years of service for officers hired prior to July 1, Age 50 with 25 years of service for officers hired on/after July 1, 1996 Employees hired on or after April 24, 2012 are eligible for contributions to a RMSA account while employed. They will not be eligible for healthcare coverage at retirement. Police Sergeants Association Lieutenants and Captains Union All police sergeants, lieutenants, and captains hired prior to April 16, 2012 are eligible for lifetime retiree health care coverage once they satisfy the following requirements: years of service for officers hired prior to July 1, Age 50 with 25 years of service for officers hired on/after July 1, 1994 Employees hired on or after April 16, 2012 are eligible for contributions to a RMSA account while employed. They will not be eligible for healthcare coverage at retirement. 10 P a g e

17 City of Flint GASB Valuation Substantive Plan Provisions For Fiscal Year Ending June 30, 2013 Eligibility continued Exempt and Non-Union Employees Employees hired prior to April 24, 2012 are eligible for lifetime retiree health care coverage once they attain 25 years of service or age 55 with 10 years of service. Employees hired on or after April 24, 2012 are eligible for contributions to a RMSA account while employed. They will not be eligible for healthcare coverage at retirement. Appointed Officials Explicit Subsidy Retiree Cost Sharing All appointed officials hired prior to April 24, 2012 are eligible for lifetime retiree health care coverage once they attain 25 years of service or age 55 with 8 years of service for officials appointed prior to October 1, Employees hired on or after April 24, 2012 are eligible for contributions to a RMSA account while employed. They will not be eligible for healthcare coverage at retirement. City s subsidy for existing retirees and various employee groups are as follows: 1. Existing retirees and employees who were vested as of July 1, 2012 the City pays (i) the applicable premium rate or (ii) Michigan State caps, whichever is lower. 2. Employees hired before July 1, 2012 but not vested as of that date the City pays (i) the applicable premium rate or (ii) Michigan state caps, whichever is lower, for retiree only coverage. There is no City subsidy for dependents (including spouses). Employees hired on or after July 1, 2012 will not be eligible for healthcare benefits at retirement. Retirees are required to contribute the portion of premiums not covered by the City s explicit subsidy. Spouse Benefit Local 1600 & 1799 Retiree health care coverage will cease upon death of the retiree except for those who retired prior to July 1, Fire Local or between June 30, 1996 and the effective date of the union s 2012 agreement. Vision All Others Retiree health care coverage continues to surviving spouse upon death of retirees or active employees who have met retirement eligibility. Upon death of active employees who have not met retirement eligibility, surviving spouse receives COBRA for 36 months. Vision coverage is available to retirees. After one year of retirement all groups are eligible to have 50% of the premium subsidized by the City. 11 P a g e

18 City of Flint GASB Valuation Substantive Plan Provisions For Fiscal Year Ending June 30, 2013 Life Insurance Life insurance benefits for future retirees are paid by the City for the following Union groups: $1,000 for Local 1600 & 1799 employees hired before October 1, 2003 $2,000 for Firefighters Local 352 $5,000 for Appointed Officials Current retirees have varying life insurance amounts. We have valued the life insurance benefits as provided by the City for current retirees. Medical Benefit Those who retired prior to July 1, 2000 have been grandfathered into the prescription drug benefits that the member had in the last year of employment. Future retirees must enroll in the BCBS three-tier plan, the HealthPlus three-tier plan, or the McLaren plan at retirement. The BCBS plans are self-insured. HealthPlus and McLaren plans are fully insured and partially experience rated. Prescription drugs are covered on a primary-basis for Medicare retirees and spouses. Monthly premium rates for retirees by plan effective on July 1, 2013 are as shown below. Pre-65 Post-65 Health Plans Single Double Single Double BCBS $10/40/80 Rx $ $ $ $ BCBS $10/20 Rx $ $ 1, $ $ BCBS $5 Rx $ $ $ $ 1, BCBS $3 Rx $ $ 1, $ $ 1, BCBS $2 Rx $ $ 1, $ $ 1, HealthPlus $20/40/60 Rx $ $ $ $ HealthPlus $10/20 Rx $ $ $ $ HealthPlus $10 Rx $ $ $ $ HealthPlus $5 Rx $ $ 1, N/A N/A HealthPlus $0 Rx $ $ 1, $ $ McLaren $ $ 1, N/A N/A 12 P a g e

19 City of Flint GASB Valuation Actuarial Methods and Assumptions For Fiscal Year Ending June 30, 2013 The actuarial assumptions used in this report represent a reasonable long-term expectation of future OPEB outcomes. As national economic and City experience change over time, the assumptions will be tested for ongoing reasonableness and, if necessary, updated. There are no significant changes to the actuarial methods and assumptions since the last valuation, which was for the fiscal year ending June 30, For the current year s valuation, we have updated the mortality table and per capita costs. We expect to update the per capita costs and health care trend rates for the next full valuation, which will be for the fiscal year ending June 30, Measurement Date June 30, 2013 with results actuarially projected to July 1, 2012 on a no loss/no gain basis Discount Rate 4.25% Inflation Rate 3.00% Payroll Growth Cost Method Amortization Census Data Employer Funding Policy Mortality Disability 3.00% (used for total covered payroll projection only) Entry Age Normal Level Dollar Level dollar based on a closed group. The remaining amortization period as of June 30, 2013 is 29 years. Census data was provided by the City and it was collected as of August We have reviewed it for reasonableness and no material modifications were made to the census data. Pay-as-you-go cash basis RP-2000 Combined Mortality Table fully generational using Scale AA (Prior valuation used RP-2000 Combined Mortality Table projected to 2010 using Scale AA). None 13 P a g e

20 City of Flint GASB Valuation Actuarial Methods and Assumptions For Fiscal Year Ending June 30, 2013 Retirement Rates Annual rates of retirement used in the GASB valuation is the same as those shown in the City of Flint Employees Retirement System actuarial valuation report for the fiscal year ending June 30, Annual rates by group are as shown below. Age Police and Fire All Others Age Police and Fire All Others % 0% 58 80% 15% 45 40% 20% 59 90% 15% % 15% % 70% 55 50% 15% % 60% 56 60% 15% % 70% 57 70% 15% % 100% Turnover Rates Assumption used to project terminations (voluntary and involuntary) prior to meeting minimum retirement eligibility for retiree health coverage. The rates represent the probability of termination in the next 12 months. The termination rates are the same as those shown on the City of Flint Employees Retirement System actuarial valuation report for the fiscal year ending June 30, Sample annual turnover rates are shown below: Age YOS All Others Police Fire All Ages % 12.00% 10.00% % 9.00% 7.00% % 7.00% 5.00% % 5.00% 4.00% % 4.50% 3.50% % 4.50% 3.50% % 4.50% 3.50% % 3.90% 2.90% % 2.30% 1.50% % 0.90% 0.60% % 0.50% 0.50% % 0.50% 0.50% 5 and more 14 P a g e

21 City of Flint GASB Valuation Actuarial Methods and Assumptions For Fiscal Year Ending June 30, 2013 Health Care Trend Rates FYE Health FYE Health % % % % % % % % % The initial trend rate was based on a combination of employer history, national trend surveys, and professional judgment. The ultimate trend rate was selected based on historical medical CPI information. Michigan State caps are assumed to increase 4.5% per year. Retiree Contributions Retiree contributions are assumed to increase according to health care trend rates. Health Care Coverage Election Rate Other active employees with current coverage: 100% Active employees with no coverage: 0% Deferred vested participants: None reported Inactive employees with current coverage: 100% Inactive employees with no coverage: 0% Spousal Coverage 65% of male and 45% of female employees are assumed to be married upon retirement. Inactive spousal coverage is based on actual data. Husbands are assumed to be two years older than wives. 15 P a g e

22 City of Flint GASB Valuation Actuarial Methods and Assumptions For Fiscal Year Ending June 30, 2013 Per Capita Costs For Health Plus plans, the annual per capita costs were calculated based on the 2013/14 premium rates actuarially increased to retiree appropriate level using current enrollment and health index factors. Active employees currently enrolled in the McLaren plan are assumed to elect the Health Plus plan at retirement and the per capita costs below will also apply to them. Retired before 7/1/2000 Retired on or after 7/1/2000 Age Male Female Male Female <55 $ 4,900 $ 5,200 $ 4,600 $ 4, $ 5,900 $ 5,800 $ 5,500 $ 5, $ 7,600 $ 6,800 $ 7,100 $ 6, $ 4,800 $ 4,800 $ 4,000 $ 4, $ 5,700 $ 5,700 $ 4,800 $ 4, $ 6,500 $ 6,500 $ 5,500 $ 5,500 The per capita costs represent the cost of coverage for a retiree-only population. Actuarial standards require the recognition of higher inherent costs for a retired population versus an active population. For the self-insured BCBS plans, Nyhart used the premium equivalent rates without adjustment in our calculations. The rates were provided by the City s consultant and were assumed to represent the expected cost of claims and administrative expenses under the health plans. The consultant has also indicated that the rates have been increased to retiree-appropriate level. As such, the per capita costs for the BCBS plans are equal to the premium rates. Pre-65 Post-65 BCBS Plans Retiree Spouse Retiree Spouse Retired before 7/1/2000* $ 6,586 $ 9,220 $ 7,102 $ 7,102 Retired on or after 7/1/2000 $ 5,075 $ 7,105 $ 2,721 $ 2,721 * Based on the weighted average premium rates across all plans for all participants in this category. To the extent the rates do not reflect the full cost of retiree coverage, our actuarial results will need to be revised. Common reasons for rates not reflecting the full cost are (1) use of asset reserves to pay a portion of the expected costs which leads to lower rates than required based on claims experience and (2) use of maximum claim exposure under the plan s aggregate stop-loss policy to set rates which overstate the expected costs for GASB 45 purposes. 16 P a g e

23 City of Flint GASB Valuation Actuarial Methods and Assumptions For Fiscal Year Ending June 30, 2013 Explicit Subsidy The difference between (a) the premium rate and (b) the retiree contribution. Below is an example of the monthly explicit subsidies for a future retiree under the age of 65 enrolled in the Health Plus $20/40/60 Rx plan. Premium Rate Retiree Contribution Explicit Subsidy A B C = A B Retiree $ $ 0.00 $ Spouse $ $ 0.00 $ Implicit Subsidy The difference between (a) the per capita cost and (b) the premium rate. Below is an example of the monthly implicit subsidies for a male future retiree enrolled in the Health Plus $20/40/60 plan. Per Capita Cost Premium Rate * Implicit Subsidy A B C = A B Retiree $ $ $ Spouse $ $ $ 0.00 All employers that utilize premium rates based on blended active/retiree claims experience will have an implicit subsidy. There is an exception for plans using a true community-rated premium rate. * Premium Rate has been limited to the per capita cost. GASB Subsidy Breakdown Below is a breakdown of the GASB 45 monthly total cost for a male future retiree and his spouse of the same age enrolled in the Health Plus $20/40/60 Rx plan. $600 GASB Subsidy Breakdown $210 Retiree Spouse Retiree contribution $ 0.00 $ 0.00 Explicit subsidy $ $ Implicit subsidy $ $ 0.00 $400 $200 $382 $568 Total monthly cost $ $ $0 Retiree Retiree contribution Implicit subsidy Spouse Explicit subsidy 17 P a g e

24 City of Flint GASB Valuation Summary of Plan Participants For Fiscal Year Ending June 30, 2013 Actives with coverage (by Union) Single Non-Single Total Avg. Age Avg. Svc Salary Fire N/A Appointed Officials N/A Local N/A Local N/A Police (FPOA) N/A Lieutenants and Captains N/A Sergeants N/A Exempt High N/A Exempt Low N/A Non-Union N/A Total actives with coverage N/A Actives with coverage (by Health Plan) Single Non-Single Total Avg. Age Avg. Svc Salary BCBS Community Blue PPO N/A HealthPlus N/A McLaren N/A Total actives with coverage N/A Active with coverage enrollment above includes twelve employees who will not be eligible for healthcare benefits at retirement. No information was provided for employees without coverage. 18 P a g e

25 City of Flint GASB Valuation Summary of Plan Participants For Fiscal Year Ending June 30, 2013 Retirees with coverage (by Health Plan) Single Non-Single Total Avg. Age BCBS Community Blue PPO 1, , HealthPlus McLaren Total retirees with coverage 1, , Retiree with coverage enrollment above includes spouses who have been issued an individual policy. No information was provided for retirees without coverage. Union code was not provided for retirees. 19 P a g e

26 City of Flint GASB Valuation Summary of Plan Participants For Fiscal Year Ending June 30, 2013 Active Age-Service Distribution Includes active employees eligible for retiree health benefits only. Years of Service Age < 1 1 to 4 5 to 9 10 to to to to to to & up Total Under to to to to to to to to to & up 0 Total P a g e

27 City of Flint GASB Valuation Appendix For Fiscal Year Ending June 30, 2013 APPENDIX 21 P a g e

28 City of Flint GASB Valuation Appendix For Fiscal Year Ending June 30, 2013 Comparison of Participant Demographic Information As of July 1, 2013, many spouses have been issued individual policies and are counted in addition to retirees with coverage. As of July 1, 2011 As of July 1, 2013 Active Participants With coverage Without coverage 162 N/A Retired Participants with coverage 1,550 1,833 Averages for Active with coverage Age Service Averages for Inactive Age P a g e

29 City of Flint GASB Valuation Glossary For Fiscal Year Ending June 30, 2013 Glossary 23 P a g e

30 City of Flint GASB Valuation Glossary For Fiscal Year Ending June 30, 2013 Decrements Exhibit The table below illustrates how actuarial assumptions can affect a long-term projection of future liabilities. Starting with 100 employees at age 35, the illustrated actuarial assumptions show that employees out of the original 100 are expected to retire and could elect retiree health benefits at age 55. Age # Remaining # of Terminations # of Retirements Total # Remaining # of Terminations # of Retirements Total Age Employees per Year* per Year* Decrements Employees per Year* per Year* Decrements Decrements Exhibit Actives Total Terminations Total Retirements * The above rates are illustrative rates and are not used in our GASB calculations. 24 P a g e

31 City of Flint GASB Valuation Glossary For Fiscal Year Ending June 30, 2013 Retirement Rates Exhibit The table below illustrates how actuarial assumptions can affect a long-term projection of future liabilities. The illustrated retirement rates show the number of employees who are assumed to retire annually based on 100 employees age 55 who are eligible for retiree health care coverage. The average age at retirement is Age Active Employees BOY Annual Retirement Rates* # Retirements per Year Active Employees EOY % % % % % % % % % % % Retirement Rates Exhibit Actives Total Retirements * The above rates are illustrative rates and are not used in our GASB calculations. 25 P a g e

32 City of Flint GASB Valuation Glossary For Fiscal Year Ending June 30, 2013 Illustration of GASB Calculations The purpose of the illustration is to familiarize non-actuaries with the GASB 45 actuarial calculation process. I. Facts 1. The employer provides subsidized retiree health coverage worth $100,000 to employees retiring at age 55 with 25 years of service. The employer funds for retiree health coverage on a pay-as-you-go basis. 2. Employee X is age 50 and has worked 20 years with the employer. 3. Retiree health subsidies are paid from the general fund assets which are expected to earn 4.5% per year on a long-term basis. 4. Based on Employee X s age and sex he has a 98.0% probability of living to age 55 and a 95.0% probability of continuing to work to age 55. II. Calculation of Present Value of Future Benefits Present Value of Future Benefits represents the cost to finance benefits payable in the future to current and future retirees and beneficiaries, discounted to reflect the expected effects of the time value (present value) of money and the probabilities of payment. Value Description A. $100,000 Projected benefit at retirement B. 80.2% Interest discount for five years = (1 / 1.045) 5 C. 98.0% Probability of living to retirement age D. 95.0% Probability of continuing to work to retirement age E. $74,666 Present value of projected retirement benefit measured at employee s current age = A x B x C x D 26 P a g e

33 City of Flint GASB Valuation Glossary For Fiscal Year Ending June 30, 2013 Illustration of GASB Calculations (continued) III. Calculation of Actuarial Accrued Liability Actuarial Accrued Liability represents the portion of the Present Value of Future Benefits which has been accrued recognizing the employee s past service with the employer. The Actuarial Accrued Liability is a required disclosure in the Required Supplementary Information section of the employer s financial statement. Value Description A. $74,666 Present value of projected retirement benefit measured at employee s current age B. 20 Current years of service with employer C. 25 Projected years of service with employer at retirement D. $59,733 Actuarial accrued liability measured at employee s current age = A x B / C IV. Calculation of Normal Cost Normal Cost represents the portion of the Present Value of Future Benefits allocated to the current year. Value Description A. $74,666 Present value of projected retirement benefit measured at employee s current age B. 25 Projected years of service with employer at retirement C. $2,987 Normal cost measured at employee s current age = A / B V. Calculation of Annual Required Contribution Annual Required Contribution is the total expense for the current year to be shown in the employer s income statement. Value Description A. $2,987 Normal Cost for the current year B. $3, year amortization (level dollar method) of Unfunded Actuarial Accrued Liability using a 4.5% interest rate discount factor C. $292 Interest adjustment = 4.5% x (A + B) D. $6,788 Annual Required Contribution = A + B + C 27 P a g e

34 City of Flint GASB Valuation Glossary For Fiscal Year Ending June 30, 2013 Definitions GASB 45 defines several unique terms not commonly employed in the funding of pension and retiree health plans. The definitions of the terms used in the GASB actuarial valuations are noted below. 1. Actuarial Accrued Liability That portion, as determined by a particular Actuarial Cost Method, of the Actuarial Present Value of plan benefits and expenses which is not provided for by the future Normal Costs. 2. Actuarial Assumptions Assumptions as to the occurrence of future events affecting health care costs, such as: mortality, withdrawal, disablement and retirement; changes in compensation and Government provided health care benefits; rates of investment earnings and asset appreciation or depreciation; procedures used to determine the Actuarial Value of Assets; characteristics of future entrants for Open Group Actuarial Cost Methods; and other relevant items. 3. Actuarial Cost Method A procedure for determining the Actuarial Present Value of future benefits and expenses and for developing an actuarially equivalent allocation of such value to time periods, usually in the form of a Normal Cost and an Actuarial Accrued Liability. 4. Actuarial Present Value The value of an amount or series of amounts payable or receivable at various times, determined as of a given date by the application of a particular set of Actuarial Assumptions. For purposes of this standard, each such amount or series of amounts is: a) adjusted for the probable financial effect of certain intervening events (such as changes in compensation levels, Social Security, marital status, etc.); b) multiplied by the probability of the occurrence of an event (such as survival, death, disability, termination of employment, etc.) on which the payment is conditioned; and c) discounted according to an assumed rate (or rates) of return to reflect the time value of money. 5. Annual OPEB Cost An accrual-basis measure of the periodic cost of an employer s participation in a defined benefit OPEB plan. 6. Annual Required Contribution (ARC) The employer s periodic required contributions to a defined benefit OPEB plan, calculated in accordance with the parameters. 7. Explicit Subsidy The difference between (a) the amounts required to be contributed by the retirees based on the premium rates and (b) actual cash contribution made by the employer. 8. Funded Ratio The actuarial value of assets expressed as a percentage of the actuarial accrued liability. 9. Healthcare Cost Trend Rate The rate of change in the per capita health claims costs over time as a result of factors such as medical inflation, utilization of healthcare services, plan design, and technological developments. 28 P a g e

35 City of Flint GASB Valuation Glossary For Fiscal Year Ending June 30, 2013 Definitions (continued) 10. Implicit Subsidy In an experience-rated healthcare plan that includes both active employees and retirees with blended premium rates for all plan members, the difference between (a) the age-adjusted premiums approximating claim costs for retirees in the group (which, because of the effect of age on claim costs, generally will be higher than the blended premium rates for all group members) and (b) the amounts required to be contributed by the retirees. 11. Net OPEB Obligation The cumulative difference since the effective date of this Statement between annual OPEB cost and the employer s contributions to the plan, including the OPEB liability (asset) at transition, if any, and excluding (a) short-term differences and (b) unpaid contributions that have been converted to OPEB-related debt. 12. Normal Cost The portion of the Actuarial Present Value of plan benefits and expenses which is allocated to a valuation year by the Actuarial Cost Method. 13. Pay-as-you-go A method of financing a benefit plan under which the contributions to the plan are generally made at about the same time and in about the same amount as benefit payments and expenses becoming due. 14. Per Capita Costs The current cost of providing postretirement health care benefits for one year at each age from the youngest age to the oldest age at which plan participants are expected to receive benefits under the plan. 15. Present Value of Future Benefits Total projected benefits include all benefits estimated to be payable to plan members (retirees and beneficiaries, terminated employees entitled to benefits but not yet receiving them, and current active members) as a result of their service through the valuation date and their expected future service. The actuarial present value of total projected benefits as of the valuation date is the present value of the cost to finance benefits payable in the future, discounted to reflect the expected effects of the time value (present value) of money and the probabilities of payment. Expressed another way, it is the amount that would have to be invested on the valuation date so that the amount invested plus investment earnings will provide sufficient assets to pay total projected benefits when due. 16. Select and Ultimate Rates Actuarial assumptions that contemplate different rates for successive years. Instead of a single assumed rate with respect to, for example, the investment return assumption, the actuary may apply different rates for the early years of a projection and a single rate for all subsequent years. For example, if an actuary applies an assumed investment return of 8% for year 20W0, then 7.5% for 20W1, and 7% for 20W2 and thereafter, then 8% and 7.5% select rates, and 7% is the ultimate rate. 17. Substantive Plan The terms of an OPEB plan as understood by the employer(s) and plan members. 29 P a g e

36 CITY OF FLINT Baseline Proposed Changes were made effective July 1, 2012 for simplification of calculations Medicare Advantage Caps No Spouse Subsidy Stipend Only Actuarial Accrued Liability (AAL) as of 7/1/2012 Active $ 64,805,142 $ 48,431,599 $ 37,383,306 $ 20,555,839 Retiree 255,375, ,859, ,638, ,509,780 Total AAL $ 320,180,757 $ 299,290,849 $ 196,021,570 $ 163,065,619 AAL Savings $ (20,889,908) $ (124,159,187) $ (157,115,138) Annual Required Contribution 2012/13 Total $ 21,789,244 $ 19,863,526 $ 13,323,666 $ 10,526,231 ARC Savings $ (1,925,718) $ (8,465,578) $ (11,263,013) Net OPEB Obligation (NOO) ARC $ 21,789,244 $ 19,863,526 $ 13,323,666 $ 10,526,231 Interest on NOO $ 6,671,447 $ 6,671,447 $ 6,671,447 $ 6,671,447 Amortization adj $ (9,518,192) $ (9,518,192) $ (9,518,192) $ (9,518,192) AOC $ 18,942,499 $ 17,016,781 $ 10,476,921 $ 7,679,486 Actual pay-go $ (17,016,014) $ (17,016,014) $ (17,016,014) $ (17,016,014) Change in NOO $ 1,926,485 $ 767 $ (6,539,093) $ (9,336,528) NOO as of 7/1/2012 $ 156,975,216 $ 156,975,216 $ 156,975,216 $ 156,975,216 NOO as of 6/30/2013 $ 158,901,701 $ 156,975,983 $ 150,436,123 $ 147,638,688 EOY NOO Savings $ (1,925,718) $ (8,465,578) $ (11,263,013) Projected Pay-Go Costs FYE Amounts below represent the City's portion of the pay-go costs after subtracting expected monthly contributions from retirees 2013 $ 11,450,940 $ 11,772,319 $ 7,992,652 $ 10,322, $ 12,481,526 $ 12,831,828 $ 8,711,991 $ 11,251, $ 13,058,248 $ 13,222,429 $ 8,964,316 $ 11,088, $ 13,562,181 $ 13,569,748 $ 9,173,566 $ 10,892, $ 14,024,244 $ 13,873,883 $ 9,348,633 $ 10,684, $ 14,457,798 $ 14,169,880 $ 9,506,521 $ 10,516, $ 14,884,073 $ 14,468,264 $ 9,663,270 $ 10,315, $ 15,355,767 $ 14,807,092 $ 9,848,929 $ 10,145, $ 15,747,399 $ 15,080,337 $ 9,978,195 $ 9,980, $ 16,142,003 $ 15,340,317 $ 10,105,449 $ 9,798, year Total $ 141,164,179 $ 139,136,097 $ 93,293,522 $ 104,994, year Total Pay-Go Savings $ (2,028,082) $ (47,870,657) $ (36,169,802) 11/4/2013

37 CITY OF FLINT Changes made under Proposed columns: Medicare Advantage Caps 1. For current retirees and employees vested as of 7/1/2013, the City will pay the full premium up to the Medicare Advantage premium rates. The retiree will pay the difference between the premium for the coverage elected and the Medicare Advantage premium. For this purpose, Medicare Advantage premium means the medical-only portion of the premium rates for all plans (Blue Cross, Health Plus, or McLaren). The Medicare Advantage premium rate cap will apply to both pre-medicare and post-medicare retirees. The cap is assumed to increase with Medicare Advantage premium rates. 2. Employees not vested as of 7/1/2013 will not have access to healthcare coverage at retirement. Instead the City will make contributions into a medical savings account while the employee is working. 3. Medicare Advantage premium rates as of July 1, 2013 are as shown below. Premium rates shown for retirements before July 1, 2000 are a blend of several different grandfathered prescription drug plans. Retirements on or after July 1, 2000 BCBS Medicare Advantage $ HealthPlus Medicare Advantage $ Retirements before July 1, 2000 BCBS Medicare Advantage $ HealthPlus Medicare Advantage $ No Spouse Subsidy The City will pay for retiree coverage only. Retirees will pay the entire additional cost for dependents, including spouses. Stipend Only The City will give each eligible retiree a stipend of $500 per month. The same stipend would be given to both pre-medicare and post-medicare retirees, with or without spouses or other dependents. It is not assumed to increase in the future. For valuation purposes, only members with coverage were provided. Consequently, members without coverage have not been valued. Employees who are not vested as of 7/1/2013 also have not been valued. 11/4/2013

38 City of Flint Initial Actuarial Valuation - Revised As of July 1, 2013 For Participation in the Municipal Employees' Retirement System of Michigan

39 February 21, 2014 Municipal Employees' Retirement System of Michigan 1134 Municipal Way Lansing, Michigan Re: Initial Valuation for the City of Flint - Revised This report represents the results of an initial actuarial valuation prepared as of July 01, 2013 for the City of Flint. The report includes determination of liabilities and contribution rates if the municipality becomes a member of the Municipal Employees' Retirement System of Michigan (MERS). The valuation utilized member data and benefit provisions provided by MERS. The data was checked for reasonableness, but was not otherwise audited. Except where noted, the liabilities presented in this report were calculated using the actuarial assumptions and methods adopted by the MERS Retirement Board. Actuarial assumptions and methods do not determine the cost of the benefits provided; they only impact the pattern of employer contributions. If future experience is unfavorable compared to the assumptions used, employer contribution rates will increase in future years, and vice versa. The employer contribution rates in this report are calculated using the Actuarial Value of Assets (AVA). The AVA is calculated using an asset smoothing technique that phases in investment gains and losses over a 10 year period. The purpose of this asset smoothing method is to generate a more level pattern of employer contributions. As a result of this smoothing technique, as of December 31, 2012, the Actuarial Value of Assets for MERS is 14% higher than the Market Value of Assets. The employer contribution rates shown in this report are expected to increase as the 2008 investment losses are phased in over the remaining 5 years (if the rest of the not yet reflected 2008 investment losses are not fully made up). As requested by MERS, we have calculated the employer contribution rates using both a 25- and 30-year amortization period. Most of the plan liabilities are associated with current retirees, and the plan has only slightly over 5 years of pension payments in reserve. Because of the current poor funded condition of the plan and the high benefit payouts, if the City contributes normal cost plus a 25- or 30-year amortization of the unfunded accrued liabilities (UAL), it is highly likely that the plan assets could be depleted in years. As a result, we do not recommend using either a 25- or 30-year amortization period to develop a long term employer contribution policy.

40 The results under the requested 25- and 30-year amortization periods are summarized in the table below for the fiscal year beginning July 1, 2013: Employer Contributions for the Fiscal Year Beginning July 1, 2013 Division 7/1/13-6/30/14 30 year amortization period All General divisions $8,293,621 All Police divisions $2,976,115 All Fire divisions $3,477,953 Total $14,747, year amortization period All General divisions $9,290,558 All Police divisions $3,275,807 All Fire divisions $3,843,311 Total $16,409,676 For comparison purposes, and since we do not recommend using a 25- or 30-year amortization, we have also calculated the employer contributions using a 20-year amortization period. The results are shown in the table below: Employer Contributions for the Fiscal Year Beginning July 1, 2013 Division 7/1/13-6/30/14 20 year amortization period All General divisions $10,819,761 All Police divisions $3,735,507 All Fire divisions $4,403,734 Total $18,959,002 The employer contributions shown above were calculated based on the amortization policy described below, applicable for future valuation years: Open and Closed-Linked divisions The amortization period decreases by one each year in each subsequent valuation until the period reaches 5 years. Thereafter the amortization period is reset to 5 years each valuation year. This is different from the standard policy for open and closed-linked divisions (which stops declining at 20 years) because of the poor funded condition of the plan. Closed divisions The amortization period decreases by two years in each subsequent valuation year until the period reaches 5 years. Thereafter the amortization period is reset to 5 years each valuation year. This is the Option A policy for closed divisions. Option B would also provide adequate funding.

41 If all of our assumptions materialize, computed employer contributions are projected to increase 4.5% annually. For the closed divisions (01, 02, and 05), that are subject to the MERS closed division amortization policy, the employer contributions are projected to increase more than 4.5% annually until the amortization period reaches 5 years, after which contributions are expected to decline. Based on the financial condition of the plan, we do not recommend a long term contribution policy based on an amortization period longer than 20 years. However, if a longer period is used, we recommend that each year the minimum City contribution be at least equal to the excess (if any) of three times the annual retiree benefit payments over the market value of assets. This will ensure that the plan has 2-3 years of benefit payments in reserve. However, please note, employer contribution requirements may increase substantially in a year in which the 3 times minimum is triggered. As the financial condition of the plan unfolds, the actuaries may recommend changes in the amortization policy if it is believed necessary for the solvency of the plan. The calculations in this report were based on the actuarial assumptions adopted by the MERS Retirement Board which do not include an assumption of immediate retirement when individual members are first eligible. If any of the members retire immediately when first eligible, the liabilities would be higher than shown in this report. This increase in liability would result in higher employer contribution requirements. This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. To the best of our knowledge, this report is complete and accurate and was made in accordance with generally recognized actuarial methods. Cathy Nagy and Jim Koss are members of the American Academy of Actuaries (MAAA) and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion herein. Please see the attachment following this cover letter for important information which is essential to understanding the results presented by this report Sincerely, Cathy Nagy, FSA, MAAA Actuary W. James Koss, ASA, MAAA Actuary

42 MERS Initial Valuations - Important Comments 1. The results in the report were based on information provided to the actuary by the municipality and MERS. The actuary is unaware of any additional information that would impact these results. If the information in the "Request for Initial Valuation" is incorrect or incomplete, the actuary does not assume responsibility for the accuracy of that information, and the requester (or reader) of this valuation report may not rely on the results and should advise MERS promptly. 2. The calculations in this report are based upon assumptions regarding future events, which may or may not materialize. They are also based upon proposed plan provisions that are outlined in the report. If you have reason to believe that the assumptions that were used are unreasonable, that the plan provisions are incorrectly described, that important plan provisions relevant to this proposal are not described, that conditions have changed since the calculations were made, that the information provided in this report is inaccurate or is anyway incomplete, or if you need further information in order to make an informed decision on the subject matter of this report, please contact the author of the report prior to making such decision or relying on information in the report. 3. This report is intended to describe the financial effect of the proposed benefit plan. No statement in this report is intended to be interpreted as a recommendation in favor of the proposed benefit plan, or in opposition to the proposed plan. 4. The reader of this report should keep in mind that actuarial calculations are mathematical estimates based on current data and assumptions about future events (which may or may not materialize). Please note that actuarial calculations can and do vary from one valuation year to the next, sometimes significantly if the group valued is very small (less than 30 lives). As a result, the cost impact of a benefit program may fluctuate over time, as the demographics of the group changes. 5. A summary of the benefits available under MERS and actuarial assumptions and methods used for this valuation can be found on the MERS website located at: AnnualActuarialValuation-Appendix.pdf. Additional miscellaneous and technical assumptions used for this valuation appear at the end of this report. 6. The valuation date is the last day of the month prior to the month when the request is received by the actuary, unless requested otherwise. Page 5 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

43 MERS Initial Valuations - Important Comments 7. Contribution requirements have taken into consideration prior service with other MERS entities (for eligibility service only) per Section 5(1) of the MERS Plan Document. This is reflected in the difference between benefit service and vesting service on the page of results. If members have any vesting service that is not reflected on the results page (e.g. prior MERS service or other reciprocal service if the Reciprocal Retirement Act, 1961 PA 88, has been adopted by the municipality), the unfunded liabilities and the employer contributions may be understated. 8. When an employer joins MERS and members are granted prior service, the MERS Plan Document, Section 2C(4) requires that the employer must transfer assets equal to a minimum of at least 50% of the Actuarial Accrued Liability. MERS strongly encourages full, 100%, up-front funding of the Actuarial Accrued Liability attributable to prior service (see Prior Service Credit and the Prospective MERS Municipality, September 28, 1999). As provided by Plan Section 2C(4)(b), for all initial valuations requested on or after January 1, 2007, amortization of unfunded actuarial accrued liabilities shall be 25 years, unless a difference amortization period is requested by MERS and/or the employer. The actuaries reserve the right to recommend a different amortization period if it is believed necessary for the solvency of the plan. 9. Retirement benefits and employer contributions are based on a percentage of members' gross pays, including base pay, overtime pay, longevity pay, and several other miscellaneous items. If total gross payroll exceeds the reported salaries, the dollar contribution amounts shown in the report should be increased proportionately. For divisions open to new hires the percentages of payroll will not be affected. 10. In a defined benefit plan, assets attributable to member contributions are not as valuable as assets attributable to employer contributions, because accumulated member contributions can be refunded prior to retirement. We understand that MERS requests individual member contribution account balances when collecting the data for the initial valuation. When these account balances are not available and are not reflected in the valuation, the unfunded liabilities and the employer contributions may be impacted accordingly. 11. For divisions that are closed to new hires, the Retirement Board has adopted the Amortization Policy for Closed Divisions Within Open Municipalities. This policy accelerates the payment of the unfunded accrued liability. 12. The results in the report do not show the potential impact that the adoption of the benefits may have on other post-employment benefits (such as retiree health care insurance) or ancillary benefits (such as life insurance). Page 6 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

44 MERS Initial Valuations - Important Comments 13. In the event that more than one set of benefit provisions is being considered, it is very important to remember that the results of separate actuarial valuations cannot be added together to produce a correct estimate of the combined effect of all the changes. The total can be considerably greater than the sum of the parts due to the interaction of various plan provisions with each other and with the assumptions used. 14. If the user of the report is not sure how to interpret certain results in the report or how to read the report, they should contact the MERS Employer Services Division (800) or MERS' actuary before relying on the results in the report. 15. Additional disclosures required by Actuarial Standard of Practice: a. This report was prepared at the request of the municipality and is intended for use by the municipality and those designated or approved by the municipality. The report may be provided to parties other than the municipality only in its entirety and only with the permission of MERS and the municipality. b. The purpose of the initial valuation is to show the employer contribution had the municipality been a participating municipality at the time of the request. c. One or more of the signing actuaries are Members of the American Academy of Actuaries (MAAA) and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. d. All actuarial calculations have been prepared in conformity with generally accepted actuarial principles and practices and with the Actuarial Standards of Practice issued by the Actuarial Standards Board. e. This report should not be relied on for any purpose other than the purpose described in the primary communication. f. The valuation was based upon information furnished by the municipality and MERS administrative staff concerning Retirement System benefits, financial transactions, active members, terminated members, retirees and beneficiaries. We checked for internal and year to year consistency, but did not otherwise audit the data. Tegrit Group is not responsible for the accuracy or completeness of the information provided for the preparation of these calculations. g. The signing actuaries are independent of MERS. Page 7 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

45 City of Flint Employer Contributions for Various Fiscal Years Under 30 Year Amortization Division 10/1/12-6/30/13 7/1/13-6/30/14 7/1/14-6/30/ General Retirees Only $5,085,314 $6,780,418 $7,237, Police Retirees Only $952,967 $1,270,622 $1,356, Fire Retirees Only $1,530,020 $2,040,026 $2,177, AFSCME 1600 hired after 7/1/1997 $66,696 $88,928 $98, AFSCME 1600 hired between 9/26/1984 and 6/30/1997 $503,380 $671,173 $710, AFSCME 1600 hired prior to 9/26/1984 $7,912 $10,549 $11, AFSCME 1799 hired after 7/1/1997 $39,053 $52,070 $55, AFSCME 1799 hired between 9/26/1984 and 6/30/1997 $317,264 $423,018 $443, AFSCME 1799 hired prior to 9/26/1984 $0 $0 $ Exempts $200,599 $267,465 $276, Police Officers hired after 7/1/1996 $300,852 $401,136 $429, Police Officers hired on or before 7/1/1996 $488,819 $651,758 $656, Lieutenants and Captains hired after 7/1/1994 $33,214 $44,285 $52, Lieutenants and Captains hired between 5/1/1992 and 6/30/1994 $0 $0 $ Lieutenants and Captains hired prior to 5/1/1992 $79,595 $106,126 $105, Sergeants hired after 7/1/1994 $66,067 $88,089 $103, Sergeants hired between 5/1/1992 and 6/30/1994 $152,283 $203,044 $210, Sergeants hired prior to 5/1/1992 $158,291 $211,055 $208, Fire $1,078,445 $1,437,927 $1,490,581 Total $11,060,771 $14,747,689 $15,622,416 This amortization period is not recommended. Page 8 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

46 City of Flint Employer Contributions for Various Fiscal Years Under 25 Year Amortization Division 10/1/12-6/30/13 7/1/13-6/30/14 7/1/14-6/30/ General Retirees Only $5,689,291 $7,585,721 $8,153, Police Retirees Only $1,066,150 $1,421,533 $1,527, Fire Retirees Only $1,711,739 $2,282,318 $2,452, AFSCME 1600 hired after 7/1/1997 $80,423 $107,231 $117, AFSCME 1600 hired between 9/26/1984 and 6/30/1997 $573,207 $764,276 $808, AFSCME 1600 hired prior to 9/26/1984 $8,881 $11,841 $12, AFSCME 1799 hired after 7/1/1997 $44,714 $59,619 $62, AFSCME 1799 hired between 9/26/1984 and 6/30/1997 $356,570 $475,426 $498, AFSCME 1799 hired prior to 9/26/1984 $0 $0 $ Exempts $214,833 $286,444 $296, Police Officers hired after 7/1/1996 $320,828 $427,770 $457, Police Officers hired on or before 7/1/1996 $535,343 $713,791 $721, Lieutenants and Captains hired after 7/1/1994 $35,660 $47,547 $56, Lieutenants and Captains hired between 5/1/1992 and 6/30/1994 $0 $0 $ Lieutenants and Captains hired prior to 5/1/1992 $87,859 $117,145 $116, Sergeants hired after 7/1/1994 $71,180 $94,906 $110, Sergeants hired between 5/1/1992 and 6/30/1994 $165,251 $220,334 $228, Sergeants hired prior to 5/1/1992 $174,586 $232,781 $231, Fire $1,170,745 $1,560,993 $1,619,185 Total $12,307,260 $16,409,676 $17,469,914 This amortization period is not recommended. Page 9 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

47 City of Flint Employer Contributions for Various Fiscal Years Under 20 Year Amortization Division 10/1/12-6/30/13 7/1/13-6/30/14 7/1/14-6/30/ General Retirees Only $6,615,733 $8,820,977 $9,586, Police Retirees Only $1,239,761 $1,653,014 $1,796, Fire Retirees Only $1,990,478 $2,653,970 $2,884, AFSCME 1600 hired after 7/1/1997 $101,479 $135,305 $146, AFSCME 1600 hired between 9/26/1984 and 6/30/1997 $680,314 $907,085 $957, AFSCME 1600 hired prior to 9/26/1984 $10,367 $13,823 $14, AFSCME 1799 hired after 7/1/1997 $53,400 $71,200 $75, AFSCME 1799 hired between 9/26/1984 and 6/30/1997 $416,861 $555,815 $582, AFSCME 1799 hired prior to 9/26/1984 $0 $0 $ Exempts $236,667 $315,556 $326, Police Officers hired after 7/1/1996 $351,468 $468,624 $500, Police Officers hired on or before 7/1/1996 $606,709 $808,945 $820, Lieutenants and Captains hired after 7/1/1994 $39,414 $52,552 $61, Lieutenants and Captains hired between 5/1/1992 and 6/30/1994 $0 $0 $ Lieutenants and Captains hired prior to 5/1/1992 $100,536 $134,048 $134, Sergeants hired after 7/1/1994 $79,022 $105,362 $121, Sergeants hired between 5/1/1992 and 6/30/1994 $185,142 $246,856 $256, Sergeants hired prior to 5/1/1992 $199,580 $266,106 $266, Fire $1,312,323 $1,749,764 $1,816,451 Total $14,219,254 $18,959,002 $20,347,013 Page 10 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

48 MERS Initial Valuations City of Flint Division 01 General Retirees Only Computed Employer Contributions as of July 01, 2013 Average Benefit Vesting Salary/ 1. Member Information Counts Age Service Service Benefit * a) Active $0 b) Retired ,054 c) Vested Former Members ,940 d) Total 1066 e) Retiree Accumulated Member Contributions $468,781 * Salary for active members, annual benefit amount for others. 2. Annual Benefits $24,583, Actuarial Value of Assets $103,664, Actuarial Accrued Liability a) Active $0 b) Retired $225,108,010 c) Vested Former Members $4,543,326 d) Pending Refunds $437,199 e) Total $230,088, Unfunded Accrued Liability (UAL) (4e - 3) $126,423, Annual Dollar Contribution a) Employer Normal Cost $0 b) Amortization of UAL (over 20 years) * $8,820,977 c) Employer Contribution (a + b, not less than 0) $8,820,977 * This division is closed and subject to the MERS closed division amortization policy. Notes: 1.The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions reflect a fiscal year start date of 7/1/2013. Page 11 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

49 MERS Initial Valuations City of Flint Division 02 Police Retirees Only Computed Employer Contributions as of July 01, 2013 Average Benefit Vesting Salary/ 1. Member Information Counts Age Service Service Benefit * a) Active $0 b) Retired ,427 c) Vested Former Members ,580 d) Total 454 e) Retiree Accumulated Member Contributions $60,508 * Salary for active members, annual benefit amount for others. 2. Annual Benefits $14,657, Actuarial Value of Assets $123,382, Actuarial Accrued Liability a) Active $0 b) Retired $146,432,875 c) Vested Former Members $614,279 d) Pending Refunds $26,946 e) Total $147,074, Unfunded Accrued Liability (UAL) (4e - 3) $23,691, Annual Dollar Contribution a) Employer Normal Cost $0 b) Amortization of UAL (over 20 years) * $1,653,014 c) Employer Contribution (a + b, not less than 0) $1,653,014 * This division is closed and subject to the MERS closed division amortization policy. Notes: 1.The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions reflect a fiscal year start date of 7/1/2013. This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 12 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

50 MERS Initial Valuations City of Flint Division 05 Fire Retirees Only Computed Employer Contributions as of July 01, 2013 Average Benefit Vesting Salary/ 1. Member Information Counts Age Service Service Benefit * a) Active $0 b) Retired ,217 c) Vested Former Members ,674 d) Total 331 e) Retiree Accumulated Member Contributions $505,545 * Salary for active members, annual benefit amount for others. 2. Annual Benefits $10,502, Actuarial Value of Assets $64,821, Actuarial Accrued Liability a) Active $0 b) Retired $101,350,190 c) Vested Former Members $1,469,091 d) Pending Refunds $39,513 e) Total $102,858, Unfunded Accrued Liability (UAL) (4e - 3) $38,037, Annual Dollar Contribution a) Employer Normal Cost $0 b) Amortization of UAL (over 20 years) * $2,653,970 c) Employer Contribution (a + b, not less than 0) $2,653,970 * This division is closed and subject to the MERS closed division amortization policy. Notes: 1.The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions reflect a fiscal year start date of 7/1/2013. Page 13 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

51 1. Benefits MERS Initial Valuations City of Flint Division 10 - AFSCME 1600 hired after 7/1/1997 Computed Employer Contributions as of July 01, 2013 a) Benefit Formula b) Normal Retirement Age c) Vesting Provision d) F50 Retirement Condition e) F55 Retirement Condition f) F(N) Retirement Condition g) Rule of X h) FAC Period i) RS50 Percent j) D-2 k) Benefit E1 l) Benefit E2 m) FAC Load n) Member Contribution Rate o) Max Years Prior Service p) Apply Max Years to Vesting Service q) Status Average Benefit Vesting Salary/ 2. Member Information Counts Age Service Service Benefit * a) Active $39,975 b) Retired ,942 c) Vested Former Members d) Total 59 e) Accumulated Member Contributions for Actives $1,338,192 * Salary for active members, annual benefit amount for others. 3. Annual Payroll $2,318, Actuarial Value of Assets $0 5. Actuarial Accrued Liability a) Active $2,690,200 b) Retired $179,275 c) Vested Former Members $0 d) Pending Refunds $3,794 e) Total $2,873, Unfunded Accrued Liability (UAL) (5e - 4) $2,873, Annual Dollar Contribution a) Employer Normal Cost ($65,172) b) Amortization of UAL (over 20 years) $200,477 c) Employer Contribution (a + b, not less than 0) $135,305 Notes: Bridged Benefit: Frozen Benefit provided % for service after 5/1/2012 (No max) 59 V - 10 F55(30) FAC The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions are for the fiscal year starting 7/1/ % All No Closed linked to Hybrid division This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 14 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

52 MERS Initial Valuations City of Flint Division 11 - AFSCME 1600 hired between 9/26/1984 and 6/30/1997 Computed Employer Contributions as of July 01, Benefits a) Benefit Formula b) Normal Retirement Age c) Vesting Provision d) F50 Retirement Condition e) F55 Retirement Condition f) F(N) Retirement Condition g) Rule of X h) FAC Period i) RS50 Percent j) D-2 k) Benefit E1 l) Benefit E2 m) FAC Load n) Member Contribution Rate o) Max Years Prior Service p) Apply Max Years to Vesting Service q) Status Average Benefit Vesting Salary/ 2. Member Information Counts Age Service Service Benefit * a) Active $42,238 b) Retired ,765 c) Vested Former Members ,392 d) Total 107 e) Accumulated Member Contributions for Actives $4,098,822 * Salary for active members, annual benefit amount for others. 3. Annual Payroll $4,350, Actuarial Value of Assets $0 5. Actuarial Accrued Liability a) Active $14,146,713 b) Retired $222,936 c) Vested Former Members $246,385 d) Pending Refunds $0 e) Total $14,616, Unfunded Accrued Liability (UAL) (5e - 4) $14,616, Annual Dollar Contribution a) Employer Normal Cost ($112,720) b) Amortization of UAL (over 20 years) $1,019,805 c) Employer Contribution (a + b, not less than 0) $907,085 Notes: Bridged Benefit: Frozen Benefit provided % for service after 5/1/2012 (No max) 55 V - 10 FAC The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions are for the fiscal year starting 7/1/ % All No Closed linked to Hybrid division This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 15 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

53 MERS Initial Valuations City of Flint Division 12 - AFSCME 1600 hired prior to 9/26/1984 Computed Employer Contributions as of July 01, Benefits a) Benefit Formula b) Normal Retirement Age c) Vesting Provision d) F50 Retirement Condition e) F55 Retirement Condition f) F(N) Retirement Condition g) Rule of X h) FAC Period i) RS50 Percent j) D-2 k) Benefit E1 l) Benefit E2 m) FAC Load n) Member Contribution Rate o) Max Years Prior Service p) Apply Max Years to Vesting Service q) Status Average Benefit Vesting Salary/ 2. Member Information Counts Age Service Service Benefit * a) Active $44,206 b) Retired c) Vested Former Members d) Total 1 e) Accumulated Member Contributions for Actives $43,061 * Salary for active members, annual benefit amount for others. 3. Annual Payroll $44, Actuarial Value of Assets $0 5. Actuarial Accrued Liability a) Active $202,840 b) Retired $0 c) Vested Former Members $0 d) Pending Refunds $0 e) Total $202, Unfunded Accrued Liability (UAL) (5e - 4) $202, Annual Dollar Contribution a) Employer Normal Cost ($330) b) Amortization of UAL (over 20 years) $14,153 c) Employer Contribution (a + b, not less than 0) $13,823 Notes: Bridged Benefit: Frozen Benefit provided % for service after 5/1/2012 (No max) 55 V - 10 F(25) FAC The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions are for the fiscal year starting 7/1/ % All No Closed linked to Hybrid division This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 16 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

54 1. Benefits MERS Initial Valuations City of Flint Division 13 - AFSCME 1799 hired after 7/1/1997 Computed Employer Contributions as of July 01, 2013 a) Benefit Formula b) Normal Retirement Age c) Vesting Provision d) F50 Retirement Condition e) F55 Retirement Condition f) F(N) Retirement Condition g) Rule of X h) FAC Period i) RS50 Percent j) D-2 k) Benefit E1 l) Benefit E2 m) FAC Load n) Member Contribution Rate o) Max Years Prior Service p) Apply Max Years to Vesting Service q) Status Average Benefit Vesting Salary/ 2. Member Information Counts Age Service Service Benefit * a) Active $58,351 b) Retired c) Vested Former Members d) Total 15 e) Accumulated Member Contributions for Actives $500,948 * Salary for active members, annual benefit amount for others. 3. Annual Payroll $875, Actuarial Value of Assets $0 5. Actuarial Accrued Liability a) Active $1,185,209 b) Retired $0 c) Vested Former Members $0 d) Pending Refunds $0 e) Total $1,185, Unfunded Accrued Liability (UAL) (5e - 4) $1,185, Annual Dollar Contribution a) Employer Normal Cost ($11,496) b) Amortization of UAL (over 20 years) $82,696 c) Employer Contribution (a + b, not less than 0) $71,200 Notes: Bridged Benefit: Frozen Benefit provided % for service after 5/1/2012 (No max) 59 V - 10 F55(30) FAC The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions are for the fiscal year starting 7/1/ % All No Closed linked to Hybrid division This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 17 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

55 MERS Initial Valuations City of Flint Division 14 - AFSCME 1799 hired between 9/26/1984 and 6/30/1997 Computed Employer Contributions as of July 01, Benefits a) Benefit Formula b) Normal Retirement Age c) Vesting Provision d) F50 Retirement Condition e) F55 Retirement Condition f) F(N) Retirement Condition g) Rule of X h) FAC Period i) RS50 Percent j) D-2 k) Benefit E1 l) Benefit E2 m) FAC Load n) Member Contribution Rate o) Max Years Prior Service p) Apply Max Years to Vesting Service q) Status Average Benefit Vesting Salary/ 2. Member Information Counts Age Service Service Benefit * a) Active $61,177 b) Retired c) Vested Former Members ,534 d) Total 38 e) Accumulated Member Contributions for Actives $2,008,653 * Salary for active members, annual benefit amount for others. 3. Annual Payroll $2,263, Actuarial Value of Assets $0 5. Actuarial Accrued Liability a) Active $7,942,981 b) Retired $0 c) Vested Former Members $284,572 d) Pending Refunds $0 e) Total $8,227, Unfunded Accrued Liability (UAL) (5e - 4) $8,227, Annual Dollar Contribution a) Employer Normal Cost ($18,246) b) Amortization of UAL (over 20 years) $574,061 c) Employer Contribution (a + b, not less than 0) $555,815 Notes: Bridged Benefit: Frozen Benefit provided % for service after 5/1/2012 (No max) 55 V - 10 FAC The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions are for the fiscal year starting 7/1/ % All No Closed linked to Hybrid This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 18 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

56 MERS Initial Valuations City of Flint Division 16 - Exempts Computed Employer Contributions as of July 01, Benefits a) Benefit Formula b) Normal Retirement Age c) Vesting Provision d) F50 Retirement Condition e) F55 Retirement Condition f) F(N) Retirement Condition g) Rule of X h) FAC Period i) RS50 Percent j) D-2 k) Benefit E1 l) Benefit E2 m) FAC Load n) Member Contribution Rate o) Max Years Prior Service p) Apply Max Years to Vesting Service q) Status Average Benefit Vesting Salary/ 2. Member Information Counts Age Service Service Benefit * a) Active $58,928 b) Retired c) Vested Former Members d) Total 15 e) Accumulated Member Contributions for Actives $344,649 * Salary for active members, annual benefit amount for others. 3. Annual Payroll $883, Actuarial Value of Assets $0 5. Actuarial Accrued Liability a) Active $2,979,504 b) Retired $0 c) Vested Former Members $0 d) Pending Refunds $0 e) Total $2,979, Unfunded Accrued Liability (UAL) (5e - 4) $2,979, Annual Dollar Contribution a) Employer Normal Cost $107,667 b) Amortization of UAL (over 20 years) $207,889 c) Employer Contribution (a + b, not less than 0) $315,556 Notes: 2.40% Multiplier (80% Max) 55 V - 10 F(25) FAC The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions are for the fiscal year starting 7/1/ % All No Open This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 19 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

57 1. Benefits MERS Initial Valuations City of Flint Division 20 - Police Officers hired after 7/1/1996 Computed Employer Contributions as of July 01, 2013 a) Benefit Formula b) Normal Retirement Age c) Vesting Provision d) F50 Retirement Condition e) F55 Retirement Condition f) F(N) Retirement Condition g) Rule of X h) FAC Period i) RS50 Percent j) D-2 k) Benefit E1 l) Benefit E2 m) FAC Load n) Member Contribution Rate o) Max Years Prior Service p) Apply Max Years to Vesting Service q) Status Average Benefit Vesting Salary/ 2. Member Information Counts Age Service Service Benefit * a) Active $54,439 b) Retired c) Vested Former Members d) Total 56 e) Accumulated Member Contributions for Actives $1,525,359 * Salary for active members, annual benefit amount for others. 3. Annual Payroll $3,048, Actuarial Value of Assets $0 5. Actuarial Accrued Liability a) Active $4,181,240 b) Retired $0 c) Vested Former Members $0 d) Pending Refunds $0 e) Total $4,181, Unfunded Accrued Liability (UAL) (5e - 4) $4,181, Annual Dollar Contribution a) Employer Normal Cost $176,886 b) Amortization of UAL (over 20 years) $291,738 c) Employer Contribution (a + b, not less than 0) $468,624 Notes: Bridged Benefit: Frozen Benefit provided % for service after 5/1/2012 (No max) 60(10) V - 15 F50(25) FAC The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions are for the fiscal year starting 7/1/ Days 9.50% All No Open linked to division 21 This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 20 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

58 MERS Initial Valuations City of Flint Division 21 - Police Officers hired on or before 7/1/1996 Computed Employer Contributions as of July 01, Benefits a) Benefit Formula b) Normal Retirement Age c) Vesting Provision d) F50 Retirement Condition e) F55 Retirement Condition f) F(N) Retirement Condition g) Rule of X h) FAC Period i) RS50 Percent j) D-2 k) Benefit E1 l) Benefit E2 m) FAC Load n) Member Contribution Rate o) Max Years Prior Service p) Apply Max Years to Vesting Service q) Status Average Benefit Vesting Salary/ 2. Member Information Counts Age Service Service Benefit * a) Active $57,995 b) Retired c) Vested Former Members d) Total 34 e) Accumulated Member Contributions for Actives $1,877,203 * Salary for active members, annual benefit amount for others. 3. Annual Payroll $1,971, Actuarial Value of Assets $0 5. Actuarial Accrued Liability a) Active $9,738,651 b) Retired $0 c) Vested Former Members $0 d) Pending Refunds $0 e) Total $9,738, Unfunded Accrued Liability (UAL) (5e - 4) $9,738, Annual Dollar Contribution a) Employer Normal Cost $129,450 b) Amortization of UAL (over 20 years) $679,495 c) Employer Contribution (a + b, not less than 0) $808,945 Notes: Bridged Benefit: Frozen Benefit provided % for service after 5/1/2012 (No max) 60(10) V - 15 F(23) FAC The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions are for the fiscal year starting 7/1/ Days 9.50% All No Closed linked to division 20 This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 21 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

59 MERS Initial Valuations City of Flint Division 22 - Lieutenants and Captains hired after 7/1/1994 Computed Employer Contributions as of July 01, Benefits a) Benefit Formula b) Normal Retirement Age c) Vesting Provision d) F50 Retirement Condition e) F55 Retirement Condition f) F(N) Retirement Condition g) Rule of X h) FAC Period i) RS50 Percent j) D-2 k) Benefit E1 l) Benefit E2 m) FAC Load n) Member Contribution Rate o) Max Years Prior Service p) Apply Max Years to Vesting Service q) Status Average Benefit Vesting Salary/ 2. Member Information Counts Age Service Service Benefit * a) Active $70,484 b) Retired c) Vested Former Members d) Total 2 e) Accumulated Member Contributions for Actives $123,209 * Salary for active members, annual benefit amount for others. 3. Annual Payroll $140, Actuarial Value of Assets $0 5. Actuarial Accrued Liability a) Active $512,187 b) Retired $0 c) Vested Former Members $0 d) Pending Refunds $0 e) Total $512, Unfunded Accrued Liability (UAL) (5e - 4) $512, Annual Dollar Contribution a) Employer Normal Cost $16,815 b) Amortization of UAL (over 20 years) $35,737 c) Employer Contribution (a + b, not less than 0) $52,552 Notes: 2.6% for the first 20 years % for years in excess of 20 (no max) 60(10) V - 15 F50(25) FAC The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions are for the fiscal year starting 7/1/ Days 9.50% All No Open linked to division 24 This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 22 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

60 MERS Initial Valuations City of Flint Division 24 - Lieutenants and Captains hired prior to 5/1/1992 Computed Employer Contributions as of July 01, Benefits a) Benefit Formula b) Normal Retirement Age c) Vesting Provision d) F50 Retirement Condition e) F55 Retirement Condition f) F(N) Retirement Condition g) Rule of X h) FAC Period i) RS50 Percent j) D-2 k) Benefit E1 l) Benefit E2 m) FAC Load n) Member Contribution Rate o) Max Years Prior Service p) Apply Max Years to Vesting Service q) Status Average Benefit Vesting Salary/ 2. Member Information Counts Age Service Service Benefit * a) Active $81,819 b) Retired c) Vested Former Members d) Total 3 e) Accumulated Member Contributions for Actives $263,595 * Salary for active members, annual benefit amount for others. 3. Annual Payroll $245, Actuarial Value of Assets $0 5. Actuarial Accrued Liability a) Active $1,729,938 b) Retired $0 c) Vested Former Members $0 d) Pending Refunds $0 e) Total $1,729, Unfunded Accrued Liability (UAL) (5e - 4) $1,729, Annual Dollar Contribution a) Employer Normal Cost $13,345 b) Amortization of UAL (over 20 years) $120,703 c) Employer Contribution (a + b, not less than 0) $134,048 Notes: Bridged Benefit: Frozen Benefit provided % for service after 5/1/2012 (No max) 60(10) V - 15 F(23) FAC The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions are for the fiscal year starting 7/1/ Days 9.50% All No Closed linked to division 22 This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 23 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

61 1. Benefits MERS Initial Valuations City of Flint Division 25 - Sergeants hired after 7/1/1994 Computed Employer Contributions as of July 01, 2013 a) Benefit Formula b) Normal Retirement Age c) Vesting Provision d) F50 Retirement Condition e) F55 Retirement Condition f) F(N) Retirement Condition g) Rule of X h) FAC Period i) RS50 Percent j) D-2 k) Benefit E1 l) Benefit E2 m) FAC Load n) Member Contribution Rate o) Max Years Prior Service p) Apply Max Years to Vesting Service q) Status Average Benefit Vesting Salary/ 2. Member Information Counts Age Service Service Benefit * a) Active $59,305 b) Retired c) Vested Former Members d) Total 5 e) Accumulated Member Contributions for Actives $273,498 * Salary for active members, annual benefit amount for others. 3. Annual Payroll $296, Actuarial Value of Assets $0 5. Actuarial Accrued Liability a) Active $1,070,137 b) Retired $0 c) Vested Former Members $0 d) Pending Refunds $0 e) Total $1,070, Unfunded Accrued Liability (UAL) (5e - 4) $1,070, Annual Dollar Contribution a) Employer Normal Cost $30,695 b) Amortization of UAL (over 20 years) $74,667 c) Employer Contribution (a + b, not less than 0) $105,362 Notes: 2.6% for the first 20 years % for years in excess of 20 (no max) 60(10) V - 15 F50(25) FAC The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions are for the fiscal year starting 7/1/ Days 9.50% All No Open linked to divisions 26 and 27 This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 24 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

62 MERS Initial Valuations City of Flint Division 26 - Sergeants hired between 5/1/1992 and 6/30/1994 Computed Employer Contributions as of July 01, Benefits a) Benefit Formula b) Normal Retirement Age c) Vesting Provision d) F50 Retirement Condition e) F55 Retirement Condition f) F(N) Retirement Condition g) Rule of X h) FAC Period i) RS50 Percent j) D-2 k) Benefit E1 l) Benefit E2 m) FAC Load n) Member Contribution Rate o) Max Years Prior Service p) Apply Max Years to Vesting Service q) Status Average Benefit Vesting Salary/ 2. Member Information Counts Age Service Service Benefit * a) Active $63,953 b) Retired c) Vested Former Members d) Total 9 e) Accumulated Member Contributions for Actives $580,213 * Salary for active members, annual benefit amount for others. 3. Annual Payroll $575, Actuarial Value of Assets $0 5. Actuarial Accrued Liability a) Active $2,714,399 b) Retired $0 c) Vested Former Members $0 d) Pending Refunds $0 e) Total $2,714, Unfunded Accrued Liability (UAL) (5e - 4) $2,714, Annual Dollar Contribution a) Employer Normal Cost $57,464 b) Amortization of UAL (over 20 years) $189,392 c) Employer Contribution (a + b, not less than 0) $246,856 Notes: 2.6% for the first 20 years % for years in excess of 20 (no max) 60(10) V - 15 F(23) FAC The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions are for the fiscal year starting 7/1/ Days 9.50% All No Closed linked to division 25 This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 25 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

63 1. Benefits MERS Initial Valuations City of Flint Division 27 - Sergeants hired prior to 5/1/1992 Computed Employer Contributions as of July 01, 2013 a) Benefit Formula b) Normal Retirement Age c) Vesting Provision d) F50 Retirement Condition e) F55 Retirement Condition f) F(N) Retirement Condition g) Rule of X h) FAC Period i) RS50 Percent j) D-2 k) Benefit E1 l) Benefit E2 m) FAC Load n) Member Contribution Rate o) Max Years Prior Service p) Apply Max Years to Vesting Service q) Status Average Benefit Vesting Salary/ 2. Member Information Counts Age Service Service Benefit * a) Active $67,433 b) Retired c) Vested Former Members d) Total 7 e) Accumulated Member Contributions for Actives $555,840 * Salary for active members, annual benefit amount for others. 3. Annual Payroll $472, Actuarial Value of Assets $0 5. Actuarial Accrued Liability a) Active $3,410,731 b) Retired $0 c) Vested Former Members $0 d) Pending Refunds $0 e) Total $3,410, Unfunded Accrued Liability (UAL) (5e - 4) $3,410, Annual Dollar Contribution a) Employer Normal Cost $28,129 b) Amortization of UAL (over 20 years) $237,977 c) Employer Contribution (a + b, not less than 0) $266,106 Notes: Bridged Benefit: Frozen Benefit provided % for service after 5/1/2012 (No max) 60(10) V - 15 F(23) FAC The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions are for the fiscal year starting 7/1/ Days 9.50% All No Closed linked to division 25 This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 26 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

64 MERS Initial Valuations City of Flint Division 50 - Fire Computed Employer Contributions as of July 01, Benefits a) Benefit Formula b) Normal Retirement Age c) Vesting Provision d) F50 Retirement Condition e) F55 Retirement Condition f) F(N) Retirement Condition g) Rule of X h) FAC Period i) RS50 Percent j) D-2 k) Benefit E1 l) Benefit E2 m) FAC Load n) Member Contribution Rate o) Max Years Prior Service p) Apply Max Years to Vesting Service q) Status Average Benefit Vesting Salary/ 2. Member Information Counts Age Service Service Benefit * a) Active $52,713 b) Retired c) Vested Former Members ,416 d) Total 111 e) Accumulated Member Contributions for Actives $4,713,205 * Salary for active members, annual benefit amount for others. 3. Annual Payroll $5,798, Actuarial Value of Assets $0 5. Actuarial Accrued Liability a) Active $19,153,868 b) Retired $0 c) Vested Former Members $166,145 d) Pending Refunds $0 e) Total $19,320, Unfunded Accrued Liability (UAL) (5e - 4) $19,320, Annual Dollar Contribution a) Employer Normal Cost $401,748 b) Amortization of UAL (over 20 years) $1,348,016 c) Employer Contribution (a + b, not less than 0) $1,749,764 Notes: Bridged Benefit: Frozen Benefit provided % for service after 5/1/2012 (No max) 55(10) V - 15 F(23) FAC The demographic data was provided to us by MERS. It is our understanding that MERS checked individual records against data for other exisiting MERS municipalities for additional vesting service. The existence of additional MERS vesting service impacts the valuation results. 2. The above computed employer contributions reflect the transfer of $254,864,297 member and employer assets into MERS. The $254,864,297 in market value of assets were provided as of 12/31/2012 and converted to an actuarial value of assets using the MERS 12/31/2012 asset conversion factor of This AVA was then adjusted to the initial valuation date using the MERS 8.0% interest rate assumption and the provided contributions, pension checks, and employee refunds between 1/1/2013 and 6/30/2013. As requested, we allocated the assets in each subgroup (General, Police, and Fire) to the retiree only division of that subgroup first. 3. The above computed employer contributions are for the fiscal year starting 7/1/ Days 9.50% All No Open This report may be provided to other interested parties only in its entirety and only with the prior permission of MERS and the municipality. Page 27 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

65 Miscellaneous and Technical Assumptions and Ancillary Benefit Provisions 1. The following MERS Withdrawal Rate Scaling Factors were used for this valuation. Division Factor Division 10 - AFSCME 1600 hired after 7/1/ Division 11 - AFSCME 1600 hired between 9/26/1984 and 0.7 6/30/1997 Division 12 - AFSCME 1600 hired prior to 9/26/ Division 13 - AFSCME 1799 hired after 7/1/ Division 14 - AFSCME 1799 hired between 9/26/1984 and 0.7 6/30/1997 Division 16 - Exempts 0.7 Division 20 - Police Officers hired after 7/1/ Division 21 - Police Officers hired on or before 7/1/ Division 22 - Lieutenants and Captains hired after 7/1/ Division 24 - Lieutenants and Captains hired prior to 5/1/ Division 25 - Sergeants hired after 7/1/ Division 26 - Sergeants hired between 5/1/1992 and 6/30/ Division 27 - Sergeants hired prior to 5/1/ Division 50 - Fire The following loads are included in the Final Average Compensation to account for expected increases at retirement due to lump sum payments for unused paid time off or extra overtime pay in the final year of employment. Division FAC Load Division 10 - AFSCME 1600 hired after 7/1/ % Division 11 - AFSCME 1600 hired between 9/26/1984 and 0.00% 6/30/1997 Division 12 - AFSCME 1600 hired prior to 9/26/ % Division 13 - AFSCME 1799 hired after 7/1/ % Division 14 - AFSCME 1799 hired between 9/26/1984 and 0.00% 6/30/1997 Division 16 - Exempts 0.00% Division 20 - Police Officers hired after 7/1/ % Division 21 - Police Officers hired on or before 7/1/ % Division 22 - Lieutenants and Captains hired after 7/1/ % Division 24 - Lieutenants and Captains hired prior to 5/1/ % Division 25 - Sergeants hired after 7/1/ % Division 26 - Sergeants hired between 5/1/1992 and 6/30/ % Division 27 - Sergeants hired prior to 5/1/ % Division 50 - Fire 4.00% 3. There was a 20% load included in the Duty Disability decrement to account for the benefit recalculation provision of divisions 10, 11, 12 13, 14, 16, and 50. Page 28 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /

66 4. The following ancillary benefits that are not MERS standard benefits were included in this initial valuation. Vesting Benefit Provision Divisions Benefit commences at age 60 or when member would have attained age 50 with 25 years of service Benefit commences at age 60 or when member would have attained 23 years of service, if earlier Benefit commences at age 55 or when member would have attained 25 years of service, if earlier Benefit commences at age 55 or when member would have attained 23 years of service, if earlier Duty Disability Minimum benefit is 50% of FAC Minimum benefit is 15% of FAC; benefit is recalculated at age 60 with additional service Minimum benefit is 20% of FAC; benefit is recalculated when member would have had 25 years of service Non-Duty Disability Minimum benefit is 20% of FAC Minimum benefit is 22.5% of FAC Duty Death Minimum benefit is 33.33% of FAC Minimum benefit is 40% of FAC 20,22,25 21,23,24 12,15, ,21,22,23,24,25,26,27 10,11,12,13,14,15, , 23, 24, 25, 26, 27 20, 21 16,20,21,22,23,24,25,26,27 50 Page 29 of N. Laurel Park Drive, Suite 250 Livonia, MI / (p) / (f) /