METROPOLITAN TRANSIT AUTHORITY NON-UNION PENSION PLAN

Transcription

1 METROPOLITAN TRANSIT AUTHORITY NON-UNION PENSION PLAN GASB 67 AND 68 DISCLOSURE Fiscal Year: October 1, 2015 to September 30, 2016 Prepared by Milliman, Inc. James Tumlinson, Jr., EA, MAAA Principal and Consulting Actuary Jake Pringle, EA, MAAA Consulting Actuary 500 Dallas St., Suite 2550 Houston, TX Tel Fax milliman.com July 13, 2016

2 Table of Contents Certification 1 Overview of GASB 67 and GASB 68 3 Statement of Fiduciary Net Position 4 Statement of Changes in Fiduciary Net Position 5 Money-Weighted Rate of Return 6 Net Pension Liability 7 Long-Term Expected Rate of Return 8 Depletion Date Projection 9 Projection of Contributions 10 Projection of Fiduciary Net Position 11 Actuarial Present Value of Projected Benefit Payments 12 Changes in Net Pension Liability 13 Pension Expense 14 Schedule of Deferred Inflows and Outflows 15 Schedule of Changes in Net Pension Liability and Related Ratios 16 Schedule of Employer Contributions 17 Actuarial Methods and Assumptions Used for Funding Policy 18 Summary Chart 19 Glossary 20 GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016

3 Certification Actuarial computations presented in this report under Statements No. 67 and 68 of the Governmental Accounting Standards Board are for purposes of assisting the Metropolitan Transit Authority of Harris County, Texas (METRO) in fulfilling its financial accounting requirements. No attempt is being made to offer any accounting opinion or advice. This report is for fiscal year October 1, 2015 to September 30, The reporting date for determining plan assets and obligations is December 31, The calculations enclosed in this report have been made on a basis consistent with our understanding of the plan provisions. Determinations for purposes other than meeting financial reporting requirements may be significantly different than the results contained in this report. Accordingly, additional determinations may be needed for other purposes, such as judging benefit security or meeting employer funding requirements. In preparing this report, we relied, without audit, on information as of January 1, 2015 furnished by METRO. This information includes, but is not limited to, statutory provisions, member census data, and financial information. The breakdown as of January 1, 2015 includes 621 active participants, 92 terminated vested and other inactive participants, and 249 retirees and beneficiaries. Please see Milliman's funding valuation report dated June 10, 2015 for more information on the plan's participant group as of January 1, 2015 as well as a summary of the plan provisions and actuarial methods and assumptions. We performed a limited review of the census and financial information used directly in our analysis and have found them to be reasonably consistent and comparable with information used for other purposes. The valuation results depend on the integrity of this information. If any of this information is inaccurate or incomplete our results may be different and our calculations may need to be revised. All costs, liabilities, rates of interest, and other factors for the Plan have been determined on the basis of actuarial assumptions and methods which are individually reasonable (taking into account the experience of the Plan and reasonable expectations); and which in combination, offer our best estimate of anticipated experience affecting the Plan. Actuarial assumptions and methods are chosen and authorized by the Committee and Plan sponsor after discussions with the actuary. The Plan Sponsor has the final decision for the appropriateness of the assumptions. This valuation report is only an estimate of the Plan's financial condition as of a single date. It can neither predict the Plan's future condition nor guarantee future financial soundness. Actuarial valuations do not affect the ultimate cost of Plan benefits, only the timing of Plan contributions. While the valuation is based on an array of individually reasonable assumptions, other assumption sets may also be reasonable and valuation results based on those assumptions would be different. No one set of assumptions is uniquely correct. Determining results using alternative assumptions is outside the scope of our engagement. Future actuarial measurements may differ significantly from the current measurements presented in this report due to factors such as, but not limited to, the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan s funded status); and changes in plan provisions or applicable law. Due to the limited scope of the actuarial assignment, we did not perform an analysis of the potential range of such future measurements. GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 1

4 Certification Milliman s work is prepared solely for the use and benefit of the Metropolitan Transit Authority of Harris County, Texas. To the extent that Milliman's work is not subject to disclosure under applicable public records laws, Milliman s work may not be provided to third parties without Milliman s prior written consent. Milliman does not intend to benefit or create a legal duty to any third party recipient of its work product. Milliman s consent to release its work product to any third party may be conditioned on the third party signing a Release, subject to the following exceptions: (a) the Plan Sponsor may provide a copy of Milliman s work, in its entirety, to the Plan Sponsor's professional service advisors who are subject to a duty of confidentiality and who agree to not use Milliman s work for any purpose other than to benefit the Fund; and (b) the Plan Sponsor may provide a copy of Milliman's work, in its entirety,to other governmental entities, as required by law. No third party recipient of Milliman's work product should rely upon Milliman's work product. Such recipients should engage qualified professionals for advice appropriate to their specific needs. The consultants who worked on this assignment are pension actuaries. Milliman's advice is not intended to be a substitute for qualified legal or accounting counsel. The signing actuaries are independent of the plan sponsor. We are not aware of any relationship that would impair the objectivity of our work. On the basis of the foregoing, we hereby certify that, to the best of our knowledge and belief, this report is complete and has been prepared in accordance with generally recognized accepted actuarial principles and practices. We are members of the American Academy of Actuaries and meet the Qualification Standards to render the actuarial opinion contained herein. James Tumlinson, Jr., EA, MAAA Principal and Consulting Actuary Jake Pringle, EA, MAAA Consulting Actuary GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 2

5 Overview of GASB 67 and GASB 68 The Governmental Accounting Standards Board (GASB) released new accounting standards for public pension plans and participating employers in These standards, GASB Statements No. 67 and 68, have substantially revised the accounting requirements previously mandated under GASB Statements No. 25 and 27. The most notable change is the distinct separation of funding from financial reporting. The Annual Required Contribution (ARC) has been eliminated under GASB 67 and 68 and is no longer relevant for financial reporting purposes. As a result, plan sponsors have been encouraged to establish a formal funding policy that is separate from financial reporting calculations. GASB 67 applies to financial reporting for public pension plans and is required to be implemented for plan fiscal years beginning after June 15, Note that a plan's fiscal year might not be the same as the employer's fiscal year. Even if the plan does not issue standalone financial statements, but rather is considered a pension trust fund of a government, it is subject to GASB 67. Under GASB 67, enhancements to the financial statement disclosures are required, along with certain required supplementary information. GASB 68 governs the specifics of accounting for public pension plan obligations for participating employers and is required to be implemented for employer fiscal years beginning after June 15, GASB 68 requires a liability for pension obligations, known as the Net Pension Liability, to be recognized on the balance sheets of partcipating employers. Changes in the Net Pension Liability will be immediately recognized as Pension Expense on the income statement or reported as deferred inflows/outflows of resources depending on the nature of the change. GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 3

6 Statement of Fiduciary Net Position December 31, 2014 December 31, 2015 Assets Cash and cash equivalents $2,612,831 $6,071,628 Receivables and prepaid expenses: Receivable contributions 0 0 Receivable investment income 60,764 0 Receivables from brokers for unsettled trades 163,173 18,751 Prepaid expenses 0 0 Total receivables 223,937 18,751 Investments: Fixed income 49,349,033 46,293,600 Stocks 94,264,571 90,272,390 Short-term investments 0 0 Real estate 0 0 Alternative investments 0 0 Total investments 143,613, ,565,990 Invested securities lending cash collateral 0 0 Capital assets net of accumulated depreciation 0 0 Total assets 146,450, ,656,369 Liabilities Accrued expenses and benefits payable (243,200) (104,549) Securities lending cash collateral 0 0 Payable to brokers for unsettled trades 0 0 Total liabilities (243,200) (104,549) Net position restricted for pensions $146,207,172 $142,551,820 GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 4

7 Statement of Changes in Fiduciary Net Position December 31, 2015 Additions Member contributions $0 Employer contributions 11,248,671 Total contributions 11,248,671 Investment income (loss): Interest 0 Dividends 0 Equity fund income, net 0 Net increase in fair value of investments (5,225,458) Securities lending income 0 Less investment expenses: Direct investment expense 665,458 Securities lending management fees 0 Securities lending borrower rebates 0 Net investment income (5,890,916) Other income 0 Total additions 5,357,755 Deductions Service benefits 8,777,750 Disability benefits 0 Death benefits 0 Refunds of member contributions 0 Administrative expenses 235,357 Total deductions 9,013,107 Net increase (decrease) (3,655,352) Net position restricted for pensions Beginning of year (12/31/2014) 146,207,172 End of year (12/31/2015) $142,551,820 GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 5

8 Money-Weighted Rate of Return Schedule of Investment Returns Fiscal Year Ending September 30 Net Money-Weighted Rate of Return Calculation of Money-Weighted Rate of Return 2007 N/A % % % % % % % % % The money-weighted rate of return considers the changing amounts actually invested during a period and weights the amount of pension plan investments by the proportion of time they are available to earn a return during that period. External cash flows are determined on a monthly basis and are assumed to occur at the middle of each month. External cash inflows are netted with external cash outflows, resulting in a net external cash flow in each month. The money-weighted rate of return is calculated net of investment expenses. Net External Net External Periods Period Cash Flows Cash Flows Invested Weight With Interest Beginning Value - January 1, 2015 $146,207, $140,361,403 Monthly net external cash flows: January 186, ,140 February 186, ,726 March 186, ,387 April 186, ,977 May 186, ,569 June 186, ,236 July 186, ,833 August 186, ,432 September 186, ,106 October 186, ,707 November 186, ,311 December 186, ,993 Ending Value - December 31, ,551, ,551,820 Money-Weighted Rate of Return -4.00% GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 6

9 Net Pension Liability Net Pension Liability December 31, 2014 December 31, 2015 Total pension liability $207,257,676 $235,381,436 Fiduciary net position 146,207, ,551,820 Net pension liability 61,050,504 92,829,616 Fiduciary net position as a % of total pension liability 70.54% 60.56% Covered payroll 45,601,509 44,837,816 Net pension liability as a % of covered payroll % % The total pension liability was determined by an actuarial valuation as of the valuation date, calculated based on the discount rate and actuarial assumptions below, and was then projected forward to the measurement date taking into account any significant changes between the valuation date and the fiscal year end as prescribed by GASB 67 and 68. Discount Rate Discount rate 6.75% 6.75% Long-term expected rate of return, net of investment expense 6.75% 6.75% Municipal bond rate N/A N/A The plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the discount rate for calculating the total pension liability is equal to the long-term expected rate of return. Other Key Actuarial Assumptions The actuarial assumptions that determined the total pension liability as of December 31, 2015 were based on the results of an actuarial experience study for the period 01/01/ /31/2014. Valuation date December 31, 2014 January 1, 2015 Measurement date December 31, 2014 December 31, 2015 Inflation 2.30% 2.30% Salary increases including inflation 2.50% 2.50% Retirement Age and Turnover See January 1, 2015 valuation report. See January 1, 2016 valuation report. Mortality RP-2000 Mortality for Employees, Healthy Annuitants, and Disabled Annuitants with projection to 2014 per Scale AA RP-2014 Mortality adjusted backwards to 2006 with MP-2014 and projected forward (fully generational) with MP-2015 Actuarial cost method Entry Age Normal Entry Age Normal GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 7

10 Long-Term Expected Rate of Return The best-estimate range for the long-term expected rate of return is determined by adding expected inflation to expected long-term real returns and reflecting expected volatility and correlation. The capital market assumptions are per Milliman's investment consulting practice. Long-Term Expected Target Real Rate Asset Class Index Allocation* of Return Cash Citigroup 90-Day T-Bills 4.26% 0.65% Core Fixed Income Barclays Aggregate 32.47% 2.12% Large Cap US Equities S&P % 3.95% Small Cap US Equities Russell % 4.35% Developed Foreign Equities MSCI EAFE 7.22% 4.45% Assumed Inflation - Mean 2.30% Assumed Inflation - Standard Deviation 2.00% Portfolio Arithmetic Mean Return 6.53% Portfolio Standard Deviation 11.49% Long-Term Expected Rate of Return 6.75% * As outlined in the Plan's funding policy dated May 12, 2013 GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 8

11 Depletion Date Projection In order to determine if the plan's fiduciary net position is projected to be sufficient to make projected benefit payments, we have prepared a depletion date projection using the following techniques and assumptions: - There are no required employee contribution amounts. - The employer contributes the actuarially determined contribution amounts. - Benefit payments are projected based on the actuarial assumptions and the current plan provisions. - Members are assumed to receive pay increases, terminate, retire, become disabled, die, and so forth according to the actuarial assumptions used for the 01/01/2016 valuation. - Terminating and retiring members will not be replaced with new employees. - Current administrative expenses are assumed to increase by 1.00% per year. - All cash flows are assumed to occur on average halfway through the year. - The long-term expected rate of return on pension plan investments is 6.75%. - The tax-exempt, high-quality general obligation municipal bond index rate is N/A. - The funding policy used to determine actuarially determined contributions does not change. See page 20 of this report for details. - The actuarial assumptions do not change. - The plan provisions do not change except if any material future changes have been agreed upon as of the measurement date. Actual results at each point in time will yield different values, reflecting the actual experience of the plan membership and assets. GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 9

12 Projection of Contributions Projected Projected Contribution Employer Contributions Payroll Payroll Total from Contributions from Current Future Employee Current for Current Future Total Year Employees Employees Payroll Employees Employees Employees* Contributions 1 $39,314,561 $0 $39,314,561 $0 $7,709,891 $0 $7,709, ,443, ,443, ,434, ,434, ,910, ,910, ,335, ,335, ,842, ,842, ,461, ,461, ,236, ,236, ,495, ,495, ,067, ,067, ,252, ,252, ,113, ,113, ,026, ,026, ,501, ,501, ,827, ,827, ,226, ,226, ,650, ,650, ,319, ,319, ,502, ,502,669 Note: Years subsequent to year 10 have been omitted from this table. * Contributions from future employees that are above service cost and, therefore, can be allocated to payment of benefits of current employees under GASB rules. GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 10 recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product.

13 Projection of Fiduciary Net Position Projected Projected Beginning Projected Projected Projected Projected Ending Fiduciary Total Benefit Adminstrative Investment Fiduciary Year Net Position Contributions Payments Expenses Earnings Net Position 1 $142,551,820 $7,709,891 $23,711,502 $231,768 $9,074,371 $135,392, ,392,812 7,434,994 23,446, ,128 8,591, ,752, ,752,400 7,335,493 22,627, ,706 8,100, ,353, ,353,248 7,461,911 21,594, ,676 7,640, ,664, ,664,903 7,495,884 20,685, ,802 7,220, ,511, ,511,319 7,252,502 20,432, ,797 6,806, ,962, ,962,581 7,026,266 19,553, ,150 6,386,634 94,657, ,657,650 6,827,491 18,540, ,899 5,988,873 88,779, ,779,307 6,650,911 17,528, ,342 5,620,600 83,377, ,377,591 6,502,669 16,370, ,559 5,290,367 78,664,377 Note: Years subsequent to year 10 have been omitted from this table. GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 11

14 Actuarial Present Value of Projected Benefit Payments Present Present Present Projected "Funded" "Unfunded" Value of Value of Value of Beginning Projected Portion of Portion of "Funded" "Unfunded" Total Fiduciary Benefit Benefit Benefit Benefit Benefit Benefit Year Net Position Payments Payments Payments Payments* Payments** Payments*** 1 $142,551,820 $23,711,502 $23,711,502 $0 $22,212,180 $0 $22,212, ,392,812 23,446,476 23,446, ,575, ,575, ,752,400 22,627,123 22,627, ,600, ,600, ,353,248 21,594,834 21,594, ,629, ,629, ,664,903 20,685,655 20,685, ,922, ,922, ,511,319 20,432,725 20,432, ,807, ,807, ,962,581 19,553,681 19,553, ,378, ,378, ,657,650 18,540,808 18,540, ,994, ,994, ,779,307 17,528,885 17,528, ,737, ,737, ,377,591 16,370,691 16,370, ,518, ,518, ,218 18,602 18, ,557 13,505 13, ,134 9,545 9, ,053 6,575 6, ,510 4,457 4, ,792 2,851 2, ,489 1,774 1, ,148 1,085 1, , , , , , , , , , Total 217,148, = 217,148,376 Note: Years 11 through 69 are not shown. * Discounted at the long-term expected rate of return, 6.75% ** Discounted at the municipal bond rate, but not applicable here. *** Discounted at the single interest rate that produces a total actuarial present value equal to the sum of the actuarial present values of ''funded'' and ''unfunded'' benefit payments, 6.75% GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 12

15 Changes in Net Pension Liability Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability Changes in Net Pension Liability (a) (b) (a) - (b) Balances as of September 30, 2015 $207,257,676 $146,207,172 $61,050,504 Changes for the year: Service cost 2,782,533 2,782,533 Interest on total pension liability 15,165,652 15,165,652 Effect of plan changes 0 0 Effect of economic/demographic gains or losses 6,720,589 6,720,589 Effect of assumptions changes or inputs 12,232,736 12,232,736 Benefit payments (8,777,750) (8,777,750) 0 Adminstrative expenses (235,357) 235,357 Member contributions 0 0 Net investment income (5,890,916) 5,890,916 Employer contributions 11,248,671 (11,248,671) Balances as of September 30, ,381, ,551,820 92,829,616 Sensitivity Analysis The following presents the net pension liability of the METRO, calculated using the discount rate of 6.75%, as well as what METRO's net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (5.75%) or 1 percentage point higher (7.75%) than the current rate. 1% Current 1% Decrease Discount Rate Increase 5.75% 6.75% 7.75% Total pension liability $252,382,504 $235,381,436 $220,668,159 Fiduciary net position 142,551, ,551, ,551,820 Net Pension liability 109,830,684 92,829,616 78,116,339 GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 13

16 Pension Expense October 1, 2014 to October 1, 2015 to Pension Expense September 30, 2015 September 30, 2016 Service cost $2,753,593 $2,782,533 Interest on total pension liability 13,384,981 15,165,652 Effect of plan changes 0 0 Administrative expenses 941, ,357 Member contributions 0 0 Expected investment return net of investment expenses (9,557,886) (9,943,202) Recognition of Deferred Inflows/Outflows of Resources Recognition of economic/demographic gains or losses 0 1,764,861 Recognition of assumption changes or inputs 0 3,212,378 Recognition of investment gains or losses 924,810 4,091,634 Pension Expense 8,446,785 17,309,213 As of September 30, 2016, the deferred inflows and outflows of resources are as follows: Deferred Inflows Deferred Outflows Deferred Inflows / Outflows of Resources of Resouces of Resouces Differences between expected and actual experience $0 $4,955,728 Changes of assumptions 0 9,020,358 Net difference between projected and actual earnings 0 15,441,726 Contributions made subsequent to measurement date 0 0 Total 0 29,417,812 Amounts currently reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended September 30: 2017 $9,068, ,068, ,113, ,166, Thereafter* 0 * Note that additional future deferred inflows and outflows of resources may impact these numbers. GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 14

17 Schedule of Deferred Inflows and Outflows of Resources Amount Balance of Balance of Original Recognized Deferred Deferred Original Date Recognition in 09/30/2016 Inflows Outflows AmountEstablished Period* Expense 09/30/ /30/2016 Investment 15,834,118 09/30/ ,166, ,667,294 (gains) or losses 4,624,052 09/30/ , ,774, /30/ /30/ /30/ ,091, ,441,726 Economic/demographic 6,720,589 09/30/ ,764, ,955,728 (gains) or losses 0 09/30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ ,764, ,955,728 Assumption 12,232,736 09/30/ ,212, ,020,358 changes or inputs 0 09/30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ ,212, ,020,358 * Investment (gains)/losses are recognized in pension expense over a period of five years; economic/demographic (gains)/losses and assumption changes or inputs are recognized over the average remaining service life for all active and inactive members. GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 15

18 Schedule of Changes in Net Pension Liability and Related Ratios Fiscal Year Ending September Total Pension Liability Service cost $2,782,533 $2,753,593 $0 $0 $0 $0 $0 $0 $0 $0 Interest on total pension iability 15,165,652 13,384, Effect of plan changes Effect of assumption changes or inputs 12,232, Effect of economic/demographic gains or (losses) 6,720, Benefit payments (8,777,750) (8,704,519) Net change in total pension liability 28,123,760 7,434, Total pension liability, beginning 207,257, ,823, Total pension liability, ending (a) 235,381, ,257, Fiduciary Net Position Employer contributions $11,248,671 $9,006,301 $0 $0 $0 $0 $0 $0 $0 $0 Member contributions Investment income net of investment expenses (5,890,916) 4,933, Benefit payments (8,777,750) (8,704,519) Administrative expenses (235,357) (941,287) Net change in plan fiduciary net position (3,655,352) 4,294, Fiduciary net position, beginning 146,207, ,912, Fiduciary net position, ending (b) 142,551, ,207, Net pension liability, ending = (a) - (b) $92,829,616 $61,050,504 $0 $0 $0 $0 $0 $0 $0 $0 Fiduciary net position as a % of total pension liability 60.56% 70.54% N/A N/A N/A N/A N/A N/A N/A N/A Covered payroll $44,837,816 $45,601,509 $44,388,906 $47,184,896 $57,702,434 $56,962,295 $63,625,252 $62,929,627 $64,349,486 $58,554,000 Net pension liability as a % of covered payroll % % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% This schedule is presented to illustrate the requirement to show information for 10 years. However, recalculations of prior years are not required, and if prior years are not reported in accordance with the current GASB standards, they should not be reported. GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 16 purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman

19 Schedule of Employer Contributions Fiscal Year Actuarially Actual Contribution Contribution Ending Determined Employer Deficiency Covered as a % of September 30 Contribution Contribution (Excess) Payroll Covered Payroll ,151,972 9,751,968 ($599,996) 58,554, % ,503,253 13,503,253 (4,000,000) 64,349, % ,948,287 8,948, ,929, % ,652,758 12,652, ,625, % ,833,143 11,143,438 (310,295) 56,962, % ,689,258 10,689,264 (6) 57,702, % ,215,493 8,215, ,184, % ,847,436 8,847, ,388, % ,006,301 9,006, ,601, % ,911,253 11,248,671 (2,337,418) 44,837, % GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 17

20 Actuarial Methods and Assumptions Used for Funding Policy The following actuarial methods and assumptions were used in the January 1, 2016 funding valuation. Please see the valuation report for further details. Valuation Timing The valuation is performed at January 1 and the Actuarially Determined Contribution is calculated as of December 31. Actuarial Cost Method Entry Age Normal (level percent of pay) assumed for 2015 valuation and beyond. Amortization Method Level percent or level dollar Level dollar Closed, open, or layered periods Closed Amortization Period at 01/01/ years Amortization Growth Rate 0.00% Asset Valuation Method Smoothing period Recognition method Corridor 5 years Non-asymptotic 80% -120% of Market Value Inflation 2.30% Salary Increases 2.50% Investment Rate of Return Cost of Living Adjustments Retirement Age Turnover Mortality 6.75% assumed for December 31, 2014 measurement and beyond None See retirement rates in January 1, 2016 valuation report. See withdrawal rates in January 1, 2016 valuation report. RP-2014 Mortality adjusted backwards to 2006 with MP-2014 and projected forward (fully generational) with MP-2015 GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 18 purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product.

21 Summary Chart Total Plan Net Net Pension Pension Fiduciary Pension Deferred Deferred Net Liability plus Annual Liability Net Position Liability Inflows Outflows Deferrals Net Deferrals Expense Balances as of September 30, 2015 ($207,257,676) $146,207,172 ($61,050,504) $0 $3,699,242 $3,699,242 ($57,351,262) Service cost (2,782,533) (2,782,533) 2,782,533 Interest on total pension liability (15,165,652) (15,165,652) 15,165,652 Effect of plan changes Effect of liability gains or losses (6,720,589) (6,720,589) 0 6,720,589 6,720,589 Effect of assumption changes or inputs (12,232,736) (12,232,736) 0 12,232,736 12,232,736 Benefit payments 8,777,750 (8,777,750) 0 Administrative expenses (235,357) (235,357) 235,357 Member contributions Expected investment income (net of inv expenses) 9,943,202 9,943,202 (9,943,202) Investment gains or losses (15,834,118) (15,834,118) 0 15,834,118 15,834,118 Employer contributions 11,248,671 11,248,671 11,248,671 Recognition of liability gains or losses 0 (1,764,861) (1,764,861) 1,764,861 Recognition of assumption changes or inputs 0 (3,212,378) (3,212,378) 3,212,378 Recognition of investment gains or losses 0 (4,091,634) (4,091,634) 4,091, Annual expense (17,309,213) 17,309, Balances as of September 30, 2016 (235,381,436) 142,551,820 (92,829,616) 0 29,417,812 29,417,812 (63,411,804) GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 19 purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product.

22 Glossary Actuarially Determined Contribution Deferred Inflows/Outflows of Resources Discount Rate Fiduciary Net Position Long-Term Expected Rate of Return Money-Weighted Rate of Return Municipal Bond Rate Net Pension Liability Projected Benefit Payments Service Cost Total Pension Liability A target or recommended contribution to a defined benefit pension plan for the reporting period, determined based on the funding policy and most recent measurement available when the contribution for the reporting period was adopted. Portion of changes in net pension liability that is not immediately recognized in Pension Expense. These changes include differences between expected and actual experience, changes in assumptions, and differences between expected and actual earnings on plan investments. Single rate of return that, when applied to all projected benefit payments, results in an actuarial present value of projected benefit payments equal to the sum of: 1) 2) The actuarial present value of benefit payments projected to be made in future periods where the plan assets are projected to be sufficient to meet benefit payments, calculated using the Long-Term Expected Rate of Return. The actuarial present value of projected benefit payments not included in (1), calculated using the Municipal Bond Rate. Equal to market value of assets. Long-term expected rate of return on pension plan investments expected to be used to finance the payment of benefits, net of investment expenses. The internal rate of return on pension plan investments, net of investment expenses. Yield or index rate for 20-year, tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher. Total Pension Liability minus the Plan's Fiduciary Net Position (unfunded accrued liability). All benefits estimated to be payable through the pension plan to current active and inactive employees as a result of their past service and expected future service. The portion of the actuarial present value of projected benefit payments that is attributed to a valuation year. The portion of actuarial present value of projected benefit payments that is attributable to past periods of member service using the Entry Age Normal cost method based on the requirements of GASB 67 and 68. GASB 67 and 68 Disclosure for Fiscal Year Ending September 30, 2016 Page 20