DALLAS AREA RAPID TRANSIT (DART) EMPLOYEES DEFINED BENEFIT RETIREMENT PLAN ACTUARIAL VALUATION REPORT AS OF OCTOBER 1, 2016

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1 DALLAS AREA RAPID TRANSIT (DART) EMPLOYEES DEFINED BENEFIT RETIREMENT PLAN ACTUARIAL VALUATION REPORT AS OF OCTOBER 1, 2016 CONTRIBUTIONS APPLICABLE TO THE PLAN/FISCAL YEAR ENDING SEPTEMBER 30, 2017

2 February 24, 2017 Retirement Committee Dallas Area Rapid Transit 1401 Pacific Avenue Dallas, TX Re: DART Employees Defined Benefit Retirement Plan Dear Committee Members: We are pleased to present to the Committee this report of the annual actuarial valuation of the DART Employees Defined Benefit Retirement Plan. The valuation was performed to determine whether the assets and contributions are sufficient to provide the prescribed benefits and to develop the appropriate funding requirements for the applicable plan year. Please note that this valuation may not be applicable for any other purposes. The valuation has been conducted in accordance with generally accepted actuarial principles and practices, including the applicable Actuarial Standards of Practice as issued by the Actuarial Standards Committee, and reflects the financing objectives of the Employer, as well as applicable federal laws and regulations. In our opinion, the assumptions used in this valuation, as adopted by the Retirement Committee, represent reasonable expectations of anticipated plan experience. Future actuarial measurements may differ significantly from the current measurements presented in this report for a variety of reasons including: changes in applicable laws, changes in plan provisions, changes in assumptions, or plan experience differing from expectations. In conducting the valuation, we have relied on personnel, plan design, and asset information supplied by the DART faculty, financial reports prepared by the custodian bank, and the actuarial assumptions and methods described in the Actuarial Assumptions section of this report. While we cannot verify the accuracy of all this information, the supplied information was reviewed for consistency and reasonableness. As a result of this review, we have no reason to doubt the substantial accuracy of the information and believe that it has produced appropriate results. This information, along with any adjustments or modifications, is summarized in various sections of this report Parker Commons Blvd., Suite 104 Fort Myers, FL (239) Fax (239)

3 The undersigned is familiar with the immediate and long-term aspects of pension valuations and meets the Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinions contained herein. All of the sections of this report are considered an integral part of the actuarial opinions. To our knowledge, no associate of Foster & Foster, Inc. working on valuations of the program has any direct financial interest or indirect material interest in DART, nor does anyone at Foster & Foster, Inc. act as a member of the Retirement Committee of the DART Employees Defined Benefit Retirement Plan. Thus, there is no relationship existing that might affect our capacity to prepare and certify this actuarial report. If there are any questions, concerns, or comments about any of the items contained in this report, please contact me at Respectfully submitted, Foster & Foster, Inc. By: Bradley R. Heinrichs, FSA, EA, MAAA Enrolled Actuary # BRH/lke Enclosures

4 TABLE OF CONTENTS Section Title Page I Introduction a. Summary of Report 5 b. Changes Since Prior Valuation 7 c. Comparative Summary of 8 Principal Valuation Results II Valuation Information a. Reconciliation of Unfunded 11 Actuarial Accrued Liabilities b. Maintenance Schedule of Minimum 12 Contribution Amortization Bases c. Detailed Actuarial (Gain)/Loss Analysis 13 d. Actuarial Assumptions and 14 Methods e. Valuation Notes 16 III Trust Fund 17 IV Member Statistics a. Statistical Data 21 b. Member Reconciliation 22 V Summary of Plan Provisions 23 VI Governmental Accounting Standards 25 Board Disclosure Information Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 4

5 SUMMARY OF REPORT The annual actuarial valuation of the DART Employees Defined Benefit Retirement Plan, performed as of October 1, 2016, has been completed, and the results are presented in this Report. The contribution amounts developed in this valuation are applicable to the plan/fiscal year ended September 30, The contribution requirements, compared with amounts developed in the October 1, 2015 actuarial valuation report, are as follows: Valuation Date Applicable Plan/Fiscal Yr. End 10/1/2016 9/30/ /1/2015 9/30/2016 Minimum Required Contribution ¹ (Payable on September 30) $7,754,873 $9,217,479 ¹ Reflects minimum required contribution payable at end of plan year. As can be seen, the Minimum Required Contribution has decreased by approximately $1.46 million since the previous valuation. There are three main sources that contributed to this decrease in the actuarial required contribution. The first source was due to an amortization charge base which was fully paid off in conjunction with the previous valuation. Additionally, there was net favorable actuarial experience during the year, on the basis of the actuarial assumptions. The primary components of favorable experience included an 8.10% investment return (Actuarial Asset Basis) which exceeded the 7.00% assumption, favorable retirement experience and a decrease in the Consumer Price Index which resulted in no cost of living adjustments being granted to retirees. These gains were partially offset by the effect of unfavorable inactive mortality. Finally, as the result of an actuarial experience study dated August 19, 2016, the Retirement Committee approved a number of changes to the actuarial assumption and methods, which contributed to a decrease in the actuarial required contribution. The specific changes are outlined on page 7 and the impact of these changes are displayed in the comparative summary section of this report. Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 5

6 The balance of this Report presents additional details of the actuarial valuation and the general operation of the Fund. The undersigned would be pleased to meet with the Board to discuss the Report and answer any pending questions concerning its contents. Respectfully submitted, FOSTER & FOSTER, INC. By: Drew D. Ballard, EA, MAAA By: Bradley R. Heinrichs, FSA, EA, MAAA Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 6

7 CHANGES SINCE PRIOR VALUATION Plan Changes There have been no changes in benefits since the prior valuation. Actuarial Assumption/Method Changes In conjunction with an actuarial experience study dated August 19, 2016, the Retirement Committee approved a number of changes to the actuarial assumptions and methods, as outlined below: - The actuarial cost method was changed from the Projected Unit Credit to the Entry Age Normal actuarial cost method. - The outdated funding method of developing the minimum required contribution as if the plan were subject to Section 412 of the Internal Revenue Code of 1986 was removed. Beginning with this valuation, the minimum required contribution will be developed to be consistent with the methodology utilized for other public pension plans. - The assumed rate of investment return was lowered from 7.00% to 6.75% per year, net of all expenses. - The salary increase assumption was lowered from 3.25% to 3.00% per year until the assumed retirement age. - The assumed rates of mortality were amended to remove incorporating fully generational mortality improvements and implement projecting mortality improvements to the valuation date. - The assumed rates of retirement were amended at certain ages. - The assumed rates of termination were amended at certain ages and to eliminate varying rates by gender. - The assumed rates of disablement were reduced in half. Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 7

8 COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS A. Participant Data New Asmp/Mthd Old Asmp/Mthd 10/1/ /1/ /1/2015 Number Included Actives Service Retirees Beneficiaries Disability Retirees Terminated Vested Total 1,190 1,190 1,216 Total Annual Payroll $18,914,468 $18,914,468 $18,937,919 Payroll Under Assumed Ret. Age 18,536,367 18,536,367 18,566,864 Annual Rate of Payments to: Service Retirees 8,495,500 8,495,500 8,529,396 Beneficiaries 2,069,151 2,069,151 2,092,791 Disability Retirees 443, , ,532 Terminated Vested 1,319,720 1,319,720 1,405,337 B. Assets Actuarial Value 168,727, ,727, ,995,381 Market Value 168,333, ,333, ,468,247 C. Liabilities Present Value of Benefits Actives Retirement Benefits 97,635,453 95,020,130 91,706,376 Disability Benefits 1,207,004 2,644,306 2,744,569 Death Benefits 1,788,709 1,885,766 1,925,790 Vested Benefits 780, , ,623 Service Retirees 90,033,549 89,937,193 90,884,094 Beneficiaries 18,350,028 18,232,214 18,062,504 Disability Retirees 4,205,028 4,147,433 4,292,373 Terminated Vested 13,683,943 13,726,908 13,940,173 Total 227,683, ,081, ,272,502 Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 8

9 New Asmp/Mthd Old Asmp/Mthd C. Liabilities - (Continued) 10/1/ /1/ /1/2015 Present Value of Future Salaries 98,433, ,555, ,690,553 Normal Cost (Retirement) 1,110,387 2,122,503 2,101,328 Normal Cost (Disability) 36,799 60,021 64,210 Normal Cost (Death) 59,069 11,481 10,303 Normal Cost (Vesting) 165,716 8,430 13,826 Total Normal Cost 1,371,971 2,202,435 2,189,667 Present Value of Future Normal Costs 7,221,558 13,170,690 14,026,047 Accrued Liability (Retirement) 91,836,636 82,238,534 78,119,620 Accrued Liability (Disability) 1,011,037 2,362,292 2,425,546 Accrued Liability (Death) 1,469,566 1,793,417 1,832,751 Accrued Liability (Vesting) (127,385) 473, ,394 Accrued Liability (Inactives) 126,272, ,043, ,179,144 Total Actuarial Accrued Liability 220,462, ,911, ,246,455 Unfunded Actuarial Accrued Liability (UAAL) 51,734,500 44,183,388 52,251,074 Funded Ratio (AVA / AL) 76.5% 79.2% 75.1% D. Actuarial Present Value of Accrued Benefits Accrued Benefits Inactives 126,272, ,043, ,179,144 Actives 79,219,974 75,013,678 70,714,110 Total 205,492, ,057, ,893,254 Funded Ratio (MVA / PVAB) 81.9% 83.7% 78.1% Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 9

10 New Asmp/Mthd Old Asmp/Mthd Valuation Date 10/1/ /1/ /1/2015 Applicable to Fiscal Year Ending 9/30/2017 9/30/2017 9/30/2016 E. Development of Actuarial Required Contribution (1) Total Normal Cost $1,371,971 $2,202,435 $2,189,667 (2) Expected Employee Contributions 3,346 3,346 3,242 (3) Net Amortization Requirement 5,895,893 5,400,871 6,428,041 (4) Interest at Funding Rate to End of Year 490, , ,013 (5) Minimum Required Contribution (End of Year) (1)-(2)+(3)+(4) $7,754,873 $8,131,957 $9,217,479 % of Covered Payroll 41.8% 43.9% 49.6% (6) Minimum Required Contribution a. If paid on September 30 $7,754,873 $8,131,957 $9,217,479 b. If paid on April 1 $7,509,695 $7,865,959 $8,915,972 Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 10

11 RECONCILIATION OF UNFUNDED ACTUARIAL ACCRUED LIABILITIES (1) Unfunded Actuarial Accrued Liability as of October 1, 2015 $52,251,074 (2) Employer Normal Cost developed as of October 1, ,186,425 (3) Expected interest on (1) and (2) 3,810,625 (4) Employer contributions to the System during the year ended September 30, ,217,479 (5) Expected interest on (5) 349,055 (6) Expected Unfunded Actuarial Accrued Liability as of September 30, 2016 (1)+(2)+(3)-(4)-(5) 48,681,590 (7) Change to UAAL due to Assumption/Method Changes 7,551,112 (8) Change to UAAL due to Actuarial (Gain)/Loss (4,498,202) (9) Unfunded Accrued Liability as of October 1, ,734,500 Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 11

12 MAINTENANCE SCHEDULE OF MINIMUM CONTRIBUTION AMORTIZATION BASES Charge Bases Type of Date Years 10/1/2016 Amortization Base Established Remaining Amount Amount Assum Change 10/1/ $10,688,242 $1,082,013 Actuarial Loss 10/1/ , ,791 Actuarial Loss 10/1/ , ,572 Actuarial Loss 10/1/ , ,963 Actuarial Loss 10/1/ ,461, ,954 Assum Change 10/1/ ,657 29,588 Actuarial Loss 10/1/ ,817, ,154 Actuarial Loss 10/1/ ,225,944 1,122,637 Actuarial Loss 10/1/ ,688 55,720 Actuarial Loss 10/1/ ,555, ,456 VRIP Amendment 10/1/ ,767, ,890 Assum Change 10/1/ ,321,284 1,125,404 Actuarial Loss 10/1/ ,252,345 1,141,494 Actuarial Loss 10/1/ ,265 26,913 Method Change 10/1/ ,901, ,924 Assum/Method Change 10/1/ ,551, ,791 Total Charge Bases $64,650,353 $7,541,264 Credit Bases Type of Date Years 10/1/2016 Amortization Base Established Remaining Amount Amount Actuarial Gain 10/1/ ($1,028,610) ($233,435) Actuarial Gain 10/1/ (2,288,396) (446,273) Assum Change 10/1/ (1,605,874) (124,286) Actuarial Gain 10/1/ (3,460,064) (382,344) Actuarial Gain 10/1/ (34,707) (3,662) Actuarial Gain 10/1/ (4,498,202) (455,371) Total Credit Bases ($12,915,853) ($1,645,371) Net Charge $51,734,500 $5,895,893 Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 12

13 DETAILED ACTUARIAL (GAIN)/LOSS ANALYSIS (1) Unfunded Actuarial Accrued Liability (UAAL) as of October 1, 2015 $52,251,074 (2) Expected UAAL as of October 1, ,681,590 (3) Summary of Actuarial (Gain)/Loss, by component: Investment Return (Actuarial Asset Basis) (1,725,431) Salary Increases (179,926) Active Decrements (1,028,862) Inactive Mortality 661,170 CPI Increase (1,953,367) Other (271,786) Increase in UAAL due to (Gain)/Loss (4,498,202) Assumption/Method Changes 7,551,112 (4) Actual UAAL as of October 1, 2016 $51,734,500 Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 13

14 ACTUARIAL ASSUMPTIONS AND METHODS Mortality Rate Healthy Lives: RP-2000 Combined Healthy Table (sex distinct) with rates increased by 8.59% and with mortality improvement projections to the valuation date (previously fully generational) using Scale AA. Disabled Lives: RP-2000 Disabled Mortality Table (sex distinct). The assumed rates of mortality are reasonable as they sufficiently accommodate expected future mortality improvements. The rates were approved in conjunction with an actuarial experience study performed in Interest Rate Retirement Age 6.75% (previously 7.00%) per year compounded annually, net of all expenses. This is supported by the target asset allocation of the trust and the expected long-term return by asset class. Age Current Rate Previous Rate % 10.0% The assumed rates of retirement were approved in conjunction with an actuarial experience study performed in Salary Increases Payroll Growth 3.00% (previously 3.25%) per year until the assumed retirement age. The assumed rate of salary increase was approved in conjunction with an actuarial experience study performed in None. Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 14

15 Inflation Valuation Compensation 2.50% per year. This is reasonable based on long-term historical increases. Future compensation utilized for valuation purposes is developed as the sum of: 1) Base pay (projected with salary increases) 2) Bonus pay (projected with salary increases) 3) Service-Incentive pay (projected assuming payment of $6 per month of service (maximum of $150 per month) Termination Rate 1.50% per year prior to age 54, and 1.00% per year on and after attainment of age 54. Previously, members were assumed to terminate employment at varying rates based on age and gender. These rates were approved in conjunction with an actuarial experience study performed in Disability Rate Members are assumed to become disabled prior to retirement at varying rates based on age. Sample rates are as follows: Age Current Rate Previous Rate % 0.12% These rates were approved in conjunction with an actuarial experience study performed in Marital Status Actuarial Cost Method Actuarial Asset Method 85% of male participants and 65% of female participants are assumed to be married. Additionally, male spouses are assumed to be three years older than female spouses. Entry Age Normal (previously Projected Unit Credit) Actuarial Cost Method. All assets are valued at market value with an adjustment made to uniformly spread actuarial investment gains and losses (as measured by actual market value investment return against expected market value investment return) over a fiveyear period. Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 15

16 VALUATION NOTES Total Annual Payroll is the annual rate of valuation compensation as of the valuation date of all covered Members. Payroll Under Assumed Retirement Age is the annual rate of valuation compensation for all Members who are not subject to a 100% probability of retirement as of the valuation date. Present Value of Benefits is the single sum value on the valuation date of all future benefits to be paid to current Members, Retirees, Beneficiaries, Disability Retirees and Vested Terminations. Normal (Current Year's) Cost is determined for each participant as the present value of future benefits, determined as of the member s entry age, amortized as a level percentage of compensation over the anticipated number of years of participation, determined as of the entry age. Individual Entry Age Normal Actuarial Cost Method (Level Percent of Compensation) is the method used to determine required contributions under the Plan. The use of this method involves the systematic funding of the Normal Cost (described above) and the Unfunded Accrued (Past Service) Liability. The actuarial accrued liability for active participants is the difference between the present value of future benefits and the present value of future Normal Costs. The actuarial accrued liability for inactive participants is the present value of future benefits. Unfunded Actuarial Accrued Liability (UAAL) is the difference between the actuarial accrued liability (described above) and the actuarial value of assets. Under the Entry Age Normal Actuarial Cost Method, an actuarial gain or loss, based on actual versus expected UAAL, is determined in conjunction with each valuation of the plan. Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 16

17 STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2016 ASSETS MARKET VALUE Total Cash and Equivalents 3,308,930 Receivables: Other 3,796 From Broker for Investments Sold 59,868 Total Receivable 63,664 Investments: Fixed Income 66,017,071 Equity 82,576,854 Real Estate 16,896,562 Total Investments 165,490,487 Total Assets 168,863,081 LIABILITIES Payables: Accounts Payable, Expenses 157,823 To Broker for Investments Purchased 371,445 Total Liabilities 529,268 NET POSITION RESTRICTED FOR PENSIONS 168,333,813 Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 17

18 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2016 Market Value Basis ADDITIONS Contributions: Member 2,000 Employer 9,217,479 Total Contributions 9,219,479 Investment Income: Net Increase in Fair Value of Investments 13,515,797 Interest & Dividends 3,388,977 Less Investment Expense¹ (837,719) Net Investment Income 16,067,055 Total Additions 25,286,534 DEDUCTIONS Distributions to Members: Benefit Payments 11,202,655 Total Distributions 11,202,655 Administrative Expense 218,313 Total Deductions 11,420,968 Net Increase in Net Position 13,865,566 NET POSITION RESTRICTED FOR PENSIONS Beginning of the Year 154,468,247 End of the Year 168,333,813 ¹Investment related expenses include investment advisory, custodial and performance monitoring fees. Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 18

19 ACTUARIAL ASSET VALUATION September 30, 2016 Actuarial Assets for funding purposes are developed by recognizing the total actuarial investment gain or loss for each Plan Year over a five year period. In the first year, 20% of the gain or loss is recognized. In the second year 40%, in the third year 60%, in the fourth year 80%, and in the fifth year 100% of the gain or loss is recognized. The actuarial investment gain or loss is defined as the actual return on investments minus the actuarial assumed investment return. Actuarial Assets shall not be less than 80% nor greater than 120% of Market Value of Assets. Gains/(Losses) Not Yet Recognized Plan Year Amounts Not Yet Recognized by Valuation Year Ending Gain/Loss /30/2012 8,139, /30/2013 5,041,554 1,008, /30/2014 2,159, , , /30/2015 (10,584,350) (6,350,610) (4,233,740) (2,116,870) /30/2016 5,105,376 4,084,301 3,063,226 2,042,150 1,021,075 0 Total (394,089) (738,559) (74,720) 1,021,075 0 Development of Investment Gain/(Loss) Market Value of Assets, 09/30/ ,468,247 Contributions Less Benefit Payments (1,983,176) Expected Investment Earnings* 10,743,366 Actual Net Investment Earnings 15,848, Actuarial Investment Gain/(Loss) 5,105,376 *Expected Investment Earnings = 0.07 * [154,468, * (1,983,176)] Development of Actuarial Value of Assets (1) Market Value of Assets, 09/30/ ,333,813 (2) Gains/(Losses) Not Yet Recognized (394,089) (3) Actuarial Value of Assets, 09/30/2016, (1) - (2) 168,727,902 (A) 09/30/2015 Actuarial Assets: 157,995,381 (I) Net Investment Income: 1. Interest and Dividends 3,388, Change in Actuarial Value 10,382, Investment & Administrative Expenses (1,056,032) Total 12,715,697 (B) 09/30/2016 Actuarial Assets: 168,727,902 Actuarial Asset Rate of Return = 2I/(A+B-I): 8.10% Market Value of Assets Rate of Return: 10.33% Actuarial Gain/(Loss) due to Investment Return (Actuarial Asset Basis) 1,725,431 10/01/2016 Limited Actuarial Assets: 168,727,902 Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 19

20 CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS SEPTEMBER 30, 2016 Actuarial Asset Basis REVENUES Contributions: Member 2,000 Employer 9,217,479 Total Contributions 9,219,479 Earnings from Investments: Interest & Dividends 3,388,977 Change in Actuarial Value 10,382,752 Total Earnings and Investment Gains 13,771,729 EXPENDITURES Distributions to Members: Benefit Payments 11,202,655 Total Distributions 11,202,655 Expenses: Investment related¹ 837,719 Administrative 218,313 Total Expenses 1,056,032 Change in Net Assets for the Year 10,732,521 Net Assets Beginning of the Year 157,995,381 Net Assets End of the Year² 168,727,902 ¹Investment related expenses include investment advisory, custodial and performance monitoring fees. ²Net Assets may be limited for actuarial consideration. Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 20

21 STATISTICAL DATA 10/1/ /1/ /1/ /1/2016 Actives Number N/A Average Current Age N/A Average Age at Employment N/A Average Past Service N/A Average Annual Salary N/A $61,508 $63,550 $65,675 Service Retirees Number N/A Average Current Age N/A Average Annual Benefit N/A $16,459 $16,757 $16,756 Beneficiaries Number N/A Average Current Age N/A Average Annual Benefit N/A $9,825 $9,966 $10,093 Disability Retirees Number N/A Average Current Age N/A Average Annual Benefit N/A $12,330 $12,570 $12,663 Terminated Vested Number N/A Average Current Age N/A Average Annual Benefit N/A $8,840 $8,622 $8,514 Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 21

22 VALUATION PARTICIPANT RECONCILIATION 1. Active lives a. Number in prior valuation 10/1/ b. Terminations i. Vested (partial or full) with deferred benefits 0 ii. Non-vested or full lump sum distribution received 0 c. Deaths i. Beneficiary receiving benefits (1) ii. No future benefits payable 0 d. Disabled 0 e. Retired (10) f. Continuing participants 287 g. Rehires 1 h. Total active life participants in valuation Non-Active lives (including beneficiaries receiving benefits) Service Retirees, Vested Receiving Receiving Receiving Death Disability Vested Benefits Benefits Benefits Deferred Total a. Number prior valuation Retired (7) 10 Vested Deferred Death, With Survivor (9) Death, No Survivor (10) (18) (1) 0 (29) Disabled QDRO Rehires (1) (1) Expired Annuities Data Corrections b. Number current valuation Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 22

23 SUMMARY OF PLAN PROVISIONS Eligibility Credited Service Compensation Final Average Compensation Member Contributions Participants who on September 30, 1995 were covered under one of the Former Plans (DTS Employees Retirement Plan, DTS Retirement Plan A, DTS Retirement Plan B). The current plan is closed to future new entrants. All service as a Participant until the termination of employment. Actual or equivalent hourly base pay rate in effect on October 1 st of any year multiplied by 2,080 plus the Service-Incentive Pay (SIP) and Operator s Performance Bonus paid in that year. Average Compensation for the 3 best consecutive calendar years immediately preceding retirement or termination. Those electing to contribute under the Prior Plan contribute 3.0% of base pay. Normal Retirement Date Attainment of Age 60. Benefit Non-Contributory Members: 2.0% of Final Average Compensation per year of service through October 1, 1983 plus 1.5% of Final Average Compensation per year of service thereafter. Contributory Members: 2.0% of Final Average Compensation per year of service. Form of Benefit Actuarially equivalent 50% Joint & Contingent Survivor Annuity (married) or Life Annuity (single). Options available. Early Retirement Date Benefit Age 55 and 10 years of Credited Service. Accrued benefit, reduced 5.0% per year that the benefit commencement date precedes Age 60. Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 23

24 Vesting All members are currently 100% vested in their accrued benefit. If a member terminates employment prior to retirement eligibility, the member will receive their accrued benefit payable at Early (reduced) or Normal Retirement Age. Disability Eligibility Benefit Service Incurred Non-Service Incurred Covered from Date of Employment. 10 years of Credited Service. Accrued Benefit. Death Benefits Pre-Retirement Eligibility Benefit Post-Retirement COLA 10 years of Credited Service. Accrued Benefit (using service assuming member continued employment to age 60) multiplied by 46.0% Benefits payable in accordance with option selected at retirement. Equal to the percentage increase (up or down) in the average consumer price index as of September 30, not in excess of 5% in any one year, with such excess held in reserve. The annual adjustment is payable on January 1 st of each year and is based on the original annuity at commencement. In no event shall any adjustment downward result in a benefit less than that to which the member was originally entitled. Dallas Area Rapid Transit Employees' Defined Benefit Retirement Plan FOSTER & FOSTER 24