March 26, The purpose of the valuation of the City of Eastpointe Employees Death Benefit Plan as of November 1, 2012 is to:

Transcription

1 March 26, 2013 The Board of Trustees Employees Death Benefit Plan Eastpointe, Michigan Dear Board Members: The purpose of the valuation of the Employees Death Benefit Plan as of November 1, 2012 is to: Compute the present value of future benefits likely to be paid on behalf of current retired, active and vested inactive members of the Plan, and Compare the present value of future benefits to current assets and compute a contribution to fund the benefits. This valuation has been conducted in accordance with generally accepted actuarial principles and practices. Data concerning active members, retirees, vested inactive members and assets of the Plan was provided by the City. This data, together with data submitted for the most recent annual actuarial valuation of the Employees Retirement System, was used for this valuation. The data has been reviewed for reasonableness, but no attempt has been made to audit such information. The actuarial assumptions used in this valuation represent reasonable expectations of future experience under the Plan. This valuation has been prepared under the supervision of a Member of the American Academy of Actuaries who meets the qualification standards of the American Academy of Actuaries to render the actuarial opinions contained herein. Respectfully submitted, Denise M. Jones Senior Consultant Sandra W. Rodwan Member, American Academy of Actuaries

2 Employees Death Benefit Plan Actuarial Valuation as of November 1, 2012

3 Table of Contents Section One: Valuation Summary Valuation Summary... 1 Section Two: Actuarial Calculations Funding Actuarial Present Value of Future Benefits... 4 Conclusion... 6 Section Three: Benefit Provisions Benefit Provision Summary... 7 Section Four: Actuarial Assumptions Actuarial Assumptions... 8 Section Five: Valuation Data Participant Summary... 14

4 Section One: Valuation Summary

5 Section One: Valuation Summary Purpose of Valuation The purpose of the actuarial valuation of the Death Benefit Plan as of November 1, 2012 is to compute the present value of future benefits likely to be paid on behalf of current retired and active, and vested deferred members of the Plan and the contributions which satisfy the funding objective of the Plan The funding objective of the Plan is to finance benefits as they accrue as level dollar payments which, together with investment earnings on Plan assets, will be sufficient to cover the cost of the death benefits provided. Funding Value of Assets The market value of assets was used for the November 1, 2012 valuation, consistent with the prior valuations. Employees Death Benefit Plan November 1, 2012 Valuation

6 Section One: Valuation Summary Participant Data 11/1/2012 Active Members 97 Average Age 45.2 yrs. Average Service 12.9 yrs. Retired Members 171 Vested Deferred Members 16 Financial Data 11/31/2012 Market Value of Assets $1,049,011 Summary Results The actuarial accrued liability as of November 1, 2012 was computed to be $184,303 for active members, $624,595 for retired members and $30,129 for vested inactive members. The total actuarial accrued liability was $839,027. The assets of the Fund as of December 31, 2011 were reported to be $1,049,011. The total present value of future benefits as of November 1, 2012 was computed to be $960,753. Employees Death Benefit Plan November 1, 2012 Valuation

7 Section Two: Actuarial Calculations Funding

8 Section Two: Actuarial Calculations Funding Computed Contribution The contribution below was computed based on this actuarial valuation of the Death Benefit Plan as of November 1, The contribution consists of the normal cost for active members, computed as a level dollar amount from date of hire to date of retirement, plus amortization of unfunded actuarial accrued liability. As of November 1, 2012, the valuation assets exceeded the actuarial accrued liability. The excess was amortized as a level dollar amount over 25 years, producing a funding credit which completely offset the computed normal cost. Contributions for Normal Cost: Regular Retirement Death Benefits $12,547 Pre-Retirement Death Benefits 811 Disability Retirement Death Benefits 1,172 Total Normal Cost $14,530 Unfunded Actuarial Accrued Liability* (14,538) Total Computed Contribution 0 *25 year amortization. Employees Death Benefit Plan November 1, 2012 Valuation

9 Section Two: Actuarial Calculations Funding Actuarial Present Value of Future Benefits 11/1/2012 Actuarial Present Value of Future Benefits Active Members $306,029 Retirees 624,595 Vested Deferred 30,129 Total 960,753 Present Value of Future Normal Costs 121,726 Actuarial Accrued Liability 839,027 Valuation Assets 1,049,011 Unfunded Actuarial Accrued Liability (209,984) Employees Death Benefit Plan November 1, 2012 Valuation

10 Section Two: Actuarial Calculations Funding Summary of Plan Resources and Obligations Present Resources and Expected Future Resources Valuation assets $1,049,011 Present value of future retiree contributions 0 Actuarial present value of expected future member and employer contributions For normal costs 121,726 For unfunded actuarial accrued liability (209,984) Total (88,258) Total Present and Expected Future Resources $960,753 Actuarial Present Value of Expected Future Death Benefit Payments To current retirees $624,595 To vested deferred members 30,129 To present active members Allocated to service rendered prior to valuation date actuarial accrued liability 184,303 Allocated to service assumed to be rendered after valuation date 121,726 Total 306,029 Total Actuarial Present Value of Expected Future Benefit Payments $960,753 Employees Death Benefit Plan November 1, 2012 Valuation

11 Section Two: Actuarial Calculations Funding Conclusion: As of November 1, 2012 the present value of future benefits totaled $960,753. The market value of assets, $1,049,011, exceeded this amount by $88,258. The portion of the present value of future benefits allocated to past service, $839,027, was exceeded by accrued assets. Amortizing the excess as a level dollar amount over a period of 25 years results in a funding credit which completely offsets the normal cost contribution. Employees Death Benefit Plan November 1, 2012 Valuation

12 Section Three: Benefit Provisions

13 Section Three: Benefit Provisions Benefit Provision Summary November 1, 2012 Active Members Lump Sum Death Benefit : $10,000 Retirees and Deferred Retirees Lump Sum Death Benefit: $4,000, $5,000 or $10,000 depending on date of hire and division. Employees Death Benefit Plan November 1, 2012 Valuation

14 Section Four: Actuarial Assumptions

15 Section Four: Actuarial Assumptions Actuarial Assumptions Economic Assumptions Rate of Investment Return 5.0% (net of expenses) Demographic Assumptions Mortality RP2000 Mortality Table set forward 3 years for males and 1 year for females. Sample Value of $1 Monthly for Life Future Life Expectancy (Years) Ages Men Women Men Women 50 $ $ Disability Sample Percent Becoming Disabled within Next Year Ages Men Women % 0.04% Employees Death Benefit Plan November 1, 2012 Valuation

16 Section Four: Actuarial Assumptions Retirement Rates Percent of Active Members Retiring within A Year Percent Retiring General Age Retiring General (Pre 98) General (Post 98) Police Fire 50 15% 15% 35% 20% In addition, the rate is increased by 10% at first eligibility. Employees Death Benefit Plan November 1, 2012 Valuation

17 Section Four: Actuarial Assumptions General members hired before January 1, A member was assumed to be eligible for retirement after attaining age 52 with 25 years of service or after attaining age 55 with 10 years of service. General members hired after January 1, A member was assumed to be eligible for retirement after attaining age 55 with 25 years of service or after attaining age 60 with 10 years of service. General members hired after January 1, A member was assumed to be eligible for retirement after attaining age 57 with 25 or more years of service, or age 62 with 10 or more years of service. Police and Fire members. A member was assumed to be eligible for retirement after attaining age 50 with 25 years of service or after attaining age 55 with 10 or more years of service. Employees Death Benefit Plan November 1, 2012 Valuation

18 Section Four: Actuarial Assumptions Termination of Employment - (Excluding Disability) Members Separating Within the Year Sample Ages Years of Service General Members Police Fire ALL % 12.00% 10.00% & Over Employees Death Benefit Plan November 1, 2012 Valuation

19 Section Four: Actuarial Assumptions Actuarial Method Used for the Valuation Normal Cost. Normal cost and the allocation of actuarial present values between service rendered before and after the valuation date were determined using an individual entry-age actuarial cost method having the following characteristics: The annual normal costs for each individual active member, payable from date of hire to date of retirement, are sufficient to accumulate the value of the member s benefit at the time of retirement; Each annual normal cost is a constant percentage of the member s year-by-year projected covered pay. Financing of Unfunded Actuarial Accrued Liability. Unfunded actuarial accrued liabilities were amortized as a level dollar amount over a period of 25 years. Employees Death Benefit Plan November 1, 2012 Valuation

20 Section Four: Actuarial Assumptions Summary of Asset Information Submitted for the Valuation Statement of Assets As of November 1, 2012, the market value of Fund assets was reported to be $1,049,011. Employees Death Benefit Plan November 1, 2012 Valuation

21 Section Five: Valuation Data

22 Section Five: Valuation Data Participant Summary Retirees Included in the Valuation Retirees Eligible for Lump Sum Death Benefit Age Distribution November 1, 2012 Attained Age No Totals 171 Employees Death Benefit Plan November 1, 2012 Valuation

23 Section Five: Valuation Data Active Members Included in the Valuation Active Members - November 1, 2012 Age and Service Distribution Attained Service Age No Totals Group Averages Age: 45.2 years Service: 12.9 years Employees Death Benefit Plan November 1, 2012 Valuation

24 Section Five: Valuation Data Vested Deferred Members Included in the Valuation Eligible Deferred Members Age Distribution -November 1, 2012 Attained Age No Totals 16 Employees Death Benefit Plan November 1, 2012 Valuation