BIGLERVILLE BOROUGH (CB PLAN) N2. GASB 68 Report

Transcription

1 BIGLERVILLE BOROUGH (CB PLAN) N2 GASB 68 Report Measurement Date of: December 31, 215 For questions, please contact: Charity Rosenberry Pennsylvania Municipal Retirement System CFO, Investment & Financial Mgmt. Division

2 TABLE OF CONTENTS Table of Contents Summary Certification Determination of Discount Rate Notes Disclosures Required Supplementary Information Employer Reporting Amounts Appendix A Data, Assumptions, Methods and Glossary of Terms Appendix B Reconciliation of Deferred Inflows and Outflows Appendix C Further Information Regarding Deferred Inflows and Outflows Appendix D Market Value of Assets Reconciliation

3 SUMMARY The purpose of this report is to provide accounting and financial reporting information under Government Accounting Standards Board Statement 68 for Biglerville Borough (Cb Plan) (the Employer). This information includes: Employees covered by benefit terms Calculation of the Net Pension Liability at the discount rate as well as discount rates 1% higher and lower than the discount rate, Changes in the Net Pension Liability, Schedule of Employer Contributions, Disclosure of Deferred Inflows and Outflows, and Calculation of Annual Pension Expense Highlights The Pennsylvania Municipal Retirement System (PMRS) is an agent multiple-employer defined benefit pension plan. The Measurement Date for the Net Pension Liability (NPL) is December 31, 215, which is no earlier than the end of the employer s prior fiscal year as allowed by Paragraph 2 of GASB 68. The table below provides a summary of the key results during this measurement period. Summary of Results Measurement Date 12/31/215 12/31/214 Net Pension Liability $ 5,711 $ 1,71 Deferred Inflows Deferred Outflows (3,72) (171) Net Impact on Statement of Net Position $ 2,9 $ 9 Total Pension Expense ($ Amount) $ 1,19 $ 195 Total Pension Expense (% of Payroll) N/A N/A Any contributions between the Measurement Date and the Reporting Date would be reported as deferred outflows to offset the cash outflow reported. The final Total Pension Liability (TPL) for the Employer is measured as of December 31, 215 based upon the actuarial valuation of the same date. The beginning of year TPL as of December 31, 214 is based upon the actuarial valuation of the same date. A breakdown of the components of the net pension expense is shown later in the report. 1

4 CERTIFICATION The purpose of this report is to provide accounting and financial reporting information under GASB 68 for the Employer. This report is for their use and the use of their auditors in preparing financial reports in accordance with applicable law and accounting requirements. This report is not appropriate for other purposes, including the measurement of funding requirements for the employer under Act 25. In preparing our report, we relied on information (some oral and some written) supplied by PMRS. This information includes, but is not limited to, the plan provisions, employee data, and financial information. We performed an informal examination of the obvious characteristics of the data for reasonableness and consistency in accordance with Actuarial Standard of Practice No. 23. It is our understanding that PMRS, as the plan administrator, reviews the data for accuracy based upon information provided by the Employer. Future actuarial measurements may differ significantly from the current measurements due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; and changes in plan provisions or applicable law. To the best of our knowledge, this report and its contents have been prepared in accordance with generally recognized and accepted actuarial principles and practices that are consistent with the Code of Professional Conduct and applicable Actuarial Standards of Practice set out by the Actuarial Standards Board. Furthermore, as credentialed actuaries, we meet the Qualification Standards of the American Academy of Actuaries to render the opinion contained in this report. This report does not address any contractual or legal issues. We are not attorneys and our firm does not provide any legal services or advice. This report was prepared for PMRS for the purposes described herein and for the use by the Employer s auditor in completing an audit related to the matters herein. Other users of this report are not intended users as defined in the Actuarial Standards of Practice, and Cheiron assumes no duty or liability to such other users. Kenneth A. Kent, FSA, FCA, MAAA Principal Consulting Actuary Jonathan B. Chipko, FSA, FCA, MAAA Consulting Actuary 2

5 DETERMINATION OF DISCOUNT RATE PMRS develops a Long-Term Expected Rate of Return for individual participating municipalities, which is also referred to as the Regular Interest Rate. For more information, please refer to the PDF file entitled Long-Term Expected Rate of Return on Plan Assets for the December 31, 215 measurement. 3

6 NOTES DISCLOSURES The table below shows the changes in the Total Pension Liability, the Plan Fiduciary Net Position (i.e., fair value of Plan assets), and the Net Pension Liability as of the Measurement Date. Change in Net Pension Liability Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a) - (b) Balances at 12/31/214 $ 75,311 $ 74,24 $ 1,71 Changes for the year: Service cost Interest 4,142 4,142 Changes of benefits Changes of assumptions* Differences between expected and actual experience Contributions - employer Contributions - PMRS assessment Contributions - employee PMRS investment income 4,142 (4,142) Market value investment income** (4,467) 4,467 Transfers Benefit payments PMRS administrative expense Additional administrative expense (173) 173 Net changes 4,142 (498) 4,64 Balances at 12/31/215 $ 79,453 $ 73,742 $ 5,711 *Assumption changes reflect the liability impact of the Board of Trustee approved changes as of December 31, 215. **Reflects the net investment income/(loss) of ($4,334) and the income/(loss) due to the difference between expected and actual asset values of ($133), which includes the impact from allocation of assets in support of the underlying retiree liabilities. This report does not reflect changes in benefits or assumptions after January 1, 216. Because the beginning and end of year TPL are based upon different actuarial valuation dates, there is a difference between expected and actual experience reported this year. The beginning of year TPL is based upon the January 1, 215 actuarial valuation with liabilities measured at December 31, 214. The end of year TPL is based upon the January 1, 216 actuarial valuation with liabilities measured at December 31, 215. Except as noted below, the TPL as of December 31, 215 was based upon the data, actuarial methods and assumptions, and plan provisions described in Appendix A. 4

7 NOTES DISCLOSURES According to Governmental Accounting Standards Board (GASB) Statements No. 67 and 68, PMRS is required to allocate/distribute all funds to the respective participating employers for financial reporting purposes, to determine the respective employer plan fiduciary net position. PMRS has determined that net investment income or loss and administrative expenses will be allocated to the employer/municipality accounts pro-rata based on their beginning Fiduciary Net Position balance adjusted for cash flows throughout the year. The Additional administrative expenses are the expenses in excess of the PMRS administrative expense (i.e. $2 per participant expense paid by each plan). The PMRS investment income is based upon the regular and excess interest used to credit accounts annually. The Market value investment income reflects the investment income/loss during the year net of PMRS investment income and the income/loss due to the difference between expected and actual asset values, including the impact from allocation of assets in support of the underlying retiree liabilities. Changes in the discount rate affect the measurement of the TPL. Lower discount rates produce a higher TPL and higher discount rates produce a lower TPL. Because the discount rate does not affect the measurement of assets, the percentage change in the NPL can be very significant for a relatively small change in the discount rate. For illustrative purposes, the table below shows the sensitivities as 8% and 12% of the TPL associated with active participants as a reflection of the nature of potential variance that could occur with a +1.% and -1.% change in the discount rate, respectively. As a cash balance plan, however, we have not performed the specific sensitivity calculations based on this plan s demographics or plan provisions for active participants given that the benefits are based on the accumulated account balances at actual retirement. If the plan has retired participants, the discount rate sensitivity for the TPL associated with the retired participants has been explicitly determined. Sensitivity of Net Pension Liability to Changes in Discount Rate 1% Discount 1% Decrease Rate Increase 4.5% 5.5% 6.5% Total Pension Liability $ 95,343 $ 79,453 $ 63,562 Plan Fiduciary Net Position 73,742 73,742 73,742 Net Pension Liability $ 21,61 $ 5,711 $ (1,18) Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 77.34% 92.81% 116.2% 5

8 NOTES DISCLOSURES The following table contains the number of active participants, deferred vested participants, and participants currently receiving a benefit from the Plan based upon the most recent actuarial valuation date of December 31, 215. Employees Covered by Benefit Terms Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits 3 Active employees Total Participant Count 3 6

9 REQUIRED SUPPLEMENTARY INFORMATION The schedules of Required Supplementary Information will eventually build up to 1 years of information. The schedule below shows the changes in NPL and related ratios required by GASB. Schedule of Changes in Net Pension Liability Measurement Year Ending 12/31/215 12/31/214 Total Pension Liability Service cost (beginning of year) $ $ Interest (includes interest on service cost) 4,142 3,926 Changes of benefit terms Differences between expected and actual experience 1 Changes of assumptions Transfers Benefit payments, including refunds of member contributions Net change in total pension liability $ 4,142 $ 3,927 Total pension liability - beginning 75,311 71,384 Total pension liability - ending $ 79,453 $ 75,311 Plan fiduciary net position Contributions - employer $ $ Contributions - PMRS assessment Contributions - employee PMRS investment income 4,142 3,926 Market value investment income (4,467) (214) Transfers Benefit payments, including refunds of member contributions PMRS administrative expense Additional administrative expense (173) (151) Net change in plan fiduciary net position $ (498) $ 3,561 Plan fiduciary net position - beginning 74,24 7,679 Plan fiduciary net position - ending $ 73,742 $ 74,24 Net pension liability - ending $ 5,711 $ 1,71 Plan fiduciary net position as a percentage of the total pension liability 92.81% 98.58% Covered employee payroll $ $ Net pension liability as a percentage of covered employee payroll N/A N/A Notes to Schedule: Plan Changes: None Assumption Changes: Please refer to the PDF file entitled Cash Balance Plans Actuarial Assumptions, Methods, Glossary of Terms for the December 31, 215 Measurement Date. 7

10 REQUIRED SUPPLEMENTARY INFORMATION Due to the plan design, there are no Actuarially Determined Contributions for the cash balance pension plans. The Statutorily Required Contribution is a contribution amount based upon the payroll and the contribution rate as outlined under the terms of the cash balance pension plan. As provided by the Pennsylvania Municipal Retirement System, the employer portion of the Statutorily Required Contribution was the amount recognized by the pension plan during the year. Schedule of Employer Contributions Last 1 Measurement Years (if available) Statutorily Required Contribution $ $ Contributions in Relation to the Statutorily Required Contribution* Contribution Deficiency/(Excess) $ $ Participant Payroll $ $ Contributions as a Percentage of Participant Payroll N/A N/A *The Statutorily Required Contribution and the actual Contribution were provided by PMRS. Deviation between these amounts may be due to contributions to or transfers from the Municipal account. Notes to Schedule: Other Information: Plan Changes None 8

11 EMPLOYER REPORTING AMOUNTS The impact of investment gains or losses for expensing is recognized over a period of five years. The impact of experience gains or losses and assumption changes on the TPL are recognized in the collective pension expense over the average expected remaining service life of all active and inactive members of the Plan, as provided below. There were experience gains or losses between the beginning of year and end of year liabilities because the liabilities are based upon two different actuarial valuation dates. Also, assumption changes as of the Measurement Date have been reflected. Schedule of Collective Deferred Inflows and Outflows Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ $ Changes in assumptions Net difference between projected and actual earnings on pension plan investments 3,72 Total $ 3,72 $ Amounts reported as deferred outflows and deferred inflows of resources will be recognized in pension expense as follows: Year ended December 31: Thereafter $ The recognition period for experience and assumptions change gains/losses is 1. years. The annual pension expense recognized can be calculated two different ways. First, it is the change in the amounts reported on for the Employer s Statement of Net Position that relate to the plan and are not attributable to employer contributions. That is, it is the change in NPL plus the changes in deferred outflows and deferred inflows plus employer contributions. Alternatively, annual pension expense can be calculated by its individual components. While GASB does not require or suggest the organization of the individual components shown in the table below, we believe it helps to understand the level and volatility of pension expense, as outlined on the following page. 9

12 EMPLOYER REPORTING AMOUNTS Calculation of Collective Pension Expense Measurement Year Ending 12/31/215 12/31/214 Change in Net Pension Liability $ 4,64 $ 366 Change in Deferred Outflows (3,531) (171) Change in Deferred Inflows Employer Contributions Pension Expense $ 1,19 $ 195 Pension Expense as % of Payroll N/A.% Operating Expenses Service cost $ $ Employee contributions PMRS administrative expense Additional administrative expense Total $ 173 $ 151 Financing Expenses Interest cost $ 4,142 $ 3,926 Expected return on assets (4,142) (3,926) Total $ $ Changes Benefit changes $ $ Recognition of assumption changes Recognition of liability gains and losses 1 Recognition of investment gains and losses Total $ 936 $ 44 Pension Expense $ 1,19 $ 195 1

13 APPENDIX A DATA, ASSUMPTIONS, METHODS AND GLOSSARY OF TERMS The participant data used in this report was provided by PMRS and is effective on December 31, 215. For a detailed description of applicable assumptions and methods and a glossary of terms used in this report please refer to the PDF file entitled Cash Balance Plans Actuarial Assumptions, Methods, Glossary of Terms for the December 31, 215 Measurement Date. All data was provided by PMRS and reviewed for reasonability, but not audited, by Cheiron. For a summary of the data of the Plan please refer to the most recent Act 25 filings. For this report, the best estimate Total Pension Liability and Plan Fiduciary Net Position were applied based on retiree census data and financial data as of December 31, 215. Key Provisions of the Plan as of December 31, 215: Normal Retirement Age: Accrued Benefit available upon attainment of age 6. Vesting Service Required: A member is 1% vested after 5 years of service. Early Retirement Eligibility: Early Retirement benefit is available upon attainment of 2 years of service. Involuntary Early Retirement benefit is available upon attainment of 2 years of service. Employer Contribution Rate: None Required Employee Contribution Rate: Voluntary Employee Contribution Rate: None None 11

14 APPENDIX B RECONCILIATION OF DEFERRED INFLOWS AND OUTFLOWS Deferred (Inflows) Deferred Outflows Differences between expected and actual experience Changes in assumptions Net difference between projected and actual earnings on pension plan investments Total Differences between expected and actual experience Changes in assumptions Net difference between projected and actual earnings on pension plan investments 12/31/214 $ $ $ $ $ $ $ 171 $ 171 Adjustments due to investment earnings* $ $ $ $ $ $ $ $ 215 deferred amounts 4,467 4,467 Recognition amounts (936) (936) Net changes $ $ $ $ $ $ $ 3,531 $ 3,531 12/31/215 $ $ $ $ $ $ $ 3,72 $ 3,72 Total *This represents the adjustment due to aggregation of deferred amounts arising from differences between projected and actual pension plan investment earnings. 12

15 APPENDIX C FURTHER INFORMATION REGARDING DEFERRED INFLOWS AND OUTFLOWS Recognition of differences between expected and actual experience Detailed Schedule of Collective Inflows and Outflows of Resources From Remaining Remaining Measurement Recognition (Inflows) Recognition Year Year Ending Period and Outflows Thereafter $ $ $ $ $ $ $ $ 214 Total $ $ $ $ $ $ $ $ Recognition of changes in assumptions From Remaining Remaining Measurement Recognition (Inflows) Recognition Year Year Ending Period and Outflows Thereafter $ $ $ $ $ $ $ $ 214 Total $ $ $ $ $ $ $ $ Recognition of net difference between projected and actual earnings on pension plan investments From Remaining Remaining Measurement Recognition (Inflows) Recognition Year Year Ending Period and Outflows Thereafter $ 4,467 $ 893 $ 893 $ 893 $ 893 $ 895 $ $ Total $ 4,638 $ 936 $ 936 $ 936 $ 935 $ 895 $ $ Grand Total $ 4,638 $ 936 $ 936 $ 936 $ 935 $ 895 $ $ 13

16 APPENDIX D MARKET VALUE OF ASSETS RECONCILIATION Member/ Municipal Reserve DROP Reserve Retiree Liability Retiree Reserve Allocation Disability Reserve MVA Allocation Reported 12/31/214 GASB 68 MVA $ 75,311 $ $ $ $ $ (1,71) $ 74,24 Adjustment for updated census data Adjusted 12/31/214 GASB 68 MVA $ 75,311 $ $ $ $ $ (1,71) $ 74,24 Changes of benefits $ $ $ $ $ $ $ Changes of assumptions Transfers Contributions - employer Contributions - PMRS assessment Contributions - employee PMRS investment income 4,142 4,142 Market value investment income (4,334) (4,334) Benefit payments PMRS administrative expense Additional administrative expense (173) (173) Net changes $ 4,142 $ $ $ $ $ (4,57) $ (365) Preliminary 12/31/215 GASB 68 MVA $ 79,453 $ $ $ $ $ (5,578) $ 73,875 Differences between expected and actual experience* (133) (133) Final 12/31/215 GASB 68 MVA $ 79,453 $ $ $ $ $ (5,711) $ 73,742 Total *For an explanation of the differences between expected and actual experience, please refer to the PDF file entitled Cash Balance Plans Actuarial Assumptions, Methods, Glossary of Terms for the December 31, 215 Measurement Date. Amounts may not add due to rounding. 14