MUNICIPAL EMPLOYEES' RETIREMENT SYSTEM OF MICHIGAN ANNUAL ACTUARIAL VALUATION REPORT DECEMBER 31, 2014 EAST LANSING, CITY OF (3301)

Transcription

1 MUNICIPAL EMPLOYEES' RETIREMENT SYSTEM OF MICHIGAN ANNUAL ACTUARIAL VALUATION REPORT DECEMBER 31, 2014 EAST LANSING, CITY OF (3301)

2 Spring, 2015 East Lansing, City of In care of: Municipal Employees' Retirement System of Michigan 1134 Municipal Way Lansing, Michigan This report presents the results of the Annual Actuarial Valuation, prepared as of December 31, The report includes the determination of liabilities and contribution rates resulting from the participation of East Lansing, City of (3301) in the Municipal Employees Retirement System of Michigan ( MERS ). MERS is a nonprofit organization, independent from the State, that has provided retirement plans for municipal employees for more than 65 years. East Lansing, City of is responsible for the employer contributions needed to provide MERS benefits for its employees and former employees under the Michigan Constitution and the MERS Plan Document. The purpose of the December 31, 2014 annual actuarial valuation is to: Measure funding progress Establish contribution requirements for the fiscal year beginning July 1, 2016 Provide actuarial information in connection with applicable Governmental Accounting Standards Board (GASB) statements This valuation report should not be relied upon for any other purpose. Reliance on information contained in this report by anyone for anything other than the intended purpose could be misleading. The valuation uses financial data, plan provision data, and participant data as of December 31, 2014 furnished by MERS. In accordance with Actuarial Standards of Practice No. 23, the data was checked for internal and year to year consistency as well as general reasonableness, but was not otherwise audited. CBIZ Retirement Plan Services does not assume responsibility for the accuracy or completeness of the data used in this valuation. The actuarial assumptions and methods are adopted by the MERS Retirement Board, and are reviewed every five years in an Experience Study, which will be completed in Please refer to the division-specific assumptions described in table(s) in this report, and to the Appendix on the MERS website at: rpc_id: 6783 Page 2 of 60

3 The actuarial assumptions used for this valuation produce results that we believe are reasonable. To the best of our knowledge, this report is complete and accurate, was prepared in conformity with generally recognized actuarial principles and practices, with the Actuarial Standards of Practice issued by the Actuarial Standards Board, and is in compliance with Act No. 220 of the Public Acts of 1996, as amended, and the MERS Plan Document as revised. All of the undersigned 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. The Retirement Board of the Municipal Employees' Retirement System of Michigan confirms that the System provides for payment of the required employer contribution as described in Section 20m of Act No. 314 of 1965 (MCL m). This information is purely actuarial in nature. It is not intended to serve as a substitute for legal, accounting or investment advice. This report was prepared at the request of the Retirement Board and may be provided only in its entirety by the municipality to other interested parties (MERS customarily provides the full report on request to associated third parties such as the auditor for the municipality). CBIZ Retirement Plan Services is not responsible for the consequences of any unauthorized use. You should notify MERS if you disagree with anything contained in the report or are aware of any information that would affect the results of the report that have not been communicated to us. If you have reason to believe that the plan provisions are incorrectly described, that important plan provisions relevant to this valuation are not described, that conditions have changed since the calculations were made, that the information provided in this report is inaccurate or is in anyway incomplete, or if you need further information in order to make an informed decision on the subject matter in this report, please contact your Regional Manager at MERS(6377). Sincerely, Alan Sonnanstine, MAAA, ASA Cathy Nagy, MAAA, FSA Jim Koss, MAAA, ASA rpc_id: 6783 Page 3 of 60

4 TABLE OF CONTENTS Page Executive Summary 5 Employer Contribution Details 12 Table 1 Benefit Provisions 14 Table 2 Participant Summary 20 Table 3 Reported Assets (Market Value) 23 Table 4 Flow of Valuation Assets 24 Table 5 Actuarial Accrued Liabilities and Valuation Assets 25 Table 6 Actuarial Accrued Liabilities - Comparative Schedule 30 Table 7 Division-Based Comparative Schedules 31 Tables 8 and 9 GASB 68 Information 52 Benefit Provision History 53 Plan Provisions, Actuarial Assumptions, and Actuarial Funding Method 60 rpc_id: 6783 Page 4 of 60

5 Executive Summary Funded Ratio and Required Employer Contributions The MERS Defined Benefit Plan is an agent multiple-employer plan, meaning that assets are pooled for investment purposes but separate trusts are maintained for each individual employer. Each municipality is responsible for their own plan liabilities; MERS does not borrow from one municipality s account to pay for another. The funded ratio of a plan is the percentage of the dollar value of the accrued benefits that is covered by the actuarial value of assets. Your Funded Ratio: 12/31/ /31/2013 Funded Ratio 58% 60% Michigan Law requires that pension plans be pre-funded, meaning money is set aside now to pay for future benefits. Pension plans are usually funded by employer and employee contributions, and investment income. How quickly a plan attains the 100% funding goal depends on many factors such as: The current funded ratio The future experience of the plan The amortization period It is more important to look at the trend in the funded ratio over a period of time than at a particular point in time. rpc_id: 6783 Page 5 of 60

6 Your Required Employer Contributions: Your minimum required employer contributions are shown in the following table. Employee contributions, if any, are in addition to the required employer contributions. Division Valuation Date: Percentage of Payroll Monthly $ Based on Valuation Payroll 12/31/ /31/ /31/ /31/2013 Fiscal Year Beginning: July 1, 2016 July 1, 2015 July 1, 2016 July 1, Gnl NonUnio - - $ 38,114 $ 36, Plc NonComm ,673 46, Fire , , NewHires 54B - - 3,573 3, Gnl DPW ,549 30, Gnl Auxlry ,731 10, Gnl 54B Crt ,600 17, Jail Serv - - 1,532 2, Water&Sewer - - 8,200 7, Junior Empl Comm Devlpm Supervisory Independen ,455 25, UAW Non Sup ,545 21, UAW Jr Unit - - 1,585 1, Plc Sprvsrs 67.18% 67.19% 59,354 57, Police/Fire ,869 30, Sup of Info & Tech/Rec 38.34% 35.57% 2,133 1, POAM aft 7/1/11-Office 11.60% 11.52% 6,957 6, Fire Hired after 7/1/ % 10.79% 3,747 2,684 HA - New hires after 11/1/1 8.61% 9.01% 39,779 36,463 HB - Gen.Aux FOP-hired aft 6.47% 5.64% 1, Municipality Total $ 522,087 $ 482,850 Employee contribution rates reflected in the valuations are shown below: Division Valuation Date: Employee Contribution Rate 12/31/ /31/ Gnl NonUnio 1.00% 1.00% 02 - Plc NonComm 1.50% 1.00% 05 - Fire 4.50% 4.00% 08 - NewHires 54B 1.00% 1.00% 10 - Gnl DPW 6.70% 6.70% 11 - Gnl Auxlry 1.00% 1.00% rpc_id: 6783 Page 6 of 60

7 Division Valuation Date: Employee Contribution Rate 12/31/ /31/ Gnl 54B Crt 1.00% 1.00% 13 - Jail Serv 1.00% 1.00% 14 - Water&Sewer 0.00% 0.00% 15 - Junior Empl 3.00% 3.00% 16 - Comm Devlpm 0.00% 0.00% 17 - Supervisory Independen 1.30% 1.30% 18 - UAW Non Sup 1.00% 1.00% 19 - UAW Jr Unit 3.00% 3.00% 20 - Plc Sprvsrs 3.00% 3.00% 21 - Police/Fire 4.00% 4.00% 22 - Sup of Info & Tech/Rec 0.00% 0.00% 23 - POAM aft 7/1/11-Office 0.00% 0.00% 50 - Fire Hired after 7/1/2 0.00% 0.00% HA - New hires after 11/1/1 0.00% 0.00% HB - Gen.Aux FOP-hired aft 0.00% 0.00% For employee contribution rates that are not flat percentages, the rate shown is a weighted average flat employee contribution rate. You may contribute more than the minimum required contributions, as these additional contributions will earn investment income, and later you may have to contribute less than otherwise. MERS strongly encourages employers to contribute more than the minimum contribution shown above. Assuming that experience of the plan meets actuarial assumptions: To accelerate to a 100% funding ratio in 10 years, estimated monthly employer contributions for the entire employer would be $ 863,540, instead of $ 522,087. To accelerate to a 100% funding ratio in 20 years, estimated monthly employer contributions for the entire employer would be $ 569,498, instead of $ 522,087. If you are interested in making additional contributions, please contact MERS and they can assist you with evaluating your options. How and Why Do These Numbers Change? In a defined benefit plan contributions vary from one annual actuarial valuation to the next as a result of the following: Changes in benefit provisions (see Table 2) Changes in actuarial assumptions and methods (see the Appendix) Experience of the plan (investment experience and demographic experience); this is the difference between actual experience of the plan and the actuarial assumptions rpc_id: 6783 Page 7 of 60

8 Actuarial valuations do not affect the ultimate cost of the plan; the benefit payments (current and future) determine the cost of the plan. Actuarial valuations only affect the timing of the contributions into the plan. Because assumptions are for the long term, plan experience will not match the actuarial assumptions in any given year (except by coincidence). Each annual actuarial valuation will adjust the required employer contributions up or down based on the prior year s actual experience. Comments on the Investment Markets At this time, MERS maintains the 8% annual return assumption on investments in the belief that over the long-term this is achievable. For example, MERS' 30 year return was 9.17% on December 31, The MERS portfolio returned 6.49% in 2014; the two year (10.54%), three year (10.73%), four year (8.48%), and five year (9.59%) returns all exceed the 8% annual return assumption. When comparing these actual returns to the 8% net return assumption, deduct roughly.25% from these actual returns to reflect administrative expenses. It has now been seven years since the peak of the financial crisis and the stock market decline still weighs down MERS medium term returns. This was a one in fifty year event comparable only to the Stock Market Crash of 1929 during the Great Depression. The stock market and economy have stabilized since 2008 and are on the long road to recovery. MERS regularly monitors the investment return assumption to make sure it is reasonable compared to long term expectations. The actuarial value of assets, used to determine both your funded ratio and your required employer contribution, is based on a 10-year smoothed value of assets. Only a portion (seven-tenths, for 2008 through 2014) of the 2008 investment market losses was recognized in this actuarial valuation report. This reduces the volatility of the valuation results, which affects your required employer contribution and funded ratio. The smoothed actuarial rate of return for 2014 was 5.90%. As of December 31, 2014 the actuarial value of assets is 106% of market value. This means that meeting the actuarial assumption in the next few years will require average annual market returns that exceed the 8% investment return assumption. If the December 31, 2014 valuation results were based on market value on that date instead of 10-year smoothed funding value: i) the funded percent of your entire municipality would be 55% (instead of 58%); and ii) your total employer contribution requirement for the fiscal year starting July 1, 2016 would be $ 6,668,412 (instead of $ 6,265,044). The asset smoothing method is a powerful tool for reducing the volatility of your required employer contributions. However, if the current 6% difference between the smoothed value and the market value of assets is not made up, the result would be gradual increases in your employer contribution requirement over the next few years (to around the levels described above). Risk Characteristics of Defined Benefit Plans rpc_id: 6783 Page 8 of 60

9 It is important to understand that retirement plans, by their nature, are exposed to certain risks. While risks cannot be eliminated entirely, they can be mitigated through various strategies. Below are a few examples of risk (this is not an all-inclusive list): Economic - investment return, wage inflation, etc. Demographic - longevity, disability, retirement, etc. Plan Sponsor and Employees - contribution volatility, attract/retain employees, etc. The MERS Retirement Board adopts certain assumptions and methods to mitigate the economic and demographic risks, and the contribution volatility risks. For example, the investment risk is the largest economic risk and is mitigated by having a balanced portfolio and a clearly defined investment strategy. Demographic risks vary based on the age of the workforce and are mitigated by preparing special studies called experience studies on a regular basis to determine if the assumptions used are reasonable compared to the experience. Risk may be mitigated through a plan design that provides benefits that are sustainable in the long run. An Experience Study is completed every five years to review the assumptions and methods. The next Experience Study will be completed in Alternate Scenarios to Estimate the Potential Volatility of Results ("What If Scenarios") The calculations in this report are based on assumptions about long-term economic and demographic behavior. These assumptions will never materialize in a given year, except by coincidence. Therefore the results will vary from one year to the next. The volatility of the results depends upon the characteristics of the plan. For example: Open divisions that have substantial assets compared to their active employee payroll will have more volatile employer contribution rates due to investment return fluctuations. Open divisions that have substantial accrued liability compared to their active employee payroll will have more volatile employer contribution rates due to demographic experience fluctuations. Small divisions will have more volatile contribution patterns than larger divisions because statistical fluctuations are relatively larger among small populations. Shorter amortization periods result in more volatile contribution patterns. The analysis in this section is intended to review the potential volatility of the actuarial valuation results. It is important to note that calculations in this report are mathematical estimates based upon assumptions regarding future events, which may or may not materialize. Actuarial calculations can and do vary from one valuation to the next, sometimes significantly depending on the group s size. Many assumptions are important in determining the required employer contributions. For example: Lower investment returns would result in higher required employer contributions, and vice-versa. Smaller than projected pay increases would lower required employer contributions. rpc_id: 6783 Page 9 of 60

10 Reductions in the number of active employees would lower required contribution dollars, but would usually increase the contribution rate expressed as a percentage of (the now lower) payroll. Retirements at earlier ages than projected would usually increase required employer contributions. More non-vested terminations of employment than projected would decrease required contributions. More disabilities or survivor (death) benefits than projected would increase required contributions. Longer lifetimes after retirement than projected would increase required employer contributions. In the table below, we show the impact of varying one actuarial assumption: the future annual rate of investment return. Lower investment returns would result in higher required employer contributions, and vice-versa. The relative impact of each investment return scenario below will vary from year to year, as the participant demographics change. The impact of each scenario should be analyzed for a given year, not from year to year. The results in the table are based on the December 31, 2014 valuation, and are for the municipality in total, not by division. Assumed Future Annual Smoothed Rate of Investment Return Lower Future Annual Returns Valuation Assumption Higher Returns 12/31/2014 Valuation Results 6% 7% 8% 9% Accrued Liability $ 209,598,593 $ 187,839,841 $ 169,548,861 $ 154,044,931 Valuation Assets $ 98,571,617 $ 98,571,617 $ 98,571,617 $ 98,571,617 Unfunded Accrued Liability $ 111,026,976 $ 89,268,224 $ 70,977,244 $ 55,473,314 Funded Ratio 47% 53% 58% 64% Monthly Normal Cost $ 241,666 $ 185,051 $ 141,794 $ 108,677 Monthly Amortization Payment $ 500,973 $ 441,682 $ 380,293 $ 314,802 Total Employer Contribution 1 $ 742,639 $ 626,733 $ 522,087 $ 423,479 1 If assets exceed accrued liabilities for a division, the division s amortization payment is negative and is used to reduce the division s employer contribution requirement. If the overfunding credit is larger than the normal cost, the division s full credit is included in the municipality s amortization payment above but the division s total contribution requirement is zero. This can cause the displayed normal cost and amortization payment to not add up to the displayed total employer contribution. rpc_id: 6783 Page 10 of 60

11 Five Year Projection Scenarios The following table illustrates the plan's projected liabilities and required employer contributions for the next five fiscal years, under three actuarial assumptions and future economic scenarios. All three scenarios take into account the 2008 financial losses that will continue to affect the smoothed rate of return for the next three years. Valuation Year Ending 12/31 Fiscal Year Beginning 7/1 Actuarial Accrued Liability Valuation Assets Funded Percentage Required Annual Employer Contribution 1 8% Assumed Interest Discount Rate and Future Annual Market Rate of Return $ 169,548,861 $ 98,571,617 58% $ 6,507, ,458,700 99,383,300 57% 6,954, ,167,600 99,594,800 56% 7,446, ,744,700 99,492,400 55% 8,043, ,103, ,360,700 56% 8,321,648 7% Assumed Interest Discount Rate and Future Annual Market Rate of Return $ 187,839,841 $ 98,571,617 53% $ 7,834, ,822,500 99,246,300 52% 8,245, ,766,400 99,979,000 51% 8,715, ,505, ,271,500 51% 9,272, ,233, ,943,200 52% 9,588,064 6% Assumed Interest Discount Rate and Future Annual Market Rate of Return $ 209,598,593 $ 98,571,617 47% $ 9,311, ,885,600 99,158,700 46% 9,701, ,986, ,507,500 46% 10,184, ,988, ,213,100 47% 10,743, ,682, ,137,500 48% 11,061,812 1 For an employer with any open divisions, this column will include the impact of projected increases in total payroll from 2014 to the applicable fiscal year. This will cause the projected contribution for the fiscal year beginning in 2016 to be higher than the Estimated Annual Contribution shown in Table 1. The first scenario provides an estimate of required employer contributions based on current actuarial assumptions, and a projected 8% market return. The other scenarios may be useful if the municipality chooses to budget more conservatively, and make contributions in addition to the minimum requirements. The 7% and 6% projections provide an indication of the potential required employer contribution if MERS were to realize investment returns of 7% and 6% over the long-term. rpc_id: 6783 Page 11 of 60

12 Employer Contribution Details For the Fiscal Year Beginning July 1, 2016 Table 1 Division Amort. Period for Unfund. Liab. 4,5 Normal Cost Employer Contributions 1 Unfunded Accrued Liability Total Required Employer Contribut. Blended Employer Contribut. 7 Employee Contribution Rate 6 Employee Contribut. Conversion Factor 2 Percentage of Payroll 01 - Gnl NonUnio % 1.00% 02 - Plc NonComm % 1.50% 05 - Fire % 4.50% 08 - NewHires 54B % 1.00% 10 - Gnl DPW % 6.70% 11 - Gnl Auxlry % 1.00% 12 - Gnl 54B Crt % 13 - Jail Serv % 1.00% 14 - Water&Sewer % 15 - Junior Empl % 3.00% 16 - Comm Devlpm % 17 - Supervisory Indepe % 1.30% 18 - UAW Non Sup % 1.00% 19 - UAW Jr Unit % 3.00% 20 - Plc Sprvsrs % 51.90% 67.18% 3.00% 0.65% 21 - Police/Fire % 4.00% 22 - Sup of Info & Tech % 24.41% 38.34% 0.00% 0.90% 23 - POAM aft 7/1/11-Of % 0.41% 11.60% 26.08% 0.00% 0.92% 50 - Fire Hired after % -0.03% 11.23% 56.51% 0.00% 0.90% HA - New hires after % -0.21% 8.61% 30.06% 0.00% 0.97% HB - Gen.Aux FOP-hired % -0.51% 6.47% 26.08% 0.00% 0.96% Estimated Monthly Contribution Gnl NonUnio 24 $ 2,838 $ 35,276 $ 38, Plc NonComm 24 23,318 25,355 48, Fire 24 29, , , NewHires 54B 24 3, , Gnl DPW 24 1,799 32,750 34, Gnl Auxlry 24 3,223 8,508 11, Gnl 54B Crt 11 1,283 18,317 19, Jail Serv , Water&Sewer 12 3,459 4,741 8, Junior Empl Comm Devlpm Supervisory Indepe ,940 27, UAW Non Sup 24 3,062 18,483 21,545 rpc_id: 6783 Page 12 of 60

13 Table 1 (continued) Division Amort. Period for Unfund. Liab. 4,5 Normal Cost Employer Contributions 1 Unfunded Accrued Liability Total Required Employer Contribut UAW Jr Unit , Plc Sprvsrs 24 13,500 45,854 59, Police/Fire 24 1,151 31,718 32, Sup of Info & Tech ,358 2, POAM aft 7/1/11-Of 24 6, , Fire Hired after ,757 (10) 3,747 HA - New hires after ,749 (970) 39,779 HB - Gen.Aux FOP-hired 24 1,115 (81) 1,034 Total Municipality $ 141,794 $ 380,293 $ 522,087 Estimated Annual Contribution 3 $ 1,701,528 $ 4,563,516 $ 6,265,044 1 The above employer contribution requirements are in addition to the employee contributions, if any. Blended Employer Contribut. 7 Employee Contribution Rate 6 Employee Contribut. Conversion Factor 2 2 If employee contributions are increased/decreased by 1.00% of pay, the employer contribution requirement will decrease/increase by the Employee Contribution Conversion Factor. The conversion factor is usually under 1%, because employee contributions may be refunded at termination of employment, and not used to fund retirement pensions. Employer contributions will all be used to fund pensions. 3 For divisions that are open to new hires, estimated contributions are based on valuation payroll. Actual contributions will be based on actual reported monthly pays, and will be different from the above amounts (usually higher). For divisions that will have no new hires, invoices will be based on the above dollar amounts which are based on projected fiscal year payroll. See description of Open Divisions and Closed Divisions in the Appendix. 4 If projected assets exceed projected liabilities as of the beginning of the July 1, 2016 fiscal year, the negative unfunded accrued liability is amortized (spread) over 10 years. This amortization is used to reduce the employer contribution rate. Note that if the overfunding credit is larger than the normal cost, the full credit is shown above but the total contribution requirement is zero. This will cause the displayed normal cost and unfunded accrued liability contributions to not add across. 5 If the division is closed to new hires, with new hires not covered by MERS Defined Benefit Plan or Hybrid Plan provisions, the amortization period will decrease as follows: Under Amortization Option A, the period will decrease by 2 years each valuation year, until it reaches 6 or 5 years. Then it decreases by 1 year each valuation year until the UAL is paid off. Under Amortization Option B, the period will decrease by 2 years each valuation year, until it reaches 16 or 15 years. Thereafter, the period will reduce by 1 year each valuation year, until the UAL is paid off. This will result in amortization payments that increase faster than the usual 4.5% each year. If the division is closed to new hires, with new hires (and transfers) covered by MERS Defined Benefit Plan or Hybrid Plan provisions, the standard open division amortization period will apply. 6 For employee contribution rates that are not flat percentages, the rate shown is a weighted average flat employee contribution rate. 7 For linked divisions, the employer will be invoiced the Total Required Employer Contribution rate shown above for each linked division (a contribution rate for the open division; a contribution dollar for the closed-but-linked division), unless the employer elects to contribute the Blended Employer Contribution rate shown above, by contacting MERS at Please see the Comments on the Investment Markets. rpc_id: 6783 Page 13 of 60

14 Benefit Provisions Table Gnl NonUnio: Closed to new hires, linked to Division HA 2014 Valuation 2013 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) 2.25% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 55/25 55/25 Early Retirement (Reduced): 50/25 50/25 55/15 55/15 Final Average Compensation: 3 years 3 years Employee Contributions: 1% 1% Act 88: No No 02 - Plc NonComm: Closed to new hires, linked to Division Valuation 2013 Valuation Benefit Multiplier: 2.75% Multiplier (80% max) 2.75% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 50/25 50/25 Early Retirement (Reduced): 55/15 55/15 Final Average Compensation: 3 years 3 years COLA for Future Retirees: 2.50% (Non-Compound) 2.50% (Non-Compound) Employee Contributions: 1.50% 1% Act 88: No No 05 - Fire: Closed to new hires, linked to Division Valuation 2013 Valuation Benefit Multiplier: 2.75% Multiplier (80% max) 2.75% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 50/25 50/25 Early Retirement (Reduced): 55/15 55/15 Final Average Compensation: 3 years 3 years COLA for Future Retirees: 2.50% (Non-Compound) 2.50% (Non-Compound) Employee Contributions: 4.50% 4% Act 88: No No rpc_id: 6783 Page 14 of 60

15 Table 2 (continued) 08 - NewHires 54B: Closed to new hires, linked to Division HA 2014 Valuation 2013 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) 2.25% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 55/25 55/25 Early Retirement (Reduced): 50/25 50/25 55/15 55/15 Final Average Compensation: 3 years 3 years Employee Contributions: 1% 1% Act 88: No No 10 - Gnl DPW: Closed to new hires, linked to Division HA 2014 Valuation 2013 Valuation Benefit Multiplier: 2.50% Multiplier (80% max) 2.50% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 50/25 50/25 Early Retirement (Reduced): 55/15 55/15 Final Average Compensation: 3 years 3 years Employee Contributions: 6.70% 6.70% Act 88: No No 11 - Gnl Auxlry: Closed to new hires, linked to Division HB 2014 Valuation 2013 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) 2.25% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 50/25 50/25 Early Retirement (Reduced): 55/15 55/15 Final Average Compensation: 3 years 3 years Employee Contributions: 1% 1% Act 88: No No 12 - Gnl 54B Crt: Closed to new hires 2014 Valuation 2013 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) 2.25% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 50/25 50/25 Early Retirement (Reduced): 55/15 55/15 Final Average Compensation: 3 years 3 years Employee Contributions: 1% 1% DC Plan for New Hires: 7/1/2006 7/1/2006 Act 88: No No rpc_id: 6783 Page 15 of 60

16 Table 2 (continued) 13 - Jail Serv: Closed to new hires, linked to Division HA 2014 Valuation 2013 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) 2.25% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 55/25 55/25 Early Retirement (Reduced): 50/25 50/25 55/15 55/15 Final Average Compensation: 5 years 5 years Employee Contributions: 1% 1% Act 88: No No 14 - Water&Sewer: Closed to new hires 2014 Valuation 2013 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) 2.25% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 55/25 55/25 Early Retirement (Reduced): 50/25 50/25 55/15 55/15 Final Average Compensation: 3 years 3 years Employee Contributions: 0% 0% DC Plan for New Hires: 7/1/2007 7/1/2007 Act 88: No No 15 - Junior Empl: Closed to new hires, linked to Division HA 2014 Valuation 2013 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) 2.25% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 55/25 55/25 Early Retirement (Reduced): 50/25 50/25 55/15 55/15 Final Average Compensation: 3 years 3 years Employee Contributions: 3% 3% Act 88: No No rpc_id: 6783 Page 16 of 60

17 Table 2 (continued) 16 - Comm Devlpm: Closed to new hires 2014 Valuation 2013 Valuation Benefit Multiplier: 2.00% to Social Security Age (no max), 1.70% after SS Age (no max) 2.00% to Social Security Age (no max), 1.70% after SS Age (no max) Normal Retirement Age: Vesting: 6 years 6 years Early Retirement (Unreduced): 55/25 55/25 Early Retirement (Reduced): 50/25 50/25 55/15 55/15 Final Average Compensation: 3 years 3 years Employee Contributions: 0% 0% Act 88: No No 17 - Supervisory Independent Union: Closed to new hires, linked to Division HA 2014 Valuation 2013 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) 2.25% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 55/25 55/25 Early Retirement (Reduced): 50/25 50/25 55/15 55/15 Final Average Compensation: 3 years 3 years Employee Contributions: 1.30% 1.30% Act 88: No No 18 - UAW Non Sup: Closed to new hires, linked to Division HA 2014 Valuation 2013 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) 2.25% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 55/25 55/25 Early Retirement (Reduced): 50/25 50/25 55/15 55/15 Final Average Compensation: 3 years 3 years Employee Contributions: 1% 1% Act 88: No No rpc_id: 6783 Page 17 of 60

18 Table 2 (continued) 19 - UAW Jr Unit: Closed to new hires, linked to Division HA 2014 Valuation 2013 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) 2.25% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 55/25 55/25 Early Retirement (Reduced): 50/25 50/25 55/15 55/15 Final Average Compensation: 3 years 3 years Employee Contributions: 3% 3% Act 88: No No 20 - Plc Sprvsrs: Open Division 2014 Valuation 2013 Valuation Benefit Multiplier: 2.75% Multiplier (80% max) 2.75% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 50/25 50/25 Early Retirement (Reduced): 55/15 55/15 Final Average Compensation: 3 years 3 years COLA for Future Retirees: 2.50% (Non-Compound) 2.50% (Non-Compound) Employee Contributions: 3% 3% Act 88: No No 21 - Police/Fire: Closed to new hires, linked to Division HA 2014 Valuation 2013 Valuation Benefit Multiplier: 2.75% Multiplier (80% max) 2.75% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 50/25 50/25 Early Retirement (Reduced): 55/15 55/15 Final Average Compensation: 3 years 3 years COLA for Future Retirees: 2.50% (Non-Compound) 2.50% (Non-Compound) Employee Contributions: 4% 4% Act 88: No No 22 - Sup of Info & Tech/Records: Open Division 2014 Valuation 2013 Valuation Benefit Multiplier: 2.50% Multiplier (80% max) 2.50% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 50/25 50/25 Early Retirement (Reduced): 55/15 55/15 Final Average Compensation: 3 years 3 years Employee Contributions: 0% 0% Act 88: No No rpc_id: 6783 Page 18 of 60

19 Table 2 (continued) 23 - POAM aft 7/1/11-Officers Only: Open Division, linked to Division Valuation 2013 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) 2.25% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 55/25 55/25 Early Retirement (Reduced): 50/25 50/25 55/15 55/15 Final Average Compensation: 3 years 3 years Employee Contributions: 0% 0% Act 88: No No 50 - Fire Hired after 7/1/2011: Open Division, linked to Division Valuation 2013 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) 2.25% Multiplier (80% max) Normal Retirement Age: Vesting: 10 years 10 years Early Retirement (Unreduced): 55/25 55/25 Early Retirement (Reduced): 50/25 50/25 55/15 55/15 Final Average Compensation: 3 years 3 years Employee Contributions: 0% 0% Act 88: No No HA - New hires after 11/1/10: Open Division, linked to Division 01, 08, 10, 13, 15, 17, 18, 19, Valuation 2013 Valuation Benefit Multiplier: Hybrid Plan % Multiplier Hybrid Plan % Multiplier Normal Retirement Age: Vesting: 6 years 6 years Early Retirement (Unreduced): - - Early Retirement (Reduced): - - Final Average Compensation: 3 years 3 years Employee Contributions: 0% 0% Act 88: No No HB - Gen.Aux FOP-hired aft 7/1/2011: Open Division, linked to Division Valuation 2013 Valuation Benefit Multiplier: Hybrid Plan % Multiplier Hybrid Plan % Multiplier Normal Retirement Age: Vesting: 6 years 6 years Early Retirement (Unreduced): - - Early Retirement (Reduced): - - Final Average Compensation: 3 years 3 years Employee Contributions: 0% 0% Act 88: No No rpc_id: 6783 Page 19 of 60

20 Participant Summary Table 3 Division 2014 Valuation 2013 Valuation 2014 Valuation Number Annual Payroll 1 Number Annual Payroll 1 Average Age Average Benefit Service 2 Average Eligibility Service Gnl NonUnio Active Employees 7 $ 437,240 8 $ 541, Vested Former Employees 9 88, , Retirees and Beneficiaries 86 1,873, ,954, Plc NonComm Active Employees 27 $ 1,775, $ 1,760, Vested Former Employees , , Retirees and Beneficiaries , , Fire Active Employees 40 $ 2,926, $ 2,985, Vested Former Employees 3 21, , Retirees and Beneficiaries 63 2,963, ,765, NewHires 54B Active Employees 7 $ 357,997 7 $ 350, Vested Former Employees 2 25, , Retirees and Beneficiaries 2 13, , Gnl DPW Active Employees 6 $ 385,278 7 $ 416, Vested Former Employees Retirees and Beneficiaries 47 1,137, ,102, Gnl Auxlry Active Employees 9 $ 372, $ 407, Vested Former Employees 9 68, , Retirees and Beneficiaries , , Gnl 54B Crt Active Employees 4 $ 196,422 4 $ 194, Vested Former Employees 5 65, , Retirees and Beneficiaries , , Jail Serv Active Employees 2 $ 102,972 3 $ 154, Vested Former Employees Retirees and Beneficiaries 1 13, , Water&Sewer Active Employees 6 $ 383,241 6 $ 379, Vested Former Employees 7 47, , Retirees and Beneficiaries 5 126, , rpc_id: 6783 Page 20 of 60

21 Table 3 (continued) Division 2014 Valuation 2013 Valuation 2014 Valuation Number Annual Payroll 1 Number Annual Payroll 1 Average Age Average Benefit Service 2 Average Eligibility Service Junior Empl Active Employees 1 $ 61,419 1 $ 60, Vested Former Employees 1 18, , Retirees and Beneficiaries 2 36, , Comm Devlpm Active Employees 0 $ 0 0 $ Vested Former Employees 1 5, , Retirees and Beneficiaries Supervisory Independ Active Employees 1 $ 64,884 2 $ 140, Vested Former Employees Retirees and Beneficiaries , , UAW Non Sup Active Employees 9 $ 485, $ 517, Vested Former Employees 4 56, , Retirees and Beneficiaries , , UAW Jr Unit Active Employees 2 $ 128,625 2 $ 128, Vested Former Employees 1 12, , Retirees and Beneficiaries 2 33, , Plc Sprvsrs Active Employees 13 $ 1,060, $ 1,018, Vested Former Employees 1 25, , Retirees and Beneficiaries 18 1,142, ,159, Police/Fire Active Employees 2 $ 205,329 2 $ 197, Vested Former Employees Retirees and Beneficiaries , , Sup of Info & Tech/R Active Employees 1 $ 66,753 1 $ 63, Vested Former Employees 3 41, , Retirees and Beneficiaries 2 76, , POAM aft 7/1/11-Offi Active Employees 14 $ 719, $ 705, Vested Former Employees Retirees and Beneficiaries Fire Hired after 7/1 Active Employees 8 $ 400,438 6 $ 298, Vested Former Employees Retirees and Beneficiaries rpc_id: 6783 Page 21 of 60

22 Table 3 (continued) Division 2014 Valuation 2013 Valuation 2014 Valuation Number Annual Payroll 1 Number Annual Payroll 1 Average Age Average Benefit Service 2 Average Eligibility Service 2 HA - New hires after 11/1 Active Employees 111 $ 5,544, $ 4,856, Vested Former Employees 14 29, , Retirees and Beneficiaries 3 3, HB - Gen.Aux FOP-hired af Active Employees 8 $ 191,653 6 $ 122, Vested Former Employees Retirees and Beneficiaries Total Municipality Active Employees 278 $ 15,865, $ 15,300, Vested Former Employees , , Retirees and Beneficiaries ,158, ,903, Total Participants Annual payroll for active employees; annual deferred benefits payable for vested former employees; annual benefits being paid for retirees and beneficiaries. 2 Description can be found under Miscellaneous and Technical Assumptions in the Appendix. rpc_id: 6783 Page 22 of 60

23 Reported Assets (Market Value) Table Valuation 2013 Valuation Division Employer and Retiree 1 Employee 2 Employer and Retiree 1 Employee Gnl NonUnio $ 11,544,750 $ 38,187 $ 12,138,516 $ 32, Plc NonComm 14,387,093 69,514 13,850,707 47, Fire 21,511,282 1,362,790 21,334,979 1,306, NewHires 54B 960,384 12, ,700 8, Gnl DPW 6,861, ,642 7,151, , Gnl Auxlry 3,239,630 13,590 3,100,906 11, Gnl 54B Crt 2,464,951 6,823 2,476,814 4, Jail Serv 448,230 3, ,561 3, Water&Sewer 2,533, ,437, Junior Empl 560,873 59, ,410 57, Comm Devlpm 34, , Supervisory Independent Union 3,410,855 5,298 3,667,867 37, UAW Non Sup 5,678,444 40,957 5,727,107 48, UAW Jr Unit 600,972 86, ,278 83, Plc Sprvsrs 9,912, ,197 9,746,658 99, Police/Fire 3,768,869 75,031 3,922,858 66, Sup of Info & Tech/Records 874, , POAM aft 7/1/11-Officers Only 231,429 1, ,308 1, Fire Hired after 7/1/ , ,817 0 HA - New hires after 11/1/10 1,584, ,020,548 0 HB - Gen.Aux FOP-hired aft 7/1/ , ,678 0 Municipality Total $ 90,728,899 $ 2,268,719 $ 90,256,682 $ 2,203,237 Combined Reserves $ 92,997,618 $ 92,459,919 1 Reserve for Employer Contributions and Benefit Payments 2 Reserve for Employee Contributions The December 31, 2014 valuation assets are equal to times the reported market value of assets (compared to as of December 31, 2013). The derivation of valuation assets is described, and detailed calculations of valuation assets are shown, in the Appendix. rpc_id: 6783 Page 23 of 60

24 Flow of Valuation Assets Table 5 Year Employee Valuation Ended Employer Contributions Employee Investment Benefit Contribution Net Asset 12/31 Required Additional Contributions Income Payments Refunds Transfers Balance 2004 $ 2,291,511 $ 225,819 $ 5,590,491 $ (5,367,901) $ 0 $ 0 $ 88,846, ,590, ,801 5,562,303 (5,734,827) ,500, ,872, ,768 7,259,387 (6,301,344) (3,929) (1) 95,551, ,099, ,680 7,716,280 (7,120,650) 0 (85,503) 99,370, ,361, ,060 4,153,119 (7,587,334) (7,614) 0 99,491, ,687, ,792 3,615,006 (8,020,321) ,981, ,012, ,594 4,585,229 (8,680,299) ,154, ,819,096 $ 0 168,721 4,557,810 (9,463,412) 0 (9,383) 99,227, ,379, ,023 4,028,779 (10,312,446) ,576, ,688, ,464 5,347,999 (10,760,384) 0 (918,225) 98,177,640 Notes: ,788, ,570 5,389,258 (11,030,534) ,571,617 Transfers in and out are usually related to the transfer of participants between municipalities, and to employer and employee payments for service credit purchases (if any) that the governing body has approved. Additional employer contributions, if any, are shown separately starting in Prior to 2011, additional contributions are combined with the required employer contributions. In the actuarial valuation additional employer contributions are combined with required contributions and used to reduce computed future required employer contributions. rpc_id: 6783 Page 24 of 60

25 Actuarial Accrued Liabilities and Valuation Assets As of December 31, 2014 Table 6 Division Actuarial Accrued Liability Valuation Assets 1 Percent Funded Unfunded (Overfunded) Accrued Liabilities 01 - Gnl NonUnio Active Employees $ 2,422,056 $ 20, % $ 2,401,814 Vested Former Employees 518,658 17, % 500,713 Retirees And Beneficiaries 16,296,827 12,238, % 4,057,831 Pending Refunds % 0 Total $ 19,237,541 $ 12,277, % $ 6,960, Plc NonComm Active Employees $ 9,189,224 $ 4,425, % $ 4,763,699 Vested Former Employees 875, , % 0 Retirees And Beneficiaries 10,022,064 10,022, % 0 Pending Refunds % 0 Total $ 20,086,792 $ 15,323, % $ 4,763, Fire Active Employees $ 16,962,041 $ 1,341, % $ 15,620,245 Vested Former Employees 68,653 20, % 48,141 Retirees And Beneficiaries 31,555,456 22,882, % 8,673,172 Pending Refunds % 0 Total $ 48,586,633 $ 24,245, % $ 24,341, NewHires 54B Active Employees $ 867,585 $ 790, % $ 76,704 Vested Former Employees 89,730 89, % 0 Retirees And Beneficiaries 150, , % 0 Pending Refunds % 0 Total $ 1,107,625 $ 1,030, % $ 76, Gnl DPW Active Employees $ 1,882,321 $ 360, % $ 1,522,289 Vested Former Employees % 0 Retirees And Beneficiaries 11,924,080 7,294, % 4,629,517 Pending Refunds 1,611 1, % 0 Total $ 13,808,012 $ 7,656, % $ 6,151, Gnl Auxlry Active Employees $ 1,466,791 $ 13, % $ 1,453,375 Vested Former Employees 327, , % 133,834 Retirees And Beneficiaries 3,240,825 3,240, % 0 Pending Refunds % 0 Total $ 5,035,417 $ 3,448, % $ 1,587,209 rpc_id: 6783 Page 25 of 60

26 Table 6 (continued) Division Actuarial Accrued Liability Valuation Assets 1 Percent Funded Unfunded (Overfunded) Accrued Liabilities 12 - Gnl 54B Crt Active Employees $ 1,224,426 $ 6, % $ 1,217,613 Vested Former Employees 359, % 359,129 Retirees And Beneficiaries 3,054,220 2,613, % 441,118 Pending Refunds % 0 Total $ 4,637,785 $ 2,619, % $ 2,017, Jail Serv Active Employees $ 481,797 $ 342, % $ 139,484 Vested Former Employees % 0 Retirees And Beneficiaries 136, , % 0 Pending Refunds % 0 Total $ 618,378 $ 478, % $ 139, Water&Sewer Active Employees $ 1,645,465 $ 1,099, % $ 545,763 Vested Former Employees 247, , % 0 Retirees And Beneficiaries 1,338,658 1,338, % 0 Pending Refunds % 0 Total $ 3,231,348 $ 2,685, % $ 545, Junior Empl Active Employees $ 164,283 $ 91, % $ 72,833 Vested Former Employees 171, , % 0 Retirees And Beneficiaries 377, , % 0 Pending Refunds 17,028 17, % 0 Total $ 730,077 $ 657, % $ 72, Comm Devlpm Active Employees $ 0 $ 0 0.0% $ 0 Vested Former Employees 44,592 36, % 7,883 Retirees And Beneficiaries % 0 Pending Refunds % 0 Total $ 44,592 $ 36, % $ 7, Supervisory Independent Union Active Employees $ 322,387 $ 5, % $ 317,328 Vested Former Employees % 0 Retirees And Beneficiaries 8,390,577 3,615, % 4,774,729 Pending Refunds % 0 Total $ 8,712,964 $ 3,620, % $ 5,092, UAW Non Sup Active Employees $ 2,772,854 $ 38, % $ 2,734,563 Vested Former Employees 464,340 2, % 461,674 Retirees And Beneficiaries 6,323,730 6,021, % 302,482 Pending Refunds % 0 Total $ 9,560,924 $ 6,062, % $ 3,498,719 rpc_id: 6783 Page 26 of 60

27 Table 6 (continued) Division Actuarial Accrued Liability Valuation Assets 1 Percent Funded Unfunded (Overfunded) Accrued Liabilities 19 - UAW Jr Unit Active Employees $ 415,054 $ 298, % $ 116,979 Vested Former Employees 106, , % 0 Retirees And Beneficiaries 308, , % 0 Pending Refunds 16,398 16, % 0 Total $ 846,159 $ 729, % $ 116, Plc Sprvsrs Active Employees $ 6,622,004 $ 128, % $ 6,493,581 Vested Former Employees 106,712 2, % 103,938 Retirees And Beneficiaries 13,293,930 10,514, % 2,779,761 Pending Refunds % 0 Total $ 20,022,646 $ 10,645, % $ 9,377, Police/Fire Active Employees $ 1,986,401 $ 75, % $ 1,911,370 Vested Former Employees % 0 Retirees And Beneficiaries 8,084,996 3,999, % 4,085,735 Pending Refunds % 0 Total $ 10,071,397 $ 4,074, % $ 5,997, Sup of Info & Tech/Records Active Employees $ 264,139 $ 0 0.0% $ 264,139 Vested Former Employees 69,674 67, % 2,423 Retirees And Beneficiaries 859, , % 0 Pending Refunds % 0 Total $ 1,193,032 $ 926, % $ 266, POAM aft 7/1/11-Officers Only Active Employees $ 295,103 $ 246, % $ 48,659 Vested Former Employees % 0 Retirees And Beneficiaries % 0 Pending Refunds % 0 Total $ 295,103 $ 246, % $ 48, Fire Hired after 7/1/2011 Active Employees $ 89,996 $ 94, % $ (4,076) Vested Former Employees % 0 Retirees And Beneficiaries % 0 Pending Refunds % 0 Total $ 89,996 $ 94, % $ (4,076) HA - New hires after 11/1/10 Active Employees $ 1,481,449 $ 1,551, % $ (70,014) Vested Former Employees 101, , % 0 Retirees And Beneficiaries 27,035 27, % 0 Pending Refunds % 0 Total $ 1,609,814 $ 1,679, % $ (70,014) rpc_id: 6783 Page 27 of 60

28 Table 6 (continued) Division Actuarial Accrued Liability Valuation Assets 1 Percent Funded Unfunded (Overfunded) Accrued Liabilities HB - Gen.Aux FOP-hired aft 7/1/2011 Active Employees $ 22,037 $ 33, % $ (11,184) Vested Former Employees % 0 Retirees And Beneficiaries % 0 Pending Refunds % 0 Total $ 22,626 $ 33, % $ (11,184) Total Municipality Active Employees $ 50,577,413 $ 10,962, % $ 39,615,164 Vested Former Employees 3,551,906 1,934, % 1,617,735 Retirees and Beneficiaries 115,384,022 85,639, % 29,744,345 Pending Refunds 35,520 35, % 0 Total Participants $ 169,548,861 $ 98,571, % $ 70,977,244 The following results show the combined accrued liabilities and assets for each set of linked divisions. These results are already included in the table above. Linked Divisions HA, 01, 08, 10, 13, 15, 17, 18, 19, 21 Active Employees $ 12,796,187 $ 3,572, % $ 9,223,350 Vested Former Employees 1,452, , % 962,387 Retirees and Beneficiaries 52,019,650 34,169, % 17,850,294 Pending Refunds 35,037 35, % 0 Total $ 66,302,891 $ 38,266, % $ 28,036,031 Linked Divisions 23, 02 Active Employees $ 9,484,327 $ 4,671, % $ 4,812,358 Vested Former Employees 875, , % 0 Retirees and Beneficiaries 10,022,064 10,022, % 0 Pending Refunds % 0 Total $ 20,381,895 $ 15,569, % $ 4,812,358 Linked Divisions 50, 05 Active Employees $ 17,052,037 $ 1,435, % $ 15,616,169 Vested Former Employees 68,653 20, % 48,141 Retirees and Beneficiaries 31,555,456 22,882, % 8,673,172 Pending Refunds % 0 Total $ 48,676,629 $ 24,339, % $ 24,337,482 Linked Divisions HB, 11 Active Employees $ 1,488,828 $ 46, % $ 1,442,191 Vested Former Employees 328, , % 133,834 Retirees and Beneficiaries 3,240,825 3,240, % 0 Pending Refunds % 0 Total $ 5,058,043 $ 3,482, % $ 1,576,025 1 Includes both employer and employee assets. rpc_id: 6783 Page 28 of 60