AUSTIN POLICE RETIREMENT SYSTEM ACTUARIAL VALUATION AS OF DECEMBER 31, 2011

Transcription

1 AUSTIN POLICE RETIREMENT SYSTEM ACTUARIAL VALUATION AS OF DECEMBER 31, 2011

2 FOSTER & FOSTER ACTUAR IES AND CONSULTANTS 2 December 17, 2012 Mr. Sam Jrdan, CEO Austin Plice Retirement System 2520 Suth I H 35, Suite 100 Austin, TX Re: Austin Plice Retirement System Dear Mr. Jrdan: We are pleased t present t the Bard this reprt f the annual actuarial valuatin f the Austin Plice Retirement System. The valuatin was perfrmed t determine whether the assets and cntributins are sufficient t prvide the prescribed benefits and t develp the apprpriate funding requirements fr the applicable plan year(s). The valuatin has been cnducted in accrdance with generally accepted actuarial principles and practices, including the applicable Actuarial Standards f Practice as issued by the Actuarial Standards Bard, and reflects applicable laws and regulatins issued t date at the state and federal level. In ur pinin, the assumptins used in this valuatin, as adpted by the Bard f Trustees, represent reasnable expectatins f anticipated plan experience. In cnducting the valuatin, we have relied n persnnel, plan design, financial reprts, and asset infrmatin supplied by the City f Austin, and the actuarial assumptins and methds described in the Actuarial Assumptins sectin f this reprt. While we cannt verify the accuracy f all this infrmatin, the supplied infrmatin was reviewed fr cnsistency and reasnableness. As a result f this review, we have n reasn t dubt the substantial accuracy f the infrmatin and believe that it has prduced apprpriate results. This infrmatin, alng with any adjustments r mdificatins, is summarized in varius sectins f this reprt Parker Cmmns Blvd., Suite 104 Frt Myers, Fl (239) ' Fax (239) ' GU.I'.IIJ11~4? _ 1

3 3 The undersigned is familiar with the immediate and lng-term aspects f pensin valuatins, and meets the Qualificatin Standards f the American Academy f Actuaries necessary t render the actuarial pinins cntained herein. All f the sectins f this reprt are cnsidered an integral part f the actuarial pinins. T ur knwledge, n assciate f Fster & Fster Inc. wrking n valuatins f the prgram has any direct financial interest r indirect material interest in the City f Austin, nr des anyne at Fster & Fster Inc. act as a member f the Bard f Trustees f the Austin Plice Retirement System. Thus, there is n relatinship existing that might affect ur capacity t prepare and certify this actuarial reprt. If there are any questins, cncerns, r cmments abut any f the items cntained in this reprt, please cntact me at Respectfully submitted, Fster & Fster Inc. By: Bradley R. ei ichs, FSA, EA, MAAA Enrlled Actuary # BRHllke Enclsures

4 4 TABLE OF CONTENTS Sectin Title Pages I ntrd uctin a. Summary f Reprt 5 b. Cmparative Summary f Principal Valuatin Results 7 II Valuatin Infrmatin a. Actuarial Assumptins and Methds 11 b. Valuatin Ntes 15 III Trust Fund 17 IV Member Statistics a. Statistical Data 21 b. Age and Service Distributin 22 V Summary f Benefit Prvisins 23 VI Gvernmental Accunting Standards 26 Bard Statements N. 25 and N. 27

5 5 SUMMARY OF REPORT The regular annual actuarial valuatin f the Austin Plice Retirement System, perfrmed as f December 31,2011, has been cmpleted and the results are presented in this Reprt. The pensin csts, cmpared with thse develped in the December 31, 2010 actuarial valuatin perfrmed by Rudd and Wisdm, Inc., are as fllws: Valuatin Date 12/31/11 12/31/10 Nrmal Cst % f Ttal Annual Payrll % % Expected Member Cntributins % f Ttal Annual Payrll % % City Nrmal Cst Rate % f Ttal Annual Payrll 9.318% 9.438%> Funding Perid T Amrtize UAAL (expressed in number f years) This is ur first actuarial valuatin perfrmed fr the Austin Plice Retirement System. Since much f the histrical data typically shwn in ur reprt is nt readily available, we are nt able t prvide all f the infrmatin we wuld like t include. As a result, we have shwn an "N/A" where the data was nt available. In future years, the N/A's will be replaced with actual results. The balance f this Reprt presents additinal details f the actuarial valuatin and the general peratin f the Fund. The undersigned wuld be pleased t meet with the Bard f Trustees in rder t discuss the Reprt and any pending questins cncerning its cntents.

6 6 Respectfully submitted, FOSTER & FOSTER INC.

7 7 COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS Valuatin Date A. Participant Data Actives Service Retirees + DROP Beneficiaries QDRO Disability Retirees Terminated Vested Ttal Ttal Annual Payrll Payrll Under Assumed Ret. Age Annual Rate f Payments t: Service Retirees + DROP Beneficiaries QDRO Disability Retirees Terminated Vested 12/31/2011 1, , ,843, ,843,931 31,561,485 1,897, , , ,942 12/31/2010 1, , ,731, ,731,696 28,146,420 1,817, , , ,536 B. Assets Actuarial Value Market Value 553,701, ,600, ,956, ,137,361 C. Liabilities Present Value f Benefits Active Members Retirement Benefits * Vested Benefits * Death Benefits * Disability Benefits * Refund f Cntributins * Service Retirees + DROP Beneficiaries QDRO Disability Retirees Terminated Vested Ttal 751,002,491 1,757,624 11,264,236 15,806,982 3,090, ,627,645 16,435,130 3,498,187 1,618,819 1,332,205 1,149,433, ,784,942 N/A N/A N/A N/A N/A 305,180,308 15,891,006 2,890,741 1,422,756 4,950,553 1,095,120,307 * The December 31,2010 actuarial valuatin reprt prvided by Rudd and Wisdm, Inc. des nt include this specific infrmatin

8 8 Valuatin Date 12/31/ /31/2010 C. Liabilities - (Cntinued) Present Value f Future Salaries 1,606,400,949 N/A Nrmal Cst (Entry Age Nrmal) * Retirement Benefits 26,870,016 N/A Vested Benefits 140,584 N/A Death Benefits 499,244 N/A Disability Benefits 938,893 N/A Refund f Cntributins 456,152 N/A Ttal Nrmal Cst 28,904,889 N/A Present Value f Future Nrmal Csts 334,175, ,889,280 Actuarial Accrued Liability Retirement Benefits * 434,971,886 N/A Vested Benefits * 822,539 N/A Death Benefits * 5,721,281 N/A Disability Benefits * 6,422,920 N/A Refund f Cntributins * 808,164 N/A Inactives 366,511, ,335,364 Ttal Actuarial Accrued Liability 815,258, ,231,027 Unfunded Actuarial Accrued Liability (UAAL) 261,556, ,274,399 D. Actuarial Present Value f Accrued Benefits Vested Accrued Benefits Inactives 366,511, ,335,364 Actives * 137,924,766 N/A Member Cntributins * N/A Ttal 626,107,959 N/A Nn-vested Accrued Benefits * 16,899,693 N/A Ttal Present Value Accrued Benefits * 643,007,652 N/A * The December 31, 2010 actuarial valuatin reprt prvided by Rudd and Wisdm, Inc. des nt include this specific infrmatin

9 9 Valuatin Date 12/31/ /31/2010 E. Pensin Cst Nrmal Cst (with interest) % f Ttal Annual Payrll* Expected Member Cntributins % f Ttal Annual Payrll* City Nrmal Cst Rate 0/0 f Ttal Annual Payrll* Funding Perid t Amrtize UAAL ** 25.2 years 23.2 years F. 30-Year Funding Cst Nrmal Cst (with interest) 0/0 f Ttal Annual Payrll* Payment Required t Amrtize Unfunded Actuarial Accrued Liability ver 30 years % f Ttal Annual Payrll* Ttal 30-Year Funding Cst 0/0 f Ttal Annual Payrll* * Cntributins develped as f 12/31/11 are expressed as a percentage f ttal annual payrll at 12/31/11 f $134,843,931 and include 0.025% f payrll fr assumed administrative expenses ** The perid required t amrtize the UAAL was calculated based n the City's currently scheduled annual cntributin rates t the Fund f /0 f ttal payrll frm 10/1/2011 t 9/30/2012, and 21.63% f ttal payrll thereafter, less the calculated cntributin rate required t fund the Retiree Death Benefit Fund

10 10 Valuatin Date G. Retiree Death Benefit Fund * Present Value f Benefits Active Members Retired and Terminated Vested Members Ttal Present Value f Future Nrmal Csts Actuarial Accrued Liability Asset Value f Fund Unfunded Actuarial Accrued Liability (UAAL) Payment Required t Amrtize Unfunded Actuarial Accrued Liability ver 24 years (as f 12/31/11) 0/0 f Ttal Annual Payrll Nrmal Cst (with interest) 0/0 f Ttal Annual Payrll Ttal Required City Cntributin Rate Allcated t the Retiree Death Benefit Fund % f Ttal Annual Payrll 12/31/ ,446 1,489,705 2,463, ,096 2,037, ,051 1,549, /31/ ,087 1,184,472 2,165, ,212 1,774, ,858 1,366, * The Retiree Death Benefit Fund was established effective September 1, The Fund perates as a separate accunt within the system that is used t advance fund and t pay the $10,000 pst-retirement lump sum death benefits fr retirees

11 11 ACTUARIAL ASSUMPTIONS AND METHODS Mrtality Rates - All Lives Interest Rate Payrll Grwth Administrative Expenses PROP Investment Accunts Marital Status Funding Methd Actuarial Asset Methd Retirement Rates Terminatin Rates Disability Rates Salary Increases Pre-Retirement Death Payment Frm RP-2000 Cmbined Healthy Mrtality Tables fr males and females prjected t Sex Distinct. 8.0% per year, cmpunded annually, net f investment related expenses. 4.0% per year fr amrtizatin f the Unfunded Actuarial Accrued Liability % f payrll added t Nrmal Cst. 75% retiring in DROP will elect t leave their lump sum in the System until age 60. Average annual rate credited t the PROP accunts will be 4.00/0. 85% f actives are assumed t be married at time f benefit cmmencement Females are assumed t be 3 years yunger than Males. Entry Age Nrmal Actuarial Cst Methd All assets are valued at market value with an adjustment made t unifrmly spread actuarial investment gains and lsses (as measured by actual market value investment return against expected market value investment return) ver a five-year perid. The asset value f the Retiree Death Benefit Fund is then subtracted t determine the Actuarial Value f Assets. See fllwing tables. See fllwing tables. See fllwing tables. 55% f disablements are assumed t be service related. See fllwing tables. Married: Jint and 100 % t Survivr Single: 15-Year Certain and Life Annuity

12 12 Retirement Rates Fr Entry Aqes Under 32 1 Fr Entry Ages 33 and Abve 3 APRS 22 & 43 & AGE Service Under Over Rates are based n APRS service nly and apply after a Member is eligible fr retirement with cmbined APRS and Prprtinate Retirement Prgram (PRP) service. Entry ages are determined based n APRS service nly /0 retirement rate will be effective at age 60, if earlier. 3 Rates are based n age and apply after a Member is eligible fr retirement with cmbined APRS and PRP service. Entry ages are determined based n APRS service nly.

13 13 Terminatin Rates Cmbined Years f Service & Abve Prbability f Terminatin During Year APRS service cmbined with Prprtinate Retirement Prgram service. Disability Rates Age & Abve Prbability f Disablement During Year

14 14 Salary Increases Years f Service & Abve I ncrease in Salary1 18.0% Expected increases in salary as shwn abve are in additin t 4.0% increase per year due t general wage increases.

15 15 VALUATION NOTES Ttal Annual Payrll is the annual rate f pay as f the valuatin date f all cvered Members. Present Value f Benefits is the single sum value n the valuatin date f all future benefits t be paid t current Members, Retirees, Beneficiaries, Disability Retirees and Vested Terminatins. Entry Age Nrmal Cst Methd - Under this methd, the nrmal cst is the sum f the individual nrmal csts fr all active participants. Fr an active participant, the nrmal cst is the participant's nrmal cst accrual rate, multiplied by the participant's current cmpensatin. (a) The nrmal cst accrual rate equals: (i) the present value f future benefits fr the participant, determined as f the participant's entry age, divided by (ii) the present value f the cmpensatin expected t be paid t the participant fr each year f the participant's anticipated future service, determined as f the participant's entry age. (b) In calculating the present value f future cmpensatin, the salary scale is applied bth retrspectively and prspectively t estimate cmpensatin in years prir t and subsequent t the valuatin year based n the cmpensatin used fr the valuatin. (c) The accrued liability is the sum f the individual accrued liabilities fr all participants and beneficiaries. A participant's accrued liability equals the present value, at the participant's attained age, f future benefits less the present value at the participant's attained age f the individual nrmal csts payable in the future. A beneficiary's accrued liability equals the present value, at the beneficiary's attained age, f future benefits. The unfunded accrued liability equals the ttal accrued liability less the actuarial value f assets.

16 16 (d) Under this methd, the entry age used fr each active participant is the participant's age at the time he r she wuld have cmmenced participatin if the plan had always been in existence under current terms, r the age as f which he r she first earns service credits fr purpses f benefit accrual under the current terms f the plan.

17 Austin Plice Retirement System 17 BALANCE SHEET December 31,2011 ASSETS Cash and Cash Equivalents: Shrt Term Investments Cash Ttal Cash and Equivalents Receivable: Cntributins Accrued Incme Ttal Receivable Investments: Partnership Interests Crprate Bnds Crprate Stcks I nternatinal Stcks Internatinal Gvernment Securities Real Estate Interests Alternatives Ttal Investments Retiree Death Benefit Fund Fixed Assets Other Assets MARKET VALUE 14,285,087 83,784 14,368,871 1,726,399 4,422,524 6,148,923 47,466,319 13,938, ,078,778 24,314,676 48,287, ,796,553 58,176, ,059, , ,545 7,611 TOTAL ASSETS 484,729,126 LIABILITIES AND NET ASSETS Liabilities: Payable: Refund Other Ttal Liabilities Net Assets1 TOTAL LIABILITIES AND NET ASSETS 124, , , ,088, ,729,126 11ncludes $488,051 fr the Retiree Death Benefit Fund. The Net Market Value f Assets, excluding the Retiree Death Benefit Fund, is $483,600,580.

18 Austin Plice Retirement System 18 CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS December 31, 2011 Market Value Basis Cntributins: Member City 17,612, ,028, Ttal Cntributins Ttal Earnings and Investment Gains, Net f Expenses Ttal Distributins t Members Change in Net Assets fr the Year Net Assets Beginning f the Year Net Assets End f the Year 43,641, (17,234,790.00) 34,862, (8,456,588.00) 492,545, ,088,631.00

19 Austin Plice Retirement System 19 ACTUARIAL ASSET VALUATION December 31,2011 Actuarial Assets fr funding purpses are develped by recgnizing the ttal actuarial investment gain r lss fr each Plan Year ver a five year perid. In the first year, 200/0 f the gain r lss is recgnized. In the secnd year 40%, in the third year 60%, in the furth year 80%, and in the fifth year 100 % f the gain r lss is recgnized. The actuarial investment gain r lss is defined as the actual return n investments minus the actuarial assumed investment return. Plan Year Ending 12/31/ /31/ /31/ /31/2011 Gains/{Lsses) Nt Yet Recgnized Amunts Nt Yet Recgnized by Valuatin Year Gain/(Lss) (178,262,916) 3,260,002 16,389,018 (56,982,781 ) (35,652,583) 1,304,001 9,833,411 (45,586,225) 652,000 6,555,607 (34,189,669) 3,277,804 (22,793,112) (11,396,556) Ttal (70,101,396) (26,982,062) (19,515,308) (11,396,556) 2016 Develpment f Investment Gain/Lss Market Value f Assets, including Retiree Death Benefit Fund, 12/31/2010 Cntributins Less Benefit Payments Expected Investment Earnings* Actual Net Investment Earnings 2012 Actuarial Investment Gain/(Lss) 492,545,219 8,778,202 39,747,991 (17,234,790) (56,982,781) *Expected Investment Earnings = 0.08 * 492,545,219 + [(1.08)".5-1] * 8,778,202 Develpment f Actuarial Value f Assets Market Value f Assets, 12/31/2011 (Gains)/Lsses Nt Yet Recgnized Actuarial Value f Assets, 12/31/2011 (A) 12/31/2010 Actuarial Assets, including Retiree Death Benefit Fund: (I) Net Investment Incme: 1. Earnings and Investment Gains, less Expenses 2. Change in Actuarial Value Ttal (B) 12/31/2011 Actuarial Assets, including Retiree Death Benefit Fund: Actuarial Assets Rate f Return = 21/(A+B-I): Market Value f Assets Rate f Return: 484,088,631 70,101, ,190, ,364,486 (17,234,790) 15,201,936 (2,032,854) 554,190, % -3.5% 12/31/2011 Limited Net Actuarial Assets, excluding Retiree Death Benefit Fund: 553,701,976 (Lesser f Actuarial Assets r 120% f Market Value, but n less than 80% f Market Value)

20 Austin Plice Retirement System 20 CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS December 31,2011 Actuarial Asset Basis Cntributins: Member City 17,612, ,028, Ttal Cntributins 43,641, Ttal Earnings & Investment Gains, Net f Expenses Change in Actuarial Value (17,234,790.00) 15,201, Ttal Earnings and Investment Gains Ttal Distributins t Members Change in Net Assets fr the Year Net Assets Beginning f the Year Net Assets End f the Year* (2,032,854.00) 34,862, ,745, ,956, ,701, *Net Assets may be limited fr actuarial cnsideratin, and exclude Retiree Death Benefit Fund

21 21 STATISTICAL DATA 12/31/2011 Actives Average Current Age Average Age at Emplyment Average Past Service Average Annual Salary 1, $79,636 * Fster & Fster des nt have enugh histrical data t include data prir t 12/31/2011. We will add hisrtical data ging frward.

22 22 AGE AND SERVICE DISTRIBUTION PAST SERVICE AGE Ttal Ttal ,679

23 23 AUSTIN POLICE RETIREMENT SYSTEM SUMMARY OF BENEFIT PROVISIONS Creditable Service Earnings Ttal years and cmpleted mnths (excluding a mnth in which service amunt t fewer than 15 days) during which a Member makes cntributins t the System. Base pay, plus lngevity pay. Average Final Cmpensatin Average Earnings fr the highest 36 mnths ver the last 120 mnths f service. Member Cntributins City Cntributins 13.0% f Earnings % (as f 12/31/2011), scheduled t increase t /0 effective Octber 1,2012. Nrmal Retirement Date Benefit Frm f Benefit Earlier f age 62, age 55 and 20 years f Creditable Service, r 23 years f Creditable Service, regardless f age (excluding military service). 3.20% f Average Final Cmpensatin times Creditable Service. Mdified Cash Refund (ptins available). Vesting Schedule Benefit Amunt 1000/0 after 10 years f Creditable Service. Member will receive his (her) accrued benefit payable at the Nrmal Retirement Date based upn actual Creditable Service prir t terminatin. Nn-vested members receive a refund f accumulated cntributins.

24 24 Disability Eligibility Benefit Frm f Benefit Ttal and permanent as determined by the Bard. Members must have 10 years f Creditable Service if the disability was nn-service related. Accrued benefit at date f disability, but nt less than 64%) f Average Final Cmpensatin fr service related disablements. Mdified Cash Refund (ptins available). Death Benefits Befre Retirement Eligibility After Retirement Eligibility Retiree Death Benefit Fund Twice the amunt f the Member's accumulated cntributins, subject t a minimum f $10,000. Member's accrued benefit as f the date f death, payable based n ptinal annuity selected either by Member r beneficiary. Additinally, a lump sum death benefit is payable in the amunt f $10,000. Effective September 1,2003, a separate fund (funded as a prtin f the City's cntributin rate) was established t pay pst-retirement lump sum death benefits. Effective September 1, 2007, the amunt f these benefits was increased t $10,000. Cst f Living Adjustment Eligibility Amunt Nrmal Retirement. Determined by the actuary if prviding a COLA (nt t exceed 6.0% per year) will nt impair financial stability f the System. Pst-Retirement benefit increases will autmatically be prvided when the System's benefit accrual rate is increased.

25 25 Prprtinate Retirement Prgram Effective September 1, 2009, the System and the City began participating in the statewide Prprtinate Retirement Prgram (PRP). Service in ther participating public emplyee retirement systems can be cmbined with service in the System t satisfy the System's requirements fr service retirement eligibility and fr eligibility fr vested benefits f a terminated Member. The participating systems, in additin t the System, are the six statewide systems, the City f Austin Emplyees' Retirement System, and the systems fr the City f EI Pas emplyees. Frward DROP Eligibility Participatin Perid Rate f Return Frm f Distributin Cmpletin f 23 years f Creditable Service, excluding military service. Nt t exceed 60 mnths. 5.0%, cmpunded annually. Cash lump sum (r rllver t PROP accunt) at terminatin f emplyment. Retr DROP Eligibility Participatin Perid Rate f Return Frm f Distributin Cmpletin f 23 years f Creditable Service, excluding military service. Upn electin t retractively enter DROP, the Retr DROP perid will nt exceed 36 mnths. 5.00/0, cmpunded annually. Cash lump sum (r rllver t PROP accunt) at terminatin f emplyment.

26 Actuarial Valuatin Date 12/ / / / / /31106 DISCLOSURE INFORMATION PER STATEMENT NO. 25 OF THE GOVERNMENTAL ACCOUNTING STANDARDS BOARD The schedule prvided belw has been prepared in accrdance with the requirements f paragraph 37 f Statement N. 25 f the Gvernmental Accunting Standards Bard. SCHEDULE OF FUNDING PROGRESS Actuarial Accrued Actuarial Liability Unfunded Value f (AAL) AAL Funded Cvered Assets - Entry Age (UAAL) Rati Payrll {a} {b} {b-a} {alb} {c} 553,701, ,258, ,556, %> 134,843, ,956, ,231, ,274, % 127,731, ,111, ,634, ,522, % 122,928, ,230, ,202, ,971, % 122,735, ,303, ,559, ,256, % 111,809, ,283, ,125, ,841, % 100,090,151 UAAL as a % f Cvered Payrll {{b-a}/c} 194.0% 179.5% 175.3% 186.6% 138.9% 158.7% The schedule prvided belw has been prepared in accrdance with the requirements f paragraph 38 f Statement N. 25 f the Gvernmental Accunting Standards Bard. SCHEDULE OF CONTRIBUTIONS FROM THE EMPLOYER AND OTHER CONTRIBUTING ENTITIES Year Annual Required City Ended Cntributin Cntributin Percentage December 31 {%> f Pa~} {0/ f Pa~} Cntributed % % % % % 92.6% % %> 108.8% % % 100.3% % % 95.4% % % 100.0% N Q')

27 27 DISCLOSURE INFORMATION PER STATEMENT NO. 27 OF THE GOVERNMENTAL ACCOUNTING STANDARDS BOARD ANNUAL PENSION COSTS AND RELATED INFORMATION THREE YEAR TREND INFORMATION Annual Percentage f Fiscal Year Pensin Cst APC Ending (APC) Cntributed 9/30/ ,269, %) 9/30/ ,609, %) 9/30/ ,034, %) Net Pensin Obligatin (5,640,531 ) (1,798,632) 468,537 DEVELOPMENT OF NET PENSION OBLIGATION (NPO) Fiscal Year Ending 9/30/2009 9/30/2010 Annual Required Cntributin (ARC - 0/0) % %) City Cntributin Rate (%) %) % Actual Cntributins Made ($) 21,422,000 22,877,000 City ARC ($) 21,019,767 20,600,352 I nterest n N PO 66,309 37,483 Adjustment t ARC (51,139) (28,004) Annual Pensin Cst 21,034,937 20,609,831 Cntributins Made 21,422,000 22,877,000 Increase in NPO (387,063) (2,267,169) NPO Beginning f Year 855, ,537 NPO End f Year 855, ,537 (1,798,632) 9/30/ % % 26,111,254 22,314,946 (143,891) 98,300 22,269,355 26,111,254 (3,841,899) (1,798,632) (5,640,531 )