CITY OF KISSIMMEE MUNICIPAL FIREFIGHTERS RETIREMENT PLAN ACTUARIAL VALUATION AS OF OCTOBER 1, 2017

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1 CITY OF KISSIMMEE MUNICIPAL FIREFIGHTERS RETIREMENT PLAN ACTUARIAL VALUATION AS OF OCTOBER 1, 2017 CONTRIBUTIONS APPLICABLE TO THE PLAN YEAR ENDED SEPTEMBER 30, 2018, AND THE CITY'S FISCAL YEAR ENDED SEPTEMBER 30, 2019

2 February 2, 2018 Board of Trustees City of Kissimmee Municipal Firefighters Retirement Plan 101 North Church Street Kissimmee, FL Re: City of Kissimmee Municipal Firefighters Retirement Plan Dear Board: We are pleased to present to the Board this report of the annual actuarial valuation of the City of Kissimmee Municipal Firefighters Retirement Plan. Included are the related results for GASB Statements No. 67 and No. 68. The funding valuation was performed to determine whether the assets and contributions are sufficient to provide the prescribed benefits and to develop the appropriate funding requirements for the applicable plan year. The calculation of the liability for GASB results was performed for the purpose of satisfying the requirements of GASB Statements No. 67 and No. 68. Use of the results for other purposes may not be applicable and may produce significantly different results. The valuations have been conducted in accordance with generally accepted actuarial principles and practices, including the applicable Actuarial Standards of Practice as issued by the Actuarial Standards Board, and reflects laws and regulations issued to date pursuant to the provisions of Chapters 112 and 175, Florida Statutes, as well as applicable federal laws and regulations. In our opinion, the assumptions used in this valuation, as adopted by the Board of Trustees, represent reasonable expectations of anticipated plan experience. Future actuarial measurements may differ significantly from the current measurements presented in this report for a variety of reasons including: changes in applicable laws, changes in plan provisions, changes in assumptions, or plan experience differing from expectations. In conducting the valuations, we have relied on personnel, plan design, and asset information supplied by the City of Kissimmee, financial reports prepared by the custodian bank, and the actuarial assumptions and methods described in the Actuarial Assumptions section of this report. While we cannot verify the accuracy of all this information, the supplied information was reviewed for consistency and reasonableness. As a result of this review, we have no reason to doubt the substantial accuracy of the information and believe that it has produced appropriate results. This information, along with any adjustments or modifications, is summarized in various sections of this report Parker Commons Blvd., Suite 104 Fort Myers, FL (239) Fax (239)

3 The total pension liability, net pension liability, and certain sensitivity information shown in this report are based on an actuarial valuation performed as of October 1, The total pension liability was rolled-forward from the valuation date to the plan s fiscal year ending September 30, 2017 using generally accepted actuarial principles. It is our opinion that the assumptions used for this purpose are internally consistent, reasonable, and comply with the requirements under GASB No. 67 and No. 68. The undersigned is familiar with the immediate and long-term aspects of pension valuations, and meets the Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinions contained herein. All of the sections of this report are considered an integral part of the actuarial opinions. To our knowledge, no associate of Foster & Foster, Inc. working on valuations of the program has any direct financial interest or indirect material interest in the City of Kissimmee, nor does anyone at Foster & Foster, Inc. act as a member of the Board of Trustees of the City of Kissimmee Municipal Firefighters Retirement Plan. Thus, there is no relationship existing that might affect our capacity to prepare and certify this actuarial report. If there are any questions, concerns, or comments about any of the items contained in this report, please contact me at Respectfully submitted, Foster & Foster, Inc. By: Douglas H. Lozen, EA, MAAA Enrolled Actuary # DHL/lke Enclosures

4 TABLE OF CONTENTS Section Title Page I Introduction a. Summary of Report 5 b. Contribution Impact of Annual Changes 7 c. Changes Since Prior Valuation 8 d. Comparative Summary of Principal Valuation Results 9 II Valuation Information a. Reconciliation of Unfunded Actuarial Accrued Liabilities 15 b. Detailed Actuarial (Gain)/Loss Analysis 17 c. Actuarial Assumptions and Methods 18 d. Valuation Notes 21 e. Partial History of Premium Tax Refunds 22 III Trust Fund 23 IV Member Statistics a. Statistical Data 30 b. Age and Service Distribution 31 c. Valuation Participant Reconciliation 32 V Summary of Plan Provisions 33 VI Governmental Accounting Standards Board Statements 37 Disclosure Information City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 4

5 SUMMARY OF REPORT The regular annual actuarial valuation of the City of Kissimmee Municipal Firefighters Retirement Plan, performed as of October 1, 2017, has been completed and the results are presented in this Report. The results of this valuation are applicable to the Plan year ending September 30, 2018, and the City's fiscal year ending September 30, The sponsor (City and State) contributions have been adjusted with interest to reflect a lump sum deposit on December 31, The contribution requirements, compared with those developed in the October 1, 2016 valuation, are as follows: Valuation Date Applicable Plan Year End 10/1/2017 9/30/ /1/2016 9/30/2017 Total Required Contribution % of Total Annual Payroll 40.77% 43.98% Member Contributions (Est.) % of Total Annual Payroll 1.91% 1.69% City and State Required Contribution % of Total Annual Payroll 38.86% 42.29% State Contribution (est.) ¹ 369, ,909 % of Total Annual Payroll 6.57% 6.57% Balance from City % of Total Annual Payroll 32.29% 35.72% ¹ Amount received in calendar Per Ordinance 2868, the City may use up to $853,025 in State Contributions for determining its minimum funding requirements. For budgeting purposes, the required Sponsor Contribution (City and State) is 38.86% of Pensionable Earnings for the plan year ending September 30, The precise City requirement for the year is this amount, less actual State Contributions (up to the maximum $853,025). Additionally, there is a $22, City shortfall for the fiscal year ended September 30, This additional deposit is required prior to submission of the Annual Report on March 15, Experience since the prior valuation was less favorable than expected, relative to the Plan s actuarial assumptions. The primary sources of unfavorable experience included a 7.21% investment return (Actuarial Asset Basis), falling short of the 7.95% assumption, average increases in Pensionable City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 5

6 Compensation that significantly exceeded the assumption, unfavorable retirement experience, and no retiree mortality. These losses were partially offset by favorable turnover experience. Additionally, this valuation reflects changes to the assumptions for investment return and mortality. In spite of the net unfavorable experience, the City s expected funding obligation decreased slightly due to a larger expected increase in valuation payroll. The increase in payroll resulted in a decrease in the UAAL amortization payment, when expressed as a percentage of payroll. The balance of this Report presents additional details of the actuarial valuation and the general operation of the Fund. The undersigned would be pleased to meet with the Board of Trustees in order to discuss the Report and any pending questions concerning its contents. Respectfully submitted, FOSTER & FOSTER, Inc. By: Douglas H. Lozen, EA, MAAA By: Christine M. O Neal, FSA, EA, MAAA City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 6

7 CONTRIBUTION IMPACT OF ANNUAL CHANGES (1) Contribution Determined as of October 1, % (2) Summary of Contribution Impact by component: Change in State Contribution Percentage 1.2% Change in Normal Cost Rate -0.5% Change in Administrative Expense Percentage -0.2% Payroll Change Effect on UAAL Amortization -6.6% Investment Return (Actuarial Asset Basis) 0.8% Salary Increases 3.4% Active Decrements 0.6% Inactive Mortality 0.4% Assumption Changes 0.4% Change in Expected Member Contribution Rate -0.2% Greater than Expected Decrease in UAAL -1.2% Other -0.2% Total Change in Contribution -2.21% (3) Contribution Determined as of October 1, % City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 7

8 Changes Since Prior Valuation Plan Changes There were no changes in benefits since the last valuation. Actuarial Assumption/Method Changes The investment return assumption has been reduced from 7.95% to 7.90% (net of fees). This assumption will be reduced annually by 5 basis points until it reaches an ultimate rate of 7.75% with the October 1, 2020 actuarial valuation. Pursuant to the provisions of Chapter , Laws of Florida, the mortality assumption reflects a change from the rates utilized by the Florida Retirement System in the July 1, 2015 valuation to those utilized in the July 1, 2016 valuation. City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 8

9 COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS A. Participant Data New Assump Old Assump 10/1/ /1/ /1/2016 Actives Service Retirees DROP Retirees Beneficiaries Disability Retirees Terminated Vested Total Total Annual Payroll $5,739,576 $5,739,576 $4,509,608 Payroll Under Assumed Ret. Age 5,628,516 5,628,516 4,328,956 Annual Rate of Payments to: Service Retirees 2,004,258 2,802,383 1,782,812 DROP Retirees 798, , ,605 Beneficiaries 48,789 48,789 48,789 Disability Retirees 161, , ,148 Terminated Vested 107, ,339 48,460 B. Assets Actuarial Value (AVA) ¹ 40,148,218 40,148,218 38,609,974 Market Value (MVA) ¹ 39,432,565 39,432,565 36,924,712 C. Liabilities Present Value of Benefits Actives Retirement Benefits 16,394,984 15,881,992 13,696,860 Disability Benefits 1,894,745 1,845,438 1,433,928 Death Benefits 308, , ,170 Vested Benefits 190, , ,020 Refund of Contributions 136, ,386 91,316 Service Retirees 22,424,960 22,323,425 19,830,089 DROP Retirees ¹ 13,249,117 13,200,411 15,194,844 Beneficiaries 602, , ,670 Disability Retirees 1,556,219 1,549,818 1,568,111 Terminated Vested 626, , ,819 Share Plan Balances ¹ 614, , ,646 Total 57,997,926 57,656,776 53,977,473 City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 9

10 New Assump Old Assump C. Liabilities - (Continued) 10/1/ /1/ /1/2016 Present Value of Future Salaries 46,993,816 46,411,624 35,291,907 Present Value of Future Member Contributions 897, , ,864 Normal Cost (Retirement) 680, , ,922 Normal Cost (Disability) 138, , ,801 Normal Cost (Death) 20,826 47,182 37,596 Normal Cost (Vesting) 16,996 16,601 13,362 Normal Cost (Refunds) 23,331 23,287 16,057 Total Normal Cost 880, , ,738 Present Value of Future Normal Costs 6,964,316 6,854,985 5,317,617 Accrued Liability (Retirement) 10,982,097 10,755,031 9,684,471 Accrued Liability (Disability) 741, , ,638 Accrued Liability (Death) 132, , ,818 Accrued Liability (Vesting) 86,955 85,557 86,716 Accrued Liability (Refunds) 17,911 17,888 11,034 Accrued Liability (Inactives) ¹ 38,458,937 38,293,887 37,483,533 Share Plan Balances ¹ 614, , ,646 Total Actuarial Accrued Liability (EAN AL) 51,033,610 50,801,791 48,659,856 Unfunded Actuarial Accrued Liability (UAAL) 10,885,392 10,653,573 10,049,882 Funded Ratio (AVA / EAN AL) 78.7% 79.0% 79.3% City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 10

11 D. Actuarial Present Value of New Assump Old Assump Accrued Benefits 10/1/ /1/ /1/2016 Vested Accrued Benefits Inactives + Share Plan Balances ¹ 39,073,207 38,908,157 38,038,179 Actives 5,974,195 6,015,702 6,126,241 Member Contributions 465, , ,338 Total 45,513,085 45,389,542 44,552,758 Non-vested Accrued Benefits 887, , ,527 Total Present Value Accrued Benefits (PVAB) 46,400,737 46,258,185 45,212,285 Funded Ratio (MVA / PVAB) 85.0% 85.2% 81.7% Increase (Decrease) in Present Value of Accrued Benefits Attributable to: Plan Amendments 0 0 Assumption Changes 142,552 0 New Accrued Benefits 0 1,313,244 Benefits Paid 0 (3,714,086) Interest 0 3,446,742 Other 0 0 Total 142,552 1,045,900 City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 11

12 New Assump Old Assump Valuation Date 10/1/ /1/ /1/2016 Applicable to Fiscal Year Ending 9/30/2018 9/30/2018 9/30/2017 E. Pension Cost Normal Cost (with interest) $967,643 $964,198 $761,579 % of Total Annual Payroll ² Administrative Expenses (with interest) 65,092 65,129 59,642 % of Total Annual Payroll ² Payment Required to Amortize Unfunded Actuarial Accrued Liability over 28 years (as of 10/1/2017, with interest) 1,261,677 1,241,858 1,082,671 % of Total Annual Payroll ² Total Required Contribution 2,294,412 2,271,185 1,903,892 % of Total Annual Payroll ² Expected Member Contributions 56,285 56, ,869 % of Total Annual Payroll ² Expected City and State Contribution 2,238,127 2,214,900 1,774,023 % of Total Annual Payroll ² F. Past Contributions Plan Years Ending: 9/30/2017 City and State Requirement 2,465,211 Actual Contributions Made: Members (excluding buyback) 103,877 City 2,095,303 State 369,909 Total 2,569,089 G. Net Actuarial (Gain)/Loss 1,548,561 ¹ The asset values and liabilities include accumulated DROP and Share Plan Balances as of 9/30/2017 and 9/30/2016. ² Contributions developed as of 10/1/2017 are expressed as a percentage of total annual payroll at 10/1/2017 of $5,628,516. City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 12

13 H. Schedule Illustrating the Amortization of the Total Unfunded Actuarial Accrued Liability as of: Year Projected Unfunded Actuarial Accrued Liability ,885, ,506, ,097, ,362, ,918, , I. (i) 3 Year Comparison of Actual and Assumed Salary Increases Actual Assumed Year Ended 9/30/ % 6.42% Year Ended 9/30/ % 7.34% Year Ended 9/30/ % 7.42% (ii) 3 Year Comparison of Investment Return on Actuarial Value Actual Assumed Year Ended 9/30/ % 7.95% Year Ended 9/30/ % 8.00% Year Ended 9/30/ % 8.00% (iii) Average Annual Payroll Growth (a) Payroll as of: 10/1/2017 $5,739,576 10/1/2007 5,168,008 (b) Total Increase 11.06% (c) Number of Years (d) Average Annual Rate 1.05% City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 13

14 STATEMENT BY ENROLLED ACTUARY This actuarial valuation was prepared and completed by me or under my direct supervision, and I acknowledge responsibility for the results. To the best of my knowledge, the results are complete and accurate, and in my opinion, the techniques and assumptions used are reasonable and meet the requirements and intent of Part VII, Chapter 112, Florida Statutes. There is no benefit or expense to be provided by the plan and/or paid from the plan's assets for which liabilities or current costs have not been established or otherwise taken into account in the valuation. All known events or trends which may require a material increase in plan costs or required contribution rates have been taken into account in the valuation. Douglas H. Lozen, EA, MAAA Enrolled Actuary # Please let us know when the report is approved by the Board and unless otherwise directed we will provide copies of the report to the following offices to comply with Chapter 112, Florida Statutes: Mr. Keith Brinkman Bureau of Local Retirement Systems Post Office Box 9000 Tallahassee, FL Ms. Sarah Carr Municipal Police and Fire Pension Trust Funds Division of Retirement Post Office Box 3010 Tallahassee, FL City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 14

15 RECONCILIATION OF UNFUNDED ACTUARIAL ACCRUED LIABILITIES (1) Unfunded Actuarial Accrued Liability as of October 1, 2016 $10,049,882 (2) Sponsor Normal Cost developed as of October 1, ,579 (3) Expected administrative expenses for the year ended September 30, ,251 (4) Expected interest on (1), (2) and (3) 850,379 (5) Sponsor contributions to the System during the year ended September 30, ,465,211 (6) Expected interest on (5) 3,867 (7) Expected Unfunded Actuarial Accrued Liability as of September 30, 2017 (1)+(2)+(3)+(4)-(5)-(6) 9,105,013 (8) Change to UAAL due to Assumption Change 231,818 (9) Change to UAAL due to Actuarial (Gain)/Loss 1,548,561 (10) Unfunded Actuarial Accrued Liability as of October 1, ,885,392 Type of Date Years 10/1/2017 Amortization Base Established Remaining Amount Amount 1/1/ ,940 54,552 10/1/ ,872 73,364 Assum. Change 10/1/ (416,115) (46,507) Amendment 10/1/ ,130 22,075 Method Change 10/1/ ,661, ,370 Loss 10/1/ ,583 47,293 Loss 10/1/ ,094 73,080 Loss 10/1/ ,479, ,279 Amendment 10/1/ ,383 59,452 Loss 10/1/ ,432 75,444 Gain 10/1/ (542,505) (50,829) Loss 10/1/ ,430 91,394 Method Change 10/1/ ,021 28,740 Assum. Change 10/1/ ,871 79,039 Gain 10/1/ (474,422) (42,763) Loss 10/1/ ,232, ,253 Loss 10/1/ ,458, ,298 Gain 10/1/ (639,387) (55,038) City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 15

16 Type of Date Years 10/1/2017 Amortization Base Established Remaining Amount Amount Amendment 10/1/ (660,837) (56,885) Gain 10/1/ (542,111) (46,072) Gain 10/1/ (1,242,798) (104,392) Loss 10/1/ ,018 4,240 Assum. Change 10/1/ ,912, ,280 Gain 10/1/ (974,829) (144,024) Assum. Change 10/1/ ,818 21,720 Loss 10/1/ ,548, ,921 10,885,392 1,148,284 City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 16

17 DETAILED ACTUARIAL (GAIN)/LOSS ANALYSIS (1) Unfunded Actuarial Accrued Liability (UAAL) as of October 1, 2016 $10,049,882 (2) Expected UAAL as of October 1, ,105,013 (3) Summary of Actuarial (Gain)/Loss, by component: Investment Return (Actuarial Asset Basis) 282,535 Salary Increases 1,282,664 Active Decrements 230,328 Inactive Mortality 143,383 Other (Includes investment gains on DROP and Share Balances) (390,349) Increase in UAAL due to (Gain)/Loss 1,548,561 Assumption Changes 231,818 (4) Actual UAAL as of October 1, 2017 $10,885,392 City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 17

18 ACTUARIAL ASSUMPTIONS AND METHODS Mortality Rate Healthy Inactive Lives: Female: RP 2000 Generational, 100% Annuitant White Collar, Scale BB Male: RP 2000 Generational, 10% Annuitant White Collar / 90% Annuitant Blue Collar, Scale BB Healthy Active Lives: Female: RP2000 Generational, 100% Combined Healthy (previously Annuitant) White Collar, Scale BB Male: RP2000 Generational, 10% Combined Healthy (previously Annuitant) White Collar / 90% Combined Healthy (previously Annuitant) Blue Collar, Scale BB Disabled Lives: Female: 60% RP2000 Disabled Female set forward two years / 40% Annuitant White Collar with no setback, no projection scale Male: 60% RP2000 Disabled Male setback four years / 40% Annuitant White Collar with no setback, no projection scale The above assumption rates were mandated by Chapter , Laws of Florida. This law mandates the use of the assumption used in either of the two most recent valuations of the Florida Retirement System (FRS). The above rates are those outlined in Milliman s July 1, 2016 FRS valuation report for special risk participants. We feel this assumption sufficiently accommodates future mortality improvements. Interest Rate Payroll Growth Funding Method Actuarial Value of Assets 7.90% per year (prior year 7.95%) compounded annually, net of investment related expenses. This assumption is supported by the Plan s target asset allocation and expected long-term rate of return by asset class. None. Entry Age Normal Actuarial Cost Method. The Actuarial Value of Assets utilizes a five-year smoothing methodology. The annual difference between expected and actual investment earnings (Market Value, net of investment-related expenses) is phased-in over a five-year period. City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 18

19 Retirement Age Attainment of 1) age 50 with 10 years of Credited Service, or 2) the completion of 25 years of Credited Service, regardless of age. Retirement rates are as provided in the tables below. a) Retirement with less than 25 years of Credited Service. Number of Years After First Eligibility For Normal Retirement Probability of Retirement 0 0% 1 40% 2 100% b) For retirement with 25 or more years of Credited Service (regardless of age), 50% per year for each year of eligibility until 100% assumed retirement after 31 years of Credited Service. The above rates are based on an Experience Study performed for the period October 1, 2008 through September 30, For Members hired after December 31, 2012 (Tier 2), the Normal Retirement assumption is the attainment of 1) Age 55 with 10 years of Credited Service, or 2) the completion of 30 years of Credited Service, regardless of Age. Tier 2 Members eligible for Normal Retirement as of the valuation date are assumed to work one additional year. The above rates were reviewed and left unchanged by the Board as part of the October 28, 2016 Experience Study. Early Retirement For Members hired before January 1, 2013: commencing at eligibility for Early Retirement (Age 40 with 10 years of Credited Service) a 0% assumption for each year from age 40 to 43, and a 9% assumption for each year from age 44 to 49. For Members hired after December 31, 2012: Commencing at eligibility for Early Retirement (Age 50 with 10 years of Credited Service), Members are assumed to retire with an immediate benefit at the rate of 10% per year. These assumptions are based on an Experience Study performed for the period October 1, 2008 through September 30, City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 19

20 Disability Rate See table below. Service connected rate is assumed at 75%. It is assumed that 75% of disablements and active Member deaths are service related. This assumption was adopted in conjunction with an Experience Study performed for the period October 1, 1996 through October 1, Age % Becoming Disabled During the Year % Termination Graded schedule based on service. This is based on an experience study performed for the period October 1, 2008 through September 30, Service Termination Rate % % % % % % Administrative Expenses Salary Increases $59,242, based on administrative expenses incurred during the prior fiscal year. Graded schedule based on service. This is based on an experience study performed for the period October 1, 2008 through September 30, Service Salary Increase % 1 7.0% % % % City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 20

21 VALUATION NOTES Total Annual Payroll is the projected annual rate of pay as of the valuation date for all covered Members. Present Value of Benefits is the single sum value on the valuation date of all future benefits to be paid to current Members, Retirees, Beneficiaries, Disability Retirees and Vested Terminations. Total Required Contribution is equal to the Normal Cost plus an amount sufficient to amortize the Unfunded Accrued Liability over no more than 30 years. The required amount is adjusted for interest according to the timing of contributions during the year. Entry Age Normal Cost Method - Under this method, the normal cost is the sum of the individual normal costs for all active participants. For an active participant, the normal cost is the participant s normal cost accrual rate, multiplied by the participant s current compensation. (a) The normal cost accrual rate equals (i) the present value of future benefits for the participant, determined as of the participant s entry age, divided by (ii) the present value of the compensation expected to be paid to the participant for each year of the participant s anticipated future service, determined as of the participant s entry age. (b) In calculating the present value of future compensation, the salary scale is applied both retrospectively and prospectively to estimate compensation in years prior to and subsequent to the valuation year based on the compensation used for the valuation. (c) The accrued liability is the sum of the individual accrued liabilities for all participants and beneficiaries. A participant s accrued liability equals the present value, at the participant s attained age, of future benefits less the present value at the participant s attained age of the individual normal costs payable in the future. A beneficiary s accrued liability equals the present value, at the beneficiary s attained age, of future benefits. The unfunded accrued liability equals the total accrued liability less the actuarial value of assets. (d) Under this method, the entry age used for each active participant is the participant s age at the time he or she would have commenced participation if the plan had always been in existence under current terms, or the age as of which he or she first earns service credits for purposes of benefit accrual under the current terms of the plan. City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 21

22 PARTIAL HISTORY OF PREMIUM TAX REFUNDS Received During Increase from Fiscal Year Amount Previous Year , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 22

23 STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2017 ASSETS COST VALUE MARKET VALUE Cash and Cash Equivalents: Money Market 566, , Cash Total Cash and Equivalents 566, , Receivables: Member Contributions in Transit 4, , Member Contributions 1, , City Contributions 2,095, ,095, From Broker for Investments Sold 12, , Investment Income 17, , Total Receivable 2,131, ,131, Investments: Fixed Income 3,116, ,430, Equities 3,529, ,747, Mutual Funds: Fixed Income 8,596, ,603, Equity 10,048, ,355, Pooled/Common/Commingled Funds: Equity 897, , Real Estate 1,875, ,778, Total Investments 28,062, ,751, Total Assets 30,760, ,449, LIABILITIES Payables: Benefit Payments 1, , To Broker for Investments Purchased 15, , Total Liabilities 16, , NET POSITION RESTRICTED FOR PENSIONS 30,743, ,432, City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 23

24 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2017 Market Value Basis ADDITIONS Contributions: Member 103, Buy-Back 3, City 2,095, State 369, Total Contributions 2,572, Investment Income: Net Realized Gain (Loss) 962, Unrealized Gain (Loss) 2,090, Net Increase in Fair Value of Investments 3,052, Interest & Dividends 806, Less Investment Expense¹ (149,998.84) Net Investment Income 3,708, Total Additions 6,281, DEDUCTIONS Distributions to Members: Benefit Payments 2,103, Lump Sum DROP Distributions 1,603, Lump Sum Share Distributions 0.00 Refunds of Member Contributions 7, Total Distributions 3,714, Administrative Expense 59, Total Deductions 3,773, Net Increase in Net Position 2,507, NET POSITION RESTRICTED FOR PENSIONS Beginning of the Year 36,924, End of the Year 39,432, ¹Investment related expenses include investment advisory, custodial and performance monitoring fees. City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 24

25 ACTUARIAL ASSET VALUATION September 30, 2017 Actuarial Assets for funding purposes are developed by recognizing the total actuarial investment gain or loss for each Plan Year over a five year period. In the first year, 20% of the gain or loss is recognized. In the second year 40%, in the third year 60%, in the fourth year 80%, and in the fifth year 100% of the gain or loss is recognized. The actuarial investment gain or loss is defined as the actual return on investments minus the actuarial assumed investment return. Actuarial Assets shall not be less than 80% nor greater than 120% of Market Value of Assets. Gains/(Losses) Not Yet Recognized Plan Year Amounts Not Yet Recognized by Valuation Year Ending Gain/(Loss) /30/2013 1,340, /30/2014 1,271, , /30/2015 (4,395,736) (1,758,295) (879,148) /30/ , ,405 87,604 43, /30/ , , , , ,209 0 Total (715,653) (298,912) 372, ,209 0 Development of Investment Gain/(Loss) Market Value of Assets, including Prepaid Contributions, 09/30/ ,924,933 Contributions Less Benefit Payments & Admin Expenses (1,201,206) Expected Investment Earnings* 2,887,784 Actual Net Investment Earnings 3,708, Actuarial Investment Gain/(Loss) 821,053 *Expected Investment Earnings = * [36,924, * (1,201,206)] Development of Actuarial Value of Assets (1) Market Value of Assets, 09/30/ ,432,565 (2) Gains/(Losses) Not Yet Recognized (715,653) (3) Actuarial Value of Assets, 09/30/2017, (1) - (2) 40,148,218 (A) 09/30/2016 Actuarial Assets, including Prepaid Contributions: 38,610,195 (I) Net Investment Income: 1. Interest and Dividends 806, Realized Gains (Losses) 962, Change in Actuarial Value 1,120, Investment Expenses (149,999) Total 2,739,228 (B) 09/30/2017 Actuarial Assets: 40,148,218 Actuarial Asset Rate of Return = 2I/(A+B-I): 7.21% Market Value of Assets Rate of Return: 10.75% Actuarial Gain/(Loss) due to Investment Return (Actuarial Asset Basis) (282,535) 10/01/2017 Limited Actuarial Assets: 40,148,218 City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 25

26 CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS SEPTEMBER 30, 2017 Actuarial Asset Basis REVENUES Contributions: Member 103, Buy-Back 3, City 2,095, State 369, Total Contributions 2,572, Earnings from Investments: Interest & Dividends 806, Net Realized Gain (Loss) 962, Change in Actuarial Value 1,120, Total Earnings and Investment Gains 2,889, EXPENDITURES Distributions to Members: Benefit Payments 2,103, Lump Sum DROP Distributions 1,603, Lump Sum Share Distributions 0.00 Refunds of Member Contributions 7, Total Distributions 3,714, Expenses: Investment related¹ 149, Administrative 59, Total Expenses 209, Change in Net Assets for the Year 1,538, Net Assets Beginning of the Year 38,609, Net Assets End of the Year² 40,148, ¹Investment related expenses include investment advisory, custodial and performance monitoring fees. ²Net Assets may be limited for actuarial consideration. City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 26

27 DEFERRED RETIREMENT OPTION PLAN ACTIVITY October 1, 2016 to September 30, 2017 Beginning of the Year Balance 4,131, Plus Additions 837, Investment Return Earned 121, Less Distributions (1,603,154.08) End of the Year Balance 3,487, City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 27

28 SUPPLEMENTAL CHAPTER 175 SHARE PLAN ACTIVITY October 1, 2016 through September 30, /30/2016 Balance 554,646 Prior Year Adjustment 0 Plus Additions 0 Investment Return Earned (est.) 59,624 Administrative Fees 0 Less Distributions 0 9/30/2017 Balance (est.) 614,270 City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 28

29 RECONCILIATION OF CITY'S SHORTFALL/(PREPAID) CONTRIBUTION FOR THE FISCAL YEAR ENDED (FYE) SEPTEMBER 30, 2017 (1) City and State Required Contribution Rate 42.29% (2) Pensionable Payroll $5,829, (3) City and State Required Contribution (1) x (2) 2,465, (4) Less Allowable State Contribution (369,908.60) (5) Equals Required City Contribution for Fiscal ,095, (6) Less 2016 Prepaid Contribution 0.00 (7) Less Actual City Contributions (2,072,905.45) (8) Equals City's Shortfall/(Prepaid) Contribution as of $22, September 30, 2017 City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 29

30 STATISTICAL DATA 10/1/ /1/ /1/ /1/2017 Actives Number Average Current Age Average Age at Employment Average Past Service Average Annual Salary $57,352 $59,846 $57,815 $64,490 Service Retirees Number Average Current Age Average Annual Benefit $35,561 $36,040 $37,142 $37,816 DROP Retirees Number Average Current Age Average Annual Benefit $59,786 $61,266 $64,972 $66,510 Beneficiaries Number Average Current Age Average Annual Benefit $12,197 $12,197 $12,197 $12,197 Disability Retirees Number Average Current Age Average Annual Benefit $23,021 $23,021 $23,021 $23,021 Terminated Vested Number Average Current Age ¹ Average Annual Benefit ¹ $9,266 $6,422 $8,077 $13,417 ¹ The Average Annual Benefit and Average Age excludes participants awaiting a refund of contributions. City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 30

31 AGE AND SERVICE DISTRIBUTION PAST SERVICE AGE Total Total City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 31

32 VALUATION PARTICIPANT RECONCILIATION 1. Active lives a. Number in prior valuation 10/1/ b. Terminations i. Vested (partial or full) with deferred benefits (5) ii. Non-vested or full lump sum distribution received (2) c. Deaths i. Beneficiary receiving benefits 0 ii. No future benefits payable 0 d. Disabled 0 e. Retired (1) f. DROP (1) g. Continuing participants 69 h. New entrants 20 i. Total active life participants in valuation Non-Active lives (including beneficiaries receiving benefits) Service Retirees, Vested Receiving Receiving Receiving DROP Death Disability Vested Benefits Benefits Benefits Benefits Deferred Total a. Number prior valuation Retired 5 (3) 0 0 (1) 1 DROP Vested Deferred Death, With Survivor Death, No Survivor Disabled Refund of Contributions Rehires (1) (1) Expired Annuities Data Corrections b. Number current valuation City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 32

33 SUMMARY OF PLAN PROVISIONS (Through Ordinance 2945) Eligibility Credited Service Compensation All regular full-time firefighters become Members as a condition of employment. Total number of years and fractional parts of years of continuous employment as a firefighter. Total compensation paid to a firefighter for services rendered to the City including overtime, longevity and incentive pay, but excluding lump sum sick leave, lump sum vacation, education reimbursement, car allowance and severance pay. Additionally, Salary shall not include overtime worked in addition to the normal work assignment in excess of 300 hours per calendar year for Members not eligible for Normal Retirement as of February 19, Average Final Compensation (AFC) Retirement Age Normal Average Compensation during the best five years of the last ten years of Credited Service. Members eligible for Normal Retirement as of December 3, 2012 maintain an Average Final Compensation based on the highest 3 years of the 5 consecutive years of Credited Service at the time of termination or retirement. In no event will the AFC be less than the highest 3 years of the five consecutive years ending on December 3, The earlier of 1) Age 55 and 10 years of Credited Service, and 2) the completion of 30 years of Credited Service, regardless of age. For Members hired prior to January 1, 2013, the Normal Retirement Date is the earlier of 1) Age 50 and 10 years of Credited Service, and 2) the completion of 25 years of Credited Service, regardless of age. Early Age 50 and 10 years of Credited Service. For Members hired prior to January 1, 2013, the requirement is Age 40 with 10 years of Credited Service. City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 33

34 Retirement Benefits Normal 3.00% of AFC for each year of Credited Service, up to 30 years, and 2.00% for each year of Credited Service in excess of 30 years, subject to a maximum of 100% of AFC. For Members hired prior to January 1, 2013, the accrual rate is 3.23% for the first 30 years of Credited Service. Early Delayed Normal Form Same as Normal Retirement, reduced actuarially for commencement of benefits prior to the Normal Retirement Date. Benefit continues to accrue. Ten Year Certain and Life Annuity with other options available. Disability Retirement Eligibility Benefit All Members are eligible for service connected disability benefits. Five years of Credited Service is required for non-service connected disability benefits. Accrued pension benefit with a minimum of 42% of AFC if service connected or 25% of AFC if nonservice connected. Death Benefits (Pre-Retirement) Upon the death of a Member with at least five years of Credited Service before the Early or Normal Retirement Date, the Beneficiary will receive a monthly income, payable in the form of a ten year certain and life annuity, which can be provided by (a) or (b), whichever is greater, where: (a) is the single-sum value of the Member s accrued pension, and (b) is the smaller of (i) or (ii), where (i.) is 24 times Average Compensation, and (ii.) is 100 times the anticipated monthly normal retirement benefit. City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 34

35 Deferred Retirement Option Plan (DROP) Eligibility Benefit Participation Investment Earnings Same as for Normal Retirement. Same as calculated for Normal Retirement. Up to 96 months, but not later than eight years from the date on which the Member first becomes eligible for Normal Retirement or age 58, whichever is later. Depending on the option elected by the DROP participant, the Member s DROP account is credited with interest using one of the following: (a) no interest, or (b) the actual net rate of investment return realized by the system. Termination Benefits Effective December 3, 2012: Less than ten years of Credited Service return of employee contributions with interest. Interest is currently credited at 4.50%, but only on those contributions made on or after October 1, Effective December 3, 2012: Ten years or more of Credited Service Accrued Benefit payable at age 50 or later (reduced for Early Retirement, as applicable), if contributions left in the fund, or refund of contributions with interest. For Members employed on December 3, 2012 with less than 10 years of Credited Service, the vesting percentage is provided in the below table: Contributions Service as of 12/3/2012 Vested % Less than 5 years 0% Employees 1.00% of Compensation. Members hired after December 31, 2012 contribute 3.00% of Compensation. State Premium tax refund per Chapter 175. City Remaining amount necessary according to State Laws. City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 35

36 Supplement Benefit (Share Accounts) Initial Crediting Annual Crediting Investment earnings Expenses Vesting Payment of Distribution Pursuant to a Mutual Consent Agreement between the City and the IAFF, $554, from the Excess State Monies Reserve is allocated to eligible participants. Annual Premium tax revenues received by the City in excess of the $853,025 applicable frozen amount shall be allocated to participant accounts using a Credited Service pro rata methodology. Eligible Share Accounts shall be credited or debited annually, based on the Plan s net-of-fees investment performance for the immediately preceding Plan Year. Allocated annually to participant accounts, based on the percentage of Share Plan balances to the fund s total asset value as of the same date. Ten years of Credited Service (unless eligible to draw benefits immediately upon termination of employment.) Upon termination of employment, eligible participants shall receive their Share Balance as soon as administratively feasible following the next valuation date. City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 36

37 GASB 67 STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2017 ASSETS Cash and Cash Equivalents: Money Market Cash Total Cash and Equivalents Receivables: From Broker for Investments Sold Investment Income Total Receivable Investments: Fixed Income Equities Mutual Funds: Fixed Income Equity Pooled/Common/Commingled Funds: Equity Real Estate Total Investments Total Assets LIABILITIES Payables: To Broker for Investments Purchased Total Liabilities NET POSITION RESTRICTED FOR PENSIONS MARKET VALUE 566, ,311 12,474 17,792 30,266 3,430,983 3,747,887 9,603,615 17,355, ,578 1,778,057 36,751,569 37,348,146 15,717 15,717 37,332,429 City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 37

38 GASB 67 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2017 Market Value Basis ADDITIONS Contributions: Member 100,664 Buy-Back 3,256 City 1,542,531 State 369,909 Total Contributions 2,016,360 Investment Income: Net Increase in Fair Value of Investments 3,214,555 Interest & Dividends 644,281 Less Investment Expense¹ (149,999) Net Investment Income 3,708,837 Total Additions 5,725,197 DEDUCTIONS Distributions to Members: Benefit Payments 2,102,655 Lump Sum DROP Distributions 1,603,154 Refunds of Member Contributions 7,204 Total Distributions 3,713,013 Administrative Expense 59,242 Total Deductions 3,772,255 Net Increase in Net Position 1,952,942 NET POSITION RESTRICTED FOR PENSIONS Beginning of the Year 35,379,487 End of the Year 37,332,429 ¹Investment related expenses include investment advisory, custodial and performance monitoring fees. City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 38

39 GASB 67 NOTES TO THE FINANCIAL STATEMENTS (For the Year Ended September 30, 2017) Plan Description Plan Administration The City of Kissimmee Municipal Firefighters' Retirement Plan is a single-employer defined benefit pension plan administered by a Board of Trustees which acts as the administrator of the Plan. The Board consists of 5 Trustees, 2 of whom are legal residents of the City who are appointed by the City Commission, 2 of whom are elected by a majority of the Firefighters who are Members of the Plan and a fifth Trustee who is chosen by a majority of the first 4 Trustees. Plan Membership as of October 1, 2016: Inactive Plan Members or Beneficiaries Currently Receiving Benefits 73 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 21 Active Plan Members Benefits Provided The Plan provides retirement, termination, disability and death benefits. Retirement Age: Normal: The earlier 1) Age 55 and 10 years of Credited Service, and 2) the completion of 30 years of Credited Service, regardless of age. For Members hired prior to January 1, 2013, the Normal Retirement Date is the earlier of 1) Age 50 and 10 years of Credited Service, and 2) the completion of 25 years of Credited Service, regardless of age. Early: Age 50 and 10 years of Credited Service. For Members hired prior to January 1, 2013, the requirement is Age 40 with 10 years of Credited Service. Retirement Benefits: Normal: 3.00% of AFC for each year of Credited Service, up to 30 years, and 2.00% for each year of Credited Service in excess of 30 years, subject to a maximum of 100% of AFC. For Members hired prior to January 1, 2013, the accrual rate is 3.23% for the first 30 years of Credited Service. Early: Same as Normal Retirement, reduced actuarially for commencement of benefits prior to the Normal Retirement Date. Delayed: Benefit continues to accrue. Disability: Eligibility: All Members are eligible for service connected disability benefits; five years of Credited Service is required for non-service connected disability benefits. Benefit: Accrued pension benefit with a minimum of 42% of AFC if service connected or 25% of AFC if non-service connected. Death Benefits (Pre-Retirement): Upon the death of a Member with at least five years of Credited Service before the Early or Normal Retirement Date, the Beneficiary will receive a monthly income, payable in the form of a ten year certain and life annuity, which can be provided by (a) or (b), whichever is greater, where: (a) is the single-sum value of the Member s accrued pension, and (b) is the smaller of (i) or (ii), where (i) is 24 times Average Compensation and (ii) is 100 times the anticipated monthly normal retirement benefit. Termination Benefits: Effective December 3, 2012: Less than ten years of Credited Service return of employee contributions with interest. Interest is currently credited at 4.5%, but only on those contributions made on or after October 1, City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 39

40 GASB 67 Effective December 3, 2012: Ten years or more Accrued Benefit payable at age 50 or later (reduced for Early Retirement, as applicable), if contributions left in the fund, or refund of contributions with interest. For Members employed on December 3, 2012 with less than 10 years of Credited Service, the vesting percentage is provided in the below table: Service as of 12/3/12 Vested % Less than 5 years 0% Contributions Employees: 1.00% of Compensation. Members hired after December 31, 2012 contribute 3.00% of Compensation. State: Premium tax refund per Chapter 175. City: Remaining amount necessary according to State Laws. Investments Investment Policy: The following was the Board's adopted asset allocation policy as of September 30, 2017: Asset Class Target Allocation Domestic Equity 38% International Equity 15% Bonds 27% Convertibles 10% REITs 5% MLPs 5% Total 100% Concentrations: The Plan did not hold investments in any one organization that represent 5 percent or more of the Pension Plan's Fiduciary Net Position. Rate of Return: For the year ended September 30, 2017, the annual money-weighted rate of return on Pension Plan investments, net of Pension Plan investment expense, was percent. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. Deferred Retirement Option Program Eligibility: Same as for Normal Retirement. Participation: Up to 96 months, but not later than eight years from the date on which the Member first becomes eligible for Normal Retirement or age 58, whichever is later. Investment Earnings: Depending on the option elected by the DROP participant, the Member s DROP account is credited with interest using one of the following: a) no interest, or b) the actual net rate of investment return realized by the system. The DROP balance as September 30, 2017 is $3,487,083. City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 40

41 GASB 67 NET PENSION LIABILITY OF THE SPONSOR The components of the Net Pension Liability of the Sponsor on September 30, 2017 were as follows: Total Pension Liability $ 49,416,651 Plan Fiduciary Net Position $ (37,332,429) Sponsor's Net Pension Liability $ 12,084,222 Plan Fiduciary Net Position as a percentage of Total Pension Liability 75.55% Actuarial Assumptions: The Total Pension Liability was determined by an actuarial valuation as of October 1, 2016 updated to September 30, 2017 using the following actuarial assumptions: Inflation 2.70% Salary Increases Service based Discount Rate 7.90% Investment Rate of Return 7.90% Mortality Rate Healthy Inactive Lives: Female: RP 2000 Generational, 100% Annuitant White Collar, Scale BB. Male: RP 2000 Generational, 10% Annuitant White Collar / 90% Annuitant Blue Collar, Scale BB. Mortality Rate Healthy Active Lives: Female: RP2000 Generational, 100% Combined Healthy White Collar, Scale BB. Male: RP2000 Generational, 10% Combined Healthy White Collar / 90% Combined Healthy Blue Collar, Scale BB. Mortality Rate Disabled Lives: Female: 60% RP2000 Disabled Female set forward two years / 40% Annuitant White Collar with no setback, no projection scale. Male: 60% RP2000 Disabled Male setback four years / 40% Annuitant White Collar with no setback, no projection scale. The most recent actuarial experience study used to review the other significant assumptions was dated October 28, The Long-Term Expected Rate of Return on Pension Plan investments can be determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of Pension Plan investment expenses and inflation) are developed for each major asset class. For 2017 the inflation rate assumption of the investment advisor was 2.60%. These ranges are combined to produce the Long-Term Expected Rate of Return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of geometric real rates of return for each major asset class included in the Pension Plan's target asset allocation as of September 30, 2017 are summarized in the following table: Long Term Expected Real Asset Class Rate of Return Domestic Equity 7.0% International Equity 3.7% Bonds 4.0% Convertibles 6.0% REITs 6.8% MLPs 9.7% City of Kissimmee Municipal Firefighters' Retirement Plan FOSTER & FOSTER 41