ORLANDO UTILITIES COMMISSION PENSION PLAN ACTUARIAL VALUATION REPORT AS OF OCTOBER 1, 2016

Transcription

1 ORLANDO UTILITIES COMMISSION PENSION PLAN ACTUARIAL VALUATION REPORT AS OF OCTOBER 1, 2016 ANNUAL EMPLOYER CONTRIBUTION FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2018

2

3

4

5 TABLE OF CONTENTS Section Title Page A Discussion of Valuation Results 1 B Valuation Results 1. Participant Data 5 2. Actuarially Determined Employer Contribution 6 3. Actuarial Value of Benefits and Assets 7 4. Calculation of Employer Normal Cost 8 5. Liquidation of the Unfunded Actuarial Accrued Liability (UAAL) 9 6. Actuarial Gains and Losses Recent History of Valuation Results Recent History of UAAL and Funded Ratio Recent History of Required and Actual Contributions Actuarial Assumptions and Cost Method Glossary 26 C Pension Fund Information 1. Summary of Assets at Market Value Summary of Fund s Income and Disbursements Development of Actuarial Value of Assets Investment Rate of Return 32 D Financial Accounting Information 1. FASB No E Miscellaneous Information 1. Reconciliation of Membership Data Active Members Data Inactive Members Data Projected Payroll and Retirement Benefits 38 F Summary of Plan Provisions 1. Pre-1998 Plan Provisions Cash Balance Provisions 46

6 SECTION A DISCUSSION OF VALUATION RESULTS

7 1 DISCUSSION OF VALUATION RESULTS Nature of the Plan The Plan consists of a traditional pension plan and a cash balance plan. The former covers full-time employees hired before January 1, Those hired on or after January 1, 1998 and who were still employed on or after May 1, 2011 are covered by the cash balance plan. Additionally, approximately 80 members, who were hired prior to January 1, 1998 who had elected to transfer from the traditional pension plan to the defined contribution plan who were still employed on or after May 1, 2011, are covered by the cash balance plan. This valuation treats the two benefit structures applicable to two employee subgroups as one blended defined benefit plan with unallocated assets. All plan assets are available to pay all benefits to any plan member. Comparison of Required Employer Contributions The minimum required employer contribution developed in this year s valuation is compared below with that of the previous valuation. For FYE 9/30/2018 Based on 10/1/2016 Valuation For FYE 9/30/2017 Based on 10/1/2015 Valuation Change For FYE 9/30/2016 Based on 10/1/2014 Valuation Preliminary Required Employer Contribution $ 22,524,385 $ 21,875,854 $ 648,531 $ 18,321,715 As % of Covered Payroll % % (1.86) % % Prepaid Employer Contribution $ - $ - $ - $ (519,190) As % of Covered Payroll 0.00 % 0.00 % 0.00 % (0.67) % Net Required Employer Contribution $ 22,524,385 $ 21,875,854 $ 648,531 $ 17,802,525 As % of Covered Payroll % % (1.86) % % Estimated Employee Contribution* $ 653,296 $ 744,498 $ (91,202) $ 793,214 As % of Covered Payroll 0.73 % 0.92 % (0.19) % 1.02 % Total Contributions $ 23,177,681 $ 22,620,352 $ 557,329 $ 18,595,739 As % of Covered Payroll % % (2.05) % % * 4% member contribution rate for employees covered by the traditional pension plan.

8 2 The required contribution has been calculated as though payments would be made at the end of each quarter. Pursuant to Chapter 112, Florida Statutes, employer contributions must be made on at least a quarterly basis. The actual employer contribution for the year ending September 30, 2016 was $18,321,715 (includes $519,190 in prepaid contributions) compared to the required contribution of $18,321,715. Revisions in Benefits There were no revisions in benefits since the last actuarial valuation. Revisions in Actuarial Assumptions The mortality assumption for active members was changed from the RP-2000 Healthy Annuitant mortality table for males and females with mortality improvements projected to all future years using Scale BB, to the current FRS mortality assumption for active regular class members, as shown in the Actuarial Assumptions and Cost Method section of this Report. The FRS mortality assumption for active members was changed to the RP-2000 Combined Healthy Participant Mortality Table with mortality improvements projected to all future years using Scale BB effective July 1, This change was made in order to continue using the same mortality assumption used by the Florida Retirement System, as now required under Florida Statutes. The impact of this assumption change was a $107,005 (0.12% of covered pay) increase in the employer contribution requirement for the fiscal year ending September 30, It increased the UAAL by $171,295 (less than 0.1% of the Actuarial Accrued Liability). Revisions in Methods There were no revisions in methods since the last actuarial valuation. Actuarial Experience There was a net actuarial gain of $1,047,303 since the last valuation. The gain was primarily due to a higher than expected investment return (on the smoothed actuarial value of assets) of 7.5% compared to the assumed rate of 7.25%, fewer than expected retirements (5 actual versus 12 expected for the cash balance plan, and 25 actual versus 30 expected for the traditional pension plan), and fewer than expected

9 3 terminations in the cash balance plan (15 actual versus 57 expected). The return on the market value of assets was 9.3%. The gain was partially offset by an experience loss due to higher than expected pay increases for traditional pension plan members (7.5% actual versus 4.6% expected). The net actuarial gain for the year resulted in a decrease in the annual required employer contribution of $115,922, or 0.13% of covered payroll. Analysis of Change in Employer Contribution The components of change in the required employer contribution are as follows: Contribution Rate Last Year % Experience (Gains) or Losses (0.13) Payment on Unfunded Liability (1.44) Change in Employer Normal Cost Rate (0.37) Administrative Expense (0.04) Revision in Assumptions 0.12 Change in Method - Plan Amendment - Contribution Rate This Year Funded Ratio The funded ratio as of October 1, 2016 is 73.1% compared to 71.4% as of October 1, The funded ratio as of October 1, 2016 was 73.2% before reflecting the assumption change described above. The funded ratio is equal to the Actuarial Value of Assets divided by the Actuarial Accrued (Past Service) Liability. Variability of Future Contribution Rates The Actuarial Cost Method used to determine the contribution rate is intended to produce contribution rates which are generally level as a percent of payroll. Even so, when experience differs from the assumptions, as it often does, the employer s contribution rate can vary significantly from year-to-year. Over time, if the year-to-year gains and losses offset each other, the contribution rate would be expected to return to the current level.

10 4 The Market Value of Assets exceeds the Actuarial Value of Assets Available for Benefits by $3,815,392 as of the valuation date (see Section C). This difference will be gradually recognized over the next several years causing the required contribution to decrease slightly, in the absence of offsetting losses. Relationship to Market Value If we were not using an asset smoothing method, the required contribution rate for the fiscal year ending September 30, 2018 would have been 24.78% ($22,096,368), and the funded ratio as of October 1, 2016 would have been 73.9%. This is an increase from 71.0% as of October 1, Conclusion The remainder of this Report includes detailed actuarial valuation results, financial information, miscellaneous information and statistics, and a summary of plan provisions.

11 SECTION B VALUATION RESULTS

12 5 PARTICIPANT DATA ACTIVE MEMBERS 10/1/ /1/2015 Number 1,111 1,032 Covered Annual Payroll $ 86,572,980 $ 78,313,766 Average Annual Pay $ 77,923 $ 75,885 Average Age Average Past Service Average Age at Hire RETIREES & BENEFICIARIES* Number Annual Benefits $ 27,174,408 $ 26,279,730 Average Annual Benefit $ 31,452 $ 31,174 Average Age DISABILITIES (DEFERRED OR RECEIVING BENEFITS) Number in Cash Balance Plan 4 4 Total Cash Balances $ 286,242 $ 275,094 Average Cash Balances $ 71,561 $ 68,774 Average Age Number in Defined Benefit Plan 7 6 Annual Benefits $ 162,672 $ 133,778 Average Annual Benefit $ 23,239 $ 22,296 Average Age TERMINATED VESTED MEMBERS Number in Cash Balance Plan Total Cash Balances $ 4,298,402 $ 3,428,567 Average Cash Balances $ 54,410 $ 49,689 Average Age Number in Defined Benefit Plan Annual Benefits $ 536,661 $ 606,541 Average Annual Benefit $ 13,761 $ 13,479 Average Age * Includes COLA benefits and benefits paid under Qualified Domestic Relations Orders.

13 6 ACTUARIALLY DETERMINED EMPLOYER CONTRIBUTION (ADEC) A. Valuation Date 10/1/ /1/2016 After Assumption Before Assumption Change Change 10/1/2015 B. ADEC to Be Paid During Fiscal Year Ending 9/30/2018 9/30/2018 9/30/2017 C. Assumed Dates of Employer Contributions Quarterly Quarterly Quarterly D. Annual Payment to Amortize Unfunded Actuarial Liability $ 15,853,391 $ 15,835,577 $ 15,506,002 E. Employer Normal Cost $ 5,086,984 $ 5,007,582 $ 4,839,155 F. ADEC if Paid on Valuation Date: D+E $ 20,940,375 $ 20,843,159 $ 20,345,157 G. ADEC Adjusted for Frequency of $ 21,864,055 $ 21,762,551 $ 21,242,582 Payments H. Covered Payroll $ 86,572,980 $ 86,572,980 $ 78,313,766 I. ADEC as % of Covered Payroll: G H 25.26% 25.14% 27.12% J. Assumed Increase in Covered Payroll to Contribution Year 3.00% 3.00% 3.00% K. Covered Payroll in Contribution Year $ 89,170,169 $ 89,170,169 $ 80,663,179 L. ADEC for Contribution Year: I x K $ 22,524,385 $ 22,417,380 $ 21,875,854 M. ADEC as % of Covered Payroll in Contribution Year: L K 25.26% 25.14% 27.12%

14 7 ACTUARIAL VALUE OF BENEFITS AND ASSETS A. Valuation Date 10/1/ /1/ /1/2015 After Assumption Before Assumption Change Change B. Actuarial Present Value of All Projected Benefits for 1. Active Members a. Service Retirement Benefits $ 191,603,619 $ 188,825,316 $ 189,858,991 b. Vesting Benefits 14,300,201 14,090,986 12,656,699 c. Disability Benefits d. Preretirement Death Benefits 4,854,421 6,778,346 6,510,685 e. Return of Member Contributions f. Total 210,758, ,694, ,026, Inactive Members a. Service Retirees & Beneficiaries 292,153, ,153, ,901,076 b. Disability Retirees 1,668,971 1,668,971 1,460,862 c. Terminated Vested Members 7,375,451 7,375,451 7,070,402 d. Total 301,197, ,197, ,432, Total for All Members $ 511,955,722 $ 510,892,129 $ 498,458,715 C. Actuarial Accrued (Past Service) Liability $ 471,131,301 $ 470,960,006 $ 460,083,794 D. Actuarial Value of Accumulated Plan Benefits per FASB No. 35 $ 444,628,699 $ 444,472,118 $ 433,550,284 E. Plan Assets 1. Market Value $ 348,367,893 $ 348,367,893 $ 326,754, Actuarial Value $ 344,552,501 $ 344,552,501 $ 328,381,518 F. Unfunded Actuarial Accrued Liability: (C. - E.2.) $ 126,578,800 $ 126,407,505 $ 131,702,276 G. Actuarial Present Value of Projected Covered Payroll $ 719,825,877 $ 710,898,625 $ 640,368,022 H. Actuarial Present Value of Projected Member Contributions $ 3,588,974 $ 3,560,647 $ 4,038,414

15 8 ENTRY AGE ACTUARIAL COST METHOD CALCULATION OF EMPLOYER NORMAL COST A. Valuation Date B. Normal Cost for October 1, 2016 October 1, 2016 October 1, 2015 After Assumption Before Assumption Change Change 1. Service Retirement Benefits $ 4,836,882 $ 4,681,694 $ 4,648, Vesting Benefits 727, , , Disability Benefits Preretirement Death Benefits 184, , , Total for Future Benefits 5,748,514 5,669,112 5,539, Assumed Amount for Administrative Expenses 79,038 79, , Total Normal Cost 5,827,552 5,748,150 5,642,747 C. Expected Member Contribution 740, , ,592 D. Employer Normal Cost: B7-C $ 5,086,984 $ 5,007,582 $ 4,839,155 E. Employer Normal Cost as a % of Covered Payroll 5.88% 5.78% 6.18%

16 9 LIQUIDATION OF THE UNFUNDED ACTUARIAL ACCRUED LIABILITY The Unfunded Actuarial Accrued Liability (UAAL) is being amortized as a level dollar amount over the number of years remaining in the amortization period. Details relating to the UAAL are as follows. UAAL AMORTIZATION PERIOD AND PAYMENTS Original UAAL Current UAAL Amort'n Date Period Years Established Source (Years) Amount Remaining Amount Payment 10/1/2014 Method Change 20 $ 97,987, $ 91,689,459 $ 9,922,571 10/1/2014 Retirees Past COLA 5 13,558, ,650,742 3,087,596 10/1/2015 (Gain)/Loss 15 (1,456,021) 14 (1,426,863) (154,414) 10/1/2015 Assumption Change 15 29,124, ,541,470 3,088,738 10/1/2016 (Gain)/Loss 15 (1,047,303) 15 (1,047,303) (108,914) 10/1/2016 Assumption Change , ,295 17,814 $ 138,339,109 $ 126,578,800 $ 15,853,391 Amortization Schedule Year Expected UAAL 2016 $ 126,578, ,753, ,359, ,358, ,015, ,212, ,045,

17 10 ACTUARIAL GAINS AND LOSSES The assumptions used to anticipate mortality, employment turnover, investment income, expenses, salary increases, and other factors have been based on long range trends and expectations. Actual experience can vary from these expectations. The variance is measured by the gain and loss for the period involved. If significant long term experience reveals consistent deviation from what has been expected and that deviation is expected to continue, the assumptions should be modified. The net actuarial gain (loss) based on the entry age normal method for the past year is computed as follows: 1. Last Year's UAAL $ 131,702, Last Year's Employer Normal Cost 4,839, Last Year's Contributions 18,321, Interest at the Assumed Rate on: a. 1 and 2 for one year 9,899,254 b. 3 from dates paid 664,162 c. a - b 9,235, This Year's Expected UAAL c 127,454, This Year's Actual UAAL (Before Any Changes in Benefits and Assumptions) 126,407, Net Actuarial Gain/(Loss): 5-6 1,047, Gain/(Loss) Due to Investments 953, Gain/(Loss) Due to Other Sources: , Change in UAAL Due to Assumption Changes 171, This Year's Actual UAAL (After Assumption Changes): ,578,800

18 11 Actuarial gains and losses in previous years have been as follows: Year Ended Gain/(Loss) 9/30/98 $ 4,185,711 9/30/99 1,908,161 9/30/00 2,001,644 9/30/01 (11,107,942) 9/30/03 (51,448,368) 9/30/04 (14,118,497) 9/30/05 (15,425,560) 9/30/06 160,195 9/30/07 2,839,647 9/30/08 (10,382,639) 9/30/09 (25,058,893) 9/30/10 (3,432,804) 9/30/11 (7,931,805) 9/30/12 1,180,109 9/30/13 12,043,484 9/30/14 6,781,305 9/30/15 1,456,021 9/30/16 1,047,303

19 12 Actuarial Gain (+) or Loss (-) ($ in Millions) $20 $0 ($20) ($40) ($60) ($80) ($100) ($120) ($140) $20 $0 ($20) ($40) ($60) ($80) ($100) ($120) ($140) Plan Year End Gain or Loss Cumulative

20 13 The fund earnings and salary increase assumptions have considerable impact on the cost of the Plan, so it is important that they are in line with the actual experience. The following table shows a recent history of actual fund earnings and salary increase rates compared to the assumed rates: Investment Return Salary Increases Year Ending Actual Assumed Actual Assumed 9/30/ % 8.25 % 8.6 % 6.00 % 9/30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/2002 (10.7) /30/ /30/ /30/ /30/ /30/ /30/ /30/2009 (2.6) /30/ /30/ /30/ /30/ /30/ /30/ /30/ Average 6.3 % % --- The actual investment return rates shown above are based on the actuarial value of assets. The actual salary increase rates shown above are the increases received by those active members who were included in the actuarial valuations both at the beginning and the end of each year.

21 % History of Investment Return Based on Actuarial Value of Assets 16.0% 12.0% 8.0% 4.0% 0.0% -4.0% -8.0% -12.0% Plan Year End Actual Assumed History of Salary Increases 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Plan Year End Actual Assumed

22 15 Actual (A) Compared to Expected (E) Decrements Among Active Employees Number Added During Normal & Early Disability Terminations Active Members Year Year Retirement Retirement Death Vested Other Totals End of Ended A E A E A E A E A A A E Year Traditional Pension Plan 9/30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ Totals Expected 9/30/ Cash Balance Plan 9/30/ /30/ /30/ /30/ /30/ Totals Expected 9/30/

23 16 RECENT HISTORY OF VALUATION RESULTS Covered Actuarial Valuation Number of Members Annual Value of Employer Normal Cost*** Date Active Inactive Payroll Assets Amount % of Payroll 10/1/1992 1, $38,566,337 $110,048,366 $3,226, % 10/1/1993 1, ,318, ,478,328 2,960, /1/1994 1, ,645, ,557,755 2,706, /1/1995 1, ,525, ,666,432 3,470, /1/1996 1, ,540, ,202,484 3,240, /1/1997 1,075 * ,240, ,603,158 3,127, /1/ ** ,404, ,808,287 2,391, /1/ ,778, ,358,416 2,152, /1/ ,802, ,334,966 2,764, /1/ ,113, ,818,902 4,250, /1/ ,332, ,562,213 3,968, /1/ ,844, ,853,057 5,848, /1/ ,393, ,972,731 5,969, /1/ ,686, ,461,877 5,776, /1/ ,981, ,893,745 5,165, /1/ ,479, ,352,846 9,507, /1/ ,963, ,001,979 12,095, /1/2010 1, ,967, ,496,569 13,226, /1/2011 1, ,230, ,224,649 14,688, /1/2012 1, ,147, ,020,081 19,643, /1/2013 1, ,478, ,722,421 19,004, /1/2014 1, ,405, ,012,409 4,766, /1/2015 1, ,313, ,381,518 4,839, /1/2016 (b) 1, ,572, ,552,501 5,007, /1/2016 (a) 1, ,572, ,552,501 5,086, * The increase from '96 to '97 is due to inclusion of 79 former St. Cloud employees. ** The decrease from 97 to 98 is due to 143 employees transferring to Defined Contribution Plan. ***Aggregate funding method used prior to October 1, (b)=before changes (a)=after changes

24 17 RECENT HISTORY OF VALUATION RESULTS (Cont d) Recent History of Numbers of Members Actuarial Valuation Date, October 1 Active Inactive Recent History of Covered Payroll ($ in Millions) $100.0 $90.0 $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 Actuarial Valuation Date, October 1

25 18 RECENT HISTORY OF UAAL AND FUNDED RATIO Actuarial Valuation Date Actuarial Value of Assets (a) Entry Age Actuarial Accrued Liability (AAL) (b) Unfunded AAL (UAAL) (b) - (a) Funded Ratio (a) / (b) Covered Payroll ( c ) UAAL As % of Covered Payroll (b - a) / c 10/1/1992 $110,048, $38,566,337-10/1/ ,478, ,318,967-10/1/ ,557, ,645,961-10/1/ ,666,432 $145,148,060 $4,481, % 40,525, % 10/1/ ,202, ,235,342 1,032, ,540, /1/ ,603, ,797,178 (4,805,980) ,240,797 (11.1) 10/1/ ,808, ,340,336 (8,467,951) ,404,917 (23.3) 10/1/ ,358, ,332,431 (10,025,985) ,778,576 (28.8) 10/1/ ,886, ,333,935 3,447, ,802, /1/ ,818, ,357,743 14,538, ,113, /1/ ,562, ,163,511 11,601, ,332, /1/ ,853, ,485,261 24,632, ,844, /1/ ,972, ,617,632 22,644, ,393, /1/ ,461, ,758,525 21,296, ,686, /1/ ,893, ,786,436 16,892, ,981, /1/ ,352, ,139,500 42,786, ,479, /1/ ,001, ,798,448 65,796, ,963, /1/ ,496, ,186,958 87,690, ,967, /1/ ,224, ,684, ,459, ,230, /1/ ,020, ,073, ,053, ,147, /1/ ,722, ,298, ,576, ,478, /1/ ,012, ,558, ,546, ,405, /1/ ,381, ,083, ,702, ,313, /1/2016 (b) 344,552, ,960, ,407, ,572, /1/2016 (a) 344,552, ,131, ,578, ,572, (b)=before changes (a)=after changes

26 19 RECENT HISTORY OF REQUIRED AND ACTUAL CONTRIBUTIONS Valuation Date End of Year To Which Valuation Applies Required Employer Contribution Amount % of Payroll Actual Employer Contribution for Year to Which Valuation Applies 10/1/1992 9/30/ /1/1993 9/30/1994 $ 2,960, % $ 3,230,549 10/1/1994 9/30/1995 2,706, ,896,534 10/1/1995 9/30/1996 3,470, ,555,309 10/1/1996 9/30/1997 3,240, ,662,399 10/1/1997 9/30/1998 3,127, ,544,420 10/1/1998 9/30/1999 2,391, ,468,225 10/1/1999 9/30/2000 2,152, ,311,353 10/1/2000 9/30/2001 2,308, ,308,286 10/1/2001 9/30/2002 4,250, ,250,601 10/1/2001 9/30/2003 4,224, ,972,937 10/1/2003 9/30/2004 4,172, ,277,001 10/1/2003 9/30/2005 3,984, ,021,572 10/1/2004 9/30/2006 5,840, ,891,438 10/1/2005 9/30/2007 5,872, ,872,213 10/1/2006 9/30/2008 5,665, ,665,887 10/1/2008 9/30/2009 9,969, ,972,135 10/1/2009 9/30/ ,683, ,682,074 10/1/2010 9/30/ ,868, ,149,906 10/1/2010 9/30/ ,856, ,930,576 10/1/2011 9/30/ ,862, ,009,039 10/1/2012 9/30/ ,184, ,184,220 10/1/2013 9/30/ ,499,734 * ,499,734 * 10/1/2014 9/30/ ,321,715 ** ,321,715 ** 10/1/2015 9/30/ ,875, /1/2016 9/30/ ,524, * Before reflecting the prepaid contribution of $1,965,498. ** Before reflecting the prepaid contribution of $519,190. Note: The difference between actual and required contributions for the year consists of contributions for St. Cloud employees and interest.

27 20 Recent History of Required and Actual Contributions ($ in Millions) $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 Fiscal Year End Required Contrib Actual Contrib

28 21 ACTUARIAL ASSUMPTIONS AND COST METHOD Valuation Methods Actuarial Cost Method Normal cost and the allocation of benefit values between service rendered before and after the valuation date were determined using an Individual Entry-Age Actuarial Cost Method having the following characteristics: (i) the annual normal cost for each individual active member, payable from the date of employment to the date of retirement, is sufficient to accumulate the value of the member s benefit at the time of retirement; (ii) each annual normal cost is a constant percentage of the member s year by year projected covered pay. Actuarial gains/(losses), as they occur, reduce (increase) the Unfunded Actuarial Accrued Liability. Financing of Unfunded Actuarial Accrued Liabilities Unfunded Actuarial Accrued Liabilities (full funding credit if assets exceed liabilities) were amortized by level (principal & interest combined) dollar contributions over a reasonable period of future years. Actuarial Value of Assets The Actuarial Value of Assets is calculated by recognizing 20% of the difference between the Market Value of Assets and the expected Actuarial Asset Value. The Actuarial Value of Assets will be further adjusted to the extent necessary to fall within the corridor whose lower limit is 90% of the Market Value of plan assets and whose upper limit is 110% of the Market Value of plan assets. During periods when investment performance exceeds the assumed rate, Actuarial Value of Assets will tend to be less than Market Value. During periods when investment performance is less than assumed rate, Actuarial Value of Assets will tend to be greater than Market Value. Valuation Assumptions The actuarial assumptions used in the valuation are shown in this Section. The decrement assumptions were established following the Experience Study Report dated August 24, Economic Assumptions The investment return rate assumed in the valuation is 7.25% per year, compounded annually (net after investment expenses). The inflation rate assumed in this valuation was 2.25% per year. The inflation rate is defined to be the long-term rate of annual increases in the prices of goods and services. Pay increase assumptions for individual active members are as follows: Rounded Years of % Increase in Salary Base Total Service Merit and Seniority Inflation Increase % 2.25% 7.50% % 2.25% 6.80% % 2.25% 5.00% % 2.25% 4.50% % 2.25% 4.30% % 2.25% 3.75%

29 22 Demographic Assumptions The mortality table used was the RP-2000 Combined Healthy Participant Mortality Table for active members and the RP-2000 Mortality Table for Annuitants for non-disabled inactive members, with mortality improvement projected to all future years using Scale BB. For females, the base mortality rates include a 100% white collar adjustment. For males, the base mortality rates include a 50% blue collar adjustment and a 50% white collar adjustment. These are the same rates currently in use for Regular Class members of the Florida Retirement System (and they are based on a statewide experience study). Sample (Active) Probability of Future Life Attained Dying Next Year Expectancy (years) Ages (in 2016) Men Women Men Women % 0.15 % Sample (Inactive) Probability of Future Life Attained Dying Next Year Expectancy (years) Ages (in 2016) Men Women Men Women % 0.23 % For disabled retirees, the mortality table used was the RP-2000 mortality for disabled annuitants, set-forward 4 years for males and set-back 2 years for females, with no provision being made for future mortality improvements. These are the same rates currently in use for Regular Class members of the Florida Retirement System (and they are based on a statewide experience study). Sample Attained Probability of Future Life Expectancy (years) Dying Next Year Ages Men Women Men Women % 1.35 %

30 23 The rates of retirement are as follows: Assumed Retirement Rates Pre-98 Pension Plan Years of Service Cash Balance Plan Years of Service Age < < < 51 N/A 6% 12% N/A 25% 100% 51 N/A 12% 15% N/A 25% 100% 52 N/A 16% 15% N/A 25% 100% 53 N/A 18% 20% N/A 25% 100% 54 N/A 17% 10% N/A 25% 100% 55 6% 16% 10% N/A 25% 100% 56 3% 9% 15% N/A 25% 100% 57 8% 9% 15% N/A 25% 100% 58 8% 9% 20% N/A 25% 100% 59 12% 15% 30% N/A 25% 100% 60 15% 20% 30% N/A 25% 100% 61 21% 20% 15% N/A 25% 100% 62 21% 40% 30% 25% 30% 100% 63 30% 20% 40% 15% 40% 100% 64 20% 25% 25% 15% 25% 100% 65 55% 55% 55% 35% 55% 100% 66 45% 45% 45% 30% 45% 100% % 40% 40% 25% 40% 100% % 50% 50% 50% 50% 100% % 100% 100% 100% 100% 100%

31 24 Rates of separation from active membership for the Pre-98 Pension Plan are 1.1% per year for males and 1.7% per year for females. Separation rates for the Cash Balance Plan vary by gender, age, and years of service, as follows: Years of Service - Males Age Age < 25 35% 30% 7.5% 5% 5% 5.0% < 43 50% 25% 12.5% 10% 5% 4.0% 25 35% 30% 7.5% 5% 5% 4.8% 43 50% 25% 12.5% 10% 5% 4.2% 26 35% 30% 7.5% 5% 5% 4.6% 44 50% 25% 12.5% 10% 5% 4.4% 27 35% 30% 7.5% 5% 5% 4.4% 45 50% 25% 12.5% 10% 5% 4.6% 28 35% 30% 7.5% 5% 5% 4.2% 46 50% 25% 12.5% 10% 5% 4.8% 29 35% 30% 7.5% 5% 5% 4.0% 47 50% 25% 12.5% 10% 5% 5.0% 30 35% 30% 7.5% 5% 5% 3.8% 48 50% 25% 12.5% 10% 5% 5.2% 31 35% 30% 7.5% 5% 5% 3.6% 49 50% 25% 12.5% 10% 5% 5.4% 32 35% 30% 7.5% 5% 5% 3.4% 50 50% 25% 12.5% 10% 5% 5.6% 33 35% 30% 7.5% 5% 5% 3.2% 51 50% 25% 12.5% 10% 5% 5.8% 34 35% 30% 7.5% 5% 5% 3.0% % 25% 12.5% 10% 5% 6.0% 35 35% 30% 7.5% 5% 5% 2.8% 36 35% 30% 7.5% 5% 5% 2.6% 37 35% 30% 7.5% 5% 5% 2.5% % 30% 7.5% 5% 5% 2.4% % of Active Members Separating Within Next Year Years of Service - Females The rate of interest credited on account balances is assumed to be 5.0% per year for active members and 4.0% per year for vested terminated members. The annual rate of payroll growth assumed was 3.0%. The annual future COLA rate for eligible traditional pension plan members was 1.5% per year for 2017 (based on actual COLA granted for the year) and 1.0% per year, compounded annually, for each year thereafter. The 1.0% COLA assumption is the approximate equivalent annual COLA based on the 50 th percentile of expected COLAs payable over the next 30 years. Changes from previous valuation: The mortality table for active members was updated from the RP-2000 Mortality Table for Annuitants (for females, the base mortality rates include a 100% white collar adjustment, and for males, the base mortality rates include a 50% blue collar adjustment and a 50% white collar adjustment) with mortality improvement projected to all future years using Scale BB to the RP-2000 Combined Healthy Participant Mortality Table (for females, the base mortality rates include a 100% white collar adjustment, and for males, the base mortality rates include a 50% blue collar adjustment and a 50% white collar adjustment), with mortality improvement projected to all future years using Scale BB. This mortality assumption is the same as the mortality assumption used by the Florida Retirement System (FRS) for regular class members in the actuarial valuation report as of July 1, 2016.

32 25 Miscellaneous and Technical Assumptions Administrative & Investment Expenses Benefit Service Decrement Operation Decrement Timing Eligibility Testing Forfeitures Incidence of Contributions Marriage Assumption Normal Form of Benefit Pay Increase Timing Service Credit Accruals The investment return assumption is intended to be the return net of investment expenses. Annual administrative expenses are assumed to be equal to the average of the expenses over the previous 2 years. Assumed administrative expenses are added to the Normal Cost. Fractional service is used to determine the amount of benefit payable under the Plan. Pay credits for the cash balance plan are based on whole years of service. Disability and mortality decrements operate during retirement eligibility. Decrements of all types are assumed to occur at the beginning of the year. Eligibility for benefits is determined based upon the age nearest birthday and service nearest whole year on the valuation date. For vested separations from service, it is assumed that 0% of members separating will withdraw their contributions and forfeit an employer financed benefit. It was further assumed that the liability at termination is the greater of the vested deferred benefit (if any) or the member s accumulated contributions. Employer contributions are assumed to be made at the end of each calendar quarter. Member contributions are assumed to be received continuously throughout the year based upon the computed percent of payroll shown in this report, and the actual payroll payable at the time contributions are made. 100% of males and 100% of females are assumed to be married for purposes of death-in-service benefits. Male spouses are assumed to be four years older than female spouses for active member valuation purposes. 50% Joint and Survivor Annuity for traditional pension plan members. Cashout of account balance for cash balance plan members. End of fiscal year. This is equivalent to assuming that reported pays represent rate of pay on the valuation date. It is assumed that members accrue one year of service credit per year.

33 26 GLOSSARY Actuarial Accrued Liability (AAL) Actuarial Assumptions Actuarial Cost Method Actuarial Equivalent Actuarial Present Value (APV) Actuarial Present Value of Future Benefits (APVFB) Actuarial Valuation Actuarial Value of Assets The difference between the Actuarial Present Value of Future Benefits, and the Actuarial Present Value of Future Normal Costs. Assumptions about future plan experience that affect costs or liabilities, such as: mortality, withdrawal, disablement, and retirement; future increases in salary; future rates of investment earnings; future investment and administrative expenses; characteristics of members not specified in the data, such as marital status; characteristics of future members; future elections made by members; and other items. A procedure for allocating the Actuarial Present Value of Future Benefits between the Actuarial Present Value of Future Normal Costs and the Actuarial Accrued Liability. Of equal Actuarial Present Value, determined as of a given date and based on a given set of Actuarial Assumptions. The amount of funds required to provide a payment or series of payments in the future. It is determined by discounting the future payments with an assumed interest rate and with the assumed probability each payment will be made. The Actuarial Present Value of amounts which are expected to be paid at various future times to active members, retired members, beneficiaries receiving benefits, and inactive, nonretired members entitled to either a refund or a future retirement benefit. Expressed another way, it is the value that would have to be invested on the valuation date so that the amount invested plus investment earnings would provide sufficient assets to pay all projected benefits and expenses when due. The determination, as of a valuation date, of the Normal Cost, Actuarial Accrued Liability, Actuarial Value of Assets, and related Actuarial Present Values for a plan. An Actuarial Valuation for a governmental retirement system typically also includes calculations of items needed for compliance with GASB Statement Nos. 67 and 68. The value of the assets as of a given date, used by the actuary for valuation purposes. This may be the market or fair value of plan assets or a smoothed value in order to reduce the year-to-year volatility of calculated results, such as the funded ratio and the actuarially determined employer contribution (ADEC).

34 27 Amortization Method Amortization Payment Amortization Period Actuarially Determined Employer Contribution (ADEC) Closed Amortization Period Employer Normal Cost Equivalent Single Amortization Period Experience Gain/Loss Funded Ratio GASB Normal Cost A method for determining the Amortization Payment. The most common methods used are level dollar and level percentage of payroll. Under the Level Dollar method, the Amortization Payment is one of a stream of payments, all equal, whose Actuarial Present Value is equal to the UAAL. Under the Level Percentage of Pay method, the Amortization Payment is one of a stream of increasing payments, whose Actuarial Present Value is equal to the UAAL. Under the Level Percentage of Pay method, the stream of payments increases at the rate at which total covered payroll of all active members is assumed to increase. That portion of the plan contribution or ADEC which is designed to pay interest on and to amortize the Unfunded Actuarial Accrued Liability. The period used in calculating the Amortization Payment. The employer s periodic required contributions, expressed as a dollar amount or a percentage of covered plan compensation. The ADEC consists of the Employer Normal Cost and Amortization Payment. A specific number of years that is reduced by one each year, and declines to zero with the passage of time. For example if the amortization period is initially set at 30 years, it is 29 years at the end of one year, 28 years at the end of two years, etc. The portion of the Normal Cost to be paid by the employer. This is equal to the Normal Cost less expected member contributions. For plans that do not establish separate amortization bases (separate components of the UAAL), this is the same as the Amortization Period. For plans that do establish separate amortization bases, this is the period over which the UAAL would be amortized if all amortization bases were combined upon the current UAAL payment. A measure of the difference between the normal cost rate from last year and the normal cost rate from this year. The ratio of the Actuarial Value of Assets to the Actuarial Accrued Liability. Governmental Accounting Standards Board. The annual cost assigned, under the Actuarial Cost Method, to the current plan year.

35 28 Open Amortization Period Unfunded Actuarial Accrued Liability (UAAL) Valuation Date An open amortization period is one which is used to determine the Amortization Payment but which does not change over time. In other words, if the initial period is set as 30 years, the same 30-year period is used in determining the Amortization Period each year. In theory, if an Open Amortization Period is used to amortize the Unfunded Actuarial Accrued Liability, the UAAL will never completely disappear, but will become smaller each year, either as a dollar amount or in relation to covered payroll. The difference between the Actuarial Accrued Liability and Actuarial Value of Assets. The date as of which the Actuarial Present Value of Future Benefits are determined. The benefits expected to be paid in the future are discounted to this date.

36 SECTION C PENSION FUND INFORMATION

37 29 SUMMARY OF ASSETS AT MARKET VALUE Item September A. Receivables: 1. Member Contributions $ - $ - 2. Employer Contributions Investment Income & Other 803,557 1,173, Total Receivables 803,557 1,173,060 B. Investments 1. Short-Term Investments 8,355,224 10,248, Domestic Equities 146,906, ,246, International Equities 47,957,299 43,546, Domestic Fixed Income 70,603,790 67,882, International Fixed Income Real Estate 37,316,517 34,476, Alternative Investments 19,696,877 18,271, Other Mutual Fund Investments 17,115,848 16,358, Total Investments 347,951, ,029,229 C. Liabilities 1. Benefits/Refunds Payable Accrued Expenses and Other Payables Due Brokers (387,502) (929,068) 4. Total Liabilities (387,502) (929,068) D. Market Value of Assets Held in Trust 348,367, ,273,221 E. Contribution Paid for Future Period - (519,190) F. Market Value of Assets Available for Benefits $ 348,367,893 $ 326,754,031 G. Allocation of Investments 1. Short-Term Investments 2.4% 3.1% 2. Domestic Equities 42.2% 41.7% 3. International Equities 13.8% 13.3% 4. Domestic Fixed Income 20.3% 20.8% 5. International Fixed Income 0.0% 0.0% 6. Real Estate 10.7% 10.5% 7. Alternative Investments 5.7% 5.6% 8. Other Mutual Fund Investments 4.9% 5.0% 9. Total Investments 100.0% 100.0%

38 30 SUMMARY OF FUND S INCOME AND DISBURSEMENTS Item September A. Market Value of Assets at Beginning of Year $ 326,754,031 $ 327,025,577 B. Revenues and Expenditures 1. Contributions a. Employee Contributions 748, ,322 b. Employer Contributions 18,321,715 20,499,734 c. Other - - d. Total 19,069,939 21,321, Investment Income a. Interest, Dividends, and Other Income 8,237,922 8,108,481 b. Net Realized and Unrealized Gains/(Losses) 23,333,934 (1,563,819) c. Investment Expenses (1,667,982) (1,762,075) d. Net Investment Income 29,903,874 4,782, Benefits and Refunds a. Monthly Benefits and Refunds (27,324,387) (26,252,678) b. Other - - c. Total (27,324,387) (26,252,678) 4. Administrative and Miscellaneous Expenses (35,564) (122,511) 5. Transfers - - C. Market Value of Assets Available for Benefits 348,367, ,754,031 D. Contribution Paid for Future Period - 519,190 E. Market Value of Assets Held in Trust $ 348,367,893 $ 327,273,221

39 31 DEVELOPMENT OF ACTUARIAL VALUE OF ASSETS Year Ending Year Ending 9/30/2016 9/30/2015 A. Beginning of Year Assets 1. Market Value $ 326,754,031 $ 327,025, Actuarial Value 328,381, ,012,409 B. End of Year Market Value of Assets 348,367, ,754,031 C. Net of Contributions Less Disbursements (8,290,012) (5,054,133) D. Actual Net Investment Earnings 29,903,874 4,782,587 E. Expected Investment Earnings 23,507,147 23,830,114 F. Expected Actuarial Value End of Year: A2 + C + E 343,598, ,788,390 G. Market Value End of Year Less Expected Actuarial Value: B - F 4,769,240 (2,034,359) H. 20% of Difference 953,848 (406,872) I. End of Year Assets 1. Actuarial Value: F + H 344,552, ,381, Final Actuarial Value Within 90% to 110% of Market Value 344,552, ,381,518 J. Recognized Investment Return: E + H + I2 - I1 24,460,995 23,423,242 K. Gain/(Loss) Due to Investments 953,848 (406,872) L. Recognized Rate of Return 7.5 % 7.6 %

40 32 INVESTMENT RATE OF RETURN Year Ending September 30th Investment Rate of Return Market Value Actuarial % 8.2 % (1.4) (16.2) (9.8) (10.7) (15.0) (2.4) (2.6) (0.8) Average Returns: Last 5 Years 10.7 % 8.4 % Last 10 Years 5.7 % 6.1 % All Years 6.6 % 6.3 % *Net of investment expenses after 2005.

41 SECTION D FINANCIAL ACCOUNTING INFORMATION

42 33 FASB NO. 35 INFORMATION A. Valuation Date 10/1/ /1/2015 B. Actuarial Present Value of Accumulated Plan Benefits 1. Vested Benefits a. Members Currently Receiving Payments $ 293,822,030 $ 282,361,938 b. Terminated Vested Members 7,375,451 7,070,402 c. Other Members 139,072, ,388,606 d. Total 440,270, ,820, Non-Vested Benefits 4,358,586 4,729, Total Actuarial Present Value of Accumulated Plan Benefits: 1d + 2 $ 444,628,699 $ 433,550, Accumulated Contributions of Active Members $ 25,904,751 $ 27,266,291 C. Changes in the Actuarial Present Value of Accumulated Plan Benefits 1. Total Value at Beginning of Period $ 433,550,284 $ 392,439, Increase (Decrease) During the Period Attributable to: a. Change in Actuarial Assumptions 156,581 30,304,413 b. Plan Amendment - - c. Latest Member Data, Benefits Accumulated and Decrease in the Discount Period 38,246,221 37,058,843 d. Benefits Paid (27,324,387) (26,252,678) e. Net Increase 11,078,415 41,110, Total Value at End of Period $ 444,628,699 $ 433,550,284 D. Market Value of Assets $ 348,367,893 $ 326,754,031

43 SECTION E MISCELLANEOUS INFORMATION

44 34 Valuation Date Reconciliation of Membership Data through September 30, 2016 Defined Benefit Cash Balance Total A. Active Members 1. Number Included in Last Valuation , New Members Rehired Members Non-Vested Employment Terminations 0 (5) (5) 5. Vested Employment Terminations (1) (10) (11) 6. Service Retirements (25) (5) (30) 7. Disability Retirements Deaths (3) (1) (4) 9. Number Included in This Valuation ,111 B. Terminated Vested Members 1. Number Included in Last Valuation Additions from Active Members Lump Sum Payments/Refunds Payments Commenced (6) 0 (6) 5. Rehired Other - Data Adjustment Number Included in This Valuation C. Other Deferred Benefits (Survivors & Disabilities) 1. Number Included in Last Valuation Additions from Active Members Additions from Service Retirees (Deferred Survivor) Payments Commenced (1) 0 (1) 5. Rehired Other - Data Adjustment Number Included in This Valuation D. Retirees and Beneficiaries 1. Number Included in Last Valuation Additions from Active Members Additions from Terminated Vested Members Additions from Other Deferred Benefits Deaths Resulting in No Further Payments (14) 0 (14) 6. End of Certain Period - No Further Payments Lump Sum Payments 0 (5) (5) 8. Rehired Number Included in This Valuation E. QDRO Alternate Payees 1. Number Included in Last Valuation Additions Deaths Number Included in This Valuation

45 35 ORLANDO UTILITIES COMMISSION PENSION PLAN ACTIVE MEMBERS ON OCTOBER 1, 2016 DEFINED BENEFIT MEMBERS Age Years of Service Group & Up Totals Total Pay Avg Pay Total Pay 146, ,043 Avg Pay 73,022 73, Total Pay 127, , ,837 Avg Pay 63, ,810 91, Total Pay 1,049, , ,446 2,874,667 Avg Pay 80,761 94,703 88,404 87, Total Pay 630,023 1,605,056 3,477, ,818 6,290,191 Avg Pay 78, ,316 96,592 82,545 93, Total Pay 458, ,400 2,758,730 1,239,166 4,802,417 Avg Pay 65,446 86,600 95,129 95,320 90, Total Pay 208,077 1,017,144 1,055, ,961 3,035,675 Avg Pay 69,359 92,468 87,958 94,370 89, Total Pay 81, , , ,203 1,000,367 Avg Pay 81,016 62,212 80, , ,046 Total No Total Pay 2,700,387 4,182,974 8,425,688 3,205,148 18,514,197 Avg Pay 75,011 95,068 93, ,392 92,110

46 36 ORLANDO UTILITIES COMMISSION PENSION PLAN ACTIVE MEMBERS ON OCTOBER 1, 2016 CASH BALANCE MEMBERS Age Years of Service Group & Up Totals Under Total Pay 1,101, ,704 1,337,925 Avg Pay 42,355 59,176 44, Total Pay 1,722,306 1,023, ,456 2,890,272 Avg Pay 42,007 56,862 72,228 47, Total Pay 2,339,873 2,332,508 1,169,303 81,016 5,922,700 Avg Pay 50,867 61,382 68,783 81,016 58, Total Pay 2,789,445 2,696,128 2,525, ,733 8,801,031 Avg Pay 66,415 69,132 78,929 87,748 72, Total Pay 3,081,866 3,134,497 1,927,199 1,990, ,429 10,895,224 Avg Pay 71,671 68,141 71,378 76,547 95,179 72, Total Pay 2,643,374 2,447,040 3,050,799 1,558,158 1,489,242 1,289, ,949 12,634,748 Avg Pay 82,605 74,153 76,270 74,198 99,283 99, ,949 81, Total Pay 1,583,145 2,215,482 2,670,420 2,046, ,224 1,177, ,537 10,586,719 Avg Pay 93,126 76,396 83,451 88,987 69, , ,589 88, Total Pay 2,207,693 1,166,379 1,350,265 1,802, , , ,230 7,999,560 Avg Pay 73,590 97,198 84,392 78, ,134 74,085 91,743 82, Total Pay 1,042,704 1,367,397 2,004,162 1,125, , ,000 6,047,682 Avg Pay 115,856 85,462 95,436 86,572 90, ,000 95, Total Pay 397, , , ,924 Avg Pay 99,336 99,361 86,715 94,292 Total No Total Pay 18,511,625 17,016,988 15,041,051 9,740,582 3,703,077 2,762,743 1,282,716 68,058,783 Avg Pay 64,726 71,201 79,582 81,172 94, , ,611 74,790

47 37 Inactive Members on October 1, 2016 Terminated Vested Disabled Retired* Beneficiaries* Defined Benefit Cash Balance Defined Benefit Cash Balance Defined Benefit Defined Benefit Annual Current Annual Current Annual Annual Age No. Benefits No. Cash Balance No. Benefits No. Cash Balance No. Benefits No. Benefits Under 45 0 $0 32 $1,074,503 0 $0 1 $39,530 0 $0 4 $69, , , , , , ,023, , ,029, , , , , , ,421, , , , , , ,313, , , ,219, , ,046, , ,506, , ,590, , , , & Up , ,048 Total 39 $536, $4,298,402 7 $162,672 4 $286, $25,058, $2,116,259 * Totals include $228,696 in benefits payable under Qualified Domestic Relations Orders.

48 38 PROJECTED PAYROLL AND RETIREMENT BENEFITS FOR THE PRE-1998 PENSION PLAN No. of No. of Projected Fiscal Active Projected Inactive Benefit Year End Members Payroll Members Payout $18,514, $28,768, ,332, ,184, ,222, ,325, ,454, ,294, ,850, ,196, ,235, ,999, ,737, ,706, ,316, ,236, ,145, ,601, ,148, ,789, ,289, ,827, ,589, ,765, ,994, ,604, ,495, ,349, ,086, ,951, , ,442, , ,902, , ,249, , ,526, , ,755,732