CITY OF HOLLYWOOD FIREFIGHTERS PENSION FUND ACTUARIAL VALUATION REPORT AS OF OCTOBER 1, 2015

Transcription

1 CITY OF HOLLYWOOD FIREFIGHTERS PENSION FUND ACTUARIAL VALUATION REPORT AS OF OCTOBER 1, 2015 CONTRIBUTIONS APPLICABLE TO THE PLAN/ FISCAL YEAR ENDED SEPTEMBER 30, 2017

2 June 28, 2016 Board of Trustees c/o Ms. Jennifer V. Kerr City of Hollywood Firefighters Pension Board 2741 Stirling Road Hollywood, FL Re: City of Hollywood Firefighters Pension Fund 2015 Actuarial Valuation Report Dear Board: We are pleased to present to the Board this report of the annual actuarial valuation of the City of Hollywood Firefighters Pension Fund. The 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. Please note that this valuation may not be applicable for any other purposes. The valuation has 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 valuation, we have relied on personnel, plan design, and asset information supplied by the City of Hollywood 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 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 Hollywood, nor does anyone at Foster & Foster, Inc. act as a member of the Board of Trustees of the City of Hollywood Firefighters Pension Fund. 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: Bradley R. Heinrichs, FSA, EA, MAAA Enrolled Actuary # BRH/lke Enclosures

4 TABLE OF CONTENTS Section Title Page I II Introduction a. Summary of Report 5 b. Changes Since Prior Valuation 7 c. Comparative Summary of Principal Valuation Results 8 Valuation Information a. Reconciliation of Unfunded Actuarial Accrued Liabilities 13 b. Detailed Actuarial (Gain)/ Loss Analysis 15 c. Actuarial Assumptions and Methods 16 d. Valuation Notes 19 III Trust Fund 21 IV Member Statistics a. Statistical Data 27 b. Age and Service Distribution 28 c. Valuation Participant Reconciliation 29 V Summary of Plan Provisions 30 VI Governmental Accounting Standards 34 Board Disclosure Statements City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 4

5 SUMMARY OF REPORT The annual actuarial valuation of the City of Hollywood Firefighters Pension Fund, performed as of October 1, 2015, has been completed and the results are presented in this Report. The contribution amounts developed in this valuation apply to the plan/fiscal year ending September 30, The funding requirements for the applicable year, compared with amounts developed in the April 20, 2016 Actuarial Impact Statement, determined as of October 1, 2014, are as follows: Valuation Date Applicable Plan/Fiscal Year End 10/1/2015 9/30/ /1/2014 9/30/2016 Total Required Contribution $16,303,155 $16,294,237 Less Member Contributions (Est.) 1,415,482 1,356,196 Equals Required City and State 14,887,673 14,938,041 State Contribution ¹ 1,562,180 1,562,180 Balance from City ² 13,325,493 13,375,861 ¹ The City may use up to $1,562,180, if received, to offset their required contribution. If the State Contribution is not received, the City will owe the balance. ² Additionally, the City has a shortfall contribution of $2,510,285 for the fiscal year ending September 30, 2015 that will need to be paid with interest in addition to the required contributions above. Overall, the Plan experienced net favorable actuarial experience on the basis of the Plan s actuarial assumptions. The favorable experience included lower than expected salary increases, the effect of an investment return of 10.38% (Actuarial Asset Basis), which exceeded the 7.50% assumption, and greater than expected inactive mortality. In addition, the assumption changes had a net favorable impact on plan liability. Partially offsetting these gains was unfavorable disability experience, the granting of a 13 th check and extra interest credits to DROP Members. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 5

6 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 answer any pending questions concerning its contents. Respectfully submitted, FOSTER & FOSTER, INC. By: Bradley R. Heinrichs, FSA, EA, MAAA By: Heidi E. Andorfer, FSA, EA City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 6

7 Plan Changes Since Prior Valuation CHANGES SINCE PRIOR VALUATION It was assumed that the pending ordinance that would change the following would be implemented: In the event that the Board finds that a member is totally and permanently disabled by the plan's definition, the City may assign the member to a modified duty or light duty position. If the City makes available a modified or light duty position, and a member rejects the assignment, said member shall be ineligible for either continued employment or disability retirements. Regarding the DROP account benefit of any current City employee who was previously a member of the General Employees Plan and who later moved to a Firefighter position and is a member of the Firefighter's Pension Fund and is now participating in the DROP in the Firefighter's Pension Fund, any DROP benefit being held for that employee in the General Plan may be moved from the General Plan to the Firefighters Plan. Actuarial Assumption/Method Changes Since Prior Valuation The following assumptions were updated in the October 1, 2015 valuation, based on the experience study issued on April 25, 2016: Termination rates Disability Rates Salary Scale City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 7

8 COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS A. Participant Data New Assump Old Assump 10/1/ /1/ /1/2014 Number Included Actives Service Retirees DROP Retirees Beneficiaries Disability Retirees Terminated Vested Total Total Annual Payroll $16,225,216 $16,317,003 $15,549,137 Payroll Under Assumed Ret. Age 16,225,216 16,317,003 15,549,137 Annual Rate of Payments to: Service Retirees 12,146,347 12,146,347 11,760,432 DROP Retirees 1,465,310 1,465,310 1,704,522 Beneficiaries 831, , ,439 Disability Retirees 1,003,021 1,003, ,097 Terminated Vested 221, , ,808 B. Assets Actuarial Value ¹ 199,159, ,159, ,376,032 Market Value ¹ 201,371, ,371, ,698,922 C. Liabilities Present Value of Benefits Actives Retirement Benefits 102,163, ,139, ,704,154 Disability Benefits 5,169,181 5,005,656 5,200,033 Death Benefits 1,506,285 1,649,832 1,659,629 Vested Benefits 2,989,613 1,459,559 1,512,026 Refund of Contributions 287, , ,738 Service Retirees 150,836, ,832, ,745,085 DROP Retirees¹ 104,054, ,054, ,550,070 Beneficiaries 8,155,480 8,155,480 8,359,347 Disability Retirees 11,287,879 11,287,879 10,416,454 Terminated Vested 2,813,628 2,813,628 2,704,830 Excess State Monies Reserve 11,040 11,040 11,040 Share Balance 62,925 62,925 62,925 Total 389,338, ,825, ,220,331 City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 8

9 New Assump Old Assump C. Liabilities - (Continued) 10/1/ /1/ /1/2014 Present Value of Future Salaries 231,334, ,418, ,545,005 Present Value of Future Member Contributions 17,975,020 19,090,205 19,561,098 Normal Cost (Retirement) 3,335,998 3,722,506 3,444,473 Normal Cost (Disability) 323, , ,648 Normal Cost (Death) 75,407 79,626 76,949 Normal Cost (Vesting) 194, , ,735 Normal Cost (Refunds) 47,750 60,553 47,780 Total Normal Cost 3,977,150 4,283,275 4,005,585 Present Value of Future Normal Costs 51,151,355 58,596,159 58,715,056 Accrued Liability (Retirement) 57,983,917 59,729,328 51,534,875 Accrued Liability (Disability) 1,346,263 1,295,508 1,200,085 Accrued Liability (Death) 467, , ,930 Accrued Liability (Vesting) 1,138, , ,934 Accrued Liability (Refunds) 28,815 38,706 28,700 Accrued Liability (Inactives) ¹ 277,148, ,144, ,775,786 Excess State Monies Reserve 11,040 11,040 11,040 Share Balance 62,925 62,925 62,925 Total Actuarial Accrued Liability 338,187, ,229, ,505,275 Unfunded Actuarial Accrued Liability (UAAL) 139,028, ,070, ,129,243 Funded Ratio (AVA / AL) 58.9% 58.7% 56.8% D. Actuarial Present Value of Accrued Benefits Vested Accrued Benefits Inactives ¹ 277,148, ,144, ,775,786 Share Balance 62,925 62,925 62,925 Actives 28,922,036 28,513,239 23,435,456 Member Contributions 10,935,814 10,935,814 10,047,520 Total 317,069, ,656, ,321,687 Non-vested Accrued Benefits 11,932,483 12,140,531 13,182,183 Total Present Value Accrued Benefits 329,001, ,796, ,503,870 Funded Ratio (MVA / PVAB) 61.2% 61.2% 63.4% Increase (Decrease) in Present Value of Accrued Benefits Attributable to: Plan Amendments 0 0 Assumption Changes 204,843 0 New Accrued Benefits 0 6,318,109 Benefits Paid 0 (20,229,258) Interest 0 23,204,193 Other 0 0 Total 204,843 9,293,044 City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 9

10 New Assump Old Assump Valuation Date 10/1/ /1/ /1/2014 Applicable to Fiscal Year Ending 9/30/2017 9/30/2017 9/30/2016 E. Pension Cost Normal Cost ² $4,424,579 $4,765,143 $4,456,213 Administrative Expenses ² 544, , ,686 Payment Required to Amortize Unfunded Actuarial Accrued Liability over 30 years (as of 10/1/2015) ² 11,334,546 11,401,371 11,131,338 Total Required Contribution 16,303,155 16,710,904 16,294,237 Expected Member Contributions ² 1,415,482 1,423,490 1,356,196 Expected City and State Contribution 14,887,673 15,287,414 14,938,041 F. Past Contributions Plan Years Ending: 9/30/2015 Total Required Contribution 15,535,193 City and State Requirement 14,310,591 Actual Contributions Made: Members (excluding buyback) 1,170,620 City 14,310,591 Total 15,481,211 G. Net Actuarial (Gain)/Loss (509,171) ¹ The asset values and liabilities for DROP Members include accumulated DROP Balances as of 9/30/2015 and 9/30/2014. ² Contributions developed as of as of 10/1/2015 and 10/1/2014 displayed above have been adjusted to account for 1.5 years of interest. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 10

11 H. Schedule Illustrating the Amortization of the Total Unfunded Actuarial Accrued Liability as of: Year Projected Unfunded Accrued Liability ,028, ,502, ,609, ,482, ,618, ,204, I. (i) 3 Year Comparison of Actual and Assumed Salary Increases Actual Assumed Year Ended 9/30/ % 11.38% Year Ended 9/30/ % 10.80% Year Ended 9/30/ % 10.40% (ii) 3 Year Comparison of Investment Return on Actuarial Value Actual Assumed Year Ended 9/30/ % 7.50% Year Ended 9/30/ % 7.60% Year Ended 9/30/ % 7.70% (iii) Average Annual Payroll Growth (a) Payroll as of: 10/1/2015 $16,225,216 10/1/ ,998,000 ¹ (b) Total Increase 47.53% (c) Number of Years 9.00 (d) Average Annual Rate 4.42% ¹ Payroll prior to 10/1/2006 was unavailable. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 11

12 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. Bradley R. Heinrichs, FSA, 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 Hollywood Firefighters' Pension Fund FOSTER & FOSTER 12

13 RECONCILIATION OF UNFUNDED ACTUARIAL ACCRUED LIABILITIES (1) Unfunded Actuarial Accrued Liability as of October 1, 2014 $141,129,243 (2) Sponsor Normal Cost developed as of October 1, ,786,258 (3) Expected administrative expenses for the year ended September 30, ,223 (4) Expected interest on (1), (2) and (3) 10,817,483 (5) Sponsor contributions to the System during the year ended September 30, ,310,591 (6) Expected interest on (5) 477,726 (7) Expected Unfunded Actuarial Accrued Liability as of September 30, 2015 (1)+(2)+(3)+(4)-(5)-(6) 140,579,890 (8) Change to UAAL due to Assumption Change (1,042,699) (9) Change to UAAL due to Actuarial (Gain)/Loss (509,171) (10) Unfunded Accrued Liability as of October 1, ,028,020 Type of Date Years 10/1/2015 Amortization Base Established Remaining Amount Amount Method Change 10/1/ $44,481,549 $3,604,234 Experience Gain 10/1/ (2,529,417) (197,228) Assumption Change 10/1/ ,918, ,554 Experience Loss 10/1/ ,277,086 1,224,947 Plan Amendment 10/1/ ,088, ,442 Experience Loss 10/1/ ,389,162 1,557,642 Experience Loss 10/1/ ,888, ,689 Experience Gain 10/1/ (4,701,961) (322,841) Experience Loss 10/1/ ,020,340 1,138,130 Experience Loss 10/1/ ,826,858 1,293,452 Plan Amendment 10/1/ (1,331,105) (86,838) Assumption Change 10/1/ ,032, ,551 Plan Amendment 10/1/ (30,621,195) (1,952,013) Experience Loss 10/1/ ,932, ,674 Assumption Change 10/1/ ,356, ,149 Experience Loss 10/1/ ,851, ,396 Assumption Change 10/1/ ,783, ,306 Plan Amendment 10/1/ (209,355) (12,797) Experience Loss 10/1/ ,005,103 61,439 City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 13

14 Type of Date Years 10/1/2015 Amortization Base Established Remaining Amount Amount Reconciliation Base 10/1/ (138,412) (8,301) Experience Gain 10/1/ (1,387,206) (83,193) th Check 10/1/ ,066, ,874 13th Check Assump 10/1/ ,470, ,912 Assumption Change 10/1/ ,820, ,161 Plan Amendment 10/1/ ,247 22,504 Assumption Change 10/1/ ,557, ,646 Experience Gain 10/1/ (7,643,731) (450,254) Assumption Change 10/1/ (1,042,699) (60,391) Experience Gain 10/1/ (509,171) (29,490) 139,028,020 10,188,356 City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 14

15 DETAILED ACTUARIAL (GAIN)/LOSS ANALYSIS (1) Unfunded Actuarial Accrued Liability (UAAL) as of October 1, 2014 $141,129,243 (2) Expected UAAL as of October 1, ,579,890 (3) Summary of Actuarial (Gain)/Loss, by component: Investment Return (Actuarial Asset Basis) (5,278,082) Salary Increases (67,334) Active Decrements 1,514,049 Inactive Mortality (491,318) Other ¹ 3,813,514 Increase in UAAL due to (Gain)/Loss (509,171) Assumption Changes (1,042,699) (4) Actual UAAL as of October 1, 2015 $139,028,020 ¹ Extra interest credited to DROP Members, losses associated with providing the 13th check, etc. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 15

16 ACTUARIAL ASSUMPTIONS AND METHODS Mortality Rates Healthy Lives Disabled Lives RP-2000 Combined Healthy - Sex Distinct. RP-2000 Disabled Table. Based upon other studies of municipal Firefighters, we feel this assumption sufficiently accommodates future mortality improvements. Interest Rate 7.50% per year compounded annually, net of investment related expenses. This is supported by the target asset class allocation of the trust and the expected long-term return by asset class. 13 th Check Load An underlying interest rate of 7.20% is used (0.3% lower than the assumed rate) to account for the 13 th check. Additionally, since the DROP Balances are included in the computation of the 13 th check, the resulting load on the accrued liabilities is increased by 60% to account for this. Termination Rates Disability Rates Line of Duty Incidence See table below. These rates are based on the results of an actuarial experience study issued on April 25, See table below. These rates are based on the results of an actuarial experience study issued on April 25, Death 15% in the line of duty. Disability 45% in the line of duty. Age Termination Rate During the Year Disability Rate During The Year City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 16

17 Retirement Rates For Members with 10 or more years of service as of September 30, 2011: Years of Service Age % 0.00% 5.00% 2.50% 2.50% 2.50% % For Members with less than 10 of service as of September 30, 2011: Years of Service Age % 0.00% 2.50% 2.50% 2.50% % We feel these assumptions are reasonable given current Plan provisions. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 17

18 Salary Increases Years of Service Rate % These rates are based on the results of an actuarial experience study issued on April 25, Payroll Growth Up to 3.00% per year. Administrative Expenses Equivalent to those incurred in the prior year, $489,016 for Funding Method Actuarial Asset Method 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 Hollywood Firefighters' Pension Fund FOSTER & FOSTER 18

19 VALUATION NOTES Total Annual Payroll is the projected annual rate of pay for the fiscal year beginning on the valuation date of 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. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 19

20 (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 Hollywood Firefighters' Pension Fund FOSTER & FOSTER 20

21 STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2015 ASSETS COST VALUE MARKET VALUE Cash and Cash Equivalents: Prepaid Expenses 5, , Money Market 8,086, ,086, Cash 34, , Total Cash and Equivalents 8,126, ,126, Receivables: Member Contributions in Transit 45, , Additional City Contributions 2,510, ,510, Other 112, , DROP Loan Repayments 762, , Tax Reclaims 15, , Investment Income 290, , Total Receivable 3,736, ,736, Investments: U. S. Bonds and Bills 22,233, ,732, Federal Agency Guaranteed Securities 9,772, ,810, Corporate Bonds 2,238, ,284, Stocks 82,780, ,904, Mutual Funds: Fixed Income 11,477, ,907, Equity 18,544, ,895, Pooled/Common/Commingled Funds: Equity 4,544, ,669, Timber 6,786, ,426, Real Estate 18,903, ,487, Total Investments 177,283, ,118, Total Assets 189,146, ,981, LIABILITIES Payables: Investment Expenses 264, , Administrative Expenses 5, , To Broker for Investments Purchased 1,339, ,339, Total Liabilities 1,610, ,610, NET POSITION RESTRICTED FOR PENSIONS 187,536, ,371, City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 21

22 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2015 Market Value Basis ADDITIONS Contributions: Member 1,170, City 14,310, Total Contributions 15,481, Investment Income: Miscellaneous Income 337, Net Realized Gain (Loss) 10,797, Unrealized Gain (Loss) (10,256,216.57) Net Increase in Fair Value of Investments 878, Interest & Dividends 4,372, Less Investment Expense ¹ (1,341,894.95) Net Investment Income 3,909, Total Additions 19,390, DEDUCTIONS Distributions to Members: Benefit Payments 13,936, Lump Sum DROP Distributions 4,450, Supplemental Pension (13th check) 1,775, Refunds of Member Contributions 66, Total Distributions 20,229, Administrative Expense 489, Total Deductions 20,718, Net Increase in Net Position (1,327,565.93) NET POSITION RESTRICTED FOR PENSIONS Beginning of the Year 202,698, End of the Year 201,371, ¹ Investment related expenses include investment advisory, custodial and performance monitoring fees. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 22

23 CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS SEPTEMBER 30, 2015 Actuarial Asset Basis REVENUES Contributions: Member 1,170, City 14,310, Total Contributions 15,481, Earnings from Investments: Interest & Dividends 4,372, Miscellaneous Income 337, Net Realized Gain (Loss) 10,797, Change in Actuarial Value 4,854, Total Earnings and Investment Gains 20,362, EXPENDITURES Distributions to Members: Benefit Payments 13,936, Lump Sum DROP Distributions 4,450, Supplemental Pension (13th check) 1,775, Refunds of Member Contributions 66, Total Distributions 20,229, Expenses: Investment related ¹ 1,341, Administrative 489, Total Expenses 1,830, Change in Net Assets for the Year 13,783, Net Assets Beginning of the Year 185,376, Net Assets End of the Year ² 199,159, ¹ Investment related expenses include investment advisory, custodial and performance monitoring fees. ² Net Assets may be limited for actuarial consideration. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 23

24 ACTUARIAL ASSET VALUATION September 30, 2015 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 90% nor greater than 110% of Market Value of Assets. Gains/(Losses) Not Yet Recognized Plan Year Amounts Not Yet Recognized by Valuation Year Ending Gain/(Loss) /30/2011 (1,115,217) /30/ ,016,384 2,803, /30/ ,239,285 4,895,714 2,447, /30/2014 5,744,760 3,446,856 2,297,904 1,148, /30/2015 (11,166,962) (8,933,570) (6,700,177) (4,466,785) (2,233,392) 0 Total 2,212,277 (1,954,416) (3,317,833) (2,233,392) 0 Development of Investment Gain/(Loss) Market Value of Assets, including Prepaid Contrib, 09/30/ ,637,967 Contributions Less Benefit Payments & Expenses (5,237,062) Expected Investment Earnings ¹ 15,076,458 Actual Investment Earnings 3,909, Actuarial Investment Gain/(Loss) (11,166,962) ¹ Expected Investment Earnings = * [203,637, * (5,237,062)] Development of Actuarial Value of Assets (1) Market Value of Assets, 09/30/ ,371,356 (2) Gains/(Losses) Not Yet Recognized 2,212,277 (3) Actuarial Value of Assets, 09/30/2015, (1) - (2) 199,159,079 (A) 09/30/2014 Actuarial Assets, including Prepaid Contribs: 186,315,077 (I) Investment Income: 1. Interest, Dividends and Misc Income 4,710, Realized Gains (Losses) 10,797, Change in Actuarial Value 4,854, Investment Related Expenses (1,341,895) Total 19,020,109 (B) 09/30/2015 Actuarial Assets, including Prepaid Contribs: 199,159,079 Actuarial Asset Rate of Return = 2I/(A+B-I): 10.38% Market Value of Assets Rate of Return: 1.92% Actuarial Gain/(Loss) due to Investment Return (Actuarial Asset Basis) 5,278,082 10/01/2015 Limited Actuarial Assets, less Prepaid Contributions: 199,159,079 City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 24

25 DEFERRED RETIREMENT OPTION PLAN ACTIVITY October 1, 2014 to September 30, /30/2014 Balance 78,546, Plus Additions 1,605, Investment Return Earned 5,861, Less Distributions (4,123,439.36) 09/30/2015 Balance 81,889, City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 25

26 RECONCILIATION OF CITY'S SHORTFALL/(PREPAID) CONTRIBUTION FOR THE FISCAL YEAR ENDED (FYE) SEPTEMBER 30, 2015 (1) Required City and State Contributions $14,310, (2) Less Allowable State Contribution 0.00 (3) Required City Contribution for Fiscal ,310, (4) Less 2014 Prepaid Contribution (939,045.00) (5) Less Actual City Contributions (10,861,261.00) (6) Equals City's Shortfall/(Prepaid) Contribution as of $2,510, September 30, 2015 City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 26

27 STATISTICAL DATA 10/1/ /1/ /1/ /1/2015 Actives Number Average Current Age Average Age at Employment Average Past Service Average Annual Salary $66,058 $78,915 $82,708 $85,396 Service Retirees Number Average Current Age N/A N/A N/A 64.7 Average Annual Benefit N/A $68,633 $69,588 $71,449 DROP Retirees Number Average Current Age N/A N/A N/A 54.5 Average Annual Benefit N/A $70,605 $71,022 $69,777 Beneficiaries Number Average Current Age N/A N/A N/A 73.2 Average Annual Benefit N/A $19,986 $20,645 $21,887 Disability Retirees Number Average Current Age N/A N/A N/A 61.2 Average Annual Benefit $43,086 $45,494 $46,055 $47,763 Terminated Vested Number Average Current Age N/A N/A N/A 35.2 Average Annual Benefit ¹ $52,136 $53,179 $55,452 $55,452 ¹ Excludes terminated vested awaiting a refund of contributions. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 27

28 AGE AND SERVICE DISTRIBUTION PAST SERVICE AGE Total Total City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 28

29 VALUATION PARTICIPANT RECONCILIATION 1. Active lives a. Number in prior valuation 10/1/ b. Terminations i. Vested (partial or full) with deferred benefits (3) ii. Non-vested or full lump sum distribution received (4) c. Deaths i. Beneficiary receiving benefits 0 ii. No future benefits payable 0 d. Disabled (1) e. Retired (1) f. DROP 0 g. Continuing participants 179 h. New entrants 11 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 4 (3) DROP Vested Deferred Death, With Survivor (1) Death, No Survivor (2) 0 (4) 0 0 (6) Disabled Refund of Contributions (1) (1) Rehires Expired Annuities Data Corrections b. Number current valuation City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 29

30 SUMMARY OF PLAN PROVISIONS (Through Ord. No. O with pending provisions from April 20, 2016 actuarial impact statement) LATEST AMENDMENT June 3, ELIGIBILITY CREDITED SERVICE Full-time employees who are classified as full-time Firefighters shall participate in the System as a condition of employment. Total years and fractional parts of years of employment with the City as a Firefighter with Member contributions (computed in quarters with one to three months being one-quarter, more than three but not more than six months being one-half of a year, more than six but not more than nine months being three-quarters of a year, and more than nine but not more than twelve months being one years as a Firefighter). TIER 1 MEMBER Hired prior to July 16, TIER 2 MEMBER Hired on or after July 16, COMPENSATION For Compensation earned prior to October 1, 2011: Fixed remuneration for services rendered to the City as a Firefighter, including accrued sick leave compensation up to 2,200 hours. Compensation for Tier 1 Members shall include workers compensation/supplemental compensation, expense allowances, cash conversion of holiday benefits, up to 300 hours of overtime, 70% of the cash payment accumulated, unused annual leave paid at the time of retirement or entry into DROP, expense allowances, and education incentive payment from the Insurance Commissioner s Trust Fund. For Compensation earned after October 1, 2011: Fixed remuneration for services rendered to the City as a Firefighter, including only wages and education incentive payment from the Insurance Commissioner s Trust Fund and excluding overtime, workers compensation/supplemental compensation, expense allowances, cash conversion of holiday benefits, accrued leave payouts and cash conversion of blood time and compensatory time. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 30

31 AVERAGE FINAL COMPENSATION (AFC) Benefits accrued prior to October 1, 2011 Tier 1 Members: Tier 2 Members: Benefits accrued on and after October 1, 2011 Average compensation of the three highest years of Credited Service. Average compensation of the five highest years of Credited Service. Average compensation of the 60 highest consecutive months of the last 120 months of Credited Service. MEMBER CONTRIBUTIONS Tier 1 Members: Tier 2 Members: 8.00% of compensation. Once Member has accrued the maximum benefit of 86% of AFC, their contribution percentage reduces to 0.50% of compensation. 7.50% of compensation. Once Member has accrued the maximum benefit of 82.50% of AFC, their contribution percentage reduces to 0.50% of compensation. Notwithstanding the above, all Members hired on or after October 1, 2011 will contribute 7.50% of compensation. NORMAL RETIREMENT Date Tier 1 Members: Less than 10 years of Credited Service as of September 30, 2011: Earlier of 1) Age 55 with 10 years of Credited Service, or 2) 25 years of Credited Service. 10 or more years of Credited Service as of September 30, 2011: Earlier of 1) Age 50 with 10 years of Credited Service, or 2) 23 Years of Credited Service, regardless of Age. Tier 2 Members: Earlier of 1) Age 55 with 10 years of Credited Service, or 2) 25 years of Credited Service. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 31

32 Benefit Amount For benefits accrued prior to October 1, 2011 ( Frozen piece): Tier 1 Members: Tier 2 Members: 3.30% of Average Final Compensation times Credited Service. Maximum benefit of 86% of Average Final Compensation. 3.20% of Average Final Compensation times Credited Service. Maximum benefit of 82.50% of Average Final Compensation. For benefits accrued on and after October 1, 2011 ( Future service piece): Form of Benefit Tier 1 Members: Tier 2 Members: 3.00% of Average Final Compensation times Credited Service. Maximum benefit of 86% less 3.30% times the Credited Service accrued through September 30, % of Average Final Compensation times Credited Service. Maximum benefit of 73.60% of Average Final Compensation. For unmarried Members, Ten Year Certain and Life Annuity. For married Members, 50% Joint and Survivor annuity with Ten Years Certain. COST OF LIVING INCREASES Frozen Piece Future Service Piece Retirees receive a 2.00% per year cost-of-living adjustment commencing three years after retiree s benefit payments have begun. None. VESTING Schedule Benefit Amount 100% after 10 years of Credited Service. Member will receive the vested portion of his (her) accrued benefit payable at age 50 if the Member has at least 10 years of service as of September 30, Otherwise, the benefit is payable at age 55. DISABILITY Eligibility Service Incurred Non-Service Incurred Covered from Date of Employment. 5 years of Credited Service. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 32

33 Benefit Service Incurred Non-Service Incurred Form of Payment 75% of compensation at the time of disability. The benefit will be offset by any worker s compensation, pension, or similar benefit payable to the Member or to his dependents. 25% of earnings at the time of determination of disability. The benefit will be offset by any worker s compensation, pension, or similar benefit payable to the Member or to his dependents. Upon attainment of normal retirement age, the benefit will be recomputed as a normal retirement benefit with service included for the period of time that the member was receiving a disability retirement benefit. 10 Year Certain and Life annuity, with a 100% survivor annuity payable to the spouse until death or remarriage (in the case of a member who dies prior to age 50 while receiving a non-service connected disability) or with a 50% survivor annuity payable to the spouse until death or remarriage (for all other members). DEATH BENEFITS Service Connected Non-service Connected 50% of compensation at the date of death payable as a monthly life and 10 years certain benefit to the spouse until death or remarriage. For Members with five years of service, greater of accrued benefit or 25% of compensation at the date of death payable as a monthly life and 10 years certain benefit to the spouse until death or remarriage. DEFERRED RETIREMENT OPTION PLAN Eligibility Participation Rate of Return Form of Distribution Only those Members were eligible to retire as of September 30, There is no DROP for other Members. Not to exceed 96 months, but pre-drop service plus DROP service cannot exceed 33 years. 6.00% for Tier 1 employees. 4.00% for Tier 2 employees. Cash lump sum (options available) at termination of employment. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 33

34 GASB 67 STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2015 ASSETS Cash and Cash Equivalents: Prepaid Expenses Money Market Cash Total Cash and Equivalents Receivables: Member Contributions in Transit Additional City Contributions Other DROP Loan Repayments Tax Reclaims Investment Income Total Receivable Investments: U. S. Bonds and Bills Federal Agency Guaranteed Securities Corporate Bonds Stocks Mutual Funds: Fixed Income Equity Pooled/Common/Commingled Funds: Equity Timber Real Estate Total Investments Total Assets LIABILITIES Payables: Investment Expenses Administrative Expenses To Broker for Investments Purchased Total Liabilities NET POSITION RESTRICTED FOR PENSIONS MARKET VALUE 5,881 8,086,500 34,346 8,126,727 45,694 2,510,285 3, ,682 15, ,223 3,627,864 22,732,140 9,810,464 2,284,716 87,904,478 9,907,902 22,895,052 4,669,176 7,426,598 23,487, ,118, ,873, ,897 5,326 1,339,830 1,610, ,262,985 City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 34

35 GASB 67 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2015 Market Value Basis ADDITIONS Contributions: Member 1,170,620 City 14,310,591 Total Contributions 15,481,211 Investment Income: Net Increase in Fair Value of Investments 878,758 Interest & Dividends 4,372,634 Less Investment Expense ¹ (1,341,895) Net Investment Income 3,909,497 Total Additions 19,390,708 DEDUCTIONS Distributions to Members: Benefit Payments 13,936,577 Lump Sum DROP Distributions 4,450,101 Lump Sum DROP Loans 0 Supplemental Pension (13th check) 1,775,819 Refunds of Member Contributions 66,761 Total Distributions 20,229,258 Administrative Expense 489,016 Total Deductions 20,718,274 Net Increase in Net Position (1,327,566) NET POSITION RESTRICTED FOR PENSIONS Beginning of the Year 202,590,551 End of the Year 201,262,985 ¹ Investment related expenses include investment advisory, custodial and performance monitoring fees. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 35

36 GASB 67 NOTES TO THE FINANCIAL STATEMENTS (For the Year Ended September 30, 2015) Plan Description Plan Administration The Plan is a single-employer defined benefit pension plan administered by the Plan's Board of Trustees comprised of: five members: the Fire Chief, a person appointed by the City Commission, and three regularly employed firefighters. The Fire Chief will serve as long as he holds office as chief. The City Commission's appointment shall act as the Chairman of the Board and shall serve as a two-year term. The three firefighters will be chosen by the legislative body of the City of Hollywood upon recommendation of a majority of the regularly employed city firefighters. Each firefighter trustee shall serve for a full period of three years and may hold successive terms of office. Plan Membership as of October 1, 2014: Inactive Plan Members or Beneficiaries Currently Receiving Benefits 254 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 9 Active Plan Members Benefits Provided The Plan provides retirement, termination, disability and death benefits. Tier 1 Members: Hired prior to July 16, Tier 2 Members: Hired on or after July 16, Normal Retirement: Date Tier 1 Members: Less than 10 years of Credited Service as of 9/30/2011: Earlier of 1) Age 55 with 10 years of Credited Service, or 2) 25 years of Credited Service. 10 or more years of Credited Service as of September 30, 2011: Earlier of 1) Age 50 with 10 years of Credited Service, or 2) 23 Years of Credited Service, regardless of Age. Date Tier 2 Members: Earlier of 1) Age 55 with 10 years of Credited Service, or 2) 25 years of Credited Service. Benefit Amount for benefits accrued prior to October 1, 2011 ("Frozen" piece): Tier 1 Members: 3.30% of Average Final Compensation times Credited Service. Maximum benefit of 86% of Average Final Compensation. Tier 2 Members: 3.20% of Average Final Compensation times Credited Service. Maximum benefit of 82.50% of Average Final Compensation. Benefit Amount for benefits accrued on and after October 1, 2011 ("Future service" piece): Tier 1 Members: 3.00% of Average Final Compensation times Credited Service. Maximum benefit of 86% less 3.30% times the Credited Service accrued through 9/30/2011. Tier 2 Members: 3.00% of Average Final Compensation times Credited Service. Maximum benefit of 73.60% of Average Final Compensation. Cost of Living Increases: Frozen Piece: Retirees receive a 2.0% per year cost-of-living adjustment commencing three years after retiree s benefit payments have begun. Future Service Piece: None. Vesting: Schedule: 100% after 10 years of Credited Service. Benefit: Member will receive the vested portion of his (her) accrued benefit payable at age 50 if the Member has at least 10 years of service as of 9/30/11. Otherwise, the benefit is payable at age 55. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 36

37 GASB 67 Disability: Eligibility Service Incurred: Covered from Date of Employment. Eligibility Non-Service Incurred: 5 years of Credited Service. Benefit: Service Incurred 75% of compensation at the time of disability. The benefit will be offset by any worker s compensation, pension, or similar benefit payable to the Member or to his dependants. Non-Service Incurred 25% of earnings at the time of determination of disability. The benefit will be offset by any worker s compensation, pension, or similar benefit payable to the Member or to his dependants. Upon attainment of normal retirement age, the benefit will be recomputed as a normal retirement benefit with service included for the period of time that the member was receiving a disability retirement benefit. Death Benefits: Service Connected: 50% of compensation at the date of death payable as a monthly life and 10 years certain benefit to the spouse until death or remarriage. Non-service Connected: For Members with five years of service, greater of accrued benefit or 25% of compensation at the date of death payable as a monthly life and 10 years certain benefit to the spouse until death or remarriage. Contributions Tier 1 Member Contributions: 8.00% of compensation. Once Member has accrued the maximum benefit of 86% of AFC, their contribution percentage reduces to 0.50% of compensation. Tier 2 Member Contributions: 7.50% of compensation. Once Member has accrued the maximum benefit of 82.50% of AFC, their contribution percentage reduces to 0.50% of compensation. Notwithstanding the above, all Members hired on or after October 1, 2011 will contribute 7.50% of compensation. City and State Contribution: Remaining amount required in order to pay current costs and amortize unfunded past service cost, if any, as provided in Chapter 112, Florida Statutes. Investments Investment Policy: The following was the Board's adopted asset allocation policy as of September 30, 2015: Asset Class Target Allocation Domestic Equity 40% International Equity 15% Core Fixed Income 15% Non Core Fixed Income 10% Real Estate 10% Timber 5% Alternative 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, 2015, the annual money-weighted rate of return on Pension Plan investments, net of Pension Plan investment expense, was 1.92 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: Only those Members were eligible to retire as of September 30, There is no DROP for other Members. Participation: Not to exceed 96 months, but pre-drop service plus DROP service cannot exceed 33 years. Rate of Return: 6.0% for Tier 1 employees. 4.0% for Tier 2 employees. The DROP balance as September 30, 2015 is $81,781,568. City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 37

38 GASB 67 NET PENSION LIABILITY OF THE SPONSOR The components of the Net Pension Liability of the Sponsor on September 30, 2015 were as follows: Total Pension Liability $ 332,103,588 Plan Fiduciary Net Position $ (201,262,985) Sponsor's Net Pension Liability $ 130,840,603 Plan Fiduciary Net Position as a percentage of Total Pension Liability 60.60% Actuarial Assumptions: The Total Pension Liability was determined by an actuarial valuation as of October 1, 2014 updated to September 30, 2015 using the following actuarial assumptions: Inflation 3.00% Salary Increases Service Based Discount Rate 7.50% Investment Rate of Return 7.50% Healthy Lives: RP-2000 Combined Healthy - Sex Distinct. Disabled lives set forward 5 years. Based upon other studies of municipal Firefighters, we feel this assumption sufficiently accommodates future mortality improvements. Disabled Lives: RP-2000 Disabled Table. The actuarial assumptions used in the October 1, 2014 valuation were based on the results of a September 8, 2011 Experience Study performed by Cavanaugh Macdonald. The Long-Term Expected Rate of Return on Pension Plan investments was determined using a building-block method in which bestestimate 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. 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 arithmetic real rates of return for each major asset class included in the Pension Plan's target asset allocation as of September 30, 2015 are summarized in the following table: Asset Class Domestic Equity International Equity Core Fixed Income Non Core Fixed Income Real Estate Timber Alternative Discount Rate: Long Term Expected Real Rate of Return 7.5% 8.5% 2.5% 2.5% 4.5% 2.5% 2.5% The Discount Rate used to measure the Total Pension Liability was 7.50 percent. The projection of cash flows used to determine the Discount Rate assumed that Plan Member contributions will be made at the current contribution rate and that Sponsor contributions will be made at rates equal to the difference between actuarially determined contribution rates and the Member rate. Based on those assumptions, the Pension Plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the Long-Term Expected Rate of Return on Pension Plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. 1% Decrease Current Discount Rate 1% Increase 6.50% 7.50% 8.50% Sponsor's Net Pension Liability $ 158,218,297 $ 130,840,603 $ 109,033,281 City of Hollywood Firefighters' Pension Fund FOSTER & FOSTER 38