Jackson County State of Michigan. Amended and Restated Comprehensive Financial Plan For Pension and Other Post-Employment Benefits

Transcription

1 Jackson County State of Michigan Amended and Restated Comprehensive Financial Plan For Pension and Other Post-Employment Benefits October 17, 2017

2 T A B L E O F C O N T E N T S Section Pages Comprehensive Financial Plan - Pension Plans 2 - Post-employment Heath Plans 4 - Bond Issuance Considerations 8 - Plan Compliance 11 - Certification 12 Appendices: I Appendix A: Analysis of Current and Future Retirement Program Obligations of Jackson County A1: December 31, 2016 Actuarial Report received from GRS A2: Jackson County Employees Retirement System General County and Department of Transportation Supplemental Valuation II III IV Appendix B: Analysis of Current and Future Post Employment Healthcare Benefit Obligations of Jackson County Actuarial Valuation as of January 1, 2016 Appendix C: Evidence that the Pension Obligation Bonds will Eliminate the Unfunded Pension Liability for the Employees Defined Benefit Plan Appendix D: Debt Service Amortization Schedule V Appendix E: Evidence of Rating VI Appendix F: Comparisons of the Annual Unfunded Actuarial Accrued Liability Amortization to Estimated Bond Payments at Various Rates of Return

3 Amended and Restated Comprehensive Financial Plan This Amended and Restated Comprehensive Financial Plan (this Plan ) is being prepared pursuant to Act 34, Public Acts of Michigan, 2001, as amended ( Act 34 ) In accordance with Act 34, Jackson County (the County ) has chosen to issue bonds to finance all or a portion of the County s unfunded pension liability, as further described in this Plan The County qualifies to issue such bonds as the County meets the minimum bond rating requirement of Act 34 and the County s defined benefit pension plan for all employees (with the exception of the Medical Care Facility division) was closed to new employees as of various dates ranging from 2007 through 2017 The County has established a defined contribution plan for employees not eligible to participate in the defined benefit plan, and has the legal debt capacity to issue bonds in the required amount The County s outstanding limited tax general obligation bond rating of Aa2 from Moody s Investors Service was affirmed on April 18, 2017 in association with the County s Capital Improvement Bonds, Series 2017B A copy of the rating rationale is included in Appendix E herein The County will have the rating reassigned as a part of the bond issuance process for the General Obligation Limited Tax Pension Obligation Bonds ( POBs ) below: As noted above, the County has the legal debt capacity to issue the POBs, as computed LEGAL DEBT MARGIN July 31, State Equalized Value (SEV) $5,327,136,241 Legal Debt Limit - 10% of SEV $532,713,624 Total Bonded Debt Outstanding $92,810,000 LEGAL DEBT MARGIN AVAILABLE $439,903,624 Proposed Amount of Pension Bonds $68,000,000 Share of Legal Debt Margin Available After Pension Bonds 6981% Est Legal Debt Margin Available After Pension Bonds $371,903,624 Source: Jackson County Equalization Department and Municipal Advisory Council of Michigan The County proposes to issue bonds in the amount not to exceed $68,000,000 to fund its unfunded pension liability (also referred to herein as its unfunded actuarial accrued liability or its UAAL), which is well within the County s legal debt capacity, leaving over 69% of the County s current bonding capacity remaining Jackson County - Comprehensive Financial Plan 1

4 Pension Plans Jackson County administers the Jackson County Employees' Retirement System, (the Defined Benefit Plan ), a single-employer defined benefit plan provided by the authority of section 12a of Act No 156 of the Public Acts of 1851, which was adopted and established by the County in accordance with Michigan Compiled Laws Section 4612a The Defined Benefit Plan is included as a pension trust fund in the County's financial statements Employer and employee contributions and benefit provisions are authorized and may be amended by County Board of Commissioners resolution and benefits may vary pursuant to collective bargaining agreements Upon retirement, the Defined Benefit Plan pays a benefit percentage (depending on group), calculated using the percentage of final average compensation times years of credited service Defined Benefit Plan As of December 31, 2016, the date of the most recent actuarial valuation, membership in the Defined Benefit Plan consisted of 1,427 members as follows: 550 active employees 108 vested former members 769 retirees and beneficiaries currently receiving benefits As of December 31, 2016, the most recent actuarial valuation date, the Defined Benefit Plan was 740% funded As of December 31, 2015 and December 31, 2014, the Defined Benefit Plan funded percentage was 727% and 726%, respectively The increase in funding percentage from 2014 to 2016 is primarily attributable to recognized gains since the prior valuation As of December 31, 2016, the actuarial accrued liability for benefits for the Defined Benefit Plan was $207,591,278 and the actuarial value of assets was $153,601,282, resulting in an unfunded pension liability of $53,989,996 for the Defined Benefit Plan The covered payroll (annual payroll for active employees covered by the Defined Benefit Plan) was $25,475,000 and the ratio for the unfunded actuarial accrued liability to the covered payroll was 2119% Further detail on the County s historical pension funding is provided below Historical Pension Funding (in 000's) Actuarial Valuation Date Actuarial Value of Assets Actuarial Accrued Liability (AAL) Unfunded AAL Funded Ratio Covered Payroll UAAL as % of Covered Payroll 12/31/2007 $144,465 $140,898 ($3,567) 1025% $32, % 12/31/ , ,517 7, % 32, % 12/31/ , ,937 17, % 31, % 12/31/2010* 132, ,320 27, % 29, % 12/31/ , ,396 41, % 27, % 12/31/2012* 129, ,544 53, % 27, % 12/31/2013* 136, ,458 53, % 26, % 12/31/2014* 141, ,476 53, % 25, % 12/31/ , ,070 55, % 26, % 12/31/ , ,591 53, % 25, % * After changes in benefit provision and/or actuarial assumptions Source: Jackson County Employees' Retirement System Annual Actuarial Valuation as of December 31, 2016 Jackson County - Comprehensive Financial Plan 2

5 The Defined Benefit Plan is comprised of three divisions One of the divisions, the Medical Care division, has a negative UAAL The Defined Benefit Plan for the Medical Care division remains open As such the County is only bonding to fund that portion of the UAAL attributable to the General County and Department of Transportation divisions The table below provides a determination of the County s UAAL by Defined Benefit Plan division Determination of Unfunded Accrued Liabilities General County Dept of Transp Total General & Transp Medical Care Total Accrued Liabilities $155,057,507 $32,262,706 $187,320,213 $20,271,065 $207,591,278 Assets (Actuarial Value) 95,878,517 24,300, ,179,400 33,421, ,601,282 Unfunded Accrued Liability $59,178,990 $7,961,823 $67,140,813 ($13,150,817) $53,989,996 By combining the General County division and the Department of Transportation division, the above table shows that the County s UAAL for the two divisions that are to be funded is $67,140,813 as of the December 31, 2016 valuation date The main actuarial assumptions used in determining the actuarial valuation of the County s Defined Benefit Plan as of December 31, 2016 included: Individual Entry Age Actuarial Cost Method 75% assumed investment rate of return A 4 year smoothing of investment returns Projected salary increases of 40% to 80% For the fiscal year ended December 31, 2009, the County contributed $1,964,353 to the Defined Benefit Plan The annual required contribution as of the December 31, 2016 valuation date was $6,600,837 as shown below Actuarial Valuation Date Defined Benefit Contributions Annual Required Contribution Payment / Fiscal Year Ended Annual Contribution Percentage of ARC Contributed 12/31/ /31/2009 * $1,964,353 N/A 12/31/ /31/2010 * 2,341,599 N/A 12/31/ /31/2011 * 2,666,057 N/A 12/31/ /31/2012 * 3,022,371 N/A 12/31/ /31/2013 $5,699,327 5,699, % 12/31/ /31/2014 5,855,877 5,855, % 12/31/ /31/2015 6,049,033 6,049, % 12/31/ /31/2016 6,250,395 6,250, % 12/31/ /31/2017 6,636,508 N/A N/A 12/31/ /31/2018 6,600,837 N/A N/A * Amounts not supplied by prior actuary Source: Jackson County Employees Retirement System Annual Actuarial Valuation as of December 31, 2016 Jackson County - Comprehensive Financial Plan 3

6 Defined Contribution Plan Effective January 1, 2008, the County established a defined contribution plan administered by the Municipal Employees Retirement System of Michigan for substantially all new full time employees with fully vested service after 5 years of service In a defined contribution plan, benefits depend solely on amounts contributed to the plan, plus investment earnings Employer contributions are a minimum of 1% of eligible compensation and potential matching of 5% of the employees contribution The employees are required to contribute a minimum of 1% of eligible compensation up to a maximum of 12%, with a potential matching of up to 5% of the employee s contributions Plan provisions and contribution requirements are established and may be amended by the County Board of Commissioners For the year ended December 31, 2016, the County and employees contributed $404,059 and $488,565 respectively, to this plan Post-Employment Health Benefit Plans The County provides health insurance benefits for its retired employees and medical care facility employees retired prior to 1988 Substantially all of the County s employees may become eligible for this benefit if they reach normal retirement age while working for the County The medical care facility retirees are covered under a separate plan The County's General Fund and Retiree Health Insurance Fund covers the cost of other postemployment benefits (County OPEB) for all other eligible employees Health insurance benefits are accounted for in the self-funded managed care insurance fund County General As of January 1, 2016, the date of the most recent actuarial valuation, the healthcare plan had 545 retirees and 559 active plan members The County funds the post-employment health care on a pay as you go basis The healthcare plan had an unfunded accrued liability of $117,277,316 as of December 31, 2015 The covered payroll (annual payroll for active employees covered by the plan) was $24,450,728 and the ratio for the unfunded actuarial accrued liability to the covered payroll was 480% A table of the historical County OPEB funding is provided below: Actuarial Valuation Date Actuarial Value of Assets Historical OPEB Funding - General County Actuarial Accrued Liability (AAL) Unfunded AAL Funded Ratio Covered Payroll UAAL as % of Covered Payroll 12/31/2010 $2,480,920 $67,732,142 $65,251,222 37% $19,916, % 12/31/2013 1,563, ,468, ,904,728 11% 19,247, % 12/31/ ,277, ,277,316 00% 24,450, % Source: Jackson County Comprehensive Annual Financial Report for the Year Ended December 31, 2016 Jackson County - Comprehensive Financial Plan 4

7 The main actuarial assumptions used in determining the actuarial valuation as of December 31, 2015 included: The projected unit credit level dollar method A 3% investment rate of return Projected salary increases of 4% attributable to inflation Projected healthcare benefit increases of 8% downgraded to 4% over 8 years A 5 year smoothing of investment returns The annual County OPEB cost and net County OPEB obligation for the fiscal year ending December 31, 2016 was as follows: Annual County OPEB Cost and Net County OPEB Obligation Annual required contribution $8,792,893 Interest on net OPEB obligation 469,670 Adjustment to annual required contribution (465,494) Annual OPEB Cost $8,797,069 Contributions made (5,180,196) Change in Net OPEB obligation $3,616,873 Net OPEB obligation, beginning of year 15,655,683 Net OPEB obligation, end of year $19,272,556 Source: Jackson County Comprehensive Annual Financial Report for the Year Ended December 31, 2016 The following table shows the County OPEB contribution and funding progress over the past nine years Year Ended December 31 County OPEB Contributions Annual OPEB Cost Percentage of OPEB Cost Contributed Net Asset (Obligation) 2008 $5,438,229 79% $1,894, ,182,631 86% 3,279, ,919, % 3,168, ,012,415 88% 3,777, ,581, % 3,599, ,706,625 74% 6,816, ,729,746 56% 10,204, ,586,063 37% 15,655, ,797,069 59% 19,272,556 Source: Jackson County Comprehensive Annual Financial Reports for the Years Ended December 31, 2011 through December 31, 2016 At the current time, the County anticipates continuing to use a pay as you go basis for funding its annual County OPEB costs Jackson County - Comprehensive Financial Plan 5

8 Medical Care Facility The medical care facility provides certain retiree health benefits as other postemployment benefits (Medical Care Facility OPEB) to the applicable eligible employees upon retirement based on their date of hire and years of service as described in the plan Employees are eligible for the health insurance benefits with the premiums being paid by the medical care facility The medical care facility s current policy is to finance these benefits on a pay as you go basis As of December 31, 2015, the date of the most recent actuarial valuation, the medical care facility plan had 278 retired participants and 118 active plan members The plan has an unfunded actuarial accrued liability of $10,191,510 The covered payroll for active employees covered by the plan was $9,083,584, and the ratio for the unfunded actuarial accrued liability to the covered payroll was 112% A table of the historical Medical Care Facility OPEB funding is provided below: Actuarial Valuation Date Actuarial Value of Assets Historical OPEB Funding Medical Care Facility Actuarial Accrued Liability (AAL) Unfunded AAL Funded Ratio Covered Payroll UAAL as % of Covered Payroll 12/31/2008 $0 $6,347,659 $6,347,659 00% $7,623, % 12/31/ ,772,447 8,772,447 00% 8,448, % 12/31/ ,191,510 10,191,510 00% 9,083, % The main assumptions used in determining the actuarial valuation as of December 31, 2015 included: The projected unit credit level dollar method A 5% investment rate of return Projected salary increases of 4% attributable to inflation Projected healthcare benefit increases of 8% downgraded to 4% over 8 years The annual Medical Care Facility OPEB cost and net Medical Care Facility OPEB obligation for the fiscal year ending December 31, 2016 was as follows: Annual County OPEB Cost and Net County OPEB Obligation Annual required contribution $964,579 Interest on net OPEB obligation 130,688 Adjustment to annual required contribution (72,604) Annual OPEB Cost $1,022,663 Contributions made (401,208) Change in Net OPEB obligation $621,455 Net OPEB obligation, beginning of year 2,613,753 Net OPEB obligation, end of year $3,235,208 Source: Jackson County Comprehensive Annual Financial Report for the Year Ended December 31, 2016 Jackson County - Comprehensive Financial Plan 6

9 The following table shows the Medical Care Facility OPEB contribution and funding progress over the past three years Historical OPEB Cost- Medical Care Facility % of Annual Years Ended Annual OPEB Cost OPEB Cost Contributed Net OPEB Obligation 12/31/2014 $893, % $2,380,587 12/31/2015 1,018, % 2,613,753 12/31/2016 1,022, % 3,235,208 Source: Jackson County Comprehensive Annual Financial Report for the Year Ended December 31, 2016 The County has taken steps to reduce its County and Medical Care Facility OPEB costs Non-union employees hired after December 31, 2006 are eligible for Retirement Savings Accounts where, currently, the County contributes $1,850 per year and the employee contributes $800 per year For most unions, the Retirement Savings Accounts were effective for employees hired after December 31, 2012 Cost Containment Measures The County has taken the following steps to reduce its pension and OPEB costs Defined Benefit Plan has been closed to General County and Department of Transportation new hires Post-employment health care benefits for non-union employees hired after December 31, 2006, as well as most other union employees hired after December 31, 2012, are provided through Retiree Savings Accounts, with the County currently contributing $1,850 per year The County is currently contemplating retiree health care plan benefit changes for active employees and pre-65 retirees Jackson County - Comprehensive Financial Plan 7

10 Bond Issuance Considerations The County intends to issue bonds as authorized by Act 34 to fund the unfunded pension liability for its Defined Benefit Plan Given the near historic low interest rates, as shown on the graph below, the County anticipates receiving favorable interest rates for the pension obligation bonds it intends to issue 1000% Historical Taxable and Tax Exempt Interest Rates % 800% 700% 600% 500% 400% 300% 200% 100% 000% Treasury 10 yr AAA GO 10 yr The County understands that the value of assets and liabilities may change depending on market conditions and actuarial experiences differing from projections The County further recognizes that such changes may result in additional required contributions to the Defined Benefit Plan The County also acknowledges that such changes could result in the Defined Benefit Plan becoming overfunded The annual required contribution that the County makes for its Defined Benefit Plan is comprised of two parts, the unfunded actuarial accrued liability and the normal cost component The unfunded actuarial accrued liability is the portion of the pension liability that is not funded, while the normal cost is the cost of future benefits earned by employees in the current year Under Act 34, only the unfunded actuarial accrued liability and costs of issuance may be financed with proceeds of pension obligation bonds The County is expecting to issue pension obligation bonds for its unfunded actuarial accrued liability as of the most recent available actuarially determined UAAL using the December 31, 2016 valuation for the two noted divisions of its Defined Benefit Plan in the amount of $67,140,813 Below is a breakdown of the estimated sources and uses of funds for the pension obligation bonds The bond proceeds will fully fund the County s revised unfunded actuarial accrued liability based on its December 31, 2016 values for the General County and Department of Transportation divisions for its Defined Benefit Plan Jackson County - Comprehensive Financial Plan 8

11 Estimated Sources and Uses Sources Bond Par Amount $68,000,000 Total Sources $68,000,000 Uses Pension Fund Deposit $67,140,813 Costs of Issuance (Including Underwriter's Discount) $859,187 Total Uses $68,000,000 Provided below is a comparison of the annual unfunded actuarial accrued liability amortization payment for the unfunded accrued liability for the General County and Department of Transportation Divisions based on a 75% rate of return assumption, provided by Gabriel Roeder Smith & Company, to the estimated bond payments The normal cost is not included in the analysis below, but the County is required to pay the amounts with or without the pre-funding of its UAAL According to the July 10, 2016 supplemental report, the County s normal cost for the General County and Department of Transportation divisions for fiscal year end 2018 is $1,044,508 Fiscal Year Ending 12/31 UAL Payment (a) Market Rates - 750% Discount Rate Estimated Bond Payments (b) Difference Present 395% (c) 2018 $5,751,688 $4,213,565 $1,538,123 $1,481, ,751,688 4,274,697 1,476,992 1,367, ,751,688 4,273,220 1,478,469 1,316, ,751,688 4,271,447 1,480,241 1,267, ,751,688 4,274,287 1,477,401 1,216, ,751,688 4,277,905 1,473,784 1,167, ,751,688 4,271,394 1,480,295 1,127, ,751,688 4,270,338 1,481,351 1,085, ,751,688 4,269,938 1,481,751 1,043, ,751,688 4,270,343 1,481,346 1,003, ,751,688 4,271,263 1,480, , ,751,688 4,271,638 1,480, , ,751,688 4,273,638 1,478, , ,751,688 4,272,075 1,479, , ,751,688 4,271,950 1,479, , ,751,688 4,273,075 1,478, , ,751,688 4,268,938 1,482, , ,751,688 4,270,433 1,481, , ,751,688 4,272,165 1,479, , ,751,688 4,268,934 1,482, , ,751,688 4,270,740 1,480, , ,751,688 4,271,952 1,479, , ,751,688 4,272,190 1,479, , ,751,688 4,271,248 1,480, , ,751,688 4,268,920 1,482, , $143,792,200 $106,736,287 $37,055,913 $23,239,579 (a) Based on UAL actuarial amortization provided by Gabriel Roeder Smith & Company on July 10, not including normal cost (b) Estimate only based on market conditions on October 6, 2017 (c) Represents All-in True Interest Cost (TIC) Jackson County - Comprehensive Financial Plan 9

12 In addition, the comparisons of the annual unfunded actuarial accrued liability amortization payment for the unfunded actuarial accrued liability based on 75%, 65% and 55% rates of return assumptions, provided by Gabriel Roeder Smith & Company, to the estimated bond payments are provided in Appendix F Based on the preceding analysis, the County has determined that it is financially beneficial to pursue the issuance of pension obligation bonds in an amount not to exceed $68,000,000, including estimated costs of issuance Impact on Changes of Rate of Return on Investments The calculation determining the UAAL is based upon, among other assumptions, a 75% future annual investment rate of return on the actuarial value of assets If actual investment returns achieved are lower than 75% annually the result would be a higher liability Likewise, if the actual rate of return was higher than 75%, the result would be a lower liability The table below summarizes the County s UAAL under different rate of return assumptions as of December 31, 2016 Assumed Future Annual Smoothed Rate of Investment Return 12/31/2016 Valuation Results 550% 650% 750% Accrued Liability $231,236,579 $207,426,390 $187,320,213 Valuation Assets 120,179, ,179, ,179,400 Unfunded Accrued Liability $111,057,179 $87,246,990 $67,140,813 Funded Ratio 52% 58% 64% Adjusted Unfunded Accrued Liability Net of Estimated Bond Proceeds* 43,916,366 20,106, Adjusted Funded Ratio Net of Estimated Bond Proceeds* 81% 90% 100% *Assumes application of $67,140,813 of bond proceeds to UAAL Description of Action Required to Meet Obligations Debt service for the POBs will be paid by allocating the cost among departments with dedicated funding sources, where allowable, with the remainder being paid by the General Fund Revenue sources for the annual bond payments include annual operating levies, licenses and permits, state shared revenues, charges for services, fines and forfeitures, and other sources of annual revenue The County Administrator/Controller completes an annual budget and presents it to the County Board for approval The annual debt service amounts for the POBs within the budget will be included in the annual budget process to be presented and approved by the County Board of Commissioners annually The POBs will carry the County s limited tax general obligation full faith and credit pledge; therefore, the annual debt service will be legally required to be part of the County s total budget Jackson County - Comprehensive Financial Plan 10

13 Comprehensive Financial Plan Compliance As outlined in Act 34, this Plan contains the following elements: An analysis of the current and future obligations with respect to each retirement program of the County The County has a defined benefit plan as well as a defined contribution pension plan Information regarding the Defined Benefit Plan was obtained from Gabriel Roeder Smith & Company Information with respect to the plans is contained within Appendix A An analysis of the current and future obligations with respect to the postemployment health care plan of the County The County has a defined benefit postemployment healthcare plan Information regarding the defined benefit plan was obtained by the actuarial firm, Rodwan Consulting Company Information with respect to the plan is contained within Appendix B Evidence that the issuance coupled with any other legally available funds, is sufficient to eliminate the unfunded pension liability The estimated unfunded pension liability for the funded divisions of the Defined Benefit Plan is $67,140,813 as of December 31, 2016 The Estimated Sources and Uses of Funds provided by the County s financial advisor, PFM Financial Advisors ( PFM ), demonstrate that the bond proceeds will cover the unfunded pension liability The complete bond schedules prepared by PFM, along with the Estimated Sources and Uses, are provided under Appendix C The debt service amortization schedule The preliminary debt service amortization schedules for the POBs provided by PFM can be found under Appendix D A description of actions required to satisfy the debt service amortization schedule The POBs are a limited tax general obligation of the County, paid from the County s General Fund and supplemented by dedicated funding sources for various departments, where allowable A description of actions the County takes to create the annual budget and obtain budget approval from the County Board of Commissioners is contained on page 11 herein ` Certification that the Comprehensive Financial Plan is complete and accurate A certification from the Director of Finance attesting that the Plan is complete with information provided by reliable sources is provided on page 12 Act 34 also requires that this Plan be prepared and made publically available Accordingly, the County has prepared this Plan, which has been approved by the County Board on September 5, 2017, and amended and restated on October 17, 2017, and has been made available for public review by publication of this Plan on the County s website Jackson County - Comprehensive Financial Plan 11

14

15 Appendix A: Analysis of Current and Future Retirement Program Obligations of Jackson County Jackson County Comprehensive Financial Plan Appendix A

16 Appendix A1: December 31, 2016 Actuarial Report received from GRS Jackson County Comprehensive Financial Plan Appendix A

17 JACKSON COUNTY EMPLOYEES RETIREMENT SYSTEM ANNUAL ACTUARIAL VALUATION DECEMBER 31, 2016

18 Table of Contents Section Page Introduction A Executive Summary 1-5 Executive Summary B Valuation Results 1-2 Computed Contributions to Provide Benefits 3 History of Employer s Computed Contributions 4 Determination of Unfunded Accrued Liabilities 5 Development of Experience Gain (Loss) 6 Development of Total System Valuation Assets 7 Allocation of Valuation Assets C Summary of the Information Submitted for the Valuation 1-3 Brief Summary of Benefit Provisions 4-5 Financial Information 6-7 Retired Life Data 8 DROP Members Data 9 Inactive Members Data Active Members Data D Actuarial Cost Methods and Assumptions 1 Valuation Methods 2-5 Actuarial Assumptions 6 Miscellaneous and Technical Assumptions 7-8 Glossary E Financial Reporting 1 Schedule of Funding Progress 2 Schedule of Employer Contributions Jackson County Employees' Retirement System

19 April 26, 2017 Board of Trustees Jackson County Employees Retirement System Jackson, Michigan The results of the December 31, 2016 annual actuarial valuation of the Jackson County Employees Retirement System are presented in this report The purpose of the valuation was to measure the System's funding progress, and to determine the employer contribution for the 2018 fiscal year This report should not be relied upon for any other purpose Determinations of financial results, associated with the benefits described in this report, for purposes other than those identified above may be significantly different This report was prepared at the request of the Board and is intended for use by the Retirement System and those designated or approved by the Board This report may be provided to parties other than the System only in its entirety and only with the permission of the Board GRS is not responsible for unauthorized use of this report The contribution amounts/rates shown on page A-2 may be considered as minimum contribution amounts/rates that complies with the Board s funding policy Users of this report should be aware that contributions made at that amounts/rates do not guarantee benefit security Given the importance of benefit security to any retirement system, we suggest that contributions to the System in excess of those presented in this report be considered The findings in this report are based on data and other information through December 31, 2016 Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period, or additional cost or contribution requirements based on the plan s funded status); and changes in plan provisions or applicable law The scope of an actuarial valuation does not include an analysis of the potential range of such future measurements This valuation assumed the continuing ability of the plan sponsor to make the contributions necessary to fund this plan A determination regarding whether or not the plan sponsor is actually able to do so is outside our scope of expertise and was not performed The valuation was based upon information, furnished by the County, concerning Retirement System benefits, financial transactions, and individual members, terminated members, retirees and beneficiaries Data was checked for internal and year-to-year consistency, but was not audited, by us As a result, we are unable to assume responsibility for the accuracy or completeness of the data provided 110

20 Board of Trustees April 26, 2017 Page 2 In addition, this report was prepared using certain assumptions approved by the Board as described in the section of this report entitled Actuarial Cost Methods and Assumptions This report has been prepared by actuaries who have substantial experience valuing public employee retirement systems To the best of our knowledge, the information contained in this report is accurate and fairly presents the actuarial position of the Jackson County Employees Retirement System as of the valuation date All calculations have been made in conformity with generally accepted actuarial principles and practices, and with the Actuarial Standards of Practice issued by the Actuarial Standards Board Francois Pieterse and James D Anderson are Members of the American Academy of Actuaries (MAAA) These actuaries meet the Academy s Qualification Standards to render the actuarial opinions contained herein The signing actuaries are independent of the plan sponsor Gabriel, Roeder, Smith & Company will be pleased to review this valuation with the Board of Trustees and to answer any questions pertaining to the valuation Respectfully submitted, Francois Pieterse, ASA, FCA, MAAA James D Anderson, FSA, EA, MAAA FP/JDA:mrb -2-

21 SECTION A EXECUTIVE SUMMARY

22 Executive Summary Purpose of an Actuarial Valuation The Jackson County Employees Retirement System is a defined benefit retirement system The amount of benefits payable to a member upon retirement, termination, death or disability is defined in various contracts and legal instruments and is based, in part, on the member s years of credited service and final compensation The amount of contributions needed to fund these benefits cannot be known with certainty A primary responsibility of the fiduciaries of the Retirement System is to establish and monitor a funding policy for the contributions made to the Retirement System In some jurisdictions, contributions are made by the plan sponsor as benefits come due This is known as pay-as-you-go financing The State of Michigan mandates that Financial benefits arising on account of service rendered in each fiscal year shall be funded during that year and such funding shall not be used for financing unfunded accrued liabilities The determination of a contribution which satisfies this constitutional requirement is achieved through an actuarial valuation The Actuarial Valuation Process Under the actuarial valuation process, current information about System members is collected annually by staff at the direction of the actuary, which will assist the actuary in estimating benefits in the future The benefit provisions are also collected By making assumptions about future activities such as life expectancy and retirement patterns, the actuary is able to use the information collected to project the benefits that will be paid from the Retirement System to current members These projected future benefit payments are discounted into today s dollars using an assumed rate of investment return assumption to determine the Present Value of Future Projected Benefits (PVFB) of the Retirement System The PVFB estimates the value of the benefits promised to all members as of a valuation date, and includes future pay and service for members which has not yet been earned An actuarial cost method is then used to allocate the PVFB to past, current and future service There are many actuarial cost methods Different actuarial methods will produce different contribution patterns, but do not change the ultimate cost of the benefits The ultimate cost of benefits will only become known after the final payment is made from the Retirement System The past, current and future service components of the PVFB are respectively known as the Actuarial Accrued Liability (AAL), Normal Cost (NC) and Present Value of Future Normal Costs (PVFNC) The actuary computes the liability components (PVFB, NC, AAL, and PVFNC) for each participant in the Retirement System at the valuation date These liability components are then totaled by divisions within the Retirement System These division totals are then consolidated to determine liabilities for the total Retirement System Jackson County Employees' Retirement System A-1

23 Executive Summary (Continued) The Actuarial Valuation Process (continued) A contribution made to cover the normal cost satisfies the Michigan Constitution requirement to fund financial benefits arising on account of service rendered in the fiscal year The Unfunded Actuarial Accrued Liability (UAAL) is the portion of actuarial accrued liability that is not covered by the assets of the Retirement System The UAAL can be a negative number, which means that the Retirement System has more assets than actuarial accrued liability We refer to this condition as overfunded liability in this summary The assets used for these purposes are an Actuarial Value of Assets (AVA), not market An AVA is a smoothed value of assets which is used to limit contribution volatility To satisfy the requirements of the Michigan Constitution, the actuary calculates the total annual contribution to the Retirement System as the normal cost plus a contribution towards the UAAL A valuation report is produced annually which contains the contribution for the fiscal year as well as the funded status of the Retirement System The primary purpose of producing a valuation report annually is to replace the estimated activities which were based on assumptions with the actual experience of the Retirement System for the prior year The experience gain (loss) is the difference between the expected and the actual UAAL of the Retirement System An experience loss can be thought of as the amount of additional UAAL over and above the amount that was expected from the prior year due to deviation of actual experience from the assumption Similarly, an experience gain can be thought of as having less UAAL than that which was expected from the prior year assumptions Required Employer Contributions - Fiscal Year Beginning January 1, 2018 Computed County contributions are shown in the chart below Division Employer Contribution General County $5,968,945 Medical Care 000% 0 Department of Transportation 1787% 631,892 Total $6,600,837 Please see page B-2 for more detail Contribution Dollars Jackson County Employees' Retirement System A-2

24 Executive Summary (Continued) Required Employer Contributions - Fiscal Year Beginning January 1, 2018 (Concluded) The General County contribution requirement has decreased and the Department of Transportation contribution requirement has increased since the previous valuation For the Medical Care group, there is still overfunded liability as of the valuation date The overfunding results in a credit, reducing the required contribution below the normal cost until the overfunding is used up Therefore, if future experience were to exactly match each of the assumptions for the Medical Care group, the employer contribution rate would not remain level It will increase towards the employer normal cost of plan benefits over time (546% as of December 31, 2016) To guard against undue contribution volatility for the Medical Care group, the Board may consider lengthening the amortization period for overfunded accrued liabilities Reasons for Change There are three general reasons why contribution rates change from one valuation to the next The first is a change in the benefits or eligibility conditions of the Plan (or those anticipated in the valuations) The second is a change in the valuation assumptions used to predict future occurrences The third is the difference during the year between the Plan s actual experience and what the assumptions used in the prior valuation predicted Change in Benefits or Eligibility Since the Last Valuation There were no changes in benefits or eligibility conditions of the System 2016 Plan Experience There was an overall gain of $695,820 during 2016 This represents 03% of the 2015 accrued liabilities The gain (loss) development is shown on page B-5 Jackson County Employees' Retirement System A-3

25 Executive Summary (Continued) Causes of the Gain The primary sources of the gain were lower than assumed pay increases for active members, slightly more terminations with no future rights to a retirement benefit than expected, and a gain in valuation investment income These gains were mostly offset by higher retiree liabilities than expected due to retirees living longer than expected As discussed earlier, these gains can be thought of as the amount of reduction in UAAL over and above the amount that was expected from the prior year due to deviation of actual experience from expected experience; causing a decrease in the contribution amount 2016 Funding Position This year s valuation assets represent 740% of accrued liabilities; last year the ratio was 727% Had this year s valuation report been completed using the Market Value of Assets, the System s funded status would have been 713% (instead of 740%) If the System investment experience matches the assumed rate of 75% then the funded position will trend towards 713% over the next few years as losses from prior years are recognized as scheduled under the current asset valuation method See page B-6 Market Value of Assets A four-year smoothing of gains and losses is used to determine the System s Funding Value of Assets As of December 31, 2016, the Funding Value of Assets as a whole exceeds the Market Value for the System by $5,487,722 Given investment experience at the assumed rate, this difference will be recognized as actuarial losses over the next 3 years Had the December 31, 2016 valuation been computed using the System s Market Value of Assets as of that date in place of the Funding Value, the County s required contribution amount would have been approximately $70 million; instead of $6,600,837 Jackson County Employees' Retirement System A-4

26 Executive Summary (Concluded) Retiree Reserve Transfer In each valuation, we develop the value of anticipated future benefit payments to retired members and their beneficiaries We then compare this accrued liability to the reported balance of the reserve for Retired Benefit Payments We recommend the following transfers equal to $17,182,896 from the Reserve for Employer Contributions to the Reserve for Retired Benefit Payments to fully fund retiree liabilities on December 31, 2016 General County $11,784,731 Medical Care 1,733,162 Department of Transportation 3,665,003 Total $17,182,896 Recommendation Section F(1) of the Funding Policy adopted by the Board requires an experience study to review the actuarial assumptions at least once every five years Since the last experience study was completed in 2012, we recommend that a study be conducted prior to the next valuation to review the following items: Mortality Rates Investment Return Wage Inflation Merit & Seniority Salary Increases Retirement Rates Rates of Separation Rates of Disability Review of Loads and Miscellaneous assumptions Conclusions Assuming there are no increases in benefits provided, and no actuarial gains or losses, contribution rates are expected to trend upward in the short-term, due to the scheduled recognition of investment losses that occurred in prior years Future investment gains could lead to decreases in contributions; conversely future investment losses could aid the increase in contributions Over the longer term, contribution rates will trend toward the normal cost of benefits in the absence of other gains and losses or change in benefits or assumptions Jackson County Employees' Retirement System A-5

27 SECTION B VALUATION RESULTS

28 Computed Contributions to Provide Benefits The Retirement System is supported by contributions from the County and active members and by the investment income earned on System assets Member contribution rates are determined by the benefit provisions of the System and are summarized in Section C of this report The County provides an actuarially determined contribution, which is the remainder needed to meet the financial objective Member and County contributions cover both (i) normal cost, and (ii) the financing of the unfunded accrued liability over a period of future years The normal cost is the portion of System costs allocated to the current year by the valuation method described in Section D The unfunded accrued liability is the portion of System costs not covered by present System assets and future normal costs For a plan that is overfunded, the contribution income covers the normal cost less an amortization credit on the overfunding When the overfunding is substantial, the amortization credit can completely offset the normal cost, eliminating the need for contribution income for a period of years, or even indefinitely We recommend one of the following procedures for determining County contributions to the Retirement System (1) Contribute dollar amounts which are equal to the County s percent-of-payroll contribution requirements for the period (page B-3) multiplied by the covered active member payroll for the period Adjustments should be made as necessary to exclude items of pay that are not covered compensation for Retirement System benefits and to include non-payroll payments that are covered compensation (2) Contribute the dollar amounts on page A-2 PUBLIC ACT 728 CERTIFICATION The Board of the Jackson County Employees Retirement System confirms that the System provides for payment of the required employer contribution as described in Section 20m of Michigan Public Act No 728 Jackson County Employees' Retirement System B-1

29 Computed Contributions to Provide Benefits for Fiscal Year 2018 Contributions for General County Medical Care Department of Transportation Normal cost of benefits: Age & service $1,460, % 1378% Disability 54, % 124% Death before retirement 9, % 010% Total 1,525, % 1512% Member contributions: Total 691, % 1200% Future refunds 93, % 099% Available for pensions 598, % 1101% Employer normal cost 926, % 411% Amortization charges 5,042,268 (546)% 1376% COMPUTED EMPLOYER RATE 000% 1787% COMPUTED EMPLOYER DOLLAR $5,968,945 $0 $631,892 Medical Care overfunded liabilities were amortized as a level percent-of-payroll over an open 10-year period Department of Transportation unfunded liabilities were amortized as a level percent-of-payroll over a closed 25-year period Because the General County group is closed to new hires, a closed level dollar amortization method was used (with the amortization period declining each year) The amortization period for the General group is 25 years in this valuation This amortization method is appropriate for a closed group Jackson County Employees' Retirement System B-2

30 History of Employer s Computed Contributions Valuation As Percents of Valuation Payroll Date Medical Dept of December 31 General Care Transportation * After benefit and/or actuarial assumption changes 1996* 453% 000% 000% 1997* * * * * * # # # # # 2011 $5,348, # 2012* 5,406, # 2013* 5,619, # 2014* 5,772, ,063, ,968, # Pursuant to the collective bargaining agreement, the actual contribution rate is 1448% for 2013, 1418% for 2012, 1033% for 2011, 833% for 2010, 683% for 2009, 524% for 2008, 431% for 2006 and 606% each for employer and employees for 2005 Results shown throughout this report, for years prior to 2011, were prepared by previous actuarial firms Jackson County Employees' Retirement System B-3

31 Determination of Unfunded Accrued Liabilities General County Medical Care Dept of Transportation Total A Accrued Liability 1 For retirees and beneficiaries and DROP $102,245,569 $ 10,229,016 $ 23,149,748 $ 135,624,333 2 For vested terminated members 3,698,215 1,339, ,755 5,755,261 3 For present active members a Value of expected future benefit payments 61,642,734 13,202,048 12,707,057 87,551,839 b Value of future normal costs 12,529,011 4,499,290 4,311,854 21,340,155 c Active member liability: (a) - (b) 49,113,723 8,702,758 8,395,203 66,211,684 4 Total 155,057,507 20,271,065 32,262, ,591,278 B Present Assets 1 Valuation Basis 95,878,517 33,421,882 24,300, ,601,282 2 Market Basis 92,453,059 32,227,817 23,432, ,113,560 C Unfunded Accrued Liability (Excess Assets) 1 Valuation Basis (A4) - (B1) 59,178,990 (13,150,817) 7,961,823 53,989,996 2 Market Basis (A4) - (B2) 62,604,448 (11,956,752) 8,830,022 59,477,718 D Funded Percent 1 Valuation Basis (B1)/ (A4) 618% 1649% 753% 740% 2 Market Basis (B2)/ (A4) 596% 1590% 726% 713% Unless otherwise indicated, a funded ratio measurement presented in this report is based upon the actuarial accrued liability and the actuarial value of assets Unless otherwise indicated, with regard to any funded status measurements presented in this report: 1 The measurement is inappropriate for assessing the sufficiency of plan assets to cover the estimated cost of settling the plan s benefit obligations, in other words, of transferring the obligations to a unrelated third party in an arm s length market value type transaction 2 The measurement is dependent upon the actuarial cost method which, in combination with the plan s amortization policy, affects the timing and amounts of future contributions The amount of future contributions will most certainly differ from those assumed in this report due to future actual experience differing from assumed experience based upon actuarial assumptions A funded ratio measurement in this report of 100% is not synonymous with no required future contributions If the funded ratio were 100%, the plan would still require future normal cost contributions (ie, contributions to cover the cost of the active membership accruing an additional year of service credit) 3 The measurement would produce a different result if the market value of assets were used instead of the actuarial value of assets Jackson County Employees' Retirement System B-4

32 Development of Experience Gain (Loss) Year Ended December 31, 2016 Actual experience will never (except by coincidence) exactly match assumed experience It is hoped that gains and losses will cancel each other over a period of years, but sizable year-to-year fluctuations are common Detail on the derivation of the experience gain (loss) is shown below Year Ending December 31, 2016 (1) UAAL* at start of year $55,633,284 (2) Normal cost from last year 2,967,274 (3) Actual contributions 7,902,179 (4) Interest accrual 3,987,437 (5) Expected UAAL* before changes: (1) + (2) - (3) + (4) 54,685,816 (6) Change from benefit increases 0 (7) Change from revised actuarial assumptions 0 (8) Expected UAAL* after changes: (5) + (6) + (7) 54,685,816 (9) Actual UAAL* at end of year 53,989,996 (10) Gain (loss): (8) - (9) 695,820 (11) Gain (loss) as percent of actuarial accrued liabilities at start of year 03% * Unfunded actuarial accrued liabilities Jackson County Employees' Retirement System B-5

33 Development of Total System Valuation Assets Year Ended December 31: A Funding Value Beginning of Year $141,904,790 $148,437,114 B Market Value End of Year 143,978, ,113,560 C Market Value Beginning of Year 149,161, ,978,974 D Non-Investment Net Cash Flow (5,318,410) (6,478,302) E Investment Income E1 Market Total: B - C - D 135,621 10,612,888 E2 Amount for Immediate Recognition 10,443,419 10,889,847 E3 Amount for Phased-In Recognition E1-E2 (10,307,798) (276,959) F Phased-In Recognition of Investment Income F1 Current Year: 025 x E3 (2,576,950) (69,240) $ 0 $ 0 $ 0 F2 First Prior Year (126,105) (2,576,950) (69,240) 0 0 F3 Second Prior Year 3,524,917 (126,105) (2,576,950) (69,240) 0 F4 Third Prior Year 585,453 3,524,918 (126,105) (2,576,948) (69,239) F5 Total Recognized Investment Gain 1,407, ,623 (2,772,295) (2,646,188) (69,239) G Funding Value End of Year: A + D + E2 + F5 148,437, ,601,282 H Difference between Market Value & Funding Value: B - G (4,458,140) (5,487,722) (2,715,427) (69,239) 0 I Recognized Rate of Return 851% 802% J Rate of Return, Market Basis 009% 754 % The Valuation Assets recognizes assumed investment income (line E2) fully each year Differences between actual and assumed investment income (line E3) are phased-in over a closed 4-year period During periods when investment performance exceeds the assumed rate, Valuation Assets will tend to be less than Market Value During periods when investment performance is less than the assumed rate, Valuation Assets will tend to be greater than Market Value The Valuation Assets is unbiased with respect to Market Value At any time it may be either greater or less than Market Value If assumed rates are exactly realized for 4 consecutive years, it will become equal to Market Value Jackson County Employees' Retirement System B-6

34 Allocation of Valuation Assets Reserve for Employees' Contributions General $ 13,640,783 Medical Care 2,806,662 Department of Transportation 3,764,098 $ 20,211,543 Reserve for Employer Contributions General $ 88,451 Medical Care 25,016,656 Department of Transportation 3,158,645 28,263,752 Reserve for Retired Benefit Payments General $ 90,364,086 Medical Care 8,462,128 Department of Transportation 19,460, ,286,437 Reserve for Fiduciary Liability Insurance 155,000 Funding Value Adjustment General $(8,311,555) Medical Care (2,897,290) Department of Transportation (2,106,605) (13,315,450) Total Funding Value $153,601,282 Total Funding Value by Group General $ 95,878,517 Medical Care 33,421,882 Department of Transportation 24,300,883 $153,601,282 Jackson County Employees' Retirement System B-7

35 SECTION C SUMMARY OF THE INFORMATION SUBMITTED FOR THE VALUATION

36 Brief Summary of Benefit Provisions as Reported for the December 31, 2016 Valuation Voluntary Retirement Eligibility Final Division Union Average Member Groups Number Name Code Multiplier Pay Contribution NRA General 79 Non-Union, Elected 9,10,99 200% final 3 250% 25 years Hired prior to 1/1/ & & 8 11 Non-Union, Elected 9,10,99 200% final 3 250% 30 years Hired after 1/1/ & & AFSCME 41,51,61 200% final 3 250% 60 & 8 Hired prior to 1/1/ Window Period AFSCME 41,51,61 200% final 3 250% 60 & 10 Hired after 1/1/ Window Period Prosecutors % final 3 250% 60 & 8 Hired prior to 1/1/ Window Period Prosecutors % final 3 250% 60 & 10 Hired after 1/1/ Window Period MNA % final 3 250% 60 & 8 Hired prior to 1/1/ Window Period MNA % final 3 250% 60 & 10 Hired after 1/1/ Window Period POLC % final 3 250% 60 & 8 Hired prior to 1/1/ Window Period POLC % final 3 250% 60 & 10 Hired after 1/1/ Window Period Probation Officers % final 3 250% 60 & 8 Hired prior to 1/1/ Window Period Probation Officers % final 3 250% 60 & 10 Hired after 1/1/ Window Period Attorney Referee/ Magistrate % final 3 250% 60 & 8 Hired prior to 1/1/ Attorney Referee/ Magistrate % final 3 250% 60 & 10 Hired after 1/1/ POAM % final % 25 years 55 & & 8 25 FOP % final 3 645% 25 years 55 & & 8 Jackson County Employees' Retirement System C-1

37 Brief Summary of Benefit Provisions (Continued) as Reported for the December 31, 2016 Valuation General 6 COAM - Road Sgts % final % 25 years 55 & & 8 4 COAM - Corrections % final 3 750% 25 years Supervisors 55 & & 8 Medical % final 5 250% 60 & 8 Care % final 5 250% 60 & 8 Rule of 90 Depart of 21 JDOT - Union % final % 57 & 10* Transportation Hired before 1/1/01 Total JDOT - Union % final % 57 & 10* Hired after 1/1/01 3 JDOT - Non-Union % final % 57 & 10* Hired before 1/1/01 2 JDOT - Non-Union % final % 57 & 10* Hired after 1/1/01 The maximum employer-financed portion is 75% of final average pay * Vesting under the Plan shall be increased from eight (8) years to ten (10) years Employees with eight (8) years of seniority by 12/31/08 will be grandfathered and deemed vested Employees shall be allowed to enter the Deferred Retirement Option Plan (DROP) at fifty-seven (57) years of age with ten (10) years of service Deferred Retirement Option Plan (DROP) Eligibility: A member who has satisfied the same requirements as Voluntary Retirement conditions Amount: Accrued benefit at the date of election to participate in DROP Contributions: Members have the option to contribute to their DROP accounts at the same rate of their employee contributions at the time of entrance into the DROP Contributions are not made by the employer DROP Account: Medical Care and Department of Transportation: DROP account is credited with the DROP benefit, member DROP contributions (if elected), plus interest of one percent below the assumed rate of return in the annual actuarial valuation General County: DROP account is credited with the DROP benefit, member DROP contributions (if elected), plus interest credit at an annual rate equal to the Nominal Rate of Return on Smoothed Value for the relevant Plan Year minus 10%, provided however, that such Member s DROP accounts shall be credited with interest credit at a minimum annual rate of 40% DROP Period: Participating member must retire within 3 years of date of DROP Benefits at Retirement: DROP account balance plus member begins to draw monthly retirement benefit Jackson County Employees' Retirement System C-2

38 Brief Summary of Benefit Provisions (Concluded) as Reported for the December 31, 2016 Valuation Deferred Retirement (vested benefit) Eligibility: Termination of County employment after attaining the minimum years of service required for retirement eligibility Annual Amount: Payable beginning at age 60 or at any age allowed by bylaws at time of retirement, accrued regular retirement amount based on credited service and FAC at time of termination Duty Disability Retirement Eligibility: Total and permanent disability incurred in line of duty with the County for which Worker's Compensation is being paid Annual Amount: Computed in the same manner as the regular retirement amount but based on FAC and credited service at time of disability retirement; minimum is 15% of FAC The sum of the County-financed portion of the retirement allowance cannot exceed the sum of one-half of the disability retiree s final average compensation and Worker's Compensation, converted to an annual basis At expiration of Worker's Compensation period or attainment of age 65, whichever occurs first, amount is recomputed to include years during which Worker's Compensation was paid Non-Duty Disability Retirement Eligibility: Total and permanent disability after 10 or more years of credited service Annual Amount: Computed in the same manner as the regular retirement amount based on FAC and credited service at time of disability retirement Minimum is 15% of FAC Duty Death Before Retirement Eligibility: Death in line of duty with the County or within 3 years following Disability Retirement and prior to age 60 Annual Amount: General, Medical Care: Amount to spouse and children equal to Worker's Compensation payments, payable at the termination of the Worker's Compensation period amount to spouse continues to remarriage or death Amount to children continues to earlier of marriage or attainment of age 18 years Department of Transportation: Accrued retirement allowance payable immediately to spouse of deceased member If deceased member was not vested, additional service credit will be granted up to the amount needed to be vested prior to computation of retirement allowance of spouse If no benefit payable to spouse, each unmarried child of deceased member under 18 years will be paid an equal share of the deceased member s retirement allowance, which will terminate upon marriage, attainment of 18 years of age or death, whichever occurs first Non-Duty Death Before Retirement Eligibility: Age 60 with 8 or more years of credited service or any age with 25 or more years of credited service, or when contract provision or Board of Commissioner action provides, age 55 with 10 years Upon election of the surviving spouse, and upon attainment of age 60 by the surviving spouse, a retirement allowance will be paid to the spouse if the deceased employee was vested in the System and had designated the surviving spouse as beneficiary Annual Amount: Option A actuarial equivalent of regular retirement amount based on credited service and FAC at time of death Jackson County Employees' Retirement System C-3

39 Reported Financial Information Year Ended December 31, 2016 (Total System Assets) Income and Expenses Member Contributions General $ 911,282 Department of Transportation 472,125 Medical Care 268,377 Employer Contributions General 5,772,761 Department of Transportation 477,634 Medical Care 0 Investment Income Interest and dividends 2,755,605 Gains (Loss) on sales of investments 2,384,328 Unrealized appreciation in Market Value 6,224,861 $ 1,651,784 6,250,395 11,364,794 Total Revenues $19,266,973 Retirement Benefits Paid General $ 9,179,951 Department of Transportation 1,975,978 Medical Care 1,071,993 Refunds of Member Contribution General 1,428,329 Department of Transportation 339,959 Medical Care 197,089 Year Ended December 31, 2016 $12,227,922 1,965,377 Investment Expense Counseling Fees 751,906 Administrative Expense 187,182 Total Expenditures 15,132,387 Net Income (Loss) $ 4,134,586 Jackson County Employees' Retirement System C-4

40 Reported Financial Information Year Ended December 31, 2016 Market Value of Assets (Total System): Assets and Reserves Reserve Accounts (Total System): a Cash or equivalents $ 5,524,245 a Member contributions $ 20,211,543 b Receivables net of payables 249,054 b Employer contributions 28,263,752 c Stocks 101,114,008 c Reserve for future d Bonds 41,226,253 benefits 118,286,437 d Fiduciary liability 155,000 e Unrealized appreciation (18,803,172) Total $ 148,113,560 Total $ 148,113,560 Jackson County Employees' Retirement System C-5

41 Retirees and Beneficiaries - December 31, 2016 Tabulated by Attained Age General County Medical Care Dept of Transportation Total Attained Annual Annual Annual Annual Ages No Allowances No Allowances No Allowances No Allowances $ 444,701 1 $ 18, $ 462, , , , ,544, , ,715, ,000, $ 286, , ,923, ,353, , , ,038, ,395, , , ,967, , , , , , , , , , , , , & Over 16 62, , , ,880 Totals 509 $9,435, $1,093, $1,992, $12,521,661 Average Age at Retirement: 579 years Average Age Now: 697 years Jackson County Employees' Retirement System C-6

42 Retirees, Beneficiaries and DROP Members Pension Being Paid Historical Schedule Year Ended December 31 Discounted Value of Annual Average Pensions No Pensions Pension Total Average $ 2,272,669 $ 5,437 * * ,334,784 5,653 * * ,497,500 5,975 * * ,687,667 6,280 * * ,016,337 6,887 * * ,247,020 7,346 * * ,303,529 7,542 * * ,523,515 7,830 * * ,629,741 9,410 $ 44,082,387 $ 89, ,314,511 10,299 51,114,228 99, ,279,252 11,253 62,359, , ,023,751 12,131 70,153, , ,864,921 13,130 79,451, , ,159,994 13,355 81,103, , ,577,680 13,880 82,877, , ,148,890 14,453 89,062, , ,995,062 15,053 97,975, , ,680,347 15, ,605, , ,954,475 15, ,061, , ,637,755 16, ,015, , ,387,067 16, ,852, , ,876,249 17, ,346, , ,314,427 17, ,624, ,365 * Amounts not available Jackson County Employees' Retirement System C-7

43 DROP Members - December 31, 2016 Tabulated by Attained Age General County Medical Care Dept of Transportation Total Attained Annual Annual Annual Annual Ages No Allowances No Allowances No Allowances No Allowances $ 133,509 3 $ 133, , , ,717 7 $ 223, , ,913 3 $ 33, , , , ,110 Totals 18 $489,763 4 $ 44,096 9 $258, $ 792,766 Jackson County Employees' Retirement System C-8

44 Inactive Members - December 31, 2016 Tabulated by Attained Age General & Sheriffs Medical Care Dept of Transportation Totals Attained Estimated Estimated Estimated Estimated Ages No Allowances No Allowances No Allowances No Allowances $ 11,437 2 $ 11, , , $ 79, , , ,498 1 $ 12, , , , , , , , , , , , , & over 5 40, ,138 Totals 47 $ 568, $199,337 7 $ 128, $896,043 Jackson County Employees' Retirement System C-9

45 General County Active Members as of December 31, 2016 by Attained Age and Years of Service Totals Attained Years of Service to Valuation Date Valuation Age Plus No Payroll $ 153, , ,727, ,391, ,218, ,267, ,316, , , , , , , ,880 Totals $13,597,243 While not used in the financial computations, the following group averages are computed and shown because of their general interest Group Averages: Age: 468 years Service: 168 years Annual Pay: $55,050 Jackson County Employees' Retirement System C-10

46 Medical Care Active Members as of December 31, 2016 by Attained Age and Years of Service Totals Attained Years of Service to Valuation Date Valuation Age Plus No Payroll Under $ 14, , ,153, , , , ,317, , ,385, , , , , , , ,250 Totals $8,609,387 While not used in the financial computations, the following group averages are computed and shown because of their general interest Group Averages: Age: 410 years Service: 63 years Annual Pay: $34,998 Jackson County Employees' Retirement System C-11

47 Department of Transportation Active Members as of December 31, 2016 by Attained Age and Years of Service Totals Attained Years of Service to Valuation Date Valuation Age Plus No Payroll $ 50, , , , , , , , , , , ,114 Totals $3,268,758 While not used in the financial computations, the following group averages are computed and shown because of their general interest Group Averages: Age: 466 years Service: 113 years Annual Pay: $57,347 Jackson County Employees' Retirement System C-12

48 SECTION D ACTUARIAL COST METHODS AND ASSUMPTIONS

49 Valuation Methods The normal cost was computed as follows: The series of contributions necessary to accumulate to the present value at time of retirement of a member s pension was computed so that each contribution in the series was a constant percentage of the member s year-by-year projected covered compensation This is referred to as the Individual Entry Age Actuarial Cost Method The accrued liability was computed and financed as follows: Retirees and Beneficiaries: The discounted value of pensions likely to be paid retirees and beneficiaries was computed using the investment return and mortality assumptions This amount was financed by applicable accrued assets Active and Inactive Members: The discounted value of benefits likely to be paid active and inactive members was computed using the assumptions outlined on the following pages This amount was reduced by the present value of normal costs anticipated to be paid on behalf of the present active members This accrued liability was then reduced by applicable accrued assets and the remainder was financed as a level percent-of-payroll over a period of 10 years for Medical Care, as a level percent-of-payroll over a period of 25 years for Department of Transportation and as a level dollar over a period of 25 years for General County Asset Valuation Method Last year s valuation assets are increased by contributions and expected investment income on last year s valuation assets and non-investment net cash flow and reduced by refunds, benefit payments and expenses Added to this amount is the phased-in recognition of investment income The phased-in recognition is the sum over the four years ending on the valuation date of 25% of the difference between each year s expected return and actual market return Jackson County Employees' Retirement System D-1

50 Actuarial Assumptions The rate of investment return was 75% a year, compounded annually net of investment and administrative expenses The assumed real return is the rate of return in excess of wage growth Considering other assumptions used in the valuation, the 75% nominal rate translates to a net real rate of return over wage growth of 35% a year The rates of pay increase used for individual members are shown below This assumption is used to project a member s current pay to the pay upon which System benefits will be based Sample Ages Annual Rate of Salary Increase for Sample Ages Base Merit and Longevity Total % 40 % 80 % Active Member Payroll is assumed to grow at 40% per year No specific Price Inflation assumption is required to perform this valuation, since there are no benefits that are linked to price increases However, a price inflation assumption on the order of 25% to 30% would be consistent with the other economic assumptions Jackson County Employees' Retirement System D-2

51 The healthy mortality table used to evaluate death after retirement in this valuation of the System was the RP2000 mortality table projected to 2020 using projection scale AA (adjusted by 120% for males) The mortality rates were adjusted to include margin for future mortality improvements Sample values follow: Value of Future Life Sample $1 Monthly for Life Expectancy (Years) Ages Men Women Men Women 50 $14318 $ This assumption is used to measure the probabilities of each benefit payment being made after retirement The mortality rates used for disabled members is the RP2000 mortality table projected to 2020 using projection scale AA set forward 10 years for both males and females The pre-retirement mortality table used to evaluate death before retirement in this valuation of the System was the RP2000 Mortality table projected to 2020 using projection scale AA (multiplied by 80% for males and females) Jackson County Employees' Retirement System D-3

52 Rates of separation from active membership used in the valuation are shown below (rates do not apply to members eligible to retire and do not include separations on account of death or disability) This assumption measures the probabilities of members remaining in employment Sample Ages Years of Service General Percent Separating within Next Year Medical Care Dept of Trans Sheriff ALL % 3600 % 1000 % 1000 % & Over Rates of Disability among active members used in the valuation are shown below These rates represent the probabilities of active members becoming disabled Sample Ages Percent Becoming Disabled within Next Year General & Medical Care Dept of Sheriff Men Women Transportation % 004 % 005 % 008 % Jackson County Employees' Retirement System D-4

53 The rates of regular retirement/drop used to measure the probability of eligible members retiring or electing to DROP during the next year are shown below Age General Non-Union % Retiring or DROPing - Age Based Other General Dept and of Medical Care Transportation Sheriff % 20 % % % % Retiring or DROPing - Rule of 90 Age Medical Care % % Retiring or DROPing - Service Based General Service Non-Union Sheriff % 40 % Jackson County Employees' Retirement System D-5

54 Miscellaneous and Technical Assumptions Marriage Assumption Pay Increase Timing Decrement Timing Eligibility Testing Benefit Service Decrement Relativity Disability Decrement Operation Normal Form of Benefit Loads Incidence of Contributions Actuarial Equivalence Basis for Optional Forms of Payment 80% of males and 80% of females are assumed to be married for purposes of death-in-service benefits Male spouses are assumed to be three years older than female spouses Was assumed to occur in the middle of the year This means that the pays reported for the valuation are assumed to be rates of pay on the valuation date Decrements of all types are assumed to occur mid-year Eligibility for benefits is determined based upon the age nearest birthday and service nearest whole year on the date the decrement is assumed to occur Exact fractional service is used to determine the amount of benefit payable Decrement rates are used directly from the experience study, without adjustment for multiple decrement table effects Disability benefits are covered from a separately insured plan We assume that if a disability retiree dies during a deferral period, the beneficiary receives death-in-service benefits Our assumption is that a retiree dies 60% of the way through the deferral period Disability and withdrawal do not operate during retirement eligibility The assumed normal form of benefit is straight life form Liabilities were increased 3% to reflect the inclusion of lump sum payments in the computation of the Final Average Pay 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 New entrant normal cost contributions are applied to the funding of new entrant benefits 7% interest with a 95%/5% unisex blend of the 1971 Group Annuity Mortality Table Jackson County Employees' Retirement System D-6

55 Glossary Actuarial Accrued Liability Accrued Service Actuarial Assumptions Actuarial Cost Method Actuarial Equivalent Actuarial Present Value Amortization Experience Gain (Loss) The difference between (i) the actuarial present value of future plan benefits, and (ii) the actuarial present value of future normal cost Sometimes referred to as accrued liability or past service liability Under the actuarial cost method used the AAL differs somewhat from the value of future payments based on benefits earned as of the valuation date The service credited under the plan which was rendered before the date of the actuarial valuation Estimates of future plan experience with respect to rates of mortality, disability, retirement, investment income and salary increases Decrement assumptions (rates of mortality, separation and retirement) are generally based on past experience, often modified for projected changes in conditions Economic assumptions (salary increases and investment income) consist of an underlying rate appropriate in an inflation-free environment plus a provision for a long-term average rate of inflation A mathematical budgeting procedure for allocating the dollar amount of the actuarial present value of future plan benefits between the normal costs to be paid in the future and the actuarial accrued liability Sometimes referred to as the actuarial funding method Benefits whose actuarial present values are equal The amount of funds presently required to provide a payment or series of payments in the future It is determined by discounting the future payments at a predetermined rate of interest, taking into account the probability of payment Paying of an interest-bearing liability by means of periodic contributions of interest and principal, as opposed to a lump sum payment A measure of the difference between actual experience and experience anticipated by a set of actuarial assumptions during the period between two actuarial valuation dates, in accordance with the actuarial cost method being used Jackson County Employees' Retirement System D-7

56 Glossary (Concluded) Normal Cost Plan Termination Liability Reserve Account Unfunded Actuarial Accrued Liability Valuation Assets The annual cost assigned, under the actuarial funding method, to current and subsequent plan years Sometimes referred to as current service cost An amortization payment toward the unfunded actuarial accrued liability is in addition to the normal cost The actuarial present value of future plan benefits based on the assumption that there will be no further accruals for the future service and salary The termination liability will generally be less than the liabilities computed on a going-concern basis and is not normally determined in a routine actuarial valuation An account used to indicate that funds have been set aside for a specific purpose and are not generally available for other uses The difference between the actuarial accrued liability and valuation assets Sometimes referred to as unfunded accrued liability The value of current plan assets recognized for valuation purposes Jackson County Employees' Retirement System D-8

57 SECTION E FINANCIAL REPORTING This information is presented in draft form for review by the County s auditor Please let us know if there are any items that the auditor changes so that we may maintain consistency with the County s financial statements

58 Valuation Date Dec 31 Schedule of Funding Progress (Dollar amounts in $ 000) Actuarial Actuarial Accrued Unfunded Value of Liability (AAL) AAL Funded Covered Assets - Entry Age (UAAL) Ratio Payroll UAAL as a % of Covered Payroll 2007 $ 144,465 $ 140,898 $ (3,567) 1025 % $32,298 - % , ,517 7, , , ,937 17, , (a) 132, ,320 27, , , ,396 41, , (a) 129, ,544 53, , (a) 136, ,458 53, , (a) 141, ,476 53, , , ,070 55, , , ,591 53, , (a) After changes in benefit provision and/or actuarial assumptions Jackson County Employees' Retirement System E-1

59 Schedule of Employer Contributions Fiscal Valuation Year Annual Actual Date Ended Required Annual Percentage December 31 December 31 Contribution Contributions Contributed * $1,964,353 N/A * 2,341,599 N/A * 2,666,057 N/A * 3,022,371 N/A $5,699,327 5,699,339 N/A ,855,877 5,855,877 N/A ,049,033 6,049,033 N/A ,250,395 6,250,395 N/A ,636, ,600,837 * Amounts not supplied by prior actuary Actuarial Cost Method Amortization method Remaining amortization period Asset valuation method Individual Entry Age Normal Cost General County: Level Dollar, Closed 25 years Medical Care: Level Percent-of- Payroll, Open 10-Year Period Road Commission: Level Percent-of- Payroll, Closed 25-Year Period Market Value with 4-Year Smoothing Principal Actuarial Assumptions: Net Investment Return* 75% Projected Salary Increases* 40% to 80% Cost-of-Living Adjustments None * Includes pay inflation at 40% Jackson County Employees' Retirement System E-2

60 Appendix A2: Jackson County Employees Retirement System General County and Department of Transportation Supplemental Valuation Jackson County Comprehensive Financial Plan Appendix A

61 July 10, 2017 Mr James E Latham Director of Finance Jackson County Employees Retirement System 120 West Michigan Avenue, 12 th Floor Jackson, MI Re: Jackson County Employees Retirement System - General County and Department of Transportation Supplemental Valuation Dear Mr Latham: Enclosed is a supplemental actuarial valuation for the Jackson County Employees Retirement System - General County and Department of Transportation Please call if you have any questions regarding the calculations enclosed Sincerely, Francois Pieterse, ASA, FCA, MAAA FP:bd Enclosure cc: Debby Gorz (Jackson County Employees Retirement System) James D Anderson (GRS)

62 Jackson County Employees Retirement System General County and Department of Transportation Supplemental Valuation as of December 31, 2016 Requested By: Mr James E Latham, Director of Finance Date: July 10, 2017 Submitted By: Francois Pieterse, ASA, FCA, MAAA and James D Anderson, FSA, EA, MAAA Gabriel, Roeder, Smith & Company This report contains an actuarial valuation of two (2) alternate assumption scenarios for the Jackson County Employees Retirement System - General County and Department of Transportation The purpose of these scenarios is to provide additional information to the County in regards to bonding This is by no means an exhaustive study of the actuarial and financial issues associated with bonding These specific scenarios were requested by the County This communication is not a recommendation Determining the reasonability of the alternate assumptions was not in the scope of this study Francois Pieterse and James D Anderson are Members of the American Academy of Actuaries (MAAA) and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein The signing actuaries are independent of the plan sponsor The date of the valuation was December 31, 2016 This means that the results of the supplemental valuation indicate what the December 31, 2016 valuation would have shown if the alternate assumptions had been in effect on that date Supplemental valuations do not predict the result of future actuarial valuations Rather, supplemental valuations give an indication of the probable long-term cost of the alternate scenarios only without comment on the complete end result of the future valuations This valuation was based upon information furnished by the County, for use in the December 31, 2016 valuation of the System We checked for internal consistency, but did not audit the data We are not responsible for the accuracy or completeness of the information provided by the County All actuarial assumptions, methods, and Plan provisions valued in this report, are as described in the December 31, 2016 valuation report except as explicitly described in this document Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements; and changes in plan provisions or applicable law Due to the limited scope of the actuary s assignment, the actuary did not perform an analysis of the potential range of such future measurements -1-

63 Jackson County Employees Retirement System General County and Department of Transportation Supplemental Valuation as of December 31, 2016 Actuarial assumptions and methods were consistent with those used in the regular actuarial valuation of the Retirement System on the valuation date, unless otherwise noted Actuarial assumptions are adopted by the Retirement Board of Trustees In particular: The current assumed rate of interest was 75% Payroll was assumed to increase by 40% per year The amortization period was 25 years DATA: A brief summary of the data provided by the County, as of December 31, 2016, used in this valuation is presented below: Active Members Count Payroll Average Payroll Average Age (Yrs) Average Service (Yrs) General County 247 $ 13,597,243 $ 55, Department of Transportation 57 3,268,758 57, Total 304 $ 16,866,001 $ 55, Inactive Members Annual Average Average Age at Average Service at Count Benefits Benefits Retirement (Yrs) Retirement (Yrs) General County 47 $ 568,151 $ 12, Department of Transportation 7 128,555 18, Total 54 $ 696,706 $ 12, DROP Members Annual Average Average Age at Average Service at Count Benefits Benefits Retirement (Yrs) Retirement (Yrs) General County 18 $ 489,763 $ 27, Department of Transportation 9 258,907 28, Total 27 $ 748,670 $ 27, Retired Members Count Annual Benefits Average Benefits Average Age at Retirement (Yrs) Average Service at Retirement (Yrs) General County 509 $ 9,435,694 $ 18, Department of Transportation 104 1,992,181 19, Total 613 $11,427,875 $ 18,

64 Jackson County Employees Retirement System General County and Department of Transportation Supplemental Valuation as of December 31, 2016 CURRENT ASSUMPTION: The assumed investment rate of return is 750% ALTERNATE SCENARIO 1: The assumed investment rate of return is 650% ALTERNATE SCENARIO 2: The assumed investment rate of return is 550% -3-

65 Jackson County Employees Retirement System General County and Department of Transportation Supplemental Valuation as of December 31, 2016 Actuarial Statement: Funded Status Current Assumption 750% Alternate 1 650% Alternate 2 550% Actuarial Accrued Liabilities $ 187,320,213 $ 207,426,390 $ 231,236,579 Actuarial Valuation Assets 120,179, ,179, ,179,400 Unfunded Actuarial Accrued Liabilities 67,140,813 87,246, ,057,179 Percent Funded (Assets/Liabilities) 6416% 5794% 5197% Funded Status (Market) Current Assumption Alternate 1 Alternate 2 750% 650% 550% Actuarial Accrued Liabilities $ 187,320,213 $ 207,426,390 $ 231,236,579 Market Valuation Assets 115,885, ,885, ,885,743 Unfunded Actuarial Accrued Liabilities 71,434,470 91,540, ,350,836 Percent Funded (Assets/Liabilities) 6187% 5587% 5012% Contribution Information Current Assumption Alternate 1 Alternate 2 750% 650% 550% County's Normal Cost $ 1,044,508 $ 1,569,242 $ 2,251,221 County's UAAL Cost 5,741,794 6,964,660 8,175,859 County's Fiscal Year 2018 ARC 6,786,302 8,533,902 10,427,080 It is our understanding that the purpose of this valuation is to study alternatives for bonding and, therefore, the amortization amounts are subject to change The normal cost is the annual cost for members benefit accrual during the year The figures shown above are based on the December 31, 2016 actuarial valuation Please remember that the actual funded status at the next valuation will depend on the assets and liabilities as of December 31,

66 Jackson County Employees Retirement System General County and Department of Transportation Supplemental Valuation as of December 31, 2016 Amortization Schedule Actuarial Valuation Assets at 750% Unfunded Accrued Liability Beginning UAL Payment Unfunded Accrued Valuation Date of Year Schedule Liability End of Year 12/31/2016 $ 67,140,813 $ 5,484,157 $ 66,489,040 12/31/2017 $ 66,489,040 $ 5,751,688 $ 65,510,941 12/31/2018 $ 65,510,941 $ 5,751,688 $ 64,459,485 12/31/2019 $ 64,459,485 $ 5,751,688 $ 63,329,170 12/31/2020 $ 63,329,170 $ 5,751,688 $ 62,114,082 12/31/2021 $ 62,114,082 $ 5,751,688 $ 60,807,862 12/31/2022 $ 60,807,862 $ 5,751,688 $ 59,403,675 12/31/2023 $ 59,403,675 $ 5,751,688 $ 57,894,174 12/31/2024 $ 57,894,174 $ 5,751,688 $ 56,271,461 12/31/2025 $ 56,271,461 $ 5,751,688 $ 54,527,044 12/31/2026 $ 54,527,044 $ 5,751,688 $ 52,651,796 12/31/2027 $ 52,651,796 $ 5,751,688 $ 50,635,904 12/31/2028 $ 50,635,904 $ 5,751,688 $ 48,468,820 12/31/2029 $ 48,468,820 $ 5,751,688 $ 46,139,205 12/31/2030 $ 46,139,205 $ 5,751,688 $ 43,634,869 12/31/2031 $ 43,634,869 $ 5,751,688 $ 40,942,708 12/31/2032 $ 40,942,708 $ 5,751,688 $ 38,048,635 12/31/2033 $ 38,048,635 $ 5,751,688 $ 34,937,506 12/31/2034 $ 34,937,506 $ 5,751,688 $ 31,593,043 12/31/2035 $ 31,593,043 $ 5,751,688 $ 27,997,744 12/31/2036 $ 27,997,744 $ 5,751,688 $ 24,132,799 12/31/2037 $ 24,132,799 $ 5,751,688 $ 19,977,982 12/31/2038 $ 19,977,982 $ 5,751,688 $ 15,511,555 12/31/2039 $ 15,511,555 $ 5,751,688 $ 10,710,145 12/31/2040 $ 10,710,145 $ 5,751,688 $ 5,548,629 12/31/2041 $ 5,548,629 $ 5,751,688 $ - 12/31/2042 $ - $ - $ - The Chart above represents an illustration of the amortization of $67,140,813 over a closed 25-year period using level dollar financing In practice, the UAL will differ from illustration due to experience gains and losses, plan provision changes, and other As a result, the UAL in any given year would be different from the illustration shown above -5-

67 Jackson County Employees Retirement System General County and Department of Transportation Supplemental Valuation as of December 31, 2016 Amortization Schedule Market Valuation Assets at 750% Unfunded Accrued Liability Beginning UAL Payment Unfunded Accrued Valuation Date of Year Schedule Liability End of Year 12/31/2016 $ 71,434,470 $ 5,484,157 $ 71,104,721 12/31/2017 $ 71,104,721 $ 6,150,971 $ 70,058,723 12/31/2018 $ 70,058,723 $ 6,150,971 $ 68,934,275 12/31/2019 $ 68,934,275 $ 6,150,971 $ 67,725,493 12/31/2020 $ 67,725,493 $ 6,150,971 $ 66,426,053 12/31/2021 $ 66,426,053 $ 6,150,971 $ 65,029,154 12/31/2022 $ 65,029,154 $ 6,150,971 $ 63,527,489 12/31/2023 $ 63,527,489 $ 6,150,971 $ 61,913,198 12/31/2024 $ 61,913,198 $ 6,150,971 $ 60,177,836 12/31/2025 $ 60,177,836 $ 6,150,971 $ 58,312,321 12/31/2026 $ 58,312,321 $ 6,150,971 $ 56,306,893 12/31/2027 $ 56,306,893 $ 6,150,971 $ 54,151,058 12/31/2028 $ 54,151,058 $ 6,150,971 $ 51,833,535 12/31/2029 $ 51,833,535 $ 6,150,971 $ 49,342,197 12/31/2030 $ 49,342,197 $ 6,150,971 $ 46,664,010 12/31/2031 $ 46,664,010 $ 6,150,971 $ 43,784,958 12/31/2032 $ 43,784,958 $ 6,150,971 $ 40,689,978 12/31/2033 $ 40,689,978 $ 6,150,971 $ 37,362,874 12/31/2034 $ 37,362,874 $ 6,150,971 $ 33,786,237 12/31/2035 $ 33,786,237 $ 6,150,971 $ 29,941,353 12/31/2036 $ 29,941,353 $ 6,150,971 $ 25,808,102 12/31/2037 $ 25,808,102 $ 6,150,971 $ 21,364,858 12/31/2038 $ 21,364,858 $ 6,150,971 $ 16,588,370 12/31/2039 $ 16,588,370 $ 6,150,971 $ 11,453,645 12/31/2040 $ 11,453,645 $ 6,150,971 $ 5,933,816 12/31/2041 $ 5,933,816 $ 6,150,971 $ - 12/31/2042 $ - $ - $ - The Chart above represents an illustration of the amortization of $71,434,470 over a closed 25-year period using level dollar financing In practice, the UAL will differ from illustration due to experience gains and losses, plan provision changes, and other As a result, the UAL in any given year would be different from the illustration shown above -6-

68 Jackson County Employees Retirement System General County and Department of Transportation Supplemental Valuation as of December 31, 2016 Amortization Schedule Actuarial Valuation Assets at 650% Unfunded Accrued Liability Beginning UAL Payment Unfunded Accrued Valuation Date of Year Schedule Liability End of Year 12/31/2016 $ 87,246,990 $ 5,484,157 $ 87,257,523 12/31/2017 $ 87,257,523 $ 6,930,620 $ 85,775,761 12/31/2018 $ 85,775,761 $ 6,930,620 $ 84,197,684 12/31/2019 $ 84,197,684 $ 6,930,620 $ 82,517,033 12/31/2020 $ 82,517,033 $ 6,930,620 $ 80,727,139 12/31/2021 $ 80,727,139 $ 6,930,620 $ 78,820,902 12/31/2022 $ 78,820,902 $ 6,930,620 $ 76,790,760 12/31/2023 $ 76,790,760 $ 6,930,620 $ 74,628,658 12/31/2024 $ 74,628,658 $ 6,930,620 $ 72,326,020 12/31/2025 $ 72,326,020 $ 6,930,620 $ 69,873,710 12/31/2026 $ 69,873,710 $ 6,930,620 $ 67,262,001 12/31/2027 $ 67,262,001 $ 6,930,620 $ 64,480,530 12/31/2028 $ 64,480,530 $ 6,930,620 $ 61,518,263 12/31/2029 $ 61,518,263 $ 6,930,620 $ 58,363,449 12/31/2030 $ 58,363,449 $ 6,930,620 $ 55,003,573 12/31/2031 $ 55,003,573 $ 6,930,620 $ 51,425,304 12/31/2032 $ 51,425,304 $ 6,930,620 $ 47,614,448 12/31/2033 $ 47,614,448 $ 6,930,620 $ 43,555,886 12/31/2034 $ 43,555,886 $ 6,930,620 $ 39,233,517 12/31/2035 $ 39,233,517 $ 6,930,620 $ 34,630,195 12/31/2036 $ 34,630,195 $ 6,930,620 $ 29,727,657 12/31/2037 $ 29,727,657 $ 6,930,620 $ 24,506,454 12/31/2038 $ 24,506,454 $ 6,930,620 $ 18,945,872 12/31/2039 $ 18,945,872 $ 6,930,620 $ 13,023,853 12/31/2040 $ 13,023,853 $ 6,930,620 $ 6,716,902 12/31/2041 $ 6,716,902 $ 6,930,620 $ - 12/31/2042 $ - $ - $ - The Chart above represents an illustration of the amortization of $87,246,990 over a closed 25-year period using level dollar financing In practice, the UAL will differ from illustration due to experience gains and losses, plan provision changes, and other As a result, the UAL in any given year would be different from the illustration shown above -7-

69 Jackson County Employees Retirement System General County and Department of Transportation Supplemental Valuation as of December 31, 2016 Amortization Schedule Market Valuation Assets at 650% Unfunded Accrued Liability Beginning UAL Payment Unfunded Accrued Valuation Date of Year Schedule Liability End of Year 12/31/2016 $ 91,540,647 $ 5,484,157 $ 91,830,268 12/31/2017 $ 91,830,268 $ 7,293,820 $ 90,270,854 12/31/2018 $ 90,270,854 $ 7,293,820 $ 88,610,078 12/31/2019 $ 88,610,078 $ 7,293,820 $ 86,841,351 12/31/2020 $ 86,841,351 $ 7,293,820 $ 84,957,658 12/31/2021 $ 84,957,658 $ 7,293,820 $ 82,951,524 12/31/2022 $ 82,951,524 $ 7,293,820 $ 80,814,992 12/31/2023 $ 80,814,992 $ 7,293,820 $ 78,539,585 12/31/2024 $ 78,539,585 $ 7,293,820 $ 76,116,277 12/31/2025 $ 76,116,277 $ 7,293,820 $ 73,535,454 12/31/2026 $ 73,535,454 $ 7,293,820 $ 70,786,877 12/31/2027 $ 70,786,877 $ 7,293,820 $ 67,859,642 12/31/2028 $ 67,859,642 $ 7,293,820 $ 64,742,138 12/31/2029 $ 64,742,138 $ 7,293,820 $ 61,421,995 12/31/2030 $ 61,421,995 $ 7,293,820 $ 57,886,044 12/31/2031 $ 57,886,044 $ 7,293,820 $ 54,120,255 12/31/2032 $ 54,120,255 $ 7,293,820 $ 50,109,691 12/31/2033 $ 50,109,691 $ 7,293,820 $ 45,838,439 12/31/2034 $ 45,838,439 $ 7,293,820 $ 41,289,556 12/31/2035 $ 41,289,556 $ 7,293,820 $ 36,444,996 12/31/2036 $ 36,444,996 $ 7,293,820 $ 31,285,540 12/31/2037 $ 31,285,540 $ 7,293,820 $ 25,790,718 12/31/2038 $ 25,790,718 $ 7,293,820 $ 19,938,734 12/31/2039 $ 19,938,734 $ 7,293,820 $ 13,706,370 12/31/2040 $ 13,706,370 $ 7,293,820 $ 7,068,903 12/31/2041 $ 7,068,903 $ 7,293,820 $ - 12/31/2042 $ - $ - $ - The Chart above represents an illustration of the amortization of $91,540,647 over a closed 25-year period using level dollar financing In practice, the UAL will differ from illustration due to experience gains and losses, plan provision changes, and other As a result, the UAL in any given year would be different from the illustration shown above -8-

70 Jackson County Employees Retirement System General County and Department of Transportation Supplemental Valuation as of December 31, 2016 Amortization Schedule Actuarial Valuation Assets at 550% Unfunded Accrued Liability Beginning of UAL Payment Unfunded Accrued Valuation Date Year Schedule Liability End of Year 12/31/2016 $ 111,057,179 $ 5,484,157 $ 111,531,698 12/31/2017 $ 111,531,698 $ 8,094,017 $ 109,351,326 12/31/2018 $ 109,351,326 $ 8,094,017 $ 107,051,033 12/31/2019 $ 107,051,033 $ 8,094,017 $ 104,624,224 12/31/2020 $ 104,624,224 $ 8,094,017 $ 102,063,940 12/31/2021 $ 102,063,940 $ 8,094,017 $ 99,362,841 12/31/2022 $ 99,362,841 $ 8,094,017 $ 96,513,181 12/31/2023 $ 96,513,181 $ 8,094,017 $ 93,506,790 12/31/2024 $ 93,506,790 $ 8,094,017 $ 90,335,047 12/31/2025 $ 90,335,047 $ 8,094,017 $ 86,988,859 12/31/2026 $ 86,988,859 $ 8,094,017 $ 83,458,630 12/31/2027 $ 83,458,630 $ 8,094,017 $ 79,734,239 12/31/2028 $ 79,734,239 $ 8,094,017 $ 75,805,006 12/31/2029 $ 75,805,006 $ 8,094,017 $ 71,659,666 12/31/2030 $ 71,659,666 $ 8,094,017 $ 67,286,332 12/31/2031 $ 67,286,332 $ 8,094,017 $ 62,672,464 12/31/2032 $ 62,672,464 $ 8,094,017 $ 57,804,833 12/31/2033 $ 57,804,833 $ 8,094,017 $ 52,669,483 12/31/2034 $ 52,669,483 $ 8,094,017 $ 47,251,689 12/31/2035 $ 47,251,689 $ 8,094,017 $ 41,535,916 12/31/2036 $ 41,535,916 $ 8,094,017 $ 35,505,775 12/31/2037 $ 35,505,775 $ 8,094,017 $ 29,143,977 12/31/2038 $ 29,143,977 $ 8,094,017 $ 22,432,280 12/31/2039 $ 22,432,280 $ 8,094,017 $ 15,351,439 12/31/2040 $ 15,351,439 $ 8,094,017 $ 7,881,153 12/31/2041 $ 7,881,153 $ 8,094,017 $ - 12/31/2042 $ - $ - $ - The Chart above represents an illustration of the amortization of $111,057,179 over a closed 25-year period using level dollar financing In practice, the UAL will differ from illustration due to experience gains and losses, plan provision changes, and other As a result, the UAL in any given year would be different from the illustration shown above -9-

71 Jackson County Employees Retirement System General County and Department of Transportation Supplemental Valuation as of December 31, 2016 Amortization Schedule Market Valuation Assets at 550% Unfunded Accrued Liability Beginning UAL Payment Unfunded Accrued Valuation Date of Year Schedule Liability End of Year 12/31/2016 $ 115,350,836 $ 5,484,157 $ 116,061,506 12/31/2017 $ 116,061,506 $ 8,422,751 $ 113,792,579 12/31/2018 $ 113,792,579 $ 8,422,751 $ 111,398,861 12/31/2019 $ 111,398,861 $ 8,422,751 $ 108,873,488 12/31/2020 $ 108,873,488 $ 8,422,751 $ 106,209,219 12/31/2021 $ 106,209,219 $ 8,422,751 $ 103,398,416 12/31/2022 $ 103,398,416 $ 8,422,751 $ 100,433,019 12/31/2023 $ 100,433,019 $ 8,422,751 $ 97,304,525 12/31/2024 $ 97,304,525 $ 8,422,751 $ 94,003,964 12/31/2025 $ 94,003,964 $ 8,422,751 $ 90,521,871 12/31/2026 $ 90,521,871 $ 8,422,751 $ 86,848,264 12/31/2027 $ 86,848,264 $ 8,422,751 $ 82,972,608 12/31/2028 $ 82,972,608 $ 8,422,751 $ 78,883,792 12/31/2029 $ 78,883,792 $ 8,422,751 $ 74,570,090 12/31/2030 $ 74,570,090 $ 8,422,751 $ 70,019,135 12/31/2031 $ 70,019,135 $ 8,422,751 $ 65,217,877 12/31/2032 $ 65,217,877 $ 8,422,751 $ 60,152,550 12/31/2033 $ 60,152,550 $ 8,422,751 $ 54,808,630 12/31/2034 $ 54,808,630 $ 8,422,751 $ 49,170,794 12/31/2035 $ 49,170,794 $ 8,422,751 $ 43,222,878 12/31/2036 $ 43,222,878 $ 8,422,751 $ 36,947,826 12/31/2037 $ 36,947,826 $ 8,422,751 $ 30,327,646 12/31/2038 $ 30,327,646 $ 8,422,751 $ 23,343,357 12/31/2039 $ 23,343,357 $ 8,422,751 $ 15,974,931 12/31/2040 $ 15,974,931 $ 8,422,751 $ 8,201,242 12/31/2041 $ 8,201,242 $ 8,422,751 $ - 12/31/2042 $ - $ - $ - The Chart above represents an illustration of the amortization of $115,350,836 over a closed 25-year period using level dollar financing In practice, the UAL will differ from illustration due to experience gains and losses, plan provision changes, and other As a result, the UAL in any given year would be different from the illustration shown above -10-

72 Jackson County Employees Retirement System General County and Department of Transportation Supplemental Valuation as of December 31, 2016 Comments Comment 1 The impact on the County s cost under the alternate assumptions show results prior to the cash infusion from bonding The current amortization policy amortizes the Unfunded Actuarial Accrued Liability (UAAL) over a closed 25-year period using the level dollar amortization method Advance funding the plan through a bond issue would change the remaining UAAL We will bring to the attention of the Retirement System Board that they may wish to revisit the funding policy if a large cash infusion is made Comment 2 If you have reason to believe that the information provided in this report is inaccurate, or is in any way incomplete, or if you need further information in order to make an informed decision on the subject matter of this report, please contact the authors of the report prior to making such decision Comment 3 The calculations are based upon assumptions regarding future events, which may or may not materialize They are also based upon present plan provisions and assumptions that are outlined in the December 31, 2016 actuarial report issued April 26, 2017 These calculations do not take into account any possible changes to assumptions that may occur as a result of an experience study that will be performed in the next 6 months Comment 4 Issuing bonds to fund a pension system invested in risky assets will not eliminate risk to the County The success of these bonds depends on investment returns averaging more than the cost of financing the debt Even if the plan is 100% funded at the time of the bond issue, benefits continue to accrue and require funding In addition, future unfunded liabilities may occur in periods of unfavorable experience and also require funding In other words, decision makers should be aware that being 100% funded at one point in time is not a guarantee of remaining 100% funded Comment 5 No statement in this report is intended to be interpreted as a recommendation in favor of the alternate assumptions, or in opposition to them -11-

73 Jackson County Employees Retirement System General County and Department of Transportation Supplemental Valuation as of December 31, 2016 Comments (Concluded) Comment 6 No statement in this report is intended to be investment or legal advice Comment 7 The reader of this report should keep in mind that actuarial calculations are mathematical estimates based on current data and assumptions about future events (which may or may not materialize) Please note that actuarial calculations can and do vary from one valuation year to the next, sometimes significantly, if the group valued is very small As a result, the cost impact of a benefit change may fluctuate over time as the demographics of the group changes -12-

74 Appendix B: Analysis of Current and Future Post Employment Healthcare Benefit Obligations of Jackson County Jackson County Comprehensive Financial Plan Appendix B

75 June 25, 2016 County of Jackson 120 W Michigan Ave Jackson, Michigan Attention: Mr James Latham, Finance Officer This report contains the results of an actuarial valuation of the liabilities associated with retiree health benefits provided by Jackson County Proper (General/Sheriffs) and Road Division, together with computed contributions to systematically finance these benefits The date of the valuation was January 1, 2016 The purpose of the actuarial valuation is to: Compute the liabilities associated with post-retirement health benefits likely to be paid on behalf of current active employees and retirees, and Compute a pre-funding contribution rate for the County to finance the postretirement health benefits as they accrue This valuation has been conducted in accordance with generally accepted actuarial principles and practices Data concerning active employees, retirees and assets was provided by County This data has been reviewed for reasonableness, but no attempt has been made to audit such information The valuation was based on the benefit provisions as submitted by the County This report was prepared under the direction of a member of the American Academy of Actuaries who meets the qualification standards of the American Academy of Actuaries to render the actuarial opinion contained herein Respectfully submitted, Denise M Jones Senior Consultant Sandra W Rodwan Member, American Academy of Actuaries

76 Jackson County Post-Employment Health Benefits County Proper and Road Divisions Actuarial Valuation as of January 1, 2016

77 Table of Contents Section One: Valuation Summary Valuation Summary 1 Section Two: Actuarial Calculations Funding Actuarial Accrued Liability 3 Computed Contribution 3 Comments 4 Section Three: Benefit Provisions Benefit Provision Summary 6 Section Four: Actuarial Assumptions and Methods Actuarial Assumptions 7 Actuarial Methods 11 Section Five: Valuation Data Benefit Data Submitted 12 Participant Summary 13

78 Section One: Valuation Summary

79 Section One: Valuation Summary Purpose of Valuation Jackson County General and Sheriffs and Road Division The purpose of this actuarial valuation of post-retirement health benefits as of January 1, 2016 is to: Compute the liabilities associated with post-retirement health benefits likely to be paid on behalf of current active and retired participants, Compute a pre-funding contribution rate to finance the benefits as they accrue Assumptions Used in the Valuation The liabilities and pre-funding contributions are very sensitive to the long-term assumptions used in making the valuation The assumptions used in making this valuation, summarized in Section Four, are only one reasonable set out of a large number of possibilities To the extent that actual experience differs from the long-term assumptions, the liabilities and contribution will be greater or less than those indicated in this report The assumptions having the greatest impact are the rate of medical care inflation and the investment return rate We have assumed an 8% annual rate for medical care inflation in the first year, graded down to 4% over the next 8 years The assumed investment return rate was 3% Please refer to Comments 2 and 3 on pages 4 and 5 Liabilities and computed contributions can change significantly in future years depending upon the actual and assumed rates of medical care inflation, benefit provisions and demographics of the participant group Actuarial Accrued Liabilities Actuarial accrued liabilities as of January 1, 2016, were computed to be $117,277,316 for the General County Proper and Road Divisions Of this amount, $41,042,371 was attributable to current active employees and $76,234,945 to current retirees Funding Value of Assets There were no assets reported as of January 1, 2016 Computed Contribution Rate The total annual contribution computed to pre-fund post-retirement health benefits was computed to be $8,792,893 There are two components of the contribution, the normal cost and an amortization payment for unfunded actuarial accrued liability The normal cost contribution was computed to be $2,897,487 The amortization payment was computed to be $5,895,406 The amortization period used was 30 years The 30 year period is the maximum permitted for reporting purposes under Statements 43 and 45 of the Governmental Accounting Standards Board Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

80 Section One: Valuation Summary Participants Active Employees 559 Retired participants 545 Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

81 Section Two: Actuarial Calculations Funding

82 Section Two: Actuarial Calculations Funding Actuarial Accrued Liabilities The actuarial accrued liability as of January 1, 2016 was computed to be $117,277,316 Active participants $41,042,371 Retired participants 76,234,945 Total Actuarial Accrued Liability 117,277,316 Funding Value of Assets 0 Unfunded Actuarial Accrued Liability $117,277,316 Computed Contribution Annual Required Contribution The computed contribution consists of two components: normal cost and amortization of unfunded actuarial accrued liability Normal cost was computed from date of hire to date of termination The normal cost can be considered to be the ongoing cost The portion of the total present value of future benefits allocated to service already rendered is the actuarial accrued liability We have amortized the unfunded actuarial accrued liability for active employees over 30 years The annual dollar amount of contributions are as follows: Normal Cost $2,897,487 Unfunded Actuarial Accrued Liability 5,895,406 Total Computed Contribution Rate $8,792,893 Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

83 Section Two: Actuarial Calculations Funding Comments Comment 1: The GASB statements do not mandate that the plan sponsor pre-fund OPEB liabilities However, if the plan sponsor s funding policy is to contribute less than the Annual Required Contribution (ARC), the GASB standards require that a lower assumed rate of investment return be used to compute the liabilities and Annual Required Contribution This will increase the liabilities, ARC, and the OPEB obligation that must be reported in the financial statements The OPEB obligation represents the cumulative difference between the annual OPEB cost and the employer s actual contribution For purposes of this valuation we have assumed a 3% rate of investment return based upon the assumption that the County will not contribute the actuarially determined annual required contribution Comment 2: Liabilities for health insurance premiums are highly dependent upon the underlying assumptions concerning medical care inflation and the discount rate For the purposes of this valuation, we assumed an 8% annual medical care inflation rate graded down to 4% over a period of 8 years and 3% discount rate Liabilities and computed contributions would be greater if a higher medical care inflation rate is assumed or a lower discount rate, and conversely To show the sensitivity of results to the medical care inflation we also performed the valuation assuming a discount rate of 5% rather than 3% The results based on this alternate discount rate are shown below Actuarial Accrued Liabilities Based on Alternate 5% Discount Assumption Active participants $29,320,233 Retiree participants 60,119,141 Total Actuarial Accrued Liability 89,439,374 Funding Value of Assets 0 Unfunded Actuarial Accrued Liability $89,439,374 Computed Contribution Based on Alternate 5% Discount Assumption Normal Cost $1,731,204 Unfunded Actuarial Accrued Liability 5,677,379 Total Computed Contribution $7,408,583 Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

84 Section Two: Actuarial Calculations Funding Comment 3: The unfunded actuarial accrued liabilities were amortized over the maximum 30 year period permitted for reporting purposes under the GASB standards A shorter period would result in higher computed contribution rates Comment 4: In order for assets to be considered in determining the unfunded actuarial accrued liability, the assets must be a) irrevocably held in a trust or equivalent arrangement, b) dedicated to providing benefits to retirees and their beneficiaries in accordance with the terms of the plan, and c) legally protected from creditors of the employer or plan Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

85 Section Three: Benefit Provisions

86 Section Three: Benefit Provisions Benefit Provision Summary Eligibility Employees retiring with 15 or more years of service are eligible for retiree health benefits Coverage for employees retiring with less than 15 years of service is funded by the County as follows: Fourteen years 95% Thirteen years 90% Twelve years 85% Eleven years 80% Ten years 75% Employees must be eligible to immediately begin drawing pension benefits upon termination of employment in order to be eligible for retiree health benefits Benefits Upon termination of service, continued medical fringe benefits to the eligible retired participant and spouse Premium co-pays by the retiree are required The benefits are payable for the life of the retired employee Spousal benefits are payable if the retired employee has at least 15 years of service and was hired before 1/1/2007 Surviving spouse benefits continue after the death of the retiree if the surviving spouse is receiving a pension as the designated beneficiary of the retiree who elected a joint and survivor optional form of payment Employer-financed retiree spousal coverage is not available for employees hired on or after 1/1/2007 Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

87 Section Four: Actuarial Assumptions And Methods

88 Section Four: Actuarial Assumptions and Methods Actuarial Assumptions Economic Assumptions (i) Interest Rate 30% (net of expenses) (ii) Inflation Rate Medical 80% graded down to 4% Over 8 years Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

89 Section Four: Actuarial Assumptions and Methods Demographic Assumptions (i) Mortality RP2000 Projected to 2020 Using projection scale AA (adjusted by 120% for males) Future Life Sample Expectancy (Years) Ages Men Women (ii) Disability Sample Percent Becoming Disabled At Indicated Age Ages Roads General County % 008% Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

90 Section Four: Actuarial Assumptions and Methods (ii) Termination of Employment Service related rates for first 5 years of employment Age related rates after first 5 years of employment Sample Ages % of Active Members Separating Within Year Years of Service Roads General County ALL % 4000% & Over Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

91 Section Four: Actuarial Assumptions and Methods (iii) Retirement Rates Age-related rates Percent Retiring Age Related Rates Retirement Age General County Roads 57 40% % Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

92 Section Four: Actuarial Assumptions and Methods Actuarial Method Used for the Valuation Normal Cost Normal cost and the allocation of actuarial present values between service rendered before and after the valuation date were determined using an individual entry age actuarial cost method having the following characteristic: The annual normal costs for each individual active participant, payable from date of hire to date of retirement, are sufficient to accumulate the value of the participant s benefit at the time of retirement; Financing of Unfunded Actuarial Accrued Liability Unfunded actuarial accrued liability was amortized as level dollars over 30 years Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

93 Section Five: Valuation Data

94 Section Five: Valuation Data Benefit Data Submitted Claims information and illustrative premium rates were submitted by the County For pre 65 retirees, illustrative monthly premiums averaged $62340 for single and $1,37182 for 2 persons Post 65 premiums were $343 per month per person Valuation Assets None Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

95 Section Five: Valuation Data Participant Summary General County Retirees and Survivors December 31, 2015 Attained Age Totals Totals 426 Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

96 Section Five: Valuation Data Roads Retirees and Survivors December 31, 2015 Attained Age Totals Totals 119 Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

97 Section Five: Valuation Data General Active Members - December 31, 2015 Age and Service Distribution Attained Service Total Age Over 30 No Payroll $211, ,792, ,650, ,818, ,004, ,468, ,199, ,084, ,490, , , ,169 Totals $22,147,555 Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

98 Section Five: Valuation Data Roads Active Members - December 31, 2015 Age and Service Distribution Attained Service Total Age Over 30 No Payroll $38, , , , , , , , ,637 Totals $2,303,173 Jackson County Proper and Roads Post-Employment Health Benefits January 1, 2016 Valuation

99 Appendix C: Evidence that the Pension Obligation Bonds will Eliminate the Unfunded Pension Liability of the Defined Benefit Plan Jackson County Comprehensive Financial Plan Appendix C

100 Sources and Uses Sources Bond Par Amount $68,000,000 Total Sources $68,000,000 Uses Pension Fund Deposit $67,140,813 Costs of Issuance (Including Underwriter's Discount) $859,187 Total Uses $68,000,000 Jackson County Comprehensive Financial Plan Appendix C

101 Appendix D: Debt Service Amortization Schedule Jackson County Comprehensive Financial Plan Appendix D

102 Debt Service Amortization Schedule for Not to Exceed Amount of $68,000,000 Fiscal Year Ending 12/31 UAL Payment (a) Market Rates - 750% Discount Rate 1-Jun 1-Dec 1-Dec Interest Payment Principal Payment Est Interest Rate Interest Payment Estimated Bond Payments (b) Difference Present 395% (c) 2018 $5,751,688 $1,114,774 $1,890, % $1,208,791 $4,213,565 $1,538,123 $1,481, ,751,688 1,192,348 1,890, % 1,192,348 4,274,697 1,476,992 1,367, ,751,688 1,174,110 1,925, % 1,174,110 4,273,220 1,478,469 1,316, ,751,688 1,153,224 1,965, % 1,153,224 4,271,447 1,480,241 1,267, ,751,688 1,129,644 2,015, % 1,129,644 4,274,287 1,477,401 1,216, ,751,688 1,103,952 2,070, % 1,103,952 4,277,905 1,473,784 1,167, ,751,688 1,075,697 2,120, % 1,075,697 4,271,394 1,480,295 1,127, ,751,688 1,045,169 2,180, % 1,045,169 4,270,338 1,481,351 1,085, ,751,688 1,012,469 2,245, % 1,012,469 4,269,938 1,481,751 1,043, ,751, ,671 2,315, % 977,671 4,270,343 1,481,346 1,003, ,751, ,631 2,390, % 940,631 4,271,263 1,480, , ,751, ,819 2,480, % 895,819 4,271,638 1,480, , ,751, ,319 2,575, % 849,319 4,273,638 1,478, , ,751, ,038 2,670, % 801,038 4,272,075 1,479, , ,751, ,975 2,770, % 750,975 4,271,950 1,479, , ,751, ,038 2,875, % 699,038 4,273,075 1,478, , ,751, ,969 2,985, % 641,969 4,268,938 1,482, , ,751, ,717 3,105, % 582,717 4,270,433 1,481, , ,751, ,082 3,230, % 521,082 4,272,165 1,479, , ,751, ,967 3,355, % 456,967 4,268,934 1,482, , ,751, ,370 3,490, % 390,370 4,270,740 1,480, , ,751, ,476 3,635, % 318,476 4,271,952 1,479, , ,751, ,595 3,785, % 243,595 4,272,190 1,479, , ,751, ,624 3,940, % 165,624 4,271,248 1,480, , ,751,688 84,460 4,100, % 84,460 4,268,920 1,482, , % $143,792,200 $19,321,135 $68,000,000 $19,415,152 $106,736,287 $37,055,913 $23,239,579 (a) Based on UAL actuarial amortization provided by Gabriel Roeder Smith & Company on July 10, not including normal cost (b) Estimate only based on market conditions on October 6, 2017 (c) Represents All-in True Interest Cost (TIC) Jackson County Comprehensive Financial Plan Appendix D

103 Oct 10, :53 pm Prepared by PFM Financial Advisors LLC (SM) TABLE OF CONTENTS Jackson County Limited Tax General Obligation Pension Bonds, Series 2017 (Federally Taxable) 750% Return - AVA Report Page Bond Debt Service 1 Sources and Uses of Funds 2 Bond Pricing 3 Bond Summary Statistics 4

104 BOND DEBT SERVICE Jackson County Limited Tax General Obligation Pension Bonds, Series 2017 (Federally Taxable) 750% Return - AVA Period Annual Ending Principal Coupon Interest Debt Service Debt Service 06/01/2018 1,114, ,114, /01/2018 1,890, % 1,208, ,098, ,213, /01/2019 1,192, ,192, /01/2019 1,890, % 1,192, ,082, ,274, /01/2020 1,174, ,174, /01/2020 1,925, % 1,174, ,099, ,273, /01/2021 1,153, ,153, /01/2021 1,965, % 1,153, ,118, ,271, /01/2022 1,129, ,129, /01/2022 2,015, % 1,129, ,144, ,274, /01/2023 1,103, ,103, /01/2023 2,070, % 1,103, ,173, ,277, /01/2024 1,075, ,075, /01/2024 2,120, % 1,075, ,195, ,271, /01/2025 1,045, ,045, /01/2025 2,180, % 1,045, ,225, ,270, /01/2026 1,012, ,012, /01/2026 2,245, % 1,012, ,257, ,269, /01/ , , /01/2027 2,315, % 977, ,292, ,270, /01/ , , /01/2028 2,390, % 940, ,330, ,271, /01/ , , /01/2029 2,480, % 895, ,375, ,271, /01/ , , /01/2030 2,575, % 849, ,424, ,273, /01/ , , /01/2031 2,670, % 801, ,471, ,272, /01/ , , /01/2032 2,770, % 750, ,520, ,271, /01/ , , /01/2033 2,875, % 699, ,574, ,273, /01/ , , /01/2034 2,985, % 641, ,626, ,268, /01/ , , /01/2035 3,105, % 582, ,687, ,270, /01/ , , /01/2036 3,230, % 521, ,751, ,272, /01/ , , /01/2037 3,355, % 456, ,811, ,268, /01/ , , /01/2038 3,490, % 390, ,880, ,270, /01/ , , /01/2039 3,635, % 318, ,953, ,271, /01/ , , /01/2040 3,785, % 243, ,028, ,272, /01/ , , /01/2041 3,940, % 165, ,105, ,271, /01/ , , /01/2042 4,100, % 84, ,184, ,268, ,000,000 38,736, ,736, ,736,28690 Oct 10, :53 pm Prepared by PFM Financial Advisors LLC (SM) Page 1

105 Sources: SOURCES AND USES OF FUNDS Jackson County Limited Tax General Obligation Pension Bonds, Series 2017 (Federally Taxable) 750% Return - AVA Bond Proceeds: Par Amount 68,000, ,000,00000 Uses: Project Fund Deposits: Pension Fund Deposit 67,140,81300 Delivery Date Expenses: Cost of Issuance 275,00000 Underwriter's Discount 579, ,89000 Other Uses of Funds: Additional Proceeds 4, ,000,00000 Notes: Cost of Issuance and Underwriter's Discount are estimates only Interest rates estimated based on market conditions as of 10/6/17 Oct 10, :53 pm Prepared by PFM Financial Advisors LLC (SM) Page 2

106 BOND PRICING Jackson County Limited Tax General Obligation Pension Bonds, Series 2017 (Federally Taxable) 750% Return - AVA Maturity Bond Component Date Amount Rate Yield Price Bond Component: 12/01/2018 1,890, % 1740% /01/2019 1,890, % 1930% /01/2020 1,925, % 2170% /01/2021 1,965, % 2400% /01/2022 2,015, % 2550% /01/2023 2,070, % 2730% /01/2024 2,120, % 2880% /01/2025 2,180, % 3000% /01/2026 2,245, % 3100% /01/2027 2,315, % 3200% /01/2028 2,390, % 3750% /01/2029 2,480, % 3750% /01/2030 2,575, % 3750% /01/2031 2,670, % 3750% /01/2032 2,770, % 3750% /01/2033 2,875, % 3970% /01/2034 2,985, % 3970% /01/2035 3,105, % 3970% /01/2036 3,230, % 3970% /01/2037 3,355, % 3970% /01/2038 3,490, % 4120% /01/2039 3,635, % 4120% /01/2040 3,785, % 4120% /01/2041 3,940, % 4120% /01/2042 4,100, % 4120% ,000,000 Dated Date 12/15/2017 Delivery Date 12/15/2017 First Coupon 06/01/2018 Par Amount 68,000,00000 Original Issue Discount Production 68,000, % Underwriter's Discount (579,89000) ( %) Purchase Price 67,420, % Accrued Interest Net Proceeds 67,420,11000 Oct 10, :53 pm Prepared by PFM Financial Advisors LLC (SM) Page 3

107 BOND SUMMARY STATISTICS Jackson County Limited Tax General Obligation Pension Bonds, Series 2017 (Federally Taxable) 750% Return - AVA Dated Date 12/15/2017 Delivery Date 12/15/2017 Last Maturity 12/01/2042 Arbitrage Yield % True Interest Cost (TIC) % Net Interest Cost (NIC) % All-In TIC % Average Coupon % Average Life (years) Duration of Issue (years) Par Amount 68,000,00000 Bond Proceeds 68,000,00000 Total Interest 38,736,28690 Net Interest 39,316,17690 Total Debt Service 106,736,28690 Maximum Annual Debt Service 4,277,90450 Average Annual Debt Service 4,276,10319 Underwriter's Fees (per $1000) Average Takedown Other Fee Total Underwriter's Discount Bid Price Par Average Average PV of 1 bp Bond Component Value Price Coupon Life change Bond Component 68,000, % , ,000, ,33210 All-In Arbitrage TIC TIC Yield Par Value 68,000, ,000, ,000, Accrued Interest + Premium (Discount) - Underwriter's Discount (579,89000) (579,89000) - Cost of Issuance Expense (275,00000) - Other Amounts Target Value 67,420, ,145, ,000,00000 Target Date 12/15/ /15/ /15/2017 Yield % % % Oct 10, :53 pm Prepared by PFM Financial Advisors LLC (SM) Page 4

108 Appendix E: Evidence of Rating Jackson County Comprehensive Financial Plan Appendix E

109 Rating Action: Moody's Assigns Aa2 to Jackson County, MI's GOLT Bonds Global Credit Research - 18 Apr 2017 New York, April 18, Issue: Capital Improvement Bonds, Series 2017B (Limited Tax General Obligation); Rating: Aa2; Rating Type: Underlying LT; Sale Amount: $7,500,000; Expected Sale Date: 05/02/2017; Rating Description: General Obligation Limited Tax; Summary Rating Rationale Moody's Investors Service has assigned a Aa2 rating to Jackson County, MI's $75 million Capital Improvement Bonds, Series 2017B (Limited Tax General Obligation) The Aa2 rating on the county's outstanding general obligation limited tax (GOLT) bonds is maintained Following the sale, the county will have $966 million of total GOLT debt outstanding The Aa2 rating reflects the county's large tax base; slightly below average socioeconomic characteristics; healthy financial condition; and average debt burden The rating also factors the county's moderate pension burden and sizable unfunded OPEB liabilities The GOLT rating reflects a rating on parity with a hypothetic general obligation unlimited (GOULT) rating based on the county's full faith and credit backing the limited tax obligations Rating Outlook Outlooks are typically not assigned to local governments with this amount of debt Factors that Could Lead to an Upgrade Sustained tax base growth and/or strengthening of the county's socioeconomic profile Maintenance of sound financial operations that increase reserve levels Material reduction to unfunded pension and OPEB liabilities Factors that Could Lead to a Downgrade Weakening of the county's socioeconomic profile Substantial deterioration in operating reserves and/or liquidity Significant increases to the county's debt burden and/or pension and OPEB liabilities Legal Security The county's outstanding GOLT debt, including the current offering, are secured by the its full faith and credit pledge with bonds payable as a first budget obligation from all available general funds Use of Proceeds Proceeds of the Series 2017B bonds will finance capital projects and equipment purchases for public safety purposes Obligor Profile Jackson County is covers 707 square miles in the south-central portion of the state's Lower Peninsula The county is home to an estimated 160,000 residents Methodology The principal methodology used in this rating was US Local Government General Obligation Debt published in December 2016 Please see the Rating Methodologies page on wwwmoodyscom for a copy of this

110 methodology Regulatory Disclosures For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating For further information please see the ratings tab on the issuer/entity page for the respective issuer on wwwmoodyscom Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review Please see wwwmoodyscom for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating Please see the ratings tab on the issuer/entity page on wwwmoodyscom for additional regulatory disclosures for each credit rating Andrew Van Dyck Dobos Lead Analyst Regional PFG Chicago Moody's Investors Service, Inc 100 N Riverside Plaza Suite 2220 Chicago US JOURNALISTS: SUBSCRIBERS: David Levett Additional Contact Regional PFG Chicago JOURNALISTS: SUBSCRIBERS: Releasing Office: Moody's Investors Service, Inc 250 Greenwich Street New York, NY USA JOURNALISTS: SUBSCRIBERS: Moody s Corporation, Moody s Investors Service, Inc, Moody s Analytics, Inc and/or their licensors and affiliates (collectively, MOODY S ) All rights reserved CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC AND ITS RATINGS AFFILIATES ( MIS ) ARE MOODY S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY S PUBLICATIONS MAY INCLUDE MOODY S CURRENT OPINIONS OF THE RELATIVE