CITY OF COCOA BEACH FIREFIGHTERS' RETIREMENT SYSTEM ACTUARIAL VALUATION REPORT PERFORMED AS OF OCTOBER 1, 2016

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1 CITY OF COCOA BEACH FIREFIGHTERS' RETIREMENT SYSTEM ACTUARIAL VALUATION REPORT PERFORMED AS OF OCTOBER 1, 2016 WITH RESULTS APPLICABLE TO THE PLAN/FISCAL YEAR ENDED SEPTEMBER 30, 2018

2 November 14, 2016 Board of Trustees c/o Ms. Debbie Grant City of Cocoa Beach Firefighters Retirement System 20 S. Orlando Ave. Cocoa Beach, FL Re: City of Cocoa Beach Firefighters Retirement System Dear Board: We are pleased to present to the Board this report of the annual actuarial valuation of the City of Cocoa Beach Firefighters Retirement System. The valuation was performed to determine whether the assets and contributions are sufficient to provide the prescribed benefits and to develop the appropriate funding requirements for the applicable plan year. Please note that this valuation may not be applicable for any other purposes. The valuation has been conducted in accordance with generally accepted actuarial principles and practices, including the applicable Actuarial Standards of Practice as issued by the Actuarial Standards Board, and reflects laws and regulations issued to date pursuant to the provisions of Chapters 112 and 175, Florida Statutes, as well as applicable federal laws and regulations. In our opinion, the assumptions used in this valuation, as adopted by the Board of Trustees, represent reasonable expectations of anticipated plan experience. Future actuarial measurements may differ significantly from the current measurements presented in this report for a variety of reasons including: changes in applicable laws, changes in plan provisions, changes in assumptions, or plan experience differing from expectations. In conducting the valuation, we have relied on personnel, plan design, and asset information supplied by the Board of Trustees, financial reports prepared by the custodian bank, and the actuarial assumptions and methods described in the Actuarial Assumptions section of this report. While we cannot verify the accuracy of all this information, the supplied information was reviewed for consistency and reasonableness. As a result of this review, we have no reason to doubt the substantial accuracy of the information and believe that it has produced appropriate results. This information, along with any adjustments or modifications, is summarized in various sections of this report Parker Commons Blvd., Suite 104 Fort Myers, FL (239) Fax (239)

3 The undersigned is familiar with the immediate and long-term aspects of pension valuations, and meets the Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinions contained herein. All of the sections of this report are considered an integral part of the actuarial opinions. To our knowledge, no associate of Foster & Foster, Inc. working on valuations of the program has any direct financial interest or indirect material interest in the City of Cocoa Beach, nor does anyone at Foster & Foster, Inc. act as a member of the Board of Trustees of the City of Cocoa Beach Firefighters Retirement System. Thus, there is no relationship existing that might affect our capacity to prepare and certify this actuarial report. If there are any questions, concerns, or comments about any of the items contained in this report, please contact me at Respectfully submitted, Foster & Foster, Inc. By: Douglas H. Lozen, EA, MAAA Enrolled Actuary # DHL/lke Enclosures

4 TABLE OF CONTENTS Section Title Page I Introduction a. Summary of Report 5 b. Contribution Impact of Annual Changes 7 c. Changes Since Prior Valuation 8 d. Requirements of Chapter 112, Part VII, Florida Statutes 9 II Valuation Information a. Reconciliation of Unfunded Actuarial Accrued Liabilities 15 b. Detailed Actuarial (Gain)/Loss Analysis 17 c. Actuarial Assumptions and Methods 18 d. Valuation Notes 20 e. Partial History of Premium Tax Refunds 21 III Trust Fund 22 IV Member Statistics a. Eligibility for Retirement 28 b. Inactive Members 29 c. Statistical Data 30 d. Age and Service Distribution 31 e. Valuation Participant Reconciliation 32 V Summary of Plan Provisions 33 VI Governmental Accounting Standards Board Statements 36 City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 4

5 SUMMARY OF REPORT The regular annual actuarial valuation of the City of Cocoa Beach Firefighters Retirement System, performed as of October 1, 2016, has been completed, and the results are presented in this Report. The results of this valuation are applicable to the plan/fiscal year ended September 30, The applicable contribution requirements, compared with the amounts developed in the October 1, 2015, actuarial valuation, are as follows: Valuation Date Applicable Plan/Fiscal Yr. End 10/1/16 9/30/18 10/1/15 9/30/17 Total Required Contribution % of Total Annual Payroll 51.27% 46.64% Member Contributions % of Total Annual Payroll 5.00% 5.00% City and State Required Contribution % of Total Annual Payroll 46.27% 41.64% State Contribution (est) ¹ 144, ,452 % of Total Annual Payroll 10.84% 10.84% Balance from City ¹ % of Total Annual Payroll 35.43% 30.80% ¹ Amount received in calendar Per Mutual Consent between the City and Membership, the City may use all future State Contributions up to $153, (the amount received in fiscal 2013) in determining its minimum recommended funding requirement. Future State Contributions in excess of $153, shall be allocated as a credit to the Plan s Unfunded Actuarial Accrued Liability. Additionally, the existing Excess State Monies Reserve as of September 30, 2015, has been utilized to reduce the Unfunded Actuarial Accrued Liability. For budgeting purposes, the required Sponsor Contribution (City and State) is 46.27% of Pensionable Earnings for the fiscal year ending September 30, The precise City requirement for the year is this amount, less actual State Contributions (up to the maximum $153,172.88). Additionally, the City has a prepaid contribution of $65,975 that may be utilized for the fiscal year ending September 30, City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 5

6 Experience during the last 12 months was less favorable than expected, relative to the Plan s actuarial assumptions. The primary sources of unfavorable experience included average increases in pensionable earnings that exceeded the assumed rate by more than 6% and lower than expected employee turnover. Additionally, funding requirements have increased due to changes in assumptions adopted by the Board as the result of a special Experience Study. The balance of this Report presents additional details of the actuarial valuation and the general operation of the Fund. The undersigned would be pleased to meet with the Board of Trustees in order to discuss the Report and any pending questions concerning its contents. Respectfully submitted, FOSTER & FOSTER, INC. By: Douglas H. Lozen, EA, MAAA By: Christine M. O Neal, ASA, EA, MAAA City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 6

7 CONTRIBUTION IMPACT OF ANNUAL CHANGES (1) Contribution Determined as of October 1, % (2) Summary of Contribution Impact by component: Change in Available State Money -4.5% Investment Return (Actuarial Asset Basis) -0.2% Salary Increases 2.4% Payroll Change Effect on UAAL Amortization -1.6% Greater than expected decrease in UAAL -0.7% Allocation from Excess State Monies Reserve -3.7% Change in Administrative Expense Percentage 0.1% Active Decrements 1.0% Inactive Mortality 0.5% Change in Normal Cost Rate -0.1% Assumption Changes 8.3% Other -1.7% Total Change in Contribution -0.42% (3) Contribution Determined as of October 1, % City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 7

8 CHANGES SINCE PRIOR VALUATION Plan Changes Ordinance 1596, adopted and effective May 19, 2016, amended the Plan primarily for compliance with requirements under the Internal Revenue Code, in addition to implementation of a Share Plan. A letter of no actuarial impact was submitted for this amendment. Actuarial Assumption/Method Change As required by Chapter 112, Florida Statutes, the payroll growth assumption (utilized for amortization of the Unfunded Actuarial Accrued Liability) is limited to the Plan s actual ten-year average payroll growth average. In conjunction with this valuation of the Plan, the assumption has been decreased from 1.10% to 1.04%. Additionally, the following assumption changes are incorporated in this valuation of the Plan, based on Board approval of a special Experience Study: 1. Salary Scale was changed from a flat 6.5% assumption to one based on service. 2. Turnover was changed from an age-based assumption to one based on service. 3. Mortality pursuant to Chapter , Florida Statutes, adoption of the assumption utilized by the Florida Retirement System for special risk employees. 4. Investment Return was lowered from 8.00% to 7.75%, net of investment related expenses. 5. Retirement Rates modified Early and Normal Retirement rates, based on historical experience. Additional details regarding the above assumption changes are described in the Actuarial Assumptions and Methods section of this report. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 8

9 COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS A. Participant Data New Assump Old Assump 10/1/ /1/ /1/2015 Actives Service Retirees DROP Retirees Beneficiaries Disability Retirees Terminated Vested Total Total Annual Payroll $1,542,945 $1,569,398 $1,464,984 Payroll Under Assumed Ret. Age 1,332,137 1,569,398 1,464,984 Annual Rate of Payments to: Service Retirees 671, , ,837 DROP Retirees 62,207 62,207 62,207 Beneficiaries Disability Retirees 36,181 36,181 36,181 Terminated Vested 78,161 78, ,512 B. Assets Actuarial Value (AVA) ¹ 11,944,645 11,944,645 10,994,915 Market Value (MVA) ¹ 11,770,118 11,770,118 10,619,106 C. Liabilities Present Value of Benefits Actives Retirement Benefits 6,613,896 6,752,934 5,781,375 Disability Benefits 124, , ,349 Death Benefits 104,746 45,099 39,934 Vested Benefits 555, , ,404 Refund of Contributions 41,237 38,316 50,571 Service Retirees 6,900,996 6,480,755 6,148,414 DROP Retirees¹ 986, , ,188 Beneficiaries Disability Retirees 410, , ,350 Terminated Vested 645, ,462 1,036,752 Excess State Monies Reserve ,119 Total 16,383,640 16,047,895 15,728,456 City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 9

10 New Assump Old Assump C. Liabilities - (Continued) 10/1/ /1/ /1/2015 Present Value of Future Salaries 9,183,975 9,351,464 9,121,801 Present Value of Future Member Contributions 459, , ,090 Normal Cost (Retirement) 161, , ,716 Normal Cost (Disability) 8,982 10,508 9,888 Normal Cost (Death) 4,780 1,983 1,844 Normal Cost (Vesting) 33,398 28,351 27,845 Normal Cost (Refunds) 6,252 7,930 9,669 Total Normal Cost 214, , ,962 Present Value of Future Normal Costs 1,369,838 1,281,797 1,274,342 Accrued Liability (Retirement) 5,518,658 5,701,525 4,758,363 Accrued Liability (Disability) 66,744 77,705 64,567 Accrued Liability (Death) 72,724 33,683 28,671 Accrued Liability (Vesting) 392, , ,155 Accrued Liability (Refunds) 19,124 12,970 15,535 Accrued Liability (Inactives) ¹ 8,943,634 8,464,084 8,494,704 Excess State Monies Reserve ,119 Total Actuarial Accrued Liability (AL) 15,013,802 14,766,098 14,454,114 Unfunded Actuarial Accrued Liability (UAAL) 3,069,157 2,821,453 3,459,199 Funded Ratio (AVA / AL) 79.6% 80.9% 76.1% City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 10

11 D. Actuarial Present Value of New Assump Old Assump Accrued Benefits 10/1/ /1/ /1/2015 Vested Accrued Benefits Inactives ¹ 8,943,634 8,464,084 8,494,704 Actives 3,190,386 2,921,858 2,500,395 Member Contributions 750, , ,935 Total 12,884,275 12,136,197 11,681,034 Non-vested Accrued Benefits 418, , ,269 Total Present Value Accrued Benefits (PVAB) 13,302,855 12,539,383 12,085,303 Funded Ratio (MVA / PVAB) 88.5% 93.9% 87.9% Increase (Decrease) in Present Value of Accrued Benefits Attributable to: Plan Amendments 0 0 Assumption Changes 763,472 0 New Accrued Benefits 0 252,565 Benefits Paid 0 (735,874) Interest 0 937,389 Other 0 0 Total 763, ,080 City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 11

12 New Assump Old Assump Valuation Date 10/1/ /1/ /1/2015 Applicable to Fiscal Year Ending 9/30/2018 9/30/2018 9/30/2017 E. Pension Cost Normal Cost (with interest) $219,033 $227,919 $214,161 % of Total Annual Payroll ² Administrative Expenses (with interest) 32,676 32,696 29,724 % of Total Annual Payroll ² Payment Required to Amortize Unfunded Actuarial Accrued Liability over 20 years (as of 10/1/2016, with interest) 431, , ,295 % of Total Annual Payroll ² Total Required Contribution 683, , ,180 % of Total Annual Payroll ² Expected Member Contributions 66,607 78,470 73,249 % of Total Annual Payroll ² Expected City and State Contribution 616, , ,931 % of Total Annual Payroll ² F. Past Contributions Plan Years Ending: 9/30/2016 Total Required Contribution 814,089 City and State Requirement 733,677 Actual Contributions Made: Members (excluding buyback) 80,412 City 589,225 State 144,452 Total 814,089 G. Net Actuarial (Gain)/Loss 326,229 ¹ The asset values and liabilities for DROP Members include accumulated DROP Balances as of 9/30/2016 and 9/30/2015. ² Contributions developed as of 10/1/2016 are expressed as a percentage of total annual payroll at 10/1/2016 of $1,332,137 under the new asumptions, and $1,569,398 under the prior assumptions. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 12

13 H. Schedule Illustrating the Amortization of the Total Unfunded Actuarial Accrued Liability as of: Year Projected Unfunded Actuarial Accrued Liability ,069, ,851, ,611, ,886, , , I. (i) 3 Year Comparison of Actual and Assumed Salary Increases Actual Assumed Year Ended 9/30/ % 6.50% Year Ended 9/30/ % 6.50% Year Ended 9/30/ % 6.50% (ii) 3 Year Comparison of Investment Return on Actuarial Value Actual Assumed Year Ended 9/30/ % 8.00% Year Ended 9/30/ % 8.00% Year Ended 9/30/ % 8.00% (iii) Average Annual Payroll Growth (a) Payroll as of: 10/1/2016 $1,542,945 10/1/2006 1,391,950 (b) Total Increase 10.85% (c) Number of Years (d) Average Annual Rate 1.04% City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 13

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

15 RECONCILIATION OF UNFUNDED ACTUARIAL ACCRUED LIABILITIES (1) Unfunded Actuarial Accrued Liability as of October 1, 2015 $3,459,199 (2) Sponsor Normal Cost developed as of October 1, ,713 (3) Expected administrative expenses for the year ended September 30, ,141 (4) Expected interest on (1), (2) and (3) 288,839 (5) Sponsor contributions to the System during the year ended September 30, ,677 (6) Expected interest on (5) 30,872 (7) Expected Unfunded Actuarial Accrued Liability as of September 30, 2016 (1)+(2)+(3)+(4)-(5)-(6) 3,149,343 (8) Change to UAAL due to Assumption Change 247,704 (9) Change to UAAL due to Actuarial (Gain)/Loss 326,229 (10) Excess State Monies Reserve Allocation (654,119) (11) Unfunded Actuarial Accrued Liability as of October 1, ,069,157 Type of Date Years 10/1/2016 Amortization Base Established Remaining Amount Amount ¹ 10/1/ $129,518 $45,976 10/1/ ,990 32,031 10/1/ (136,918) (15,857) 10/1/ ,008 17,524 method change 10/1/ ,075, ,188 actuarial loss 10/1/ , ,868 actuarial loss 10/1/ ,102 14,025 actuarial loss 10/1/ ,701 40,152 benefit change 10/1/ ,730 2,449 actuarial gain 10/1/ ,691 49,764 actuarial loss 10/1/ ,553 44,999 actuarial loss 10/1/ ,965 21,537 actuarial loss 10/1/ ,131 60,964 method change 10/1/ (238,929) (27,671) assum. change 10/1/ ,790 27,887 actuarial loss 10/1/ ,574 14,403 actuarial loss 10/1/ ,293 54,177 City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 15

16 RECONCILIATION OF UNFUNDED ACTUARIAL ACCRUED LIABILITIES (1) Unfunded Actuarial Accrued Liability as of October 1, 2015 $3,459,199 (2) Sponsor Normal Cost developed as of October 1, ,713 (3) Expected administrative expenses for the year ended September 30, ,141 (4) Expected interest on (1), (2) and (3) 288,839 (5) Sponsor contributions to the System during the year ended September 30, ,677 (6) Expected interest on (5) 30,872 (7) Expected Unfunded Actuarial Accrued Liability as of September 30, 2016 (1)+(2)+(3)+(4)-(5)-(6) 3,149,343 (8) Change to UAAL due to Assumption Change 247,704 (9) Change to UAAL due to Actuarial (Gain)/Loss 326,229 (10) Excess State Monies Reserve Allocation (654,119) (11) Unfunded Actuarial Accrued Liability as of October 1, ,069,157 Type of Date Years 10/1/2016 Amortization Base Established Remaining Amount Amount ¹ actuarial gain 10/1/ (84,426) (19,123) actuarial loss 10/1/ ,234 2,575 actuarial gain 10/1/ (355,995) (61,169) actuarial gain 10/1/ (300,819) (46,585) actuarial gain 10/1/ (415,450) (58,885) assum. change 10/1/ ,704 22,981 excess reserve allocation 10/1/ (654,119) (60,686) actuarial loss 10/1/ ,229 44,613 3,069, , ,137 ¹ UAAL Bases established on and after the 10/1/2016 valuation are amortized as a level dollar. All other bases utilize the applicable payroll growth assumption disclosed in the Actuarial Assumptions and Methods section of this report. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 16

17 DETAILED ACTUARIAL (GAIN)/LOSS ANALYSIS (1) Unfunded Actuarial Accrued Liability (UAAL) as of October 1, 2015 $3,459,199 (2) Expected UAAL as of October 1, ,149,343 (3) Summary of Actuarial (Gain)/Loss, by component: Investment Return (Actuarial Asset Basis) (22,038) Salary Increases 273,389 Active Decrements 111,733 Inactive Mortality 56,798 Other (93,653) Increase in UAAL due to (Gain)/Loss 326,229 Allocation from Excess State Monies Reserve (654,119) Assumption Changes 247,704 (4) Actual UAAL as of October 1, 2016 $3,069,157 City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 17

18 ACTUARIAL ASSUMPTIONS AND METHODS Mortality Rates Healthy Lives: Female: RP2000 Generational, 100% Annuitant White Collar, Scale BB. Male: RP2000 Generational, 10% Annuitant White Collar / 90% Annuitant Blue Collar, Scale BB. Disabled Lives: Female: 60% RP2000 Disabled Female set forward two years / 40% Annuitant White Collar with no setback, no projection scale. Male: 60% RP2000 Disabled Male setback four years / 40% Annuitant White Collar with no setback, no projection scale. The assumed rates of mortality were mandated by Chapter , Laws of Florida. This law mandates the use of the assumption used in either of the two most recent valuations of the Florida Retirement System (FRS). The above rates are those outlined in the July 1, 2015 FRS actuarial valuation report. We feel this assumption sufficiently accommodates future mortality improvements. Interest Rate 7.75% (previously 8.0%) per year compounded annually, net of investment-related expenses. This assumption is in line with the national average for municipal defined benefit pension programs. Retirement Age Earlier of age 55 and 10 years of Credited Service or 25 years of Credited Service, regardless of age. The Board reviewed and adopted this assumption in conjunction with the August 22, 2016 Experience Study. Early Retirement Beginning at age 50, members electing Early Retirement are assumed to retire with an immediate subsidized benefit at the rate of 10.0% per year. Early Retirement is not assumed prior to age 50. The Board reviewed and adopted this assumption in conjunction with the August 22, 2016 Experience Study. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 18

19 Disability Rate See table below (1202) for sample rates by age. It is assumed that 75% of disablements are service related. This assumption is in line with the national average for municipal defined benefit pension programs. Attained Age Disability Assumption % % % % Termination Rate See table below. These rates were developed based upon our August 22, 2016 Experience Study. Credited Service Withdrawal Assumption Less than 2 years 5.0% 2 5 years 3.0% 6 9 years 9.0% years 6.5% 20 or more years 0.0% Valuations prior to October 1, 2016 utilized termination rates based on age. Salary Increases See table below. These rates were developed based upon our August 22, 2016 Experience Study. Credited Service Salary Increase Less than 4 years 6.5% 4 or more years 4.5% Valuations prior to October 1, 2016 utilized a flat 6.5% assumption for all years of Credited Service. Payroll Increase Administrative Expenses Funding Method Asset Valuation Method 1.04% (previously 1.10%) per year, based on the actual ten-year payroll growth average as of the valuation date. $32,055 annually, based on actual Administrative Expenses incurred in the prior fiscal year. Entry Age Normal Actuarial Cost Method. Each year, the prior Actuarial Value of Assets is brought forward utilizing the historical geometric four-year average Market Value return. It is possible that over time this technique will produce an insignificant bias above or below Market Value. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 19

20 VALUATION NOTES Total Annual Payroll is the projected annual rate of pay for the fiscal year following the valuation date of all covered Members. Present Value of Benefits is the single sum value on the valuation date of all future benefits to be paid to current Members, Retirees, Beneficiaries, Disability Retirees and Vested Terminations. Normal (Current Year's) Cost is determined for each participant as the present value of future benefits, determined as of the member s entry age, amortized as a level percentage of compensation over the anticipated number of years of participation, determined as of the entry age. Individual Entry Age Normal Actuarial Cost Method (Level Percent of Compensation) is the method used to determine required contributions under the Plan. The use of this method involves the systematic funding of the Normal Cost (described above) and the Unfunded Accrued (Past Service) Liability. The actuarial accrued liability for active participants is the difference between the present value of future benefits and the present value of future Normal Costs. The actuarial accrued liability for inactive participants is the present value of future benefits. Unfunded Actuarial Accrued Liability (UAAL) is the difference between the actuarial accrued liability (described above) and the actuarial value of assets. Under the Entry Age Normal Actuarial Cost Method, an actuarial gain or loss, based on actual versus expected UAAL, is determined in conjunction with each valuation of the plan. Total Required Contribution is equal to the Normal Cost plus an amount sufficient to amortize the Unfunded Accrued Liability over no more than 30 years. The required amount is adjusted for interest according to the timing of contributions during the year. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 20

21 PARTIAL HISTORY OF PREMIUM TAX REFUNDS Received During Increase from Fiscal Year Amount Previous Year , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % , % City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 21

22 STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2016 ASSETS COST VALUE MARKET VALUE Cash and Cash Equivalents: Short Term Investments 256, , Total Cash and Equivalents 256, , Receivables: Member Contributions in Transit 2, , Investment Income 6, , Total Receivable 9, , Investments: Mutual Funds: Fixed Income 2,886, ,806, Equity 6,808, ,710, Pooled/Common/Commingled Funds: Real Estate 1,000, ,053, Total Investments 10,695, ,569, Total Assets 10,961, ,836, LIABILITIES Prepaid City Contribution 65, , Total Liabilities 65, , NET POSITION RESTRICTED FOR PENSIONS 10,895, ,770, City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 22

23 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2016 Market Value Basis ADDITIONS Contributions: Member 80, City 589, State 144, Total Contributions 814, Investment Income: Net Realized Gain (Loss) 19, Unrealized Gain (Loss) 313, Net Increase in Fair Value of Investments 332, Interest & Dividends 800, Less Investment Expense¹ (28,915.62) Net Investment Income 1,104, Total Additions 1,918, DEDUCTIONS Distributions to Members: Benefit Payments 701, Lump Sum DROP Distributions 0.00 Refunds of Member Contributions 33, Total Distributions 735, Administrative Expense 32, Total Deductions 767, Net Increase in Net Position 1,151, NET POSITION RESTRICTED FOR PENSIONS Beginning of the Year 10,619, End of the Year 11,770, ¹Investment related expenses include investment advisory, custodial and performance monitoring fees. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 23

24 ACTUARIAL ASSET VALUATION SEPTEMBER 30, 2016 Actuarial Assets for funding purposes are developed by increasing the Actuarial Assets used in the most recent actuarial valuation of the Fund by the average annual market value rate of return (net of investment related expenses) for the past four years. Actuarial Assets shall not be less than 80% nor greater than 120% of Market Value of Assets. Details of the derivation are set forth as follows: Plan Year End Rate of Return¹ 09/30/ % 09/30/ % 09/30/ % 09/30/ % Annualized Rate of Return for prior four (4) years: 8.20% (A) 10/01/2015 Actuarial Assets: $10,994, (I) Net Investment Income: 1. Interest and Dividends 800, Realized Gains (Losses) 19, Change in Actuarial Value 112, Investment Related Expenses (28,915.62) Total 903, (B) 10/01/2016 Actuarial Assets: $11,944, Actuarial Asset Rate of Return = 2I/(A+B-I): 8.20% 10/01/2016 Limited Actuarial Assets: $11,944, /01/2016 Market Value of Assets: $11,770, Actuarial Gain/(Loss) due to Investment Return (Actuarial Asset Basis) $22, ¹Market Value Basis, net of investment related expenses. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 24

25 CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS SEPTEMBER 30, 2016 Actuarial Asset Basis REVENUES Contributions: Member 80, City 589, State 144, Total Contributions 814, Earnings from Investments: Interest & Dividends 800, Net Realized Gain (Loss) 19, Change in Actuarial Value 112, Total Earnings and Investment Gains 932, EXPENDITURES Distributions to Members: Benefit Payments 701, Lump Sum DROP Distributions 0.00 Refunds of Member Contributions 33, Total Distributions 735, Expenses: Investment related¹ 28, Administrative 32, Total Expenses 60, Change in Net Assets for the Year 949, Net Assets Beginning of the Year 10,994, Net Assets End of the Year² 11,944, ¹Investment related expenses include investment advisory, custodial and performance monitoring fees. ²Net Assets may be limited for actuarial consideration. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 25

26 DEFERRED RETIREMENT OPTION PLAN ACTIVITY October 1, 2015 to September 30, 2016 Beginning of the Year Balance 68, Plus Additions 62, Investment Return Earned 2, Less Distributions 0.00 End of the Year Balance 132, Note: Investment Return Earned is based on available data through June 30, Investment Return Earned includes earnings for the Quarter ending September 30, City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 26

27 RECONCILIATION OF CITY'S SHORTFALL/(PREPAID) CONTRIBUTION FOR THE FISCAL YEAR ENDED (FYE) SEPTEMBER 30, 2016 (1) Total Required Contribution Rate 50.62% (2) Pensionable Payroll Derived from Member Contributions $1,608, (3) Total Required Contribution (1) x (2) 814, (4) Less Actual Member Contributions (80,411.79) (5) Less Allowable State Contribution (144,452.16) (6) Equals Required City Contribution for Fiscal , (7) Less 2015 Prepaid Contribution (80,200.44) (8) Less Actual City Contributions (575,000.00) (9) Equals City's Shortfall/(Prepaid) Contribution as of ($65,975.43) September 30, 2016 City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 27

28 ELIGIBILITY FOR RETIREMENT Members are eligible for Normal Retirement based upon the following criteria: 1) Attained Age 55 with 10 Years of Credited Service or 2) 25 Years of Credited Service regardless of Age Members are eligible for Early Retirement based upon the following criteria: 1) Attained Age 45 with 10 Years of Credited Service As of the date of this valuation, the following list of Members are eligible for: Normal Retirement MAHAFFEY, SHERRY WYKOFF, ERIC Early Retirement AMARAL, MARK ANGLIN, JEFFERY MUSOLFF, TODD RIGGAN, SHAWN SCIACCA, MARC City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 28

29 INACTIVE MEMBERS Name Retirement Status Date of Retirement Armistead, William Disabled 11/1/2005 Borden, Troy Retiree 2/1/2015 Clemons, Edward Retiree 11/1/2006 Cox, Patrick Retiree 8/1/2007 Davidson, M Retiree 1/1/1993 Goding, Richard Retiree 7/1/2006 Grant, Robert Retiree 11/1/2009 Hammond, D Retiree 12/1/1993 Heller, Daniel Retiree 1/1/2010 Highbarger, D Retiree 7/1/1991 Holdsworth, F Retiree 1/1/1994 Mahaffey, Bryant Disabled 12/1/2011 Malzone, P Retiree 1/1/1998 Pennell, D Retiree 3/1/2011 Russell, Andrew Retiree 10/1/2009 Scalise, F. Retiree 12/1/2015 Spell, S Retiree 9/1/1990 Telesca, M DROP 9/1/2014 Walker, R Retiree 3/1/1997 Watson, J Retiree 6/1/2011 Womack, Charles Retiree 3/1/2007 The following are Vested Terminated Members who are entitled to future benefits from the Plan: Barnes, C. Doyle, C Roberts, J Shear, S The following Member is due a refund of Accumulated Member Contributions as of the valuation date. Brigham, Aaron City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 29

30 STATISTICAL DATA ¹ 10/1/ /1/ /1/ /1/2016 Actives Number Average Current Age Average Age at Employment Average Past Service Average Annual Salary $56,030 $56,323 $56,346 $64,289 Service Retirees Number Average Current Age Average Annual Benefit $36,847 $36,847 $37,343 $37,333 DROP Retirees Number Average Current Age Average Annual Benefit $62,426 $62,317 $62,207 $62,207 Beneficiaries Number Average Current Age N/A N/A N/A N/A Average Annual Benefit N/A N/A N/A N/A Disability Retirees Number Average Current Age Average Annual Benefit $18,091 $18,091 $18,091 $18,091 Terminated Vested (includes non-vested members due a refund of Member Contributions only) Number Average Current Age ² Average Annual Benefit ² $22,587 $22,603 $23,302 $19,540 ¹ Prior to 10/1/2015, averages for Active Members were salary-weighted. ² Averages exclude non-vested Members awaiting a refund of Member Contributions. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 30

31 AGE AND SERVICE DISTRIBUTION PAST SERVICE AGE Total Total City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 31

32 VALUATION PARTICIPANT RECONCILIATION 1. Active lives a. Number in prior valuation 10/1/ b. Terminations i. Vested (partial or full) with deferred benefits ¹ (1) ii. Non-vested or full lump sum distribution received (1) c. Deaths i. Beneficiary receiving benefits 0 ii. No future benefits payable 0 d. Disabled 0 e. Retired 0 f. DROP 0 g. Continuing participants 24 h. New entrants 0 i. Total active life participants in valuation Non-Active lives (including beneficiaries receiving benefits) Service Retirees, Vested Receiving Receiving Receiving DROP Death Disability Vested Benefits Benefits Benefits Benefits Deferred ¹ Total a. Number prior valuation Retired (1) 0 DROP Vested Deferred Death, With Survivor Death, No Survivor Disabled Net Refund of Contributions Rehires Expired Annuities Data Corrections b. Number current valuation ¹ Includes non-vested Members awaiting a refund of Member Contributions. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 32

33 SUMMARY OF PLAN PROVISIONS Latest Amendment Date May 19, Credited Service Salary Total number of years and fractional parts of years of service with the City as a Firefighter. Base compensation for services rendered, plus overtime pay and educational incentives, plus all tax deferred, tax sheltered, or tax exempt items of income, but not including lump sum payments for unused sick leave, vacation pay, or time off pay. For Service earned after March 6, 2012 Salary shall not include more than 300 hours of overtime per calendar year. Average Final Compensation Average Salary paid during the highest 3 years of the last 5 years prior to retirement. Normal Retirement Eligibility Earlier of: 1) Age 55 and the completion of 10 years of Credited Service, or 2) the completion of 25 years of Credited Service, regardless of age. Benefit Amount Form of Benefit 4% of Average Final Compensation (AFC) times Credited Service before 11/19/98, plus 3% of AFC times Credited Service on or after 11/19/ Years Certain and Life thereafter (options available). Early Retirement Eligibility Benefit Amount Age 45 and 10 years of Credited Service. Deferred benefit payable at Normal Retirement or immediate benefit reduced 3% per year. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 33

34 Disability Eligibility Service Incurred Non-Service Incurred Exclusions Benefit Duration Covered from Date of Employment. 10 years of Credited Service. Disability resulting from use of drugs, illegal participation in riots, service in military, etc. Benefit accrued to date of disability but not less than 42% of Average Monthly Earnings (Service Incurred). Payable for life (with 120 monthly payments guaranteed) or until recovery (as determined by the Board). Optional forms of payment are available. Death Benefits Pre-Retirement Vested Non-Vested Post-Retirement Monthly accrued benefit payable to designated beneficiary for 10 years. Refund of accumulated contributions without interest. Benefits payable to beneficiary in accordance with option selected at retirement. Vesting (Termination) Less than 10 years of Contributing Service Refund of Member Contributions. 10 years or more Accrued benefit payable at otherwise Normal Retirement Date if Member contributions left in Fund orrefund of Member Contributions. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 34

35 Contributions Employee Premium Tax City Board of Trustees 5% of Salary. 1.85% tax on fire insurance premiums. Remaining amount necessary for payment of Normal (current year's) Cost and amortization of the accrued past service liability over 30 years. Two City Commission appointees who are City residents, two elected Members of the Fire Department, and a fifth member elected by the other four and appointed by Commission (as a ministerial duty). Deferred Retirement Option Plan Eligibility Participation Rate of Return Form of Distribution Satisfaction of Normal Retirement requirements (see description above). Not more than 60 months. Actual net rate of investment return (total return net of brokerage commissions, transaction costs, and management fees). Cash lump sum (options available) payable at termination of employment. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 35

36 GASB 67 ASSETS Cash and Cash Equivalents: Short Term Investments STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2016 MARKET VALUE 256,821 Total Cash and Equivalents Receivables: Member Contributions in Transit Investment Income Total Receivable Investments: Mutual Funds: Fixed Income Equity Pooled/Common/Commingled Funds: Real Estate Total Investments Total Assets Total Liabilities 256,821 2,752 6,563 9,315 2,806,166 7,710,484 1,053,307 11,569,957 11,836,093 0 NET POSITION RESTRICTED FOR PENSIONS 11,836,093 City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 36

37 GASB 67 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2016 Market Value Basis ADDITIONS Contributions: Member 80,412 City 655,200 State 144,452 Total Contributions 880,064 Investment Income: Net Increase in Fair Value of Investments 332,890 Interest & Dividends 800,878 Less Investment Expense¹ (28,916) Net Investment Income 1,104,852 Total Additions 1,984,916 DEDUCTIONS Distributions to Members: Benefit Payments 701,977 Lump Sum DROP Distributions 0 Refunds of Member Contributions 33,897 Total Distributions 735,874 Administrative Expense 32,055 Total Deductions 767,929 Net Increase in Net Position 1,216,987 NET POSITION RESTRICTED FOR PENSIONS Beginning of the Year 10,619,106 End of the Year 11,836,093 ¹Investment related expenses include investment advisory, custodial and performance monitoring fees. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 37

38 GASB 67 NOTES TO THE FINANCIAL STATEMENTS (For the Year Ended September 30, 2016) Plan Description Plan Administration The Plan is a single-employer defined benefit pension plan administered by the Plan's Board of Trustees comprised of: a. Two City Commission appointees who are City residents, b. Two elected Members of the Fire Department, c. Fifth Member elected by other four and appointed by Commission (as a ministerial duty). Plan Membership as of October 1, 2015: Inactive Plan Members or Beneficiaries Currently Receiving Benefits 20 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 6 Active Plan Members Benefits Provided The Plan provides retirement, disability and death benefits. Normal Retirement: Eligibility: Earlier of: 1) Age 55 and the completion of 10 years of Credited Service, or 2) the completion of 25 years of Credited Service, regardless of age. Benefit amount: 4% of Average Final Compensation (AFC) times Credited Service before 11/19/1998, plus 3% of AFC times Credited Service on or after 11/19/1998. Early Retirement: Eligibility: Age 45 and 10 years of Credited Service. Benefit amount: Deferred benefit payable at Normal Retirement or immediate benefit reduced 3% per year. Disability: Service Incurred: Covered from Date of Employment. Non-Service Incurred: 10 years of Credited Service. Benefit accrued to date of disability but not less than 42% of Average Monthly Earnings (Service Incurred). Death Benefits Pre-Retirement: Vested: Monthly accrued benefit payable to designated beneficiary for 10 years. Non -Vested: Refund of accumulated contributions without interest. Vesting (Termination): Less than 10 years of Contributing Service: Refund of Member Contributions. 10 years or more: Accrued benefit payable at otherwise Normal Retirement Date if Member contributions left in Fund or Refund of Member Contributions. Contributions Employee: 5% of Salary. Premium Tax: 1.85% tax on fire insurance premiums. City: Remaining amount necessary for payment of Normal (current year's) Cost and amortization of the accrued past service liability over 30 years. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 38

39 GASB 67 Investments Investment Policy: The following was the Board's adopted asset allocation policy as of September 30, 2016: Asset Class Target Allocation Domestic Equity 50% International Equity 15% Broad Market Fixed Income 20% Global Fixed Income 5% Real Estate 10% Total 100% Concentrations: The Plan did not hold investments in any one organization that represent 5 percent or more of the Pension Plan's Fiduciary Net Position. Rate of Return: For the year ended September 30, 2016 the annual money-weighted rate of return on Pension Plan investments, net of Pension Plan investment expense, was percent. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. Deferred Retirement Option Program Eligibility: Satisfaction of Normal Retirement requirements. Participation: Not more than 60 months. Rate of Return: Actual net rate of investment return (total return net of brokerage commissions, transaction costs, and management fees). The DROP balance as September 30, 2016 is $132,875. Note: Investment Return Earned is based on available data through June 30, Investment Return Earned includes earnings for the Quarter ending September 30, City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 39

40 GASB 67 NET PENSION LIABILITY OF THE SPONSOR The components of the Net Pension Liability of the Sponsor on September 30, 2016 were as follows: Total Pension Liability $ 14,408,881 Plan Fiduciary Net Position $ (11,836,093) Sponsor's Net Pension Liability $ 2,572,788 Plan Fiduciary Net Position as a percentage of Total Pension Liability 82.14% Actuarial Assumptions: The Total Pension Liability was determined by an actuarial valuation as of October 1, 2015 updated to September 30, 2016 using the following actuarial assumptions: Inflation 2.50% Salary Increases 4.50% -6.50% Discount Rate 7.75% Investment Rate of Return 7.75% Mortality Rate Healthy Lives: Female: RP2000 Generational, 100% Annuitant White Collar, Scale BB. Male: RP2000 Generational, 10% Annuitant White Collar /90% Annuitant Blue Collar, Scale BB. Mortality Rate Disabled Lives: Female: 60% RP2000 Disabled Female set forward two years / 40% Annuitant White Collar with no setback, no projection scale. Male: 60% RP2000 Disabled Male setback four years / 40% Annuitant White Collar with no setback, no projection scale. The other significant assumptions are based upon the most recent actuarial experience study dated August 22th, The compiled plan experience was from October 1, 2005 through September 30, The Long-Term Expected Rate of Return on Pension Plan investments was determined using a building-block method in which bestestimate ranges of expected future real rates of return (expected returns, net of Pension Plan investment expenses and inflation) are developed for each major asset class. For 2016 the inflation rate assumption of the investment advisor was 2.50%. These ranges are combined to produce the Long-Term Expected Rate of Return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the Pension Plan's target asset allocation as of September 30, 2016 are summarized in the following table: Long Term Expected Real Asset Class Rate of Return Domestic Equity 7.50% International Equity 8.50% Broad Market Fixed Income 2.50% Global Fixed Income 3.50% Real Estate 4.50% City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 40

41 GASB 67 Discount Rate: The Discount Rate used to measure the Total Pension Liability was 7.75 percent. The projection of cash flows used to determine the Discount Rate assumed that Plan Member contributions will be made at the current contribution rate and that Sponsor contributions will be made at rates equal to the difference between actuarially determined contribution rates and the Member rate. Based on those assumptions, the Pension Plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the Long-Term Expected Rate of Return on Pension Plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. 1% Decrease Current Discount Rate 1% Increase 6.75% 7.75% 8.75% Sponsor's Net Pension Liability $ 4,186,397 $ 2,572,788 $ 1,222,452 City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 41

42 GASB 67 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS Last 10 Fiscal Years 09/30/ /30/ /30/2014 Total Pension Liability Service Cost 238, , ,534 Interest 1,084,188 1,054,408 1,020,957 Change in Excess State Money (654,119) 77,735 85,864 Changes of benefit terms Differences between Expected and Actual Experience (88,821) (17,490) - Changes of assumptions 229, Benefit Payments, including Refunds of Employee Contributions (735,874) (1,070,390) (588,887) Net Change in Total Pension Liability 72, , ,468 Total Pension Liability - Beginning 14,335,939 14,064,859 13,315,391 Total Pension Liability - Ending (a) $ 14,408,881 $ 14,335,939 $ 14,064,859 Plan Fiduciary Net Position Contributions - Employer 655, , ,513 Contributions - State 144, , ,671 Contributions - Employee 80,412 68,646 76,167 Net Investment Income 1,104,852 (147,286) 1,080,437 Benefit Payments, including Refunds of Employee Contributions (735,874) (1,070,390) (588,887) Administrative Expense (32,055) (29,141) (18,863) Net Change in Plan Fiduciary Net Position 1,216,987 (453,794) 1,301,038 Plan Fiduciary Net Position - Beginning 10,619,106 11,072,900 9,771,862 Plan Fiduciary Net Position - Ending (b) $ 11,836,093 $ 10,619,106 $ 11,072,900 Net Pension Liability - Ending (a) - (b) $ 2,572,788 $ 3,716,833 $ 2,991,959 Plan Fiduciary Net Position as a percentage of the Total Pension Liability 82.14% 74.07% 78.73% Covered Employee Payroll $ 1,608,236 $ 1,441,819 $ 1,386,146 Net Pension Liability as a percentage of Covered Employee Payroll % % % Notes to Schedule: Changes of benefit terms: Ordinance 1596, adopted and effective May 19, 2016, amended the Plan primarily for compliance with requirements under the Internal Revenue Code, in addition to implementation of a Share Plan. A letter of no actuarial impact was submitted for this amendment. Changes of Assumptions: For the 09/30/2016 year end, amounts reported as changes of assumptions are as following: 1. Salary Scale was changed from a flat 6.5% assumption to one based on service. 2. Turnover was changed from an age-based assumption to one based on service. 3. Mortality pursuant to Chapter , Florida Statutes, adoption of the assumption utilized by the Florida Retirement System for special risk employees. 4. Investment Return was lowered from 8.00% to 7.75%, net of investment related expenses. 5. Retirement Rates modified Early and Normal Retirement rates, based on historical experience. Also the inflation assumption rate was lowered from 3.00% to 2.50%, matching the long-term inflation assumption utilized by the Plan's investment consultant. City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 42

43 GASB 67 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS Last 10 Fiscal Years 09/30/ /30/2013 Total Pension Liability Service Cost 231, ,383 Interest 1,020, ,801 Change in Excess State Money 85,864 - Changes of benefit terms - - Differences between Expected and Actual Experience - - Changes of assumptions - - Benefit Payments, including Refunds of Employee Contributions (588,887) (588,887) Net Change in Total Pension Liability 749, ,297 Total Pension Liability - Beginning 13,315,391 12,718,094 Total Pension Liability - Ending (a) $ 14,064,859 $ 13,315,391 Plan Fiduciary Net Position Contributions - Employer 581, ,182 Contributions - State 170, ,173 Contributions - Employee 76,167 66,823 Net Investment Income 1,080,437 1,190,873 Benefit Payments, including Refunds of Employee Contributions (588,887) (588,887) Administrative Expense (18,863) (24,007) Net Change in Plan Fiduciary Net Position 1,301,038 1,362,157 Plan Fiduciary Net Position - Beginning 9,771,862 8,409,705 Plan Fiduciary Net Position - Ending (b) $ 11,072,900 $ 9,771,862 Net Pension Liability - Ending (a) - (b) $ 2,991,959 $ 3,543,529 Plan Fiduciary Net Position as a percentage of the Total Pension Liability 78.73% 73.39% Covered Employee Payroll $ 1,386,146 $ 1,336,468 Net Pension Liability as a percentage of Covered Employee Payroll % % City of Cocoa Beach Firefighters' Retirement System FOSTER & FOSTER 43