TOWN OF LANTANA POLICE RELIEF AND PENSION FUND ACTUARIAL VALUATION REPORT AS OF OCTOBER 1, 2014

Transcription

1 TOWN OF LANTANA POLICE RELIEF AND PENSION FUND ACTUARIAL VALUATION REPORT AS OF OCTOBER 1, 2014 ANNUAL EMPLOYER CONTRIBUTION FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2016

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5 TABLE OF CONTENTS Section Title Page A Discussion of Valuation Results 1. Discussion of Valuation Results 1 2. State Contribution Reserve 4 B Valuation Results 1. Participant Data 5 2. Annual Required Contribution 6 3. Actuarial Value of Benefits and Assets 7 4. Calculation of Employer Normal Cost 8 5. Liquidation of the Unfunded Actuarial Accrued Liability 9 6. Actuarial Gains and Losses Recent History of Valuation Results Recent History of UAAL and Funded Ratio Recent History of Required and Actual Contributions Actuarial Assumptions and Cost Method Glossary of Terms 25 C Pension Fund Information 1. Statement of Plan Assets at Market Value Reconciliation of Plan Assets Reconciliation of DROP Accounts Development of Actuarial Value of Assets Investment Rate of Return 32 D Financial Accounting Information 1. FASB No GASB No GASB No E Miscellaneous Information 1. Reconciliation of Membership Data Active Participant Scatter Inactive Participant Scatter 43 F Summary of Plan Provisions 44

6 SECTION A DISCUSSION OF VALUATION RESULTS

7 1 DISCUSSION OF VALUATION RESULTS Comparison of Required Employer Contributions A comparison of the required employer contribution developed in this and the last actuarial valuations is as follows: For FYE 9/30/2016 For FYE 9/30/2015 Based on 10/1/2014 Based on 10/1/2013 Valuation Valuation Increase (Decrease) Required Employer/State Contribution $ 466,726 $ 500,593 $ (33,867) As % of Covered Payroll % % (0.08) % Allowable Credit for State Contribution $ 92,553 $ 92,553 * $ 0 As % of Covered Payroll 5.51 % 5.16 % 0.35 % Required Employer Contribution $ 374,173 $ 408,040 $ (33,867) As % of Covered Payroll % % (0.43) % * We have updated the amount shown in the October 1, 2013 Report to reflect the State Contribution received in August The required employer contribution has been adjusted for interest on the basis that contributions are made in equal payments at the end of each quarter. The contribution has also been computed under the assumption that the amount to be received from the State on behalf of police officers in 2015 and 2016 will be at least $92,553. If the actual payment from the State falls below this amount, then the Town must increase its contribution by the difference. The actual Employer and State contributions during the year ending September 30, 2014 were $377,272 and $92,553, respectively, for a total of $469,825 The annual required contribution was $465,226 for that year.

8 2 Revisions in Benefits There were no revisions in benefits since the last valuation. Revisions in Actuarial Assumptions or Methods There were no revisions in actuarial assumptions or methods since the last valuation. Actuarial Experience There was a net actuarial gain of $131,291 for the year which means that actual experience was more favorable than expected. The gain is primarily due to lower than expected salary increases and a recognized investment rate of return that was greater than expected. The return on market value of assets was 10.1% and the return on actuarial value of assets was 8.2%. The actuarial gain caused the employer contribution to decrease by 0.78% of covered payroll. Funded Ratio This year s funded ratio is 88.0% compared to 85.4% last year. The ratio is equal to the actuarial value of assets divided by the actuarial accrued (past service) liability. Cost of Living Adjustment The cost of living adjustment is not payable to retirees and beneficiaries since there are cumulative net actuarial losses as of September 30, 2014 as shown on page 16. Analysis of Change in Employer Contribution The components of change in the required employer contribution are as follows: Contribution rate last year % Change in assumptions/methods 0.00 Change in Normal Cost Rate (0.49) Amortization Payment on UAL 0.59 Experience gain/loss (0.78) Change in administrative expense 0.60 Change in State revenue (0.35) Contribution rate this year 22.30

9 3 Variability of Future Contribution Rates The Actuarial Cost Method used to determine the contribution rate is intended to produce contribution rates which are generally level as a percent of payroll. Even so, when experience differs from the assumptions, as it often does, the employer s contribution rate can vary significantly from yearto-year. Over time, if the year-to-year gains and losses offset each other, the contribution rate would be expected to return to the current level, but this does not always happen. The Market Value of Assets exceeds the Actuarial Value of Assets by $352,403 as of the valuation date (see Section C). This difference will be gradually recognized over the next several years. In turn, the computed employer contribution rate will decrease by approximately 2% of covered payroll over the same period in the absence of offsetting losses. Relationship to Market Value If Market Value had been the basis for the valuation, the Employer contribution rate would have been 20.22% and the funded ratio would have been 90.9%. In the absence of other gains and losses, the employer contribution rate should decrease to that level over the next several years. Conclusion The remainder of this Report includes detailed actuarial valuation results, pension fund information, miscellaneous information and statistics, and a summary of plan provisions.

10 4 STATE CONTRIBUTION RESERVE Increments in Chapter revenue over that received in 1998 must first be used to fund the cost of compliance with minimum benefits. As of the valuation date, a few of the minimum benefits have not been met. The definition of compensation should be changed to total cash remuneration. Also, the minimum service-connected disability benefit should be changed to the greater of the accrued benefit and 42% of average final compensation with eligibility from the date of hire. The non service-connected disability benefit should provide the accrued benefit as a minimum. Actuarial Confirmation of the Use of State Chapter Money 1. Base Amount Previous Plan Year $ 87, Amount Received for Previous Plan Year 95, Benefit Improvements Made in Previous Plan Year 0 4. Excess Funds for Previous Plan Year 2, Accumulated Excess at Beginning of Previous Year 40, Prior Excess Used in Previous Plan Year 0 7. Accumulated Excess as of Valuation Date (Available for Benefit Improvements): (4) + (5) - (6) 43, Base Amount This Plan Year 92,553 The Accumulated Excess shown in line 7 (if any) is being held in reserve and is subtracted from Plan assets (see Section C of this Report). The Base Amount in line 8 is the amount the employer may take as a credit against its required contribution; however, in no event may the employer take credit for more than the actual amount of Chapter revenue received. The Base Amount will continue to be updated each year based on actual Chapter revenue up to a maximum of $92,553.

11 SECTION B VALUATION RESULTS

12 5 PARTICIPANT DATA ACTIVE MEMBERS October 1, 2014 October 1, 2013 Number Covered Annual Payroll $ 1,613,718 $ 1,725,851 Average Annual Payroll $ 64,549 $ 63,920 Average Age Average Past Service Average Age at Hire RETIREES, BENEFICIARIES & DROP Number Annual Benefits $ 321,330 $ 247,244 Average Annual Benefit $ 24,718 $ 22,477 Average Age DISABILITY RETIREES Number 0 0 Annual Benefits $ 0 $ 0 Average Annual Benefit $ 0 $ 0 Average Age TERMINATED VESTED MEMBERS Number 6 5 Annual Benefits $ 123,460 $ 97,720 Average Annual Benefit $ 20,577 $ 19,544 Average Age

13 6 ANNUAL REQUIRED CONTRIBUTION (ARC) A. Valuation Date October 1, 2014 October 1, 2013 B. ARC to Be Paid During Fiscal Year Ending 9/30/2016 9/30/2015 C. Assumed Dates of Employer Contributions Quarterly Quarterly D. Annual Payment to Amortize Unfunded Actuarial Liability $ 145,067 $ 158,204 E. Employer Normal Cost 284, ,069 F. ARC if Paid on the Valuation Date: D+E 429, ,273 G. ARC Adjusted for Frequency of Payments 448, ,257 H. ARC as % of Covered Payroll % % I. Assumed Rate of Increase in Covered Payroll to Contribution Year 4.00 % 4.00 % J. Covered Payroll for Contribution Year 1,678,267 1,794,885 K. ARC for Contribution Year: H x J 466, ,593 L. Allowable Credit for State Revenue in Contribution Year * 92,553 92,553 M. Required Employer Contribution (REC) in Contribution Year 374, ,040 N. REC as % of Covered Payroll in Contribution Year: M J % % * We have updated the amount as of the October 1, 2013 valuation to reflect the State Contribution received in August 2014.

14 7 ACTUARIAL VALUE OF BENEFITS AND ASSETS A. Valuation Date October 1, 2014 October 1, 2013 B. Actuarial Present Value of All Projected Benefits for 1. Active Members a. Service Retirement Benefits $ 8,143,994 $ 8,632,916 b. Vesting Benefits 879, ,094 c. Disability Benefits 308, ,687 d. Preretirement Death Benefits 67,505 70,615 e. Return of Member Contributions 33,693 33,481 f. Total 9,433,603 9,962, Inactive Members a. Service Retirees & Beneficiaries 3,653,777 2,779,585 b. Disability Retirees 0 0 c. Terminated Vested Members 1,264, ,698 d. Total 4,918,294 3,725, Total for All Members 14,351,897 13,688,076 C. Actuarial Accrued (Past Service) Liability under Entry Age Normal 11,942,528 11,117,866 D. Actuarial Value of Accumulated Plan Benefits per FASB No ,182,332 9,250,892 E. Plan Assets 1. Market Value 10,859,699 9,641, Actuarial Value 10,507,296 9,491,707 F. Unfunded Actuarial Accrued Liability 1,435,232 1,626,159 G. Actuarial Present Value of Projected Covered Payroll 11,233,775 11,815,639 H. Actuarial Present Value of Projected Member Contributions 786, ,095 I. Accumulated Contributions of Active Members 902, ,926

15 8 CALCULATION OF EMPLOYER NORMAL COST A. Valuation Date October 1, 2014 October 1, 2013 B. Normal Cost for 1. Service Retirement Benefits $ 277,814 $ 308, Vesting Benefits 50,287 51, Disability Benefits 12,509 13, Preretirement Death Benefits 2,208 2, Return of Member Contributions 14,688 15, Total for Future Benefits 357, , Assumed Amount for Administrative Expenses 39,615 32, Total Normal Cost 397, ,879 C. Expected Member Contribution 112, ,810 D. Employer Normal Cost: B8-C 284, ,069 E. Employer Normal Cost as % of Covered Payroll % %

16 9 LIQUIDATION OF THE UNFUNDED ACTUARIAL ACCRUED LIABILITY A. UAAL Amortization Period and Payments Original UAAL Current UAAL Amortization Year Period Years Established Source (Years) Amount Remaining Amount Payment 10/1/2010 Initial UAAL 20 $ 1,255, $ 1,201,790 $ 122,293 10/1/2011 (Gain)/Loss 20 (219,482) 17 (199,106) (19,633) 10/1/2011 Assumption Change , ,900 22,275 10/1/2012 (Gain)/Loss 20 (31,824) 18 (29,979) (2,873) 10/1/2012 Assumption Change , ,213 24,364 10/1/2013 (Gain)/Loss 20 (170,866) 19 (165,785) (15,485) 10/1/2013 Assumption Change , ,490 26,106 10/1/2014 (Gain)/Loss 20 (131,291) 20 (131,291) $ (11,980) 1,435, ,067 B. Amortization Schedule The UAAL is being liquidated as a level dollar amount over the number of years remaining in the amortization period. The following schedule illustrates the expected amortization of the UAAL: Amortization Schedule Year Expected UAAL 2014 $ 1,435, ,386, ,335, ,279, ,219, ,154, , ,

17 10 ACTUARIAL GAINS AND LOSSES The assumptions used to anticipate mortality, employment turnover, investment income, expenses, salary increases, and other factors have been based on long range trends and expectations. Actual experience can vary from these expectations. The variance is measured by the gain and loss for the period involved. If significant long term experience reveals consistent deviation from what has been expected and that deviation is expected to continue, the assumptions should be modified. The net actuarial gain (loss) for the past year is computed as follows: 1. Last Year's UAAL $ 1,626, Last Year's Employer Normal Cost 278, Last Year's Contributions 469, Interest at the Assumed Rate on: a. 1 and 2 for one year 142,838 b. 3 from dates paid 10,993 c. a - b 131, This Year's Expected UAAL Prior to Revision: c 1,566, Change in UAAL Due to Plan Amendments and/or Changes in Actuarial Assumptions 0 7. This Year's Expected UAAL: ,566, This Year's Actual UAAL 1,435, Net Actuarial Gain (Loss): , Gain (Loss) Due to Investments 63, Gain (Loss) from Other Sources 67,788

18 11 Net actuarial gains in previous years have been as follows: Year Ended Gain (Loss) 9/30/1992 $ 44,072 9/30/ ,584 9/30/1994 (16,809) 9/30/ ,649 9/30/ ,931 9/30/ ,203 9/30/ ,985 9/30/ ,042 9/30/ ,381 9/30/2001 (95,175) 9/30/2002 (172,924) 9/30/2003 (115,119) 9/30/2004 (162,031) 9/30/2005 (23,944) 9/30/ ,319 9/30/2007 (16,513) 9/30/2008 (157,717) 9/30/2009 (250,566) 9/30/ ,556 9/30/ ,482 9/30/ ,824 9/30/ ,866 9/30/ ,291

19 12 Actuarial Gain (+) or Loss (-) Thousands Thousands Plan Year End Gain or Loss Cumulative

20 13 The fund earnings and salary increase assumptions have considerable impact on the cost of the Plan so it is important that they are in line with the actual experience. The following table shows the actual fund earnings and salary increase rates compared to the assumed rates for the last few years. Investment Return Salary Increases Year Ending Actual Assumed Actual Assumed 9/30/1991 N/A 8.00 % 16.5 % 7.0 % 9/30/ % /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ Averages 7.6 % % --- The actual investment return rates shown above are based on the actuarial value of assets. The actual salary increase rates shown above are the increases received by those active members who were included in the actuarial valuations both at the beginning and the end of each year.

21 14 History of Investment Return Based on Actuarial Value of Assets 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% Plan Year End Actual Assumed History of Salary Increases 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Plan Year End Compared to Previous Year Actual Assumed

22 15 Actual (A) Compared to Expected (E) Decrements Among Active Employees Number Added During Normal & DROP Disability Terminations Active Members Year Year Retirement Retirement Death Vested Other Totals End of Ended A E A E A E A E A A A E Year 9/30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ /30/ Yr Totals * * Totals are through current Plan Year only.

23 16 Cumulative Actuarial Gains (Losses) Year Balance at Ending Beginning of Gain (Loss) Balance at 9/30 Year Interest for Year COLA End of Year 2000 $ 0 $ 0 $ 101,381 $ 0 $ 101, ,381 8,110 (95,175) 0 14, ,316 1,145 (172,924) 0 (157,463) 2003 (157,463) (12,597) (115,119) 0 (285,179) 2004 (285,179) (22,814) (162,031) 0 (470,024) 2005 (470,024) (37,602) (23,944) 0 (531,570) 2006 (531,570) (42,526) 76,319 0 (497,777) 2007 (497,777) (39,822) (16,513) 0 (554,112) 2008 (554,112) (44,329) (157,717) 0 (756,158) 2009 (756,158) (60,493) (250,566) 0 (1,067,217) 2010 (1,067,217) (85,377) 292,556 0 (860,038) 2011 (860,038) (67,728) 219,482 0 (708,284) 2012 (708,284) (54,892) 31,824 0 (731,352) 2013 (731,352) (55,766) 170,866 0 (616,252) 2014 (616,252) (46,219) 131,291 0 (531,180)

24 Valuation Date Number of Active Inactive Members Members RECENT HISTORY OF VALUATION RESULTS Covered Annual Payroll Actuarial Value of Assets UAAL Employer Normal Cost Amount % of Payroll 10/1/ $ 693,073 $ 488,819 $ 0 $ 61, % 10/1/ , , , /1/ , , , /1/ , , , /1/ ,011, , , /1/ ,933 1,063, , /1/ ,644 1,271, , /1/ ,347 1,368, , /1/ ,096 1,647, , /1/ ,020,463 1,947, , /1/ ,192,651 2,174, , /1/ ,252,026 2,415, , /1/ ,457,905 2,704, , /1/ ,466,225 2,952, , /1/ ,599,814 3,303, , /1/ ,560,307 3,776, , /1/ ,729,150 4,670, , /1/ ,801,385 5,168, , /1/ ,758,203 5,792, , /1/ ,677,543 6,709,645 1,255, , /1/ ,690,206 7,596,301 1,365, , /1/ ,662,329 8,484,349 1,557, , /1/ ,725,851 9,491,707 1,626, , /1/ ,613,718 10,507,296 1,435, ,

25 RECENT HISTORY OF UAAL AND FUNDED RATIO Actuarial Valuation Date Actuarial Value of Assets (a) Actuarial Accrued Liability (AAL) - Entry Age (b) Unfunded AAL (UAAL) - Entry Age (b) - (a) Funded Ratio (a) / (b) Covered Payroll (c) UAAL As % of Covered Payroll (b - a) / c 10/1/1991 $ 488,819 $ 478,352 $ (10,467) % $ 693,073 (1.5) % 10/1/ , ,345 (19,216) ,226 (2.6) 10/1/ , ,318 (57,598) ,341 (7.2) 10/1/ , ,896 (78,461) ,884 (9.3) 10/1/ , ,566 (144,202) ,018,442 (14.2) 10/1/1996 1,063,750 1,183, , , /1/1997 1,271,036 1,251,842 (19,194) ,644 (2.1) 10/1/1998 1,368,123 1,273,447 (94,676) ,347 (10.6) 10/1/1999 1,647,026 1,414,842 (232,184) ,096 (26.0) 10/1/2000 1,947,011 1,589,940 (357,071) ,020,463 (35.0) 10/1/2001 2,174,946 2,434, , ,192, /1/2002 2,415,505 2,821, , ,252, /1/2003 2,704,054 3,283, , ,457, /1/2004 2,952, , , ,466, /1/2005 3,303,351 4,284, , ,599, /1/2006 3,776,705 4,645, , ,560, /1/2007 4,670,639 5,596, , ,729, /1/2008 5,168,480 6,280,340 1,111, ,801, /1/2009 5,792,687 7,270,006 1,477, ,758, /1/2010 6,709,645 7,965,445 1,255, ,677, /1/2011 7,596,301 8,962,174 1,365, ,690, /1/2012 8,484,349 10,041,459 1,557, ,662, /1/2013 9,491,707 11,117,866 1,626, ,725, /1/ ,507,296 11,942,528 1,435, ,613,

26 RECENT HISTORY OF REQUIRED AND ACTUAL CONTRIBUTIONS Valuation End of Required Contributions Year To Which Employer & State Estimated State Net Employer Actual Contributions Valuation % of % of % of Applies Amount Payroll Amount Payroll Amount Payroll Employer State Total 10/1/91 9/30/92 $ 64, % $ 35, % $ 28, % $ 30,105 $ 33,919 $ 64,024 10/1/92 9/30/93 65, , , ,862 34,458 66,320 10/1/93 9/30/94 56, , , ,948 32,495 56,443 10/1/94 9/30/95 66, , , ,635 33,464 68,099 10/1/95 9/30/96 105, , , ,256 74, ,910 10/1/96 9/30/97 96, , , ,921 80, ,330 10/1/97 9/30/98 78, , ,572 70,823 78,395 10/1/98 9/30/99 66, , ,235 75,235 10/1/99 9/30/00 53, , ,927 76,927 10/1/00 9/30/01 70, , ,424 71,424 10/1/01 9/30/02 203, , , ,398 75, ,340 10/1/02 9/30/03 233, , , ,233 86, ,463 10/1/03 9/30/04 294, , , ,768 86, ,998 10/1/04 9/30/05 335, , , ,990 86, ,220 10/1/04 9/30/06 348, , , ,356 92, ,909 10/1/05 9/30/07 408, , , ,435 92, ,988 10/1/06 9/30/08 380, , , ,001 92, ,554 10/1/07 9/30/09 423, , , ,310 92, ,863 10/1/08 9/30/10 452, , , ,860 85, ,810 10/1/09 9/30/11 506, , , ,736 81, ,137 10/1/10 9/30/12 420, , , ,233 92, ,786 10/1/11 9/30/13 451, , , ,132 87, ,086 10/1/12 9/30/14 465, , , ,272 92, ,825 10/1/13 9/30/15 500, , , /1/14 9/30/16 466, , ,

27 20 $550 $500 $450 $400 Recent History of Required and Actual Contributions Thousands $350 $300 $250 $200 $150 $100 $50 $0 Fiscal Year End Required Contribution Actual Contribution

28 21 ACTUARIAL ASSUMPTIONS AND COST METHOD Valuation Methods Actuarial Cost Method - Normal cost and the allocation of benefit values between service rendered before and after the valuation date were determined using an Individual Entry-Age Actuarial Cost Method having the following characteristics: (i) the annual normal cost for each individual active member, payable from the date of employment to the date of retirement, is sufficient to accumulate the value of the member s benefit at the time of retirement; (ii) each annual normal cost is a constant percentage of the member s year by year projected covered pay. Actuarial gains/(losses), as they occur, reduce (increase) the Unfunded Actuarial Accrued Liability. Financing of Unfunded Actuarial Accrued Liabilities - Unfunded Actuarial Accrued Liabilities (full funding credit if assets exceed liabilities) were amortized by level (principal & interest combined) dollar contributions over a reasonable period of future years. Actuarial Value of Assets - The Actuarial Value of Assets phase in the difference between the expected return on actuarial value and actual return on market value of assets at the rate of 20% per year. The Actuarial Value of Assets will be further adjusted to the extent necessary to fall within the corridor whose lower limit is 80% of the Market Value of plan assets and whose upper limit is 120% of the Market Value of plan assets. During periods when investment performance exceeds the assumed rate, Actuarial Value of Assets will tend to be less than Market Value. During periods when investment performance is less than assumed rate, Actuarial Value of Assets will tend to be greater than Market Value. Valuation Assumptions The actuarial assumptions used in the valuation are shown in this Section. Economic Assumptions The investment return rate assumed in the valuation is 7.50% per year, compounded annually (net after investment expenses). The Wage Inflation Rate assumed in this valuation was 4.00% per year. The Wage Inflation Rate is defined to be the portion of total pay increases for an individual that are due to macro economic forces including productivity, price inflation, and labor market conditions. The wage inflation rate does not include pay changes related to individual merit and seniority effects. The assumed real rate of return over wage inflation is defined to be the portion of total investment return that is more than the assumed wage inflation rate. Considering other economic assumptions, the 7.50% investment return rate translates to an assumed real rate of return over wage inflation of 3.50%.

29 22 The rates of salary increase used for individual members are in accordance with the following table. This assumption is used to project a member s current salary to the salaries upon which benefits will be based. % Increase in Salary Years of Service Merit and Seniority Base (Economic) Total Increase All 2.0% 4.0% 6.0% Demographic Assumptions The mortality table was the RP-2000 Combined Healthy Participant Mortality Tables for males and females. Future mortality improvements are projected to all future years from the year 2000 using Scale AA (on a fully generational basis). Sample Attained Probability of Dying Next Year Future Life Expectancy (years) Ages (in 2014) Men Women Men Women % 0.13 % This assumption is used to measure the probabilities of each benefit payment being made after retirement. For active members, the probabilities of dying before retirement were based upon the same mortality table as members dying after retirement. For disabled retirees, the regular mortality tables are set forward 5 years in ages to reflect impaired longevity. The rates of retirement used to measure the probability of eligible members retiring during the next year were as follows: Number of Years After First Eligibility Probability of for Normal Retirement Normal Retirement 0 80 %

30 Rates of separation from active membership were as shown below (rates do not apply to members eligible to retire and do not include separation on account of death or disability). This assumption measures the probabilities of members remaining in employment. 23 Rates of disability among active members: Sample Years of % of Active Members Ages Service Separating Within Next Year 20 All 9.3 % Sample Ages 20 % Becoming Disabled within Next Year 0.14 %

31 24 Miscellaneous and Technical Assumptions Administrative & Investment Expenses Benefit Service Decrement Operation Decrement Timing Eligibility Testing Forfeitures Incidence of Contributions Marriage Assumption Normal Form of Benefit Pay Increase Timing Service Credit Accruals The investment return assumption is intended to be the return net of investment expense. Annual administrative expenses are assumed to be equal to the average of the expenses over the previous two years. Assumed administrative expenses are added to the Normal Cost. Exact fractional service is used to determine the amount of benefit payable. Disability and mortality decrements operate during retirement eligibility. Decrements of all types are assumed to occur at the beginning of the year. Eligibility for benefits is determined based upon the age nearest birthday and service nearest whole year on the date the decrement is assumed to occur. For vested separations from service, it is assumed that 0% of members separating will withdraw their contributions and forfeit an employer financed benefit. It was further assumed that the liability at termination is the greater of the vested deferred benefit (if any) or the member s accumulated contributions. Employer contributions are assumed to be made at the end of each calendar quarter. Member contributions are assumed to be received continuously throughout the year based upon the computed percent of payroll shown in this report, and the actual payroll payable at the time contributions are made. 100% of males and 100% of females are assumed to be married for purposes of death-in-service benefits. Male spouses are assumed to be three years older than female spouses for active member valuation purposes. A life annuity with 10 years certain is the normal form of benefit. Middle of fiscal year. This is equivalent to assuming that reported pays represent amounts paid to members during the year ended on the valuation date. It is assumed that members accrue one year of service credit per year.

32 25 GLOSSARY OF TERMS Actuarial Accrued Liability (AAL) Actuarial Assumptions Actuarial Cost Method Actuarial Equivalent Actuarial Present Value (APV) Actuarial Present Value of Future Benefits (APVFB) Actuarial Valuation Actuarial Value of Assets The difference between the Actuarial Present Value of Future Benefits, and the Actuarial Present Value of Future Normal Costs. Assumptions about future plan experience that affect costs or liabilities, such as: mortality, withdrawal, disablement, and retirement; future increases in salary; future rates of investment earnings; future investment and administrative expenses; characteristics of members not specified in the data, such as marital status; characteristics of future members; future elections made by members; and other items. A procedure for allocating the Actuarial Present Value of Future Benefits between the Actuarial Present Value of Future Normal Costs and the Actuarial Accrued Liability. Of equal Actuarial Present Value, determined as of a given date and based on a given set of Actuarial Assumptions. The amount of funds required to provide a payment or series of payments in the future. It is determined by discounting the future payments with an assumed interest rate and with the assumed probability each payment will be made. The Actuarial Present Value of amounts which are expected to be paid at various future times to active members, retired members, beneficiaries receiving benefits, and inactive, nonretired members entitled to either a refund or a future retirement benefit. Expressed another way, it is the value that would have to be invested on the valuation date so that the amount invested plus investment earnings would provide sufficient assets to pay all projected benefits and expenses when due. The determination, as of a valuation date, of the Normal Cost, Actuarial Accrued Liability, Actuarial Value of Assets, and related Actuarial Present Values for a plan. An Actuarial Valuation for a governmental retirement system typically also includes calculations of items needed for compliance with GASB No. 67. The value of the assets as of a given date, used by the actuary for valuation purposes. This may be the market or fair value of plan assets or a smoothed value in order to reduce the year-to-year volatility of calculated results, such as the funded ratio and the actuarially required contribution (ARC).

33 26 Amortization Method Amortization Payment Amortization Period Annual Required Contribution (ARC) A method for determining the Amortization Payment. The most common methods used are level dollar and level percentage of payroll. Under the Level Dollar method, the Amortization Payment is one of a stream of payments, all equal, whose Actuarial Present Value is equal to the UAAL. Under the Level Percentage of Pay method, the Amortization Payment is one of a stream of increasing payments, whose Actuarial Present Value is equal to the UAAL. Under the Level Percentage of Pay method, the stream of payments increases at the rate at which total covered payroll of all active members is assumed to increase. That portion of the plan contribution or ARC which is designed to pay interest on and to amortize the Unfunded Actuarial Accrued Liability. The period used in calculating the Amortization Payment. The employer s periodic required contributions, expressed as a dollar amount or a percentage of covered plan compensation. The ARC consists of the Employer Normal Cost and Amortization Payment. Closed Amortization Period Employer Normal Cost Equivalent Single Amortization Period Experience Gain/Loss A specific number of years that is reduced by one each year, and declines to zero with the passage of time. For example if the amortization period is initially set at 30 years, it is 29 years at the end of one year, 28 years at the end of two years, etc. The portion of the Normal Cost to be paid by the employer. This is equal to the Normal Cost less expected member contributions. For plans that do not establish separate amortization bases (separate components of the UAAL), this is the same as the Amortization Period. For plans that do establish separate amortization bases, this is the period over which the UAAL would be amortized if all amortization bases were combined upon the current UAAL payment. A measure of the difference between actual experience and that expected based upon a set of Actuarial Assumptions, during the period between two actuarial valuations. To the extent that actual experience differs from that assumed, Unfunded Actuarial Accrued Liabilities emerge which may be larger or smaller than projected. Gains are due to favorable experience, e.g., the assets earn more than projected, salaries do not increase as fast as assumed, members retire later than assumed, etc. Favorable experience means actual results produce actuarial liabilities not as large as projected by the actuarial assumptions. On the other hand, losses are the result of unfavorable experience, i.e., actual results that produce Unfunded Actuarial Accrued Liabilities which are larger than projected.

34 27 Funded Ratio GASB GASB No. 27 and GASB No. 67 Normal Cost Open Amortization Period Unfunded Actuarial Accrued Liability Valuation Date The ratio of the Actuarial Value of Assets to the Actuarial Accrued Liability. Governmental Accounting Standards Board. These are the governmental accounting standards that set the accounting rules for public retirement systems and the employers that sponsor or contribute to them. Statement No. 27 sets the accounting rules for the employers that sponsor or contribute to public retirement systems, while Statement No. 67 sets the rules for the systems themselves. The annual cost assigned, under the Actuarial Cost Method, to the current plan year. An open amortization period is one which is used to determine the Amortization Payment but which does not change over time. In other words, if the initial period is set as 30 years, the same 30-year period is used in determining the Amortization Period each year. In theory, if an Open Amortization Period is used to amortize the Unfunded Actuarial Accrued Liability, the UAAL will never completely disappear, but will become smaller each year, either as a dollar amount or in relation to covered payroll. The difference between the Actuarial Accrued Liability and Actuarial Value of Assets. The date as of which the Actuarial Present Value of Future Benefits are determined. The benefits expected to be paid in the future are discounted to this date.

35 SECTION C PENSION FUND INFORMATION

36 28 Statement of Plan Assets at Market Value September 30 Item A. Cash and Cash Equivalents (Operating Cash) $ - $ 33,848 B. Receivables 1. Member Contributions $ - $ - 2. Employer Contributions State Contributions Investment Income and Other Receivables 10,717 10, Total Receivables $ 10,717 $ 10,234 C. Investments 1. Short Term Investments $ 300,825 $ 79, Domestic Equities 5,675,959 4,805, International Equities 1,458,262 1,405, Domestic Fixed Income 3,524,357 3,396, International Fixed Income Real Estate Private Equity Total Investments $ 10,959,403 $ 9,686,986 D. Liabilities 1. Benefits Payable $ - $ - 2. Accrued Expenses and Other Payables (2,746) (49,760) 3. Total Liabilities $ (2,746) $ (49,760) E. Total Market Value of Assets Available for Benefits $ 10,967,374 $ 9,681,308 F. Reserves 1. State Contribution Reserve $ (43,018) $ (40,039) 2. DROP Accounts (64,657) - 3. Total Reserves $ (107,675) $ (40,039) G. Market Value Net of Reserves $ 10,859,699 $ 9,641,269 H. Allocation of Investments 1. Short Term Investments 2.7% 0.8% 2. Domestic Equities 51.8% 49.6% 3. International Equities 13.3% 14.5% 4. Domestic Fixed Income 32.2% 35.1% 5. International Fixed Income 0.0% 0.0% 6. Real Estate 0.0% 0.0% 7. Private Equity 0.0% 0.0% 8. Total Investments 100.0% 100.0%

37 29 Reconciliation of Plan Assets September 30 Item A. Market Value of Assets at Beginning of Year $ 9,681,308 $ 8,461,202 B. Revenues and Expenditures 1. Contributions a. Employee Contributions $ 111,001 $ 117,240 b. Employer Contributions 377, ,132 c. State Contributions 95,532 87,954 d. Purchased Service Credit - - e. Total $ 583,805 $ 580, Investment Income a. Interest, Dividends, and Other Income $ 205,862 $ 296,140 b. Net Realized/Unrealized Gains/(Losses)* 805, ,396 c. Investment Expenses (19,325) (26,856) d. Net Investment Income $ 992,243 $ 953, Benefits and Refunds a. Regular Monthly Benefits $ (247,244) $ (247,244) b. Refunds (716) (29,449) c. Lump Sum Benefits - - d. DROP Distributions - - e. Total $ (247,960) $ (276,693) 4. Administrative and Miscellaneous Expenses $ (42,022) $ (37,207) 5. Transfers $ - $ - C. Market Value of Assets at End of Year $ 10,967,374 $ 9,681,308 D. Reserves 1. State Contribution Reserve $ (43,018) $ (40,039) 2. DROP Accounts (64,657) - 3. Total Reserves $ (107,675) $ (40,039) E. Market Value Net of Reserves $ 10,859,699 $ 9,641,269 * The breakdown between realized and unrealized gains/(losses) is not available.

38 30 Reconciliation of DROP Accounts Year Ended 9/30 Balance at Beginning of Year Credits (Net of Expenses) Interest Distributions Balance at End of Year 2014 $ - $ 63,111 $ 1,546 $ - $ 64,657

39 Development of Actuarial Value of Assets Valuation Date September A. Actuarial Value of Assets Beginning of Year $ 8,524,388 $ 9,531,746 B. Market Value End of Year 9,681,308 10,967,374 C. Market Value Beginning of Year 8,461,202 9,681,308 D. Non-Investment/Administrative Net Cash Flow 266, ,823 E. Investment Income E1. Actual Market Total: B-C-D 953, ,243 E2. Assumed Rate of Return 7.625% 7.50% 7.50% 7.50% 7.50% 7.50% E3. Assumed Amount of Return 660, ,899 E4. Amount Subject to Phase-In: E1 E3 293, ,344 F. Phased-In Recognition of Investment Income F1. Current Year: 0.2 x E4 58,708 53,269 F2. First Prior Year 42,929 58,708 53,269 F3. Second Prior Year (122,657) 42,929 58,708 53,269 F4. Third Prior Year 31,254 (122,657) 42,929 58,708 53,269 F5. Fourth Prior Year 70,556 31,254 (122,657) 42,929 58,708 53,269 F6. Total Phase-Ins 80,790 63,503 32, , ,977 53,269 G. Actuarial Value of Assets End of Year G1. Preliminary Actuarial Value of Assets End of Year: A+D+E3+F6 $ 9,531,746 $ 10,614,971 G2. Upper Corridor Limit: 120%*B 11,617,570 13,160,849 G3. Lower Corridor Limit: 80%*B 7,745,046 8,773,899 G4. Actuarial Value of Assets End of Year 9,531,746 10,614,971 G5. State Contribution Reserve (40,039) (43,018) G6. DROP Accounts - (64,657) G7. Final Actuarial Value of Assets End of Year 9,491,707 10,507,296 H. Difference between Market and Actuarial Value of Assets 149, ,403 I. Actuarial Rate of Return 8.56% 8.16% J. Market Value Rate of Return 11.10% 10.10% K. Ratio of Actuarial Value of Assets to Market Value 98.46% 96.79% 31

40 32 Year Ending Investment Rate of Return* Market Value Basis Actuarial Value Basis 9/30/ % 12.9 % 9/30/ /30/1994 (13.8) 5.6 9/30/ /30/ /30/ /30/ /30/ /30/ /30/2001 (7.7) 8.2 9/30/2002 (6.0) 3.3 9/30/ /30/ /30/ /30/ /30/ /30/2008 (11.0) 2.0 9/30/ /30/ /30/2011 (0.9) 7.6 9/30/ /30/ /30/ Average Returns: Last 5 Years 8.2 % 8.4 % Last 10 Years 8.0 % 6.9 % All Years 8.1 % 7.6 % * Net of investment expenses after 2010 The above rates are based on the retirement systems financial information reported to the actuary. They may differ from figures that the investment consultant reports, in part because of differences in the handling of administrative and investment expenses, and in part because of differences in the handling of cash flows.

41 SECTION D FINANCIAL ACCOUNTING INFORMATION

42 33 FASB NO. 35 INFORMATION A. Valuation Date October 1, 2014 October 1, 2013 B. Actuarial Present Value of Accumulated Plan Benefits 1. Vested Benefits a. Members Currently Receiving Payments $ 3,653,777 $ 2,779,585 b. Terminated Vested Members 1,264, ,698 c. Other Members 4,665,437 4,778,388 d. Total 9,583,731 8,503, Non-Vested Benefits 598, , Total Actuarial Present Value of Accumulated Plan Benefits: 1d ,182,332 9,250, Accumulated Contributions of Active Members 902, ,926 C. Changes in the Actuarial Present Value of Accumulated Plan Benefits 1. Total Value at Beginning of Year 9,250,892 8,234, Increase (Decrease) During the Period Attributable to: a. Plan Amendment 0 0 b. Change in Actuarial Assumptions 0 244,216 c. Latest Member Data, Benefits Accumulated and Decrease in the Discount Period 1,243,211 1,048,894 d. Benefits Paid (311,771) (276,693) e. Net Increase 931,440 1,016, Total Value at End of Period 10,182,332 9,250,892 D. Market Value of Assets 10,859,699 9,641,269 E. Actuarial Assumptions - See page entitled Actuarial Assumptions and Methods

43 34 ANNUAL PENSION COST AND NET PENSION OBLIGATION (GASB STATEMENT NO. 27) Employer FYE September Annual Required Contribution (ARC) * $ 465,226 $ 451,934 Interest on Net Pension Obligation (NPO) (6,908) (6,549) Adjustment to ARC (12,575) (11,481) Annual Pension Cost (APC) 470, ,866 Contributions made 469, ,086 Increase (decrease) in NPO 1,068 (6,220) NPO at beginning of year (92,111) (85,891) NPO at end of year (91,043) (92,111) * Includes expected State contribution. ** To be determined. THREE YEAR TREND INFORMATION Fiscal Year Ending Annual Pension Cost (APC) Actual Contribution Percentage of APC Contributed Net Pension Obligation 9/30/2012 $ 425,001 $ 431, % $ (85,891) 9/30/ , , (92,111) 9/30/ , , (91,043)

44 35 REQUIRED SUPPLEMENTARY INFORMATION GASB Statement No. 27 The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation: Valuation Date October 1, 2014 Contribution Rates: Employer (and State) 27.81% Plan Members 7.00% Actuarial Cost Method Amortization Method Remaining amortization period Asset valuation method Entry Age Normal Level dollar, closed 20 years 5-year smoothed market Actuarial assumptions: Investment rate of return 7.50% Projected salary increases 6.0% Includes inflation and other general increases at 4.0% Cost-of-living adjustments N/A

45 36 SCHEDULE OF CHANGES IN THE EMPLOYER S NET PENSION LIABILITY AND RELATED RATIOS GASB Statement No. 67 Fiscal year ending September 30, 2015* 2014 Total pension liability Service Cost $ 357,506 $ 390,463 Interest 925, ,826 Benefit Changes - - Difference between actual & expected experience (113,373) (847) Assumption Changes - - Benefit Payments (349,066) (247,244) Refunds (6,927) (716) Other (Increase in State Contribution Reserve and DROP Expenses) - 2,279 Net Change in Total Pension Liability 813, ,761 Total Pension Liability - Beginning 12,155,666 11,157,905 Total Pension Liability - Ending (a) $ 12,968,945 $ 12,155,666 Plan Fiduciary Net Position Contributions - Employer $ 408,040 $ 377,272 Contributions - Non-Employer Contributing Entity 95,532 95,532 Contributions - Member 112, ,001 Net Investment Income 830, ,243 Benefit Payments (349,066) (247,244) Refunds (6,927) (716) Administrative Expense (39,615) (42,022) Other - - Net Change in Plan Fiduciary Net Position 1,051,762 1,286,066 Plan Fiduciary Net Position - Beginning 10,967,374 9,681,308 Plan Fiduciary Net Position - Ending (b) $ 12,019,136 $ 10,967,374 Net Pension Liability - Ending (a) - (b) 949,809 1,188,292 Plan Fiduciary Net Position as a Percentage of Total Pension Liability % % Covered Employee Payroll $ 1,613,718 $ 1,585,729 ** Net Pension Liability as a Percentage of Covered Employee Payroll % % * These figures are estimates only. Actual figures will be provided after the end of the fiscal year. **Actual total covered payroll for the fiscal year ending September 30, 2014.

46 37 SCHEDULE OF THE EMPLOYER S NET PENSION LIABILITY GASB Statement No. 67 Total Plan Net Position Net Pension Liability FY Ending Pension Plan Net Net Pension as a % of Total Covered as a % of September 30, Liability Position Liability Pension Liability Payroll Covered Payroll 2014 $ 12,155,666 $ 10,967,374 $ 1,188, % $ 1,585,729 * 74.94% 2015** 12,968,945 12,019, , % 1,613, % * Actual total covered payroll for the fiscal year ending September 30, ** These figures are estimates only. Actual figures will be provided after the end of the fiscal year.

47 38 SCHEDULE OF CONTRIBUTIONS GASB Statement No. 67 Actuarially Contribution Actual Contribution FY Ending Determined Actual Deficiency Covered as a % of September 30, Contribution Contribution (Excess) Payroll Covered Payroll 2014 $ 465,226 $ 469,825 $ (4,599) $ 1,585,729 * 29.63% 2015** 500, ,593-1,613, % * Actual total covered payroll for the fiscal year ending September 30, ** These figures are estimates only. Actual figures will be provided after the end of the fiscal year.

48 39 NOTES TO SCHEDULE OF CONTRIBUTIONS GASB Statement No. 67 Valuation Date: October 1, 2013 Notes Actuarially determined contribution rates are calculated as of October 1, which is two year(s) prior to the end of the fiscal year in which contributions are reported. Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Amortization Method Level Dollar, Closed Remaining Amortization Period 20 years Asset Valuation Method 5-year smoothed market Inflation 4.0% Salary Increases 6.0%, including inflation Investment Rate of Return 7.50% Retirement Age Experience-based table of rates Mortality RP-2000 Combined Healthy Participant Mortality Table for males and females with mortality improvement projected to all future years after 2000 using Scale AA Other Information: Notes See Discussion of Valuation Results in the October 1, 2013 Actuarial Valuation Report

49 40 SINGLE DISCOUNT RATE GASB Statement No. 67 A single discount rate of 7.50% was used to measure the total pension liability. This single discount rate was based on the expected rate of return on pension plan investments of 7.50%. The projection of cash flows used to determine this single discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between the total actuarially determined contribution rates and the member rate. Based on these 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 (7.50%) was applied to all periods of projected benefit payments to determine the total pension liability. Regarding the sensitivity of the net pension liability to changes in the single discount rate, the following presents the plan s net pension liability, calculated using a single discount rate of 7.50%, as well as what the plan s net pension liability would be if it were calculated using a single discount rate that is 1-percentage-point lower or 1-percentage-point higher: Sensitivity of the Net Pension Liability to the Single Discount Rate Assumption* Current Single Discount 1% Decrease Rate Assumption 1% Increase 6.50% 7.50% 8.50% $ 2,583,820 $ 949,809 $ (418,752) * These figures are estimates projected to September 30, Actual figures will be provided after the end of the fiscal year.

50 SECTION E MISCELLANEOUS INFORMATION

51 41 A. Active Members RECONCILIATION OF MEMBERSHIP DATA From 10/1/13 To 10/1/14 From 10/1/12 To 10/1/13 1. Number Included in Last Valuation New Members Included in Current Valuation Non-Vested Employment Terminations 0 (2) 4. Vested Employment Terminations (1) 0 5. Service Retirements Disability Retirements Deaths Other-Entered DROP (2) Number Included in This Valuation B. Terminated Vested Members 1. Number Included in Last Valuation Additions from Active Members Lump Sum Payments/Refund of Contributions Payments Commenced Deaths Other Number Included in This Valuation 6 5 C. DROP Plan Members 1. Number Included in Last Valuation Additions from Active Members Retirements Deaths Resulting in No Further Payments Other Number Included in This Valuation 2 0 D. Service Retirees, Disability Retirees and Beneficiaries 1. Number Included in Last Valuation Additions from Active Members Additions from Terminated Vested Members Deaths Resulting in No Further Payments Deaths Resulting in New Survivor Benefits End of Certain Period - No Further Payments Other Number Included in This Valuation 13 11