SOUTH BURLINGTON SCHOOL DISTRICT RETIREMENT INCOME PLAN. ACTUARIAL VALUATION as of October 1, 2015

Transcription

1 SOUTH BURLINGTON SCHOOL DISTRICT RETIREMENT INCOME PLAN ACTUARIAL VALUATION as of October 1, 2015 FINANCIAL REPORTING AND DISCLOSURES UNDER GASB 67 and 68 as of September 30, 2015 Prepared by: KMS Actuaries, LLC 814 Elm Street, Suite 204 Manchester, NH 03101

2 January 4, 2017 Mr. John Aubin Business Manager South Burlington School District 550 Dorset Street South Burlington, VT Dear John: We are pleased to present the enclosed report summarizing the results of an actuarial valuation of the as of October 1, Our report also provides financial reporting and disclosures as of September 30, 2015 under Governmental Accounting Standards Board (GASB) Statement No. 67, Financial Reporting for Pension Plans (GASB 67), and GASB Statement No. 68, Accounting and Financial Reporting for Pensions (GASB 68). The Principal Valuation Results, including assets and liabilities are provided in Section 1. The Notes to the Financial Statements and the Required Supplementary Information are provided in Sections 2 and 3, respectively. Employer Reporting Amounts Under GASB 68 are provided in Section 4. The Summary of Plan Provisions and Actuarial Assumptions and Methods are shown in Sections 5 and 6, respectively. Section 7 summarizes the demographic profile of active participants and retired participants and beneficiaries. Finally, a Glossary of Terms is provided in Section 8. Our calculations are based on participant and asset data and other information provided by the South Burlington School District and the Plan benefit provisions. Although we did not audit the data used in the valuation and disclosure calculations, we believe that the information is complete and reliable. Liabilities presented in this report are based on a discount rate of 7%, net of investment expense, compounded annually. The investment return rate is based on expected long-term investment return rates developed by the South Burlington School District's investment consultant, SEI Investment Management Corporation.

3 Mr. John Aubin January 4, 2017 Page 2 This report was completed in accordance with generally accepted actuarial standards and procedures, and conforms to the Code of Professional Conduct of the American Academy of Actuaries. The actuarial assumptions used in the determination of costs are reasonably related to the experience of the Plan and to reasonable expectations, and represent our best estimate of anticipated long-term experience under the Plan. Future actuarial valuation results may differ significantly from the current results presented in this report. Examples of potential sources of volatility include plan experience differing from that anticipated by the economic or demographic assumptions, changes in economic or demographic assumptions, the effect of law changes and the delayed effect of smoothing techniques. Our valuation follows generally accepted actuarial methods and we perform such tests as we consider necessary to assure the accuracy of the results. The amounts presented in this report have been appropriately determined according to the actuarial assumptions and methods stated herein. This report is intended for the sole use of the South Burlington School District and is intended to provide information to comply with the stated purpose of the report. It may not be appropriate for other purposes. The undersigned credentialed actuaries are Members of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinion contained herein. They are available to answer any questions with regard to this report. Respectfully submitted, Linda L. Bournival, FSA Member, American Academy of Actuaries (603) David M. Mirabito, FSA Member, American Academy of Actuaries (978)

4 TABLE OF CONTENTS INTRODUCTION 1 SECTION 1 - PRINCIPAL VALUATION RESULTS 4 Exhibit Plan Assets Exhibit Actuarial Liabilities Exhibit Actuarially Determined Contribution SECTION 2 - NOTES TO THE FINANCIAL STATEMENTS 7 Exhibit Plan Description Exhibit Net Pension Liability SECTION 3 - REQUIRED SUPPLEMENTARY INFORMATION 10 Exhibit Changes in Net Pension Liability and Related Ratios Exhibit Schedule of Employer Contributions Exhibit Notes to Required Supplementary Information Exhibit Investment Returns SECTION 4 - EMPLOYER REPORTING AMOUNTS UNDER GASB Exhibit Deferred Outflows and Deferred Inflows of Resources Exhibit Pension Expense SECTION 5 - SUMMARY OF PLAN PROVISIONS 18 SECTION 6 - ACTUARIAL ASSUMPTIONS AND METHODS 19 SECTION 7 - PLAN PARTICIPANT INFORMATION 21 Exhibit Active Plan Participants by Age and Years of Service Exhibit Retired Plan Participants and Beneficiaries SECTION 8 - GLOSSARY OF TERMS 23 Appendix A Appendix B Appendix C MONEY-WEIGHTED RATE OF RETURN SCHEDULE OF DEFERRED OUTFLOWS OF RESOURCES and DEFERRED INFLOWS OF RESOURCES CALCULATION OF SINGLE DISCOUNT RATE

5 GASB 67 and GASB 68 INTRODUCTION In June 2012, the GASB approved two related Statements that significantly changed the way pension plans and governments account and report pension liabilities. Effective for plans with fiscal years beginning after June 15, 2013, GASB Statement No. 67 (GASB 67), Financial Reporting for Pension Plans, replaced the requirements of Statement No. 25 and effective for employers with fiscal years beginning after June 15, 2014, GASB Statement No. 68 (GASB 68), Accounting and Financial Reporting for Pensions, replaced the requirements of Statement No. 27. The South Burlington School District implemented GASB 67 and GASB 68 for the District's fiscal year ending June 30, GASB 67 requires defined benefit pension plans, such as the South Burlington School District Retirement Income Plan, to present a statement of fiduciary net position (pension plan assets) and a statement of changes in fiduciary net position. Further, the statement requires that notes to financial statements include descriptive information such as the types of benefits provided, the classes of plan members covered and the composition of the pension plan's retirement board. Finally, GASB 67 requires pension plans to present in required supplementary information the sources of the changes in the net pension liability and information about the actuarially determined contributions compared with the actual contributions made to the plan and related ratios. GASB 67 and GASB 68 require projected benefit payments be discounted to their actuarial present value using the single rate that reflects: (1) a long-term expected rate of return on pension plan investments to the extent that the pension plan's assets are sufficient to pay benefits and pension plan assets are expected to be invested using a strategy to achieve that return and (2) a tax-exempt, high-quality municipal bond rate to the extent that the conditions for use of the long-term expected rate of return are not met. GASB 68 establishes standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources and pension expense by state and local governments. Fiduciary Net Position Pension plan investments are reported at market value as of the measurement date. position as of the current and prior measurement dates is shown in Exhibit 1.1. The fiduciary net Page 1

6 INTRODUCTION A summary of principal valuation results from the current valuation and the prior valuation follows. Changes in actuarial assumptions and methods and Plan provisions are discussed below, as well as changes in census data and asset information. Valuation Date October 1, 2015 October 1, 2014 Increase/ (Decrease) Measurement Date September 30, 2015 September 30, 2014 Summary of Participant Data Active Participants (7.5%) Average Age % Average Service % Total Salary $ 5,738,245 $ 5,908,499 (2.9%) Average Salary $ 33,362 $ 31, % Retired Participants and Beneficiaries % Average Age % Total Annual Pension $ 407,330 $ 359, % Average Annual Pension $ 4,380 $ 4, % Actuarial Accrued Liability $ 11,204,785 Not applicable Normal Cost $ 374,585 $ 569,807 (34.3%) Net Pension Liability Total Pension Liability (TPL) $ 11,204,785 $ 10,469, % Plan Fiduciary Net Position (FNP) $ 8,329,592 $ 8,147, % Net Pension Liability $ 2,875,193 $ 2,321, % FNP as percentage of TPL 74.3% 77.8% (4.5%) Service Cost, Beginning of Year $ 383,030 $ 353, % Actuarially Determined Contribution¹ $ 690,573 $ 609, % ¹ The Actuarially Determined Contribution shown for the October 1, 2014 valuation is from the valuation report prepared by Future Planning Associates. Total Pension Liability The Total Pension Liability as of September 30, 2015 shown in this report is based on liabilities developed in an actuarial valuation as of September 30, 2015, and is shown in Exhibit 1.2. Pension Expense The Pension Expense for the fiscal year ending September 30, 2015 is $667,745 and is shown in Exhibit 4.2. Page 2

7 Assumption Changes INTRODUCTION For purposes of the financial statement disclosures, all of the Actuarial Assumptions and Methods used in this valuation are the same as those used in the last valuation except the mortality improvement scale was changed from MP-2014 to MP For purposes of the funding valuation, the mortality tables were updated to reflect more recent mortality rates. The Actuarial Assumptions and Methods utilized in this valuation are detailed in Section 6, Actuarial Assumptions and Methods. Benefit Changes All of the Plan provisions used in this valuation are the same as those used in the last valuation, and are detailed in Section 5, Summary of Plan Provisions. Census Data As of October 1, 2015, there are 172 active participants who are eligible for benefits in the future and 93 retirees and beneficiaries currently receiving benefits. Summaries of the active participants and retired participants and beneficiaries are included in Section 7, Demographic Information. Assets This valuation is based upon asset information provided by the District. The market value of assets increased from $8,147,450 as of September 30, 2014 to $8,329,592 as of September 30, During the plan year ended September 30, 2015, the money-weighted rate of return on the market value of assets was -1.68%, and during the plan year ended September 30, 2014, the money-weighted rate of return on the market value of assets was 10.04%. Actuarially Determined Contribution Based on the results of this valuation, the actuarially determined contribution for the fiscal year beginning October 1, 2015 is $690,573, and is developed in Section 1, Exhibit 1.3, Actuarially Determined Contribution. Page 3

8 SECTION 1 - PRINCIPAL VALUATION RESULTS Exhibit Plan Assets Statement of Fiduciary Net Position September Assets Cash $ 831 $ 219 Receivables: Contributions 0 0 Investment income 6,734 6,029 Total receivables 6,734 6,029 Investments: Domestic Equity 4,035,694 3,916,294 International Equity 922,690 1,007,577 Fixed Income 2,786,815 2,134,809 Global Fixed Income 543, ,427 High Yield 0 268,932 Emerging Markets 0 265,403 Total investments 8,288,914 8,111,442 Total assets 8,296,479 8,117,690 Liabilities Payables: Investment management fees 0 0 Benefit payments (33,113) (29,760) Total liabilities (33,113) (29,760) Net position restricted for pensions $ 8,329,592 $ 8,147,450 Statement of Changes in Fiduciary Net Position Additions Employer contributions $ 715,137 $ 757,500 Investment income: Net appreciation in fair value of investments (278,621) 578,584 Interest and dividends 178, ,110 Investment expense (42,659) (28,720) Net investment income (142,764) 720,974 Total additions 572,373 1,478,474 Deductions Benefit payments 390, ,005 Administrative expenses - - Total deductions 390, ,005 Net increase in net position 182,142 1,118,469 Net position restricted for pensions Beginning of year 8,147,450 7,028,981 End of year 8,329,592 8,147,450 (Gain) / Loss on Pension Plan Investments Projected earnings $ 581,693 $ 505,941 Actual earnings (142,764) 720,974 (Gain) / Loss on pension plan investments $ 724,457 $ (215,033) Page 4

9 SECTION 1 - PRINCIPAL VALUATION RESULTS Exhibit Actuarial Liabilities Funding The Actuarial Accrued Liability, developed using the long-term rate of return and the Entry Age Normal funding method is the portion of the actuarial present value of projected benefit payments that is attributed to past periods of member service. Actuarial Valuation as of: October 1, 2015 Long-term rate of return 7.00% Actives $ 6,047,024 Retired Participants and Beneficiaries 3,866,086 Terminated Vested Participants 1,291,675 Total Actuarial Accrued Liability $ 11,204,785 The Normal Cost is the portion of the actuarial present value of projected benefit payments that is attributed to a valuation year. Normal cost $ 374,585 GASB 67 and GASB 68 Disclosures The Total Pension Liability, developed using the Entry Age Normal funding method and the discount rate, is the portion of the actuarial present value of projected benefit payments that is attributed to past periods of member service. Measurement Date: September 30, 2015 September 30, 2014 Discount Rate 7.00% 7.00% Actives $ 6,047,024 $ 5,871,160 Retired Participants and Beneficiaries 3,866,086 3,434,001 Terminated Vested Participants 1,291,675 1,164,011 Total Pension Liability $ 11,204,785 $ 10,469,172 The Service Cost is the portion of the actuarial present value of projected benefit payments that is attributed to a valuation year. For the measurement period ended September 30, 2015, the service cost is developed as of September 30, 2014, assuming a discount rate of 7%. Service cost, beginning of year $ 383,030 $ 353,421 The Total Pension Liability decreased measurement period, as shown below: due to a change in the mortality improvement rates during the Change in Total Pension Liability: Decrease due to change in the mortality improvement rates $ 55,810 Page 5

10 SECTION 1 - PRINCIPAL VALUATION RESULTS Exhibit Actuarially Determined Contribution The Actuarially Determined Contribution, developed using the long-term rate of return and the Entry Age Normal funding method as of October 1, 2015 is comprised of the Normal Cost plus the amortization of the unfunded actuarial accrued liability over 15 years, all adjusted for interest assuming monthly payments of the required contribution. Actuarial Valuation as of: October 1, 2015 October 1, Normal cost $ 374,585 $ 569, Actuarial Accrued Liability $ 11,204, Actuarial Value of Assets 8,329, Unfunded Actuarial Accrued Liability (UAAL) = $ 2,875, Amortization of UAAL (over 15 years) 295, Interest on 1. and 5. (assumes monthly payments) 20,959 39, Actuarially Determined Contribution = $ 690,573 $ 609,693 ¹ ¹ The Actuarially Determined Contribution determined as of October 1, 2014 is based on the results of an actuarial valuation performed by Future Planning Associates. Page 6

11 SECTION 2 - NOTES TO THE FINANCIAL STATEMENTS Exhibit Plan Description Plan administration: The South Burlington School District administers the South Burlington School District Retirement Income Plan (the "Plan") - a single-employer defined benefit pension plan that provides pensions for eligible employees of the South Burlington School District. The District provides the authority under which benefit provisions are established. The Plan is administered by a Board of School Directors made up of five elected members. Plan membership: At September 30, 2015, pension plan membership consisted of the following: Inactive plan participants or beneficiaries currently receiving benefits 93 Inactive plan participants entitled to but not yet receiving benefits 80 Active plan participants The Plan is closed to employees hired on or after September 11, Benefits provided: The Plan provides retirement, disability and death benefits. Retirement benefits are determined as a percentage, 1.25%, of the member's final 3-year final average compensation times the member's years of service. Employees hired before September 11, 2013 who are non-professional educators and have completed one year of service are eligible to participate. Contributions: Employer contributions are determined in accordance with the recommended contribution provided in an annual actuarial valuation. The contribution is made up of a normal cost, amortization payment over 15 years to fully fund the unfunded actuarial accrued liability and interest. Active members do not make contributions under the Retirement Income Plan. Page 7

12 SECTION 2 - NOTES TO THE FINANCIAL STATEMENTS Exhibit Net Pension Liability The components of the net pension liability at September 30, 2015, were as follows: Total pension liability Plan fiduciary net position District's net pension liability Plan fiduciary net position as a percentage of the total pension liability $ $ 11,204,785 (8,329,592) 2,875, % Actuarial assumptions: The total pension liability was determined by an actuarial valuation as of September 30, 2015, using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.5% Salary increases Investment rate of return Mortality rates 3% per year, including longevity 7%, net of pension plan investment expense, including inflation RP-2014 Total Dataset Mortality Table projected with full generational mortality improvement using Scale MP Previously, mortality improvement using Scale MP The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of June 30, 2016 are summarized in the following table: Asset Class Target Allocation Long-Term Expected Real Rates of Return¹ Cash 0% Domestic Equity 33% International Equity 21% Fixed Income 23% Global Fixed Income 10% High Yield 7% Emerging Markets 6% 0.00% 8.75% 9.35% 4.26% 3.54% 6.13% 7.45% Total 100% ¹ long-term return forecasts provided by SEI. Page 8

13 SECTION 2 - NOTES TO THE FINANCIAL STATEMENTS Exhibit Net Pension Liability Discount rate: GASB 67 and GASB 68 require projected benefit payments be discounted to their actuarial present value using the single rate that reflects (1) a long-term expected rate of return on pension plan investments to the extent that the pension plan's assets are sufficient to pay benefits and pension plan assets are expected to be invested using a strategy to achieve that return and (2) a tax-exempt, high-quality municipal bond rate to the extent that the conditions for use of the long-term expected rate of return are not met. The discount rate used to measure the total pension liability was 7%. The projection of cash flows used to determine the discount rate assumed that contributions from the District will be made in accordance with past practice. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected benefit payments of current plan members. Therefore, the longterm expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the net pension liability to changes in the discount rate: The following presents the net pension liability calculated using the discount rate of 7%, as well as what the net pension liability would be if it were calculated using a discount rate 1-percentage point lower (6%) or 1-percentage point higher (8%) than the current rate: Current 1% Decrease Discount 1% Increase (6%) Rate (7%) (8%) Net pension liability $ 4,393,829 $ 2,875,193 $ 1,614,792 Page 9

14 SECTION 3 - REQUIRED SUPPLEMENTARY INFORMATION Exhibit Changes in Net Pension Liability and Related Ratios Fiscal Year Ended September Total Pension Liability Service cost $ 383,030 $ 353,421 Interest 745, ,654 Changes of benefit terms - - Differences between expected and actual experience 52, ,326 Changes of assumptions (55,810) - Benefit payments (390,231) (360,005) Net change in total pension liability 735, ,396 Total pension liability--beginning 10,469,172 9,678,776 Total pension liability--ending (a) $ 11,204,785 $ 10,469,172 Plan fiduciary net position Contributions--employer $ 715,137 $ 757,500 Contributions--member - - Net investment income (142,764) 720,974 Benefit payments (390,231) (360,005) Administrative expenses - - Other - - Net change in plan fiduciary net position 182,142 1,118,469 Plan fiduciary net position--beginning 8,147,450 7,028,981 Plan fiduciary net position--ending (b) $ 8,329,592 $ 8,147,450 Net pension liability--ending (a) -- (b) $ 2,875,193 $ 2,321,722 Plan fiduciary net position as a percentage of the total pension liability 74.34% 77.82% Covered payroll $ 5,738,245 $ 5,908,499 Net pension liability as a percentage of covered payroll 50.11% 39.29% Page 10

15 SECTION 3 - REQUIRED SUPPLEMENTARY INFORMATION Exhibit Schedule of Employer Contributions Fiscal Year Ended September Actuarially determined contribution¹ $ 609,693 $ 595,456 Contributions in relation to the actuarially determined contribution 715, ,500 Contribution deficiency (excess) $ (105,444) $ (162,044) Covered payroll $ 5,738,245 $ 5,908,499 Contributions as a percentage of covered payroll 12.46% 12.82% ¹ The Actuarially Determined Contributions determined as of October 1, 2013 and October 1, 2014 are based on the results of an actuarial valuation performed by Future Planning Associates. Page 11

16 SECTION 3 - REQUIRED SUPPLEMENTARY INFORMATION Exhibit Notes to Required Supplementary Information Changes of benefit terms: None. Changes of assumptions: Mortality improvement scale was changed from MP-2014 to MP Methods and assumptions used in calculations of actuarially determined contributions: The actuarially determined contributions are calculated as of October 1. The following actuarial methods and assumptions were used to determine the actuarially determined contributions: Actuarial cost method Entry Age Normal. Previously, Level Percentage of Compensation Aggregate. Actuarial Asset Method Inflation Salary increases Investment rate of return The Actuarial Value of Assets is the market value of assets. 2.5% per year. 3% per year, including longevity. 7%, net of investment expense, compounded annually. Page 12

17 SECTION 3 - REQUIRED SUPPLEMENTARY INFORMATION Exhibit Investment Returns Fiscal Year Ended September Annual money-weighted rate of return, net of investment expenses -1.68% 10.04% The money-weighted rate of return considers the changing amounts actually invested during a period and weights the amount of pension plan investments by the proportion of time they are available to earn a return during that period. The rate of return is then calculated by solving, through an iterative process, for the rate that equates the sum of the weighted external cash flows into and out of the pension plan investments to the ending fair value of pension plan investments. Appendix A shows the details of the calculation of the money-weighted rate of return for the current fiscal year. Page 13

18 SECTION 4 - EMPLOYER REPORTING AMOUNTS UNDER GASB 68 Exhibit Deferred Outflows and Deferred Inflows of Resources Deferred Outflows of Resources and Deferred Inflows of Resources arising from differences between expected and actual experience are recognized in Pension Expense over the average expected remaining service life of all active and inactive participants. Experience Losses Experience Gains Amounts Recognized in Pension Expense through September 30, 2015 Balances at September 30, 2015 Deferred Outflows of Resources Deferred Inflows of Resources Year (a) (b) (c) (a) - (c) (b) - (c) 2014 $ 107,326 $ - $ 38,330 $ 68,996 $ $ 52,628 $ - $ 10,547 $ 42,081 $ - $ 111,077 $ - Deferred Outflows of Resources and Deferred Inflows of Resources arising from changes of assumptions are recognized in Pension Expense over the average expected remaining service life of all active and inactive participants. Increases in the Total Pension Liability Decreases in the Total Pension Liability Amounts Recognized in Pension Expense through September 30, 2015 Balances at September 30, 2015 Deferred Outflows of Resources Deferred Inflows of Resources Year (a) (b) (c) (a) - (c) (b) - (c) 2015 $ - $ 55,810 $ 11,184 $ - $ 44,626 $ - $ 44,626 Deferred Outflows of Resources and Deferred Inflows of Resources arising from differences between projected and actual earnings on Pension Plan investments are recognized in Pension Expense over five years. Investment Earnings Less Than Projected Investment Earnings Greater Than Projected Amounts Recognized in Pension Expense through September 30, 2015 Balances at September 30, 2015 Deferred Outflows of Resources Deferred Inflows of Resources Year (a) (b) (c) (a) - (c) (b) - (c) 2014 $ - $ 215,033 $ 86,014 $ - $ 129, $ 724,457 $ - $ 144,891 $ 579,566 $ - $ 579,566 $ 129,019 Page 14

19 SECTION 4 - EMPLOYER REPORTING AMOUNTS UNDER GASB 68 Exhibit Deferred Outflows and Deferred Inflows of Resources Amounts reported as Deferred Outflows of Resources and Deferred Inflows of Resources will be recognized in pension expense as follows: Year ended September $ 120, , , , Thereafter - Page 15

20 SECTION 4 - EMPLOYER REPORTING AMOUNTS UNDER GASB 68 Exhibit Pension Expense Fiscal Year Ended September Service cost $ 383, Interest on the total pension liability a. Total pension liability, beginning of year 10,469,172 b. Service cost, beginning of year 383,030 c. Benefit payments (390,231) d. Interest on total pension liability = 7% times (a. + b. +.5 times c.) 745, Differences between expected and actual experience 29, Changes of benefit terms - 5. Changes of assumptions (11,184) 6. Employee Contributions - 7. Projected earnings on pension plan investments a. Plan fiduciary net position, beginning of year 8,147,450 b. Employer contributions 715,137 c. Employee contributions - d. Benefit payments (390,231) e. Administrative expenses and other - f. Total projected earnings = 7% times (a. +.5 times (b. + c. + d. + e.) (581,693) 8. Differences between projected and actual earnings on plan investments 101, Pension plan administrative expenses Other changes in fiduciary net position Total Pension Expense $ 667,745 Page 16

21 SECTION 5 - SUMMARY OF PLAN PROVISIONS Effective Date Original Restatement Most recent amendment October 1, 1974 October 1, 2011 October 1, 2013 Plan Year October 1 - September 30 Eligibility for Plan Participation Any employee who has completed one Year of Service, except: Employees who are Professional educators. Employees with a hire date (or rehire date) on or after September 11, Normal Retirement Age Age 62. Normal Retirement Date First of the month coincident with or next following the Participant's 62nd birthday. Compensation Total wages received by a Participant during a Calendar Year that ends within the Plan Year. Average Annual Compensation Participant's highest average annual Compensation of three consecutive calendar years in which the Participant has earned Credited Service. Years of Service A twelve-month period during which an employee works 1,000 hours. Normal Retirement Eligibility Attainment of age 62. Benefit Amount 1.25% of the Participant's Average Annual Compensation times Years of Service. Commencement Date Normal Retirement Date. Early Retirement Eligibility Benefit Amount Attainment of age 55 and completion of 5 or more Years of Service. Normal Retirement Benefit based on Compensation and Credited Service as of Early Retirement Date. reduced by 1/15th for each of the first 5 years and 1/30th for each of the next 5 years that commencement precedes age 62. Commencement Date Early Retirement Date. Page 17

22 SECTION 5 - SUMMARY OF PLAN PROVISIONS Late Retirement Eligibility Retirement beyond Normal Retirement Date. Benefit Amount Greater of the Normal Retirement Benefit based on Compensation and Credited Service as of Late Retirement Date and the Actuarial Equivalent of the benefit as of the prior plan year. Commencement Date Late Retirement Date. Deferred Vested Eligibility Completion of five or more Years of Service. Benefit Amount Normal Retirement Benefit based on Compensation and Credited Service as of termination date. Commencement Date Deferred to age 62. Disability Retirement Eligibility Total and permanent disability. Benefit Amount Actuarial equivalent of Normal Retirement Benefit. Pre-Retirement Death Benefit Eligibility Death in service after completion of five or more Years of Service. Benefit Amount Accrued benefit payable to beneficiary. Optional Forms of Payment The normal form of payment is a life annuity with ten years certain. A member may elect to receive his or her benefit in one of the following optional forms of payment: Single Life Annuity - monthly income for the life of the Participant. Contingent Annuity - monthly income for the life of the Participant, and in the event of the Participant's death, an amount of monthly income equal to 50%, 66-2/3% or 100% (as elected by the Participant) for the life of the Participant's Beneficiary. Ten-Year Certain Annuity - monthly income for the life of the Participant with the provision that not less than 120 monthly payments shall be made to the Participant and Beneficiary. Page 18

23 SECTION 6 - ACTUARIAL ASSUMPTIONS AND METHODS Valuation Date October 1, 2015 Measurement Date September 30, 2015 Investment Return 7%, net of investment expense, compounded annually. Discount Rate 7%, net of investment expense, compounded annually. Inflation As measured by the Consumer Price Index (CPI), at the rate of 2.5%. Salary Increases The assumed annual rate for salary increases including longevity is 3%. Mortality Table RP-2014 Total Dataset Mortality Table projected with full generational mortality improvement using Scale MP Previously, mortality improvement using Scale MP Withdrawal Rates Illustrative withdrawal rates are shown below: Age Rate of Withdrawal % % % % % % % % Disability Rates None Assumed Page 19

24 SECTION 6 - ACTUARIAL ASSUMPTIONS AND METHODS Retirement Rates Illustrative retirement rates are shown below: Age Rate of Retirement 55 5% 56 2% 57 2% 58 2% 59 2% 60 5% 61 2% 62 40% 63 5% 64 5% 65 25% 66 25% 67 25% 68 25% 69 30% % Deferred Benefits Actuarial Cost Method Begin at age 62, or current age if older. Entry Age Normal. The actuarial present value of the projected benefits of each individual is allocated on a level basis over the earnings or service of the individual between entry age and assumed exit age. Actuarial Asset Method Census Data Administrative Expenses The Actuarial Value of Assets is the market value of assets as of the measurement date. Census data as of the valuation date were submitted by the South Burlington School District. None. Page 20

25 Number Average Salary Number SECTION 7 - PLAN PARTICIPANT INFORMATION Exhibit Active Plan Participants by Age and Years of Service as of October 1, 2015 Years of Service Age 0 to 4 5 to 9 10 to to to to to to & up Total Total Average Salary Salary Under to to ,765 24, to ,898 31, to ,476 44, to ,414 40, to ,253 41, to ,060,590 34, to ,027,796 29, to ,847 34, to ,612 24, & up ,594 25,149 Total ,738,245 33,362 Average Age: Average Service: ,000 40,000 30,000 20,000 10, Age Total Participants Average Salary Years of Service Total Participants Page 21

26 Number Average Annual Benefit SECTION 7 - PLAN PARTICIPANT INFORMATION Attained Age Exhibit Retired Plan Participants and Beneficiaries Annual Benefits as of October 1, 2015 Male Female Count Total Benefits Count Total Benefits Count Total Benefits Average Annual Benefit < , ,698 8, , , ,162 7, , , ,733 3, , , ,703 3, , , ,113 3, , , ,374 10, , ,546 12, Total , , ,330 4,380 Average Age Total ,000 12,000 10,000 8,000 6,000 4,000 2,000 - Total Participants Average Annual Benefit Page 22

27 SECTION 8 - GLOSSARY OF TERMS Actuarial Assumptions Assumptions, based upon past experience or standard tables, used to predict the occurrence of future events affecting the commencement, amount and duration of pension benefits, such as: changes in compensation, mortality, withdrawal, disablement and retirement; rates of investment earnings and asset appreciation or depreciation; and any other relevant items. Actuarial Cost Method (or Funding Method) A procedure for allocating the Actuarial Present Value of projected benefit payments to the current year (Service Cost) and the past (Total Pension Liability). Actuarial Gain or Loss (or Experience Gain or Loss) A measure of the difference between actual experience and that expected based upon the set of Actuarial Assumptions during the period between the valuation date and the most recent immediately preceding valuation date. Actuarial Present Value of Projected Benefit Payments The dollar value on the valuation date of all benefits expected to be paid to current members based upon the Actuarial Assumptions and the terms of the Plan. Actuarially Determined Contribution A target or recommended contribution to a defined benefit pension plan for the reporting period, determined in conformity with Actuarial Standards of Practice based on the most recent measurement available when the contribution for the reporting period was adopted. Actuarial Valuation Date The date as of which an actuarial valuation is performed. Under GASB 67, this date may be up to 24 months prior to the measurement date and, under GASB 68, up to 30 months prior to the employer's reporting date. Deferred Inflow of Resources Acquisition of resources by a government that is applicable to future reporting periods. Under GASB 68, deferred inflows of resources are made up of experience gains, assumption changes reducing the Total Pension Liability and investment gains that are recognized in future reporting periods. Deferred Outflow of Resources Consumption of resources by a government that is applicable to future reporting periods. Under GASB 68, deferred outflows of resources are made up of experience losses, assumption changes increasing the Total Pension Liability and investment losses that are recognized in future reporting periods. Entry Age Normal Actuarial Cost Method A method under which the actuarial present value of the projected benefits of each individual in an actuarial valuation is allocated on a level basis over the earnings or service of the individual between entry age and assumed exit age. Fiduciary Net Position The fair market value of assets as of the measurement date. Funded Ratio The Actuarial Value of Assets expressed as a percentage of the Actuarial Accrued Liability. Page 23

28 SECTION 8 - GLOSSARY OF TERMS GASB Governmental Accounting Standards Board. Measurement Date The date as of which the Total Pension Liability and Fiduciary Net Position are measured. Net Pension Liability The liability of the employer for benefits provided through a defined benefit pension plan. It is calculated as the Total Pension Liability less the Fiduciary Net Position. Present Value of Future Benefits The actuarial present value of the cost to finance benefits payable in the future, discounted to reflect the expected effects of the time value of money and the probabilities of payment. Reporting Date The last day of the Plan or employer's fiscal year. Service Cost The portion of the actuarial present value of projected benefit amounts that is attributed to a valuation year. Total Pension Liability The portion of the actuarial present value of projected benefit amounts that is attributed to past periods of employee service. Unfunded Actuarial Accrued Liability The excess of the Actuarial Accrued Liability over the Actuarial Value of Assets. Page 24

29 APPENDIX A - MONEY-WEIGHTED RATE OF RETURN Plan Investments/ Net External Cash Flows (a) Periods Invested (b) Period Weight (c)=(b) 12 (d)=(a) x (1+r mw ) (c) Beginning value - September 30, 2014 $ 8,147, $ 8,010,201 Monthly net external cash flows: October 31, ,788 November 31, ,831 December 28, ,112 January 28, ,255 February 28, ,493 March 28, ,534 April 28, ,534 May (27,026) (26,873) June (28,599) (28,478) July 23, ,120 August 23, ,227 September 124, ,848 Ending value - September 30, 2015 $ 8,329,592 Money-weighted rate of return -1.68%

30 APPENDIX B - SCHEDULE OF DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES Year Differences between Expected and Actual Experience Recognition Period (Years) $ 107, ,165 19,165 19,165 19,165 19,165 11, $ 52, ,547 10,547 10,547 10,547 10, Net Increase (Decrease) in Pension Expense 19,165 29,712 29,712 29,712 29,712 21, Year Changes of Assumptions Recognition Period (Years) $ (55,810) (11,184) (11,184) (11,184) (11,184) (11,074) Net Increase (Decrease) in Pension Expense - (11,184) (11,184) (11,184) (11,184) (11,074) Year Differences between Projected and Actual Earnings on Pension Plan Investments Recognition Period (Years) (215,033) 5 (43,007) (43,007) (43,007) (43,007) (43,005) , , , , , , Net Increase (Decrease) in Pension Expense (43,007) 101, , , , ,

31 APPENDIX C - CALCULATION OF SINGLE DISCOUNT RATE Under GASB 67, a series of projections and calculations are used to determine the discount rate for the purpose of the measurement of the Total Pension Liability. The discount rate is the single rate that reflects (1) the long-term expected rate of return on pension plan investments that are expected to be used to finance the payment of benefits, to the extent that the pension plan's fiduciary net position is projected to be sufficient to make projected benefit payments and pension plan assets are expected to be invested using a strategy to achieve that return, and (2) a yield or index rate for 20-year, tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher, to the extent that the conditions for use of the long-term expected rate of return are not met. Projected cash flows into and out of the pension plan are assumed to be contributions to the pension plan, benefit payments, pension plan administrative expenses and pension plan investment earnings. These projected cash flows are used to project the pension plan's fiduciary net position at the beginning of each period. The pension plan's projected fiduciary net position at the beginning of each period is compared to the amount of benefit payments projected to occur in that period. It is assumed that the pension plan's fiduciary net position is expected to always be invested using a strategy to achieve the long-term expected rate of return on pension plan investments. The benefit payments that are projected to occur in a period are discounted using the long-term expected rate of return on pension plan investments if the amount of the pension plan's beginning fiduciary net position is projected to be sufficient to make the benefit payments in that period. In periods in which benefit payments are projected to be greater than the amount of the pension plan's fiduciary net position, they are discounted using a municipal bond rate as required by GASB 67. For the Retirement Income Plan, the discount rate used to measure the total pension liability was 7%. The projection of cash flows used to determine the discount rate assumed that contributions from the District will be made in accordance with past practice. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected 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.