August 30, 2017 VIA EMAIL Captain Stephen Aldrich City of Holly Hill Police Officers' Retirement Trust Fund City of Holly Hill 1065 Ridgewood Avenue Holly Hill, Florida 32117 Re: City of Holly Hill Police Officers' Retirement Trust Fund Senate Bill 534 (Section 112.664, Florida Statutes) Compliance Dear Stephen: Please find enclosed the annual disclosures that satisfy the October 1, 2016 financial reporting requirements made under Section 112.664. Our office will submit this information electronically to the Department of Management Services. However, it is important for you to be aware that this report must also be made available on the Plan or Plan Sponsor s website, if such website exists. A deadline for this website publication is not made clear in the law. In addition to the enclosed report, the Plan or Plan Sponsor's website must provide a link to the Division of Retirement's Actuarial Summary Fact Sheet for the Plan, and also report the previous five years' assumed and actual rates of return, along with their respective asset allocations. The Board should contact its Investment Consultant for this information. If there are any questions, concerns, or comments about any of the items contained in this report, please feel free to contact me. Respectfully submitted, Foster & Foster, Inc. By: PTD/lke Enclosures Patrick T. Donlan, EA, ASA, MAAA Enrolled Actuary #17-6595 cc via email: Ken Harrison, Board Attorney 13420 Parker Commons Blvd., Suite 104 Fort Myers, FL 33912 (239) 433-5500 Fax (239) 481-0634 www.foster-foster.com
CITY OF HOLLY HILL POLICE OFFICERS' RETIREMENT TRUST FUND SECTION 112.664, FLORIDA STATUTES COMPLIANCE With respect to the reporting standards for defined benefit retirement plans or systems contained in Section 112.664(1), F.S., the actuarial disclosures required under this section were 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, meet the requirements of Section 112.664(1), Florida Statutes, and Rule 60T-1.0035, Florida Administrative Code. By: Date: 8/30/2017 Patrick T. Donlan, EA, ASA, MAAA Enrolled Actuary #17-6595
INTRODUCTION When reviewing the following schedules, please note the following: 1) The purpose of producing this report is solely to satisfy the requirements set forth by Section 112.664, Florida Statutes, and is mandatory for every Florida public pension fund, excluding the Florida Retirement System (FRS). 2) None of the schedules shown have any impact on the funding requirements of the Plan. These schedules are for statutory compliance purposes only. 3) In the schedules that follow, the columns labeled ACTUAL represent the final recorded GASB 67/68 results. The columns labeled HYPOTHETICAL illustrate what the results would have been if different assumptions were used. 4) It is our opinion that the Plan s actual assumptions utilized in the October 1, 2016 Actuarial Valuation Report, as adopted by the Board of Trustees, are reasonable individually and in the aggregate, and represent our best estimate of future Plan experience. 5) The Number of Years Expected Benefit Payments Sustained calculated in Section II: Asset Sustainability should not be interpreted as the number of years the Plan has left until it is insolvent. This calculation is required by 112.664, Florida Statutes, but the numeric result is irrelevant, since in its calculation we are to assume there will be no further contributions to the Fund. As long as the Actuarially Determined Contribution is made each year the Plan will never become insolvent. City of Holly Hill Police Officers' Retirement Trust Fund FOSTER & FOSTER 3
SECTION I - GASB 67/68 GASB 67: SCHEDULE OF CHANGES IN NET PENSION LIABILITY FISCAL YEAR SEPTEMBER 30, 2016 ACTUAL HYPOTHETICAL 7.40% 5.40% Total Pension Liability Service Cost 230,699 364,776 Interest 843,655 831,737 Changes of Benefit Terms - - Differences Between Expected and Actual Experience (370,289) (481,875) Changes of Assumptions 385,611 (97,934) Benefit Payments, Including Refunds of Employee Contributions (619,400) (619,400) Net Change in Total Pension Liability 470,276 (2,696) Total Pension Liability - Beginning 11,327,736 15,067,420 Total Pension Liability - Ending (a) $ 11,798,012 $ 15,064,724 Plan Fiduciary Net Position Contributions - Employer 460,877 460,877 Contributions - State 108,177 108,177 Contributions - Employee 71,468 71,468 Net Investment Income 611,485 611,485 Benefit Payments, Including Refunds of Employee Contributions (619,400) (619,400) Administrative Expenses (31,987) (31,987) Net Change in Plan Fiduciary Net Position 600,620 600,620 Plan Fiduciary Net Position - Beginning 8,566,354 8,566,354 Plan Fiduciary Net Position - Ending (b) $ 9,166,974 $ 9,166,974 Net Pension Liability - Ending (a) - (b) $ 2,631,038 $ 5,897,750 GASB 68: PENSION EXPENSE FISCAL YEAR SEPTEMBER 30, 2016 ACTUAL HYPOTHETICAL 7.40% 5.40% Pension Expense $ 524,301 $ 586,748 City of Holly Hill Police Officers' Retirement Trust Fund FOSTER & FOSTER 4
SECTION II - ASSET SUSTAINABILITY Table 1 Plan Assumptions: 7.40% and Mortality PROJECTION OF THE NUMBER OF YEARS ASSETS WILL SUSTAIN BENEFIT PAYMENTS Fiscal Year Beginning 10/1 Projected Beginning Fiduciary Net Position Projected Total Contributions Projected Benefit Payments Projected Administrative Expense Projected Investment Earnings Projected Ending Fiduciary Net Position 2016 9,166,974-700,962-652,420 9,118,432 2017 9,118,432-727,596-647,843 9,038,679 2018 9,038,679-740,499-641,464 8,939,644 2019 8,939,644-748,648-633,834 8,824,830 2020 8,824,830-796,713-623,559 8,651,676 2021 8,651,676-812,192-610,173 8,449,657 2022 8,449,657-843,157-594,078 8,200,578 2023 8,200,578-878,458-574,340 7,896,460 2024 7,896,460-894,220-551,252 7,553,492 2025 7,553,492-911,929-525,217 7,166,780 2026 7,166,780-937,887-495,640 6,724,533 2027 6,724,533-954,130-462,313 6,232,716 2028 6,232,716-961,068-425,661 5,697,309 2029 5,697,309-961,446-386,027 5,121,890 2030 5,121,890-958,167-343,568 4,507,291 2031 4,507,291-956,077-298,165 3,849,379 2032 3,849,379-951,413-249,652 3,147,618 2033 3,147,618-944,876-197,963 2,400,705 2034 2,400,705-940,373-142,858 1,603,190 2035 1,603,190-932,491-84,134 754,833 2036 754,833-922,215 - - - Number of Years Expected Benefit Payments Sustained: 20.82 This projection assumes no further contributions, assumes no further benefit accruals, and assumes Market Value of Assets earn 7.40% interest. It is important to note that as long as the Actuarially Determined Contribution is made each year, the Plan will never become insolvent. Furthermore, State and local laws mandate that the Actuarially Determined Contribution be made each year. City of Holly Hill Police Officers' Retirement Trust Fund FOSTER & FOSTER 5
SECTION II - ASSET SUSTAINABILITY PROJECTION OF THE NUMBER OF YEARS ASSETS WILL SUSTAIN BENEFIT PAYMENTS Table 2 Hypothetical Assumptions: 5.40% and Mortality Fiscal Year Beginning 10/1 Projected Beginning Fiduciary Net Position Projected Total Contributions Projected Benefit Payments Projected Administrative Expense Projected Investment Earnings Projected Ending Fiduciary Net Position 2016 9,166,974-700,962-476,091 8,942,103 2017 8,942,103-727,596-463,228 8,677,735 2018 8,677,735-740,499-448,604 8,385,840 2019 8,385,840-748,648-432,622 8,069,814 2020 8,069,814-796,713-414,259 7,687,360 2021 7,687,360-812,192-393,188 7,268,356 2022 7,268,356-843,157-369,726 6,794,925 2023 6,794,925-878,458-343,208 6,259,675 2024 6,259,675-894,220-313,879 5,679,334 2025 5,679,334-911,929-282,062 5,049,467 2026 5,049,467-937,887-247,348 4,358,928 2027 4,358,928-954,130-209,621 3,614,419 2028 3,614,419-961,068-169,230 2,822,581 2029 2,822,581-961,446-126,460 1,987,595 2030 1,987,595-958,167-81,460 1,110,888 2031 1,110,888-956,077-34,174 188,985 2032 188,985-951,413 - - - Number of Years Expected Benefit Payments Sustained: 16.20 This projection assumes no further contributions, assumes no further benefit accruals, and assumes Market Value of Assets earn 5.40% interest. It is important to note that as long as the Actuarially Determined Contribution is made each year, the Plan will never become insolvent. Furthermore, State and local laws mandate that the Actuarially Determined Contribution be made each year. City of Holly Hill Police Officers' Retirement Trust Fund FOSTER & FOSTER 6
SECTION III - FUNDING ACTUAL AND HYPOTHETICAL CONTRIBUTIONS APPLICABLE TO THE FISCAL YEAR ENDING SEPTEMBER 30, 2018 Valuation Date: 10/1/2016 ACTUAL HYPOTHETICAL 7.40% 5.40% Total Required Contribution (Fixed $) $663,448 $989,613 Total Required Contribution (% of Payroll) 52.2% 77.9% Expected Member Contribution 80,588 79,810 Expected State Money 108,177 108,177 Expected Sponsor Contribution (Fixed $) $474,683 $801,626 Expected Sponsor Contribution (% of Payroll) 37.4% 63.1% ASSETS Actuarial Value ¹ 9,590,468 9,590,468 Market Value ¹ 9,166,974 9,166,974 LIABILITIES Present Value of Benefits Active Members Retirement Benefits 3,947,187 5,715,410 Disability Benefits 42,886 57,705 Death Benefits 88,296 115,880 Vested Benefits 561,309 862,618 Refund of Contributions 104,228 110,106 Service Retirees 7,634,376 9,440,494 DROP Retirees ¹ 0 0 Beneficiaries 134,849 156,650 Disability Retirees 62,386 70,351 Terminated Vested 676,080 932,438 Excess State Monies Reserve 0 0 Total: 13,251,597 17,461,652 Present Value of Future Salaries 7,603,948 8,304,171 Present Value of Future Member Contributions 532,276 581,292 Total Normal Cost 215,960 330,661 Present Value of Future Normal Costs (Entry Age Normal) 1,316,846 2,187,492 Total Actuarial Accrued Liability ¹ 11,934,751 15,274,160 Unfunded Actuarial Accrued 2,344,283 5,683,692 Liability (UAAL) City of Holly Hill Police Officers' Retirement Trust Fund FOSTER & FOSTER 7
SECTION III - FUNDING ACTUAL AND HYPOTHETICAL CONTRIBUTIONS APPLICABLE TO THE FISCAL YEAR ENDING SEPTEMBER 30, 2018 Valuation Date: 10/1/2016 ACTUAL HYPOTHETICAL 7.40% 5.40% PENSION COST Normal Cost ² 236,929 359,269 Administrative Expenses ² 35,093 34,754 Payment Required To Amortize UAAL ² 391,426 595,590 Total Required Contribution $663,448 $989,613 ¹ The asset values and liabilities for DROP Members include accumulated DROP Balances as of 9/30/2016. ² Contributions developed as of 10/1/2016 displayed above have been adjusted to account for assumed salary increase and interest components. City of Holly Hill Police Officers' Retirement Trust Fund FOSTER & FOSTER 8