Item No. 8.2. Ms. Cynthia Akersloot, CPA Pension Plans Administrator City of Sarasota General Employees Pension Fund City of Sarasota 1565 First Street, Room 110 Sarasota, Florida 34236 Re: City of Sarasota General Employees Pension Fund Lower Investment Return to 6.9% Dear Cynthia: As requested, we have prepared the enclosed Supplemental Actuarial Valuation Report showing the financial impact on the City of Sarasota General Employees Pension Fund (Plan) of lowering the investment return from the current value of 7.0% to 6.9% as of September 30, 2016. Summary of Findings The total required employer contribution for the fiscal year ending September 30, 2018 would have increased by $196,905 (1.58% of covered pay), from $6,726,147 to $6,923,052. The actual investment return experience during Fiscal Year 2017 will cause the required employed contribution to decrease by approximately $230,000, which will more than offset the impact of changing the investment return assumption as of September 30, 2017. The Plan s Unfunded Actuarial Accrued Liability (UAAL) as of September 30, 2016 would have increased by $2,141,308, from $56,469,541 to $58,610,849. The actual investment experience during Fiscal Year 2017 will cause the UAAL to decrease by approximately $2.7 million, which will more than offset the impact of changing the investment return assumption as of September 30, 2017. All remaining assumptions and benefits are the same as indicated in our September 30, 2016 Actuarial Valuation Report. Please refer to the enclosed exhibits for details. This report was prepared at the request of the Pension Board and is intended for use by the Pension Fund (Plan) and those designated or approved by the Board. GRS is not responsible for the unauthorized use of this report. This report may be provided to parties other than the Plan only in its entirety and only with the permission of the Board. 1 of 6
Ms. Cynthia Akersloot, CPA Page 2 The purpose of this report is to describe the financial effect of the changes summarized above as of September 30, 2016, the most recent actuarial valuation date. This report should not be relied on for any purpose other than the purpose described above. The calculations are based upon assumptions regarding future events, which may or may not materialize. Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the additional cost or contribution requirements based on the plan s funded status); and changes in plan provisions or applicable law. If you have reason to believe the assumptions used are unreasonable, that the plan provisions are incorrectly described, or that conditions have changed since the calculations were made, you should contact the author of the report prior to relying on information in the report. The calculations in this report are based upon information furnished by the Plan Administrator for the September 30, 2016 Actuarial Valuation concerning Plan benefits, financial transactions, plan provisions and active members, terminated members, retirees and beneficiaries. The Plan Administrator has also provided updated retiree benefit amounts reflecting the Ordinance re-interpretation. We reviewed this information for internal and year-to-year consistency, but did not otherwise audit the data. We are not responsible for the accuracy or completeness of the information provided by the Plan Administrator. Peter N. Strong and Jeffrey Amrose are members of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein. The undersigned actuaries are independent of the plan sponsor. This report has been prepared by actuaries who have substantial experience valuing public employee retirement systems. To the best of our knowledge the information contained in this report is accurate and fairly presents the actuarial position of the Plan as of the valuation date. All calculations have been made in conformity with generally accepted actuarial principles and practices, and with the Actuarial Standards of Practice issued by the Actuarial Standards Board and with applicable statutes. Respectfully submitted, Peter N. Strong, FSA, MAAA, FCA Jeffrey Amrose, MAAA, FCA Enrolled Actuary No. 17-06975 Enrolled Actuary No. 17-06599 2 of 6
SUPPLEMENTAL ACTUARIAL VALUATION REPORT Plan City of Sarasota General Employees Pension Fund Valuation Date September 30, 2016 Date of Report Report Requested by Pension Plans Administrator Peter N. Strong Group Valued All active and inactive members of the Plan as of September 30, 2016 Assumptions Being Considered for Change Lower the investment return assumption from 7.0% to 6.9%. Participants Affected All active and inactive members of the Plan as of September 30, 2016. Actuarial Assumptions and Methods The assumptions and methods are the same as used in our September 30, 2016 Actuarial Valuation Report with the exception of the proposed change. Some of the key assumptions/methods are: Salary increase 4.8% to 7.2% per year based on credited service Cost Method Entry Age Normal Amortization Period for Any Change in Actuarial Accrued Liability 21 years Summary of Data Used in Report See attached page. Page 3 of 6 3 of 6
Actuarial Impact of Change An actuarial cost impact is attached. Special Risks Involved with the Change That the Plan Has Not Been Exposed to Previously None Other Cost Considerations The actual investment return on the market value of assets during the fiscal year ending September 30, 2017 was approximately 13%-14%. Combined with the recognition of past investment experience gains in the actuarial value of assets, this experience is estimated to reduce the required employer contribution by approximately $230,000. This will more than offset the contribution increase associated with a reduction in the investment return assumption to 6.9% as of September 30, 2017. Possible Conflicts with IRS Qualification Rules None Page 4 of 6 4 of 6
Sarasota Police Officers Pension Fund Contributions to Finance Benefits of the Pension Fund September 30, 2016 Actuarial Valuation for Fiscal Year Ending 9/30/2018 9/30/2018 Baseline What if 6.9% (7.0% Investment Return) Investment Return? Normal Cost $ (Dollar) % of Pay $ (Dollar) % of Pay Service pensions $1,676,123 13.44 % $1,715,815 13.75 % Disability pensions 103,835 0.83 105,718 0.85 Death-in-service pensions 30,042 0.24 30,831 0.25 Termination Benefits Deferred service pensions 90,360 0.72 92,840 0.74 Refunds of member contributions 102,070 0.82 101,762 0.82 Total Normal Cost $2,002,430 16.05 % $2,046,966 16.41 % Unfunded Actuarial Accrued Liability Retired members and beneficiaries $0 0.00 % $0 0.00 % Active and vested terminated members 5,289,024 42.40 5,441,393 43.62 Total Unf'd. Actuarial Accrued Liability $5,289,024 42.40 % $5,441,393 43.62 % Administrative Expenses $183,110 1.47 % $183,110 1.47 % Total Contribution Requirement $7,474,564 59.92 % $7,671,469 61.50 % Expected Member portion 748,417 6.00 % 748,417 6.00 % City portion @ 6,726,147 53.92 % 6,923,052 55.50 % Expected covered payroll (millions) $12,473,619 $12,473,619 Page 5 of 6 5 of 6
Unfunded Actuarial Accrued Liability As of September 30, 2016 Valuation (No Changes) What if 6.9% Investment Return Increase/ (Decrease) A. Actuarial present value of future benefits $ 208,520,543 $ 210,969,813 $ 2,449,270 B. Actuarial present value of future normal costs 11,107,067 11,415,029 307,962 C. Actuarial accrued liability 197,413,476 199,554,784 2,141,308 D. Actuarial value of assets 140,943,935 140,943,935 0 E. Unfunded actuarial accrued liability 56,469,541 58,610,849 2,141,308 F. Funded Ratio: D/C 71.4% 70.6% -0.8% Page 6 of 6 6 of 6