Milliman CITY OF NORWALK POLICE BENEFIT FUND Actuarial Valuation as of July 1, 214 For Fiscal Year 215-216 Prepared by Rebecca A. Sielman, FSA Consulting Actuary Stephen Chykirda, ASA Actuary 8 Lamberton Road Windsor, CT 695 USA Tel +1 86.687.211 Fax +1 86.687.2111 milliman.com December 22, 214
Table of Contents Page CERTIFICATION EXECUTIVE SUMMARY A. Highlights B. Summary of Principal Results 3 9 II PLAN ASSETS A. Summary of Fund Transactions B. Development of Actuarial Value of Assets 1 11 Ill DEVELOPMENT OF CONTRIBUTION A. Past Service Cost B. Actuarially Determined Contribution C. Long Range Forecast 12 13 14 IV ACCOUNTING INFORMATION A. Notes to Required Supplementary Information B. Schedule of Funding Progress C. Schedule of Employer Contributions D. Solvency Test E. Accrued and Vested Benefits F. Statement of Changes in Accrued Plan Benefits 15 16 17 18 19 2 v MEMBERSHIP DATA A. Reconciliation of Membership From Prior Valuation 21 B. Statistics of Membership 22 C. Distribution of Active Members as of July 1, 214- Count 23 D. Distribution of Active Members as of July 1, 214- Average Compensation 24 E. Distribution of Inactive Members as of July 1, 214 25 APPENDICES A. Actuarial Funding Method B. Actuarial Assumptions C. Summary of Plan Provisions 26 27 29 July 1, 214 Actuarial Valuation
Certification We have performed an actuarial valuation of the Plan as of July 1, 214 for fiscal year 215-216. This report presents the results of our valuation. The ultimate cost of a pension plan is the total amount needed to provide benefits for plan members and beneficiaries and to pay the expenses of administering the plan. Pension costs are met by contributions and by investment return on plan assets. The principal purpose of this report is to set forth an actuarial recommendation of the contribution, or range of contributions, which will properly fund the plan, in accordance with applicable government regulations. In addition, this report provides: A valuation of plan assets and liabilities to review the year-to-year progress of funding. Information needed to meet disclosure requirements. Review of plan experience for the previous year to ascertain whether the assumptions and methods employed for valuation purposes are reflective of actual events and remain appropriate for prospective application. Assessment of the relative funded position of the plan, i.e., through a comparison of plan assets and projected plan liabilities. Comments on any other matters which may be of assistance in the funding and operation of the plan. This report may not be used for purposes other than those listed above without Milliman's prior written consent. If this report is distributed to other parties, it must be copied in its entirety, including this certification section. Milliman's work is prepared solely for the internal business use of the City. To the extent that Milliman's work is not subject to disclosure under applicable public records laws, Milliman's work may not be provided to third parties without Milliman's prior written consent. Milliman does not intend to benefit or create a legal duty to any third party recipient of its work product. Milliman's consent to release its work product to any third party may be conditioned on the third party signing a Release, subject to the following exception(s): (a) the City may provide a copy of Milliman's work, in its entirety, to the City's professional service advisors who are subject to a duty of confidentiality and who agree to not use Milliman's work for any purpose other than to benefit the City; and (b) the City may provide a copy of Milliman's work, in its entirety, to other governmental entities, as required by law. No third party recipient of Milliman's work product should rely upon Milliman's work product. Such recipients should engage qualified professionals for advice appropriate to their own specific needs. In preparing this report, we relied on employee census data and financial information as of the valuation date, furnished by the City. We performed a limited review of the data used directly in our analysis for reasonableness and consistency and have found them to be reasonably consistent and comparable with data used for other purposes. If the underlying data or information is inaccurate or incomplete, the results of our analysis may likewise be inaccurate or incomplete and our calculations may need to be revised. If there are material defects in the data, it is possible that they would be uncovered by a detailed, systematic review and comparison of the data to search for data values that are questionable or for relationships that are materially inconsistent. Such a review was beyond the scope of our assignment. July 1, 214 Actuarial Valuation Page 1
Certification The calculations reported herein have been made on a basis consistent with our understanding of ERISA and the related sections of the tax code. Additional determinations may be needed for purposes other than meeting funding requirements, such as judging benefit security at plan termination or meeting employer accounting requirements. On the basis of the foregoing, we hereby certify that, to the best of our knowledge, this report is complete and accurate and all costs and liabilities were determined in conformance with generally accepted actuarial principles and practices. I further certify that, in my opinion, each actuarial assumption, method and technique used is reasonable taking into account the experience of the Plan and reasonable expectations or would, in the aggregate, result in a total contribution equivalent to that which would be determined if each such assumption, method, or technique were reasonable. Future actuarial measurements may differ significantly from the current measurements presented in this report due to factors such as, but not limited to, 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 end of an amortization period or additional cost or contribution requirements based on the plan's funded status); and changes in plan provisions or applicable law. Due to the limited scope of the actuarial assignment, we did not perform an analysis of the potential range of such future measurement. The consultants who worked on this assignment are pension actuaries. Milliman's advice is not intended to be a substitute for qualified legal or accounting counsel. We are members of the American Academy of Actuaries and meet the Qualification Standards of the American AcademY, f tuaries to render the actuarial opinion contained herein. Actuary July 1, 214 Actuarial Valuation Page 2
Section I - Executive Summary A. Highlights Assets There are two different measures of the plan's assets that are used throughout this report. The Market Value is a snapshot of the plan's investments as of the valuation date. The Actuarial Value is a smoothed asset value designed to temper the volatile fluctuations in the market by recognizing investment gains or losses over five years. Market Actuarial Value as of July 1, 213 Contributions Investment Income Benefit Payments and Administrative Expenses Value as of July 1, 214 $93,28,47 4,36,476 14,919,812 (6,82,227) 16,424,468 $91,94,177 4,36,476 1,344,238 (6,82,227) 99,662,664 For fiscal year 213-14, the plan's assets earned 16.15% on a Market Value basis and 11.47% on an Actuarial Value basis. The actuarial assumption for this period was 7. 75% ; the result is an asset gain of $7.8 million on a Market Value basis and a gain of $3.4 million on an Actuarial Value basis. Historical asset values are shown in the graph below to the left; historical returns are shown in the graph below to the right. Asset Levels ($ millions) Rate of Return 12 1 8 6 4 25% 2% 15% 1% 5% % -5% -1% 2-15% -2% 29 21 211 212 213 214-25% 29 21 211 212 213 214 Market Value DActuarial Value Market Value o Actuarial Value Please note that the Actuarial Value currently is less than the Market Value by $6.8 million. This figure represents investment gains that will be gradually recognized over the next five years. This process will exert downward pressure on the City's contribution, unless there are offsetting market losses. July 1, 214 Actuarial Valuation Page 3 purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman
Section I Executive Summary A. Highlights Membership There are three basic categories of plan members included in the actuarial valuation : (1) active employees who have met the eligibility requirements for membership, (2) former employees who have a vested right to benefits but have not yet started collecting, and (3) members who are receiving monthly pension benefits. 4 35 3 25 2 15 1 5 Number of Members 29 21 211 212 213 214 CActive Members Terminated Vested Members 1!!1 Members in Pay Status From July 1, 213 to July 1, 214, the overall membership increased from 369 to 375. During this period there were 7 new active members. 5 members retired during the year, including one who entered the DROP. There were 5 members who died, 2 without a beneficiary. July 1, 214 Actuarial Valuation Page 4
Section I - Executive Summary A. Highlights Changes in Actuarial Assumptions In order to better reflect anticipated future plan experience, we lowered the expected investment rate from 7.75% to 7.625%. We also added an assumption to reflect that some administrative expenses are paid from plan assets. These changes increased the Unfunded Accrued Liability by $1,969, and increased the Actuarially Determined Contribution by $219,. Changes in Actuarial Methods Non Changes in Plan Provisions Non July 1, 214 Actuarial Valuation Page 5
Section I Executive Summary A. Highlights Funded Status The chart below shows the plan's Accrued Liability and Actuarial Value of Assets for the past few years. Since investment gains and losses are recognized gradually over a five year period, the large market losses suffered in 28-29 were manifested by a gradual decline in the funded ratio. Funded Status ($ millions) 16 1% 9 86.1 % 14 9% 12 8% 7% 1 6% 8 5% 6 4% 4 2 1% % 29 21 211 212 213 214 3% 2% c::::::::1 Accrued Liabil ity - Actuarial Value of Assets -Funded Ratio July 1, 214 Actuarial Valuation Page 6
Section I - Executive Summary A. Highlights Actuarially Determined Contribution The Actuarially Determined Contribution consists of three pieces: a Normal Cost payment to fund the benefits earned each year, a Past Service Cost to gradually reduce any unfunded or surplus liability, and Interest assuming payment is made mid-year. If the plan has a sufficiently large surplus, the Past Service Cost may be large enough to cover the Normal Cost, in which case no contribution is required. Contribution levels (in$ millions) for the current year and the past few fiscal years are shown below. 5 4 3 2 1 211-212 212-213 213-214 214-215 215-216 - Normal Cost Past Service Cost ~ Interest Actuarially Determined Contribution July 1, 214 Actuarial Valuation Page 7
Section I- Executive Summary A. Highlights Long Range Forecast The long range forecast reflects continued reductions in the interest rate assumption, which is projected to decrease by 1/8% per year, from 7.625% as of July 1, 214 until an ultimate rate of 7.25% is reached by July 1, 217. Funded Ratio 1% 8% 6% 4% 2% % 214 215 216 217 218 219 Valuation Date 6,, 5,, 4,, 3,, 2,, 1,, - - ~ ~ r--- - -~ r - 1= ~ ~ 216 217 Actuarially Determined Contribution - - r---1--- 1--- 1--- I ~ I 1--- i ~ 218 219 22 221 Fiscal Year 1--- To the extent that there are future investment or liability gains or losses, changes in the actuarial assumptions or methods, or plan changes, the actual valuation results will differ from these forecasts. Please see Section Ill C for more details of the long range forecast. July 1, 214 Actuarial Valuation Page 8
Section I - Executive Summary B. Summary of Principal Results Membership July 1, 213 July 1, 214 Active Members 161 Terminated Vested Members Members in DROP 12 Members in Pay Status 196 Total Compensation $12,425,33 163 12 2 $12,88,465 Assets and Liabilities July 1, 213 July 1, 214 Market Value of Assets $93,28,47 Actuarial Value of Assets 91,94,177 $1 6,424,468 99,662,664 Accrued Liability for Active Members $45,688,841 Accrued Liability for Terminated Vested Members Accrued Liability for Members in DROP 6,624,83 Accrued Liability for Members in Pay Status 75,478,51 Total Accrued Liability 127' 791,434 $4 7, 712,472 8,223,668 8,525,836 136,461,976 Unfunded Accrued Liability 36,697,257 36,799,312 Funded Ratio 71.3% 73.% Actuarially Determined Contribution for Fiscal Year 214-215 215-216 Normal Cost $1,636,422 Past Service Cost 2,291,955 Interest 152,225 Actuarially Determined Contribution 4,8,62 $1,814,948 2,341,226 158,454 4,314,628 Contribution as a Percent of Compensation 32.8% 33.5% July 1, 214 Actuarial Valuation Page 9
Section II - Plan Assets A. Summary of Fund Transactions Market Value as of July 1, 213 Employer Contributions Employee Contributions Benefit Payments Other Receipts/Disbursements Interest and Dividends Net Change in Accrued Income Unrealized Gains/(Losses) Realized Gains/(Losses) Investment Expenses Administrative Expenses Market Value as of July 1, 214 Approximate Rate of Return $93,28,47 3,388,517 917,959 (6,51,249) (164) 1,26,173 3,13 7,131,82 6,819,2 (24,23) (3,978) 16,424,468 16.15% Note: The rate shown here is not the dollar or time weighted investment yield rate which measures investment performance. It is an approximate net return assuming all activity occurred on average midway through the fiscal year. July 1, 214 Actuarial Valuation Page 1 purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman
Section II Plan Assets B. Development of Actuarial Value of Assets In order to minimize the impact of market fluctuations on the contribution level, we use an Actuarial Value of Assets that recognizes gains and losses over a five year period. The Actuarial Value of Assets as of July 1, 214 is determined below. 1. Expected Market Value of Assets: a. Market Value of Assets as of July 1, 213 b. Employer and Employee Contributions c. Benefit Payments and Administrative Expenses d. Expected Investment Return Based on 7.75% Interest e. Expected Market Value of Assets as of July 1, 214 $93,28,47 4,36,476 (6,82,227) 7,159,662 98,664,318 2. Actual Market Value of Assets as of July 1, 214 1 6,424,468 3. Market (Gain)/Loss: (1 e)- (2) (7,76,15) 4. Delayed Recognition of Market (Gains)/Losses: Percent Not Plan Year End (Gain)/Loss Recognized 6/3/214 ($7,76,15) 8% 6/3/213 (3,557,971) 6% 6/3/212 8,727,542 4% 6/3/211 (9,549,591) 2% Amount Not Recognized ($6,28, 12) (2, 134, 783) 3,491,17 (1,99,918) (6,761,84) 5. Actuarial Value of Assets as of July 1, 214: (2) + ( 4) 99,662,664 6. Expected Actuarial Value of Assets: a. Actuarial Value of Assets as of July 1, 213 b. Employer and Employee Contributions c. Benefit Payments and Administrative Expenses d. Expected Investment Return Based on 7.75% Interest e. Expected Actuarial Value of Assets as of July 1, 214 91,94,177 4,36,476 (6,82,227) 6,989,351 96,37,777 7. Asset (Gain)/Loss: (6e)- (5) (3,354,887) 8. Approximate Rate of Return on Actuarial Value 11.47% July 1, 214 Actuarial Valuation Page 11
Section Ill - Development of Contribution A. Past Service Cost For determining the Past Service Cost, the Unfunded Accrued Liability is amortized as a level percent over a period of 25 years starting on July 1, 211. July1,213 July 1, 214 1. Accrued Liability Active Members $45,688,841 $47,712,472 Terminated Vested Members Terminated Non-Vested Members Due Refund Members in DROP 6,624,83 8,223,668 Retired Members 62,55,968 65,876,29 Disabled Members 5,193,33 5,131,757 Beneficiaries of Deceased Members 7,779,212 91517J 89 Total 127,791,434 136,461,976 2. Actuarial Value of Assets (see Section II B) 91,94,177 99,662,664 3. Unfunded Accrued Liability: (1)- (2) 36,697,257 36,799,312 4. Funded Ratio: (2) I (1) 71.3% 73.% 5. Amortization Period 23 22 6. Amortization Growth Rate 4.% 4.% 7. Past Service Cost: (3) amortized over (5) 2,291,955 2,341,226 July 1, 214 Actuarial Valuation Page 12
Section Ill- Development of Contribution B. Actuarially Determined Contribution Fiscal Year 214 215 Fiscal Year 215-216 1. Total Normal Cost $2,616,276 $2,81,287 2. Expected Employee Contributions 979,854 1,18,239 3. Expected Administrative Expenses N/A 31,9 4. Net Normal Cost: (1)- (2) + (3) 1,636,422 1,814,948 5. Past Service Cost (see Section Ill A) 2,291,955 2,341,226 6. Interest on (4) + (5) assuming mid year payment 152,225 158,454 7. Actuarially Determined Contribution: (4) + (5) + (6) 4,8,62 4,314,628 8. Payroll 12,425,33 12,88,465 9. Contribution as a Percentage of Payroll: (7) I (8) 32.84% 33.5% July 1, 214 Actuarial Valuation Page 13
Section Ill - Development of Contribution C. Long Range Forecast This forecast is based on the results of the July 1, 214 actuarial valuation and assumes that the City will pay the Actuarially Determined Contribution each year, the interest rate assumption will decline by 1/8% each year until reaching 7.25%, the assets will earn the assumed return on a market value basis each year, and there are no other future changes in the actuarial methods or assumptions or in the plan provisions. Actual results at each point in time will yield different values, reflecting the actual experience of the plan membership and assets. Values as of the Valuation Date Cash Flows Projected to the Following Fiscal Year Actuarial Unfunded Valuation Accrued Value of Accrued Funded Fiscal Employer Employee Benefit Net Date Liability Assets Liability Ratio Year Contributions Contributions Payments Cash Flows 7/1/214 $136,461,976 $99,662,664 $36,799,312 73.% 216 $4,314,628 $1,6, ($7,225,) ($1,85,372) 7/1/215 145,438, 18,673, 36,765, 74.7% 217 4,498, 1,86, (7,919,) (2,335,) 7/1/216 154,424, 115,712, 38,712, 74.9% 218 4,817, 1,11 3, (8, 16,) (2,23,) 7/1/217 163,451, 124,334, 39,117, 76.1% 219 5,61, 1,1 38, (8,46,) (2,27,) 7/1/218 17,441, 132,666, 37,775, 77.8% 22 5,96, 1,175, (1,63,) (3,792,) 7/1/219 177,711, 139,96, 37,751, 78.8% 221 5,275, 1,22, (11,215,) (4,738,) 7/1/22 183,97, 146,139, 37,768, 7~.5% 222 5,443, 1,245, (1,648,) (3,96,) 7/1/221 189,443, 151,785, 37,658, 8.1% 223 5,649, 1,288, (11, 16,) (4,223,) 7/1/222 195,965, 158,646, 37,319, 81.% 224 5,851, 1,329, (11,587,) (4,47,) 7/1/223 22,497, 165,73, 36,767, 81.8% 225 6,69, 1,359, (12, 128,) (4,7,) 7/1/224 29,11, 173,136, 35,965, 82.8% 226 6,277, 1,43, (12,731,) (5,51,) 7/1/225 215,757, 18,774, 34,983, 83.8% 227 6,491, 1,448, (12,686,) (4,747,) 7/1/226 222,348, 188,6, 33,748, 84.8% 228 6,724, 1,54, (12,877,) (4,649,) 7/1/227 229,569, 197,37, 32,262, 85.9% 229 6,995, 1,544, (13,538,) (4,999,) 7/1/228 237,187, 26,746, 3,441, 87.2% 23 7,24, 1,61, (14,379,) (5,538,) 7/1/229 244,8, 216,55, 28,295, 88.4% 231 7,532, 1,657, (14,721,) (5,532,) 7/1/23 252,258, 226,411, 25,847, 89.8% 232 7,828, 1,71, (15,416,) (5,878,) 7/1/231 259,992, 237,41, 22,951, 91.2% 233 8,143, 1,757, (15,529,) (5,629,) 7/1/232 267,715, 248,81, 19,634, 92.7% 234 8,53, 1,83, ( 16,322,) (6,16,) 7/1/233 276,33, 26,178, 15,855, 94.3% 235 8,862, 1,875, ( 16,82,) (6,65,) For purposes of this forecast the amortization period declines to 1 year to illustrate the progress of the plan towards becoming fully funded; in actual practice the amortization period will not be less than 1 years in order to shield the City from contribution volatility. July 1, 214 Actuarial Valuation Page 14 CI'TY OF NORWALK POUCE BENEFIT FUND purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman
Section IV- Accounting Information A. Notes to Required Supplementary Information The information presented in Section IV has been determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows: Valuation Date July 1, 214 Actuarial Cost Method Entry Age Normal Amortization Method Level percent Amortization Period Closed 25 years from July 1, 211 Asset Valuation Method 5 Year Smoothed Market Value Actuarial Assumptions Investment Rate of Return Projected Salary Increases Amortization Growth Rate Inflation Cost-of-Living Adjustments 7.625% 4.% 4.% 2.5% 1.5% fixed per plan provisions July 1, 214 Aotuarla l Va luation Page 15
Miniman Actuarial Valuation Section IV- Accounting Information B. Schedule of Funding Progress {1) (2) (3) (4) (5) (6) UAALasa Actuarial Actuarial Actuarial Unfunded AAL Funded Percentage of Valuation For Value of Accrued i(uaal) Ratio Covered Covered PayroU Date FlSCafYear Assets Liabifrty (AAL) (2)- (1) {1) T (2) Payro1T (3) I (5) 7/1/25 26-27 $76,869,181 $83,468,237 $6,599,56 92.1% * * 7/1/26 27-28 79,834,138 88,299,719 8,465,581 9.4% 8,54,939 99.1% 7/1/27 28-29 87,569,89 91,63,735 4,33,845 95.6% 8,277,467 48.7% 7/1/28 29-21 94,636,631 97,873,967 3,237,336 96.7% 7,836,642 41.3% 7/1/29 21-211 94,249,586 13,712,578 9,462,992 9.9% 9,767,44 96.9% 7/1/21 211-212 92,593,831 17,525,222 14,931,391 86.1% 1,38,26 148.7% 7/1/211 212-213 92,79,77 114,35,654 21,596,577 81.1% 9,892,35 218.3% 7/1/212 213-214 9,854,816 121,114,987 3,26,171 75.% 11,276,37 268.4% 7/1/213 214-215 91,94,177 127,791,434 36,697,257 71.3% 12,425,33 295.3% 7/1/214 215-216 99,662,664 136,461,976 36,799,312 73.% 12,88,465 285.7% *A full valuation was not performed on this date Jufy 1, 214 Actuarial Valuation Page 16 CITY OF NORWALK POUCE BEHERT FUND purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman
Section IV- Accounting Information c. Schedule of Employer Contributions Fiscal Year Aotuarlally Ending D termlned AotuPI Percent June 3 Contrlbutloh Contribution Fund d 27 $1,599,9 $1,599,9 1% 28 1,65,475 1,65,475 1% 29 1,267,867 1,267,867 1% 21 1 '197,83 1,97,327 92% 211 1,925,38 1,925,38 1% 212 2,272,357 2,272,357 1% 213 2,588,62 2,588,62 1% 214 3,388,517 3,388,517 1% 215 4,8,62 TBD TBD 216 4,314,628 TBD TBD July 1, 214 Actuarial Va luation Pagq 1'T
Mifn:nan Actuarial Valuation Section IV- Accounting rnfonnation D. SolvencyTest The Solvency Test measures the extent to which plan assets (on an Actuarial Value basis) are sufficient to cover the Accrued Liability for different classes of plan members. Accrued Liabifltv Percentage Funded ActuariaJ Actuarial" Terminated Terminated ValuatiOn Value of Memibelsin Vested Active Members in Vested Active Date Assets Pay Status Members 1M embers Pay Status Mem:bers Members 7/1/26 $79,834,138 $53,753,62 $ $34,546,117 1.% 1.% 75.5% 7/1/27 87,569,89 57,869,436 33,734,299 1.% 1.% 88.% 7/1/28 94,636,631 64,97,145 568,246 33,28,576 1.% 1.% 9.3% 7/1/29 94,249,586 66,317,16 1,92,559 36,32,859 1.% 1.% 73.9% 7/1/21 92,593,831 69,87,942 516,816 37,2,464 1.% 1.% 59.9% 7/1/211 92,79,77 77,855,68 582,936 35,867,65 1.% 1.% 39.8% 7/1/212 9,854,816 8,713,121 63,553 39,771,313 1.% 1.% 23.9% 7/1/213 91,94,177 82,12,593 45,688,841 1.% 1.% 19.7% 7/1/214 99,662,664 88,749,54 47,712,472 1.% 1.% 22.9% JufY1~ 2D14.Acmarial Vaft.Jatii:Jn Page 18 crry OF NORWAI.K POUCEBEMEFITRJMD purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product.
Milliman Actuarial Va luation Section IV "' Accounting Information E. Accrued and Vested Benefit The actuarially computed Value of Accrued Benefits represents the present value of (a) the benefits based on earnings and service to date expected to become payable at future dates to present employees, (b) the benefits expected to become payable to former employees who have terminated service with vested rights or who have become inactive, and (c) the benefits currently payable to retired participants and beneficiaries. A of July 1, 213 July 1, 214 A of 1. Value of Vested Benefits Active Members $34,531,64 $35,495,28 Terminated Vested Members Members in DROP 6,624,83 8,223,668 Retired Members 62,55,968 65,876,29 Disabled Members 5,193,33 5,131,757 Beneficiaries of Deceased Members 7,779,212 9,517,789 Total Value of Vested Benefits 116,633,657 124,244,784 2. Value of Non-Vested Benefits 2,779,252 3,528,311 3. Total Value of Accrued Benefits: (1)+(2) 119,412,99 127,773,95 4. Market Value of Assets 93,28,47 1 6,424,468 5. Vested Funded Ratio: (4)/(1) 8.% 85.7% 6. Accrued Funded Ratio: (4)/(3) 78.1% 83.3% July 1, 214 Actuarllll Valuation Peg 19 CITY OF NORWALK POLICE BI!Ni!PIT FUNO purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman
Milliman Actuari al Valuation Section IV- Accounting Information F. Statement of Change In Accrued Plan Benefit lnorep /(Deer a ) during th 213 214 plan y ar pttrlbutpbl to : Increase for interest due to the decrease in the discount period $9,24,39 Benefits Accumulated/(Forfeited) 3,549, 795 Benefit Payments (6,51,249) Plan Amendments Changes in Actuarial Assumptions 1,837,25 Net lncrease/(decrease) 8,36,186 Vplu of Aoorued Plan B neflts: July 1, 214 $127,773,95 July 1, 213 119,412,99 Net lncrease/(decrease) 8,36,186 JUlY 1, 214 Actuarial Valuatloh Page 2 Cl'rY or: NORWALK POLICE BlaNEFIT FUND
Mllllm n Actuarial Valuation Section V.. Member hlp Data A. Reconciliation of Membership from Prior Valuation Details of the changes in the Plan membership since the last valuation are shown below. Additional details on the Plan membership are provided in the remainder of Section V. Aotlv DROP abled Bene floiprle Total Count as of July 1, 213 161 12 121 27 48 369 Terminated not vested Terminated, benefits due Lump sum paid Elected DROP ( 1) 1 Retired (4) ( 1) 5 Disabled Died, due refund Died, with beneficiary (3) 3 Died, no further benefits ( 1) ( 1) (2) New member 7 7 New beneficiary Rehired NewQDRO 1 Correction Count of July 1 1 214 163 12 123 26 51 375 July 1, 214 Actuorlal Valuation Page 21
Section V.. Membership Data B. Statistics of Membership A of July 1, 213 A of July 1, 214 Active Members Number Total Annual Compensation Average Compensation Average Age Average Service 161 $12,425,33 77,174 4. 12.2 163 $12,88,465 79,21 4.1 12.2 Terminated Ve ted Members Number Total Annual Benefit Average Annual Benefit Average Age $. $. Retired Members (Includes DROP) Number Total Annual Benefit Average Annual Benefit Average Age 133 $5,174,31 38,95 63.2 135 $5,355,572 39,671 63.3 Disabled Member Number Total Annual Benefit Average Annual Benefit Average Age 27 $417,215 15,452 65.6 26 $41,16 15,773 66.2 Benefiel rl of D oaa ed Memb rs Number Total Annual Benefit Average Annual Benefit Average Age 48 $87,883 16,831 75.3 51 $1,,246 19,613 75.5 July 1, 214 Actuarial Valuation Page 22
Section V- Membership Data C. Distribution of Active Members as of July 1, 214- Count Years of Service Age -4 <25 3 25-29 17 3-34 19 35-39 4 4-44 4 45-49 1 5-54 1 55-59 1 6-64 65+ Total 5 5-9 1-14 9 12 7 2 11 3 2 2 2 43 7 15-19 2-24 25-29 3-34 3 6 3 5 1 7 3 3 1 2 1 1 2 4 1 1 18 17 2 7 35+ Total 3 26 31 16 27 27 21 9 1 2 1 1 163 Distribution By Age 6 5 4 3 2 1 i IF,... ll"" < 25 25-29 3-34 35-39 4-44 45-49 5-54 55-59 6-64 Distribution by Years of Service 6 5 4 3 2 1 65+ -4 5-9 1-14 15-19 2-24 25-29 3-34 35+ July 1, 214 Actuarial Valuation CITY OF NORWALK POUCE BEINEAT FUND purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman Page 23
Section V - Membership Data D. Distribution of Active Members as of July 1, 214- Average Compensation Years of Service Age -4 5-9 1-14 15-19 2-24 25-29 3-34 35+ Total <25 66,235 66,235 25-29 69,77 77,95 72,56 3-34 7,964 75,778 72,828 35-39 68,966 81,563 89,965 84,615 8,36 4-44 71,841 79,983 84,892 8,163 74,746 78,78 45-49 74,746 79,275 78,858 84,638 84,594 91,759 85,276 5-54 74,746 74,746 89,41 78,42 86,599 11 6,532 86,936 55-59 7,66 74,746 74,746 91,15 86,647 83,1 96 6-64 89,1 33 89,133 89,1 33 65+ 74,746 74,746 Total 7,38 78,365 84,617 83,388 81,121 88,254 95,54 89,133 79,21 Distribution By Age 1, 1, 8, 8, 6, 6, 4, 4, 2, 2, Distribution by Years of Service < 25 25-29 3-34 35-39 4-44 45-49 5-54 55-59 6-64 65+ -4 5-9 1-14 15-19 2-24 25-29 3-34 35+ July 1, 214 Actuarial Valuation CITY OF NORWALK POUCE BENEFIT FUND Page24 purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman
Milliman Actuari al Valuation Section V Membership Data E. Distribution of Inactive Members as of July 1, 214 Annual Age Number Benefits Terminated Vested Members < 3 $ 3-39 4-49 5-59 6-64 65 + Total Retired Members (Includes DROP) <5 2 $122,25 5-59 55 2,462,578 6-69 51 2,245,517 7-79 14 372,471 8-89 12 144,581 9 + 8,4 Total 135 5,355,572 Disabled Retirees <5 2 $7,47 5-59 3 56,25 6-69 12 193,313 7-79 6 65,941 8-89 3 24,6 9 + Total 26 41,16 Beneficiaries <5 $ 5-59 5 152,965 6-69 11 331,525 7-79 12 25,921 8-89 19 27,94 9 + 4 38,895 Total 51 1,,246 July 1, 214 Actuarial Valuation Page 25
Appendix A Actuarial Funding Method The actuarial funding method used in the valuation of this Plan is the Entry Age Normal Cost Method. Recommended annual contributions until the accrued liability is completely funded will consist of two pieces: Normal Cost plus a payment towards the Unfunded Accrued Liability. The Normal Cost is determined by calculating the present value of future benefits for present active Members that will become payable as the result of death, disability, retirement or termination. This cost is then spread as a level percentage of earnings from entry age to termination as an Active Member. If Normal Costs had been paid at this level for all prior years, a fund would have accumulated. Because this fund represents the portion of benefits that would have been funded to date, it is termed the Accrued Liability. In fact, it is calculated by adding the present value of benefits for Retired Members and Terminated Vested Members to the present value of benefits for Active Members and subtracting the present value of future Normal Cost contributions. The funding cost of the Plan is derived by making certain specific assumptions as to rates of interest, mortality, turnover, etc. which are assumed to hold for many years into the future. Since actual experience may differ somewhat from the assumptions, the costs determined by the valuation must be regarded as estimates of the true costs of the Plan. The Unfunded Liability for the plan is the excess of the Accrued Liability over the assets which have been accumulated for the plan. This Unfunded Accrued Liability is amortized as a level percent. Beginning on July 1, 211, the amortization period is 25 years; the amortization period will decrease each year until it reaches 1 years, after which point it will remain at 1 years. The Actuarial Value of Assets is determined by recognizing market gains or losses over a five year period. July 1, 214 Actuarial Valuation Page 26
Appendix B -Actuarial Assumptions Interest Salary Scale Amortization Growth Rate Healthy Mortality 7.625% 4.% 4.% RP-2 Combined Healthy Mortality Table with generational projection per Scale AA. For members currently in DROP, mortality projection is only through the year of the valuation. This assumption includes a margin for anticipated longetivity improvements beyond the valuation date. Disabled Mortality Withdrawal RP-2 Disabled Mortality Table with generational projection per Scale AA. This assumption includes a margin for anticipated longetivity improvements beyond the valuation date. Active members are assumed to terminate as follows: A ~ e Rate 18-39 2.% 4 & over.% Disability A~ e Rate 2.3% 25.3% 3.48% 35.66% 4.66% 45.6% 5.42% 55.42% 6.% Percent Married Age of Spouse Benefits for Terminated Vested Members 7% The female spouse is assumed to be three years younger than the male spouse. For terminated vested members for whom a benefit was not provided, we have estimated their accrued benefit based on data we received from the City. July 1, 214 Actuarial Valuation Page 27
Appendix B Actuarial Assumptions Retirement Active members are assumed to retire as follows: Age Normal Retirement Age 49-54 55-61 62 Rate 3% 2% 4% 1% Members hired on or after January 1, 213: 2% of eligible members are assumed to retire at each Early Retirement Age prior to Normal Retirement Age. 1% of terminated vested members are assumed to retire at their Normal Retirement Age. DROP Plan Administrative Expenses 75% of active members are assumed to elect DROP at their earliest eligible age. Based on actual administrative expenses paid in the prior year, increased by 3% and rounded to the nearest $1. July 1, 214 Actuarial Valuation Page 28
Milliman Actuarial Valuati on Appendix C - Summary of Plan Provisions This exhibit summarizes the major provisions of the Plan. It is not intended to be, nor should it be interpreted as a complete statement of all plan provisions. All eligibility requirements and benefit amounts shall be determined in strict accordance with the plan document itself. To the extent that this summary does not accurately reflect the plan provisions, then the results of this valuation may not be accurate. Normal Retirement Eligibility Benefit Salary Averaging Period Salary Basis Normal Form Member Contributions Date of hire prior to 7/1/1973 and hired before 23rd birthday: Any age with 25 years of service. Date of hire on or after 7/1/1973: Age 48 with 2 years of service. Date of hire prior to 7/1/1973 and hired before 23rd birthday: 5% of final annual base salary. Date of hire on or after 7/1/1973: 2.5% of final average salary per year of service with a maximum benefit of 75% of final average salary. There is a minimum $7 monthly benefit for all pre-1986 retirees. Date of hire prior to 7/1/1973 and before 23rd birthday: last full year. Date of hire on or after 7/1/1973: final26 weeks. Base salary. 1% Joint and Survivor Annuity. 8% of regular compensation. Vesting Eligibility Benefit 1 years of service. Accrued benefit payable at age 48. If the member withdraws their member contributions, no further benefit is payable. If the member is not vested, all member contributions made after 7/1/1971 are refunded. Service Connected Disability Eligibility Benefit No age or service requirements. Higher of 5% of base salary or accrued benefit. July 1, 214 Actuarial Valuation Page 29
Appendix C - Summary of Plan Provisions Non-Service Connected Disability Eligibility Benefit 1 years of service. Higher of 2.5% of final year base salary per year of service or the accrued benefit. This payment plus Worker's Compensation may not exceed 1% of base salary. Pre-retirement Death Benefit Lump Sum Eligibility Lump Sum Benefit Annuity Eligibility Annuity Benefit No age or service requirement, if the member has no spouse/dependents or does not meet the eligibility requirements for the plan's annuity death benefit. Refund of member contributions made after 7/1/1971. Age 48 with 2 years of service or on Veteran's Reserve. The member's accrued benefit at death is payable to any surviving spouse until their death or remarriage, or if the member is not married the accrued benefit at death is payable to any children until they reach age 16. If there is no spouse or children, the accrued benefit at death is payable to any dependent parents as determined by the Board of Trustees. The minimum benefit is 5% of final average salary. This benefit plus Worker's Compensation may not exceed 1% of regular weekly compensation at death. Post-retirement Death Benefit Lump Sum Benefit Spouse's Benefit Post-retirement Cost-of-Living Increases 1% of member contributions made after 7/1/1971, less the total of benefits that have been paid to the pensioner, if there is no surviving spouse or dependents. 1% of retirement benefit payable for the life of the spouse. Retirees receive an annual benefit increase of 1%% on 62nd birthday and each year thereafter. If a pensioner dies prior to age 62, the spouse is eligible for this increase when the pensioner would have reached their 62nd birthday. After 7/1/1998, the 1%% increase begins at age 55. July 1, 214 Actuarial Valuation Page 3
Appendix C - Summary of Plan Provisions Deferred Retirement Option Plan (DROP) Effective starting in 24, a member who is at or beyond normal retirement date can elect a DROP of up to five years (but not beyond the 32nd year of employment). During the DROP period, 1% (9% effective July 1, 28) of the benefit accrued as of the beginning of the DROP period is credited to the member's notional DROP account. For the member's 3th, 31st, and 32nd years of employment, only 85% of the benefit accrued as of the beginning of the DROP period is credited. At the end of the DROP period, the member retires and receives their DROP account balance as a single payment and receives thereafter 1% of the benefit accrued as of the beginning of the DROP period. During the DROP period the member does not make employee contributions, nor does the member's benefit get increased by Cost of Living Adjustments (COLAs). July 1, 214 Actuarial Valuation Page 31 purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman