April 29, 2016 Mr. Alfred Riverol Finance Director City Hall 6130 Sunset Drive South Miami, Florida 33143 Re: South Miami Pension Plan (City DB Plan) Updated Actuarial Projection Study as of October 1, 2014 Future Service Retirement Benefits Based Upon New Tier of Benefits for Current DC Employees Dear Alfred: As requested, we are pleased to enclose our updated Actuarial Projection Study including thirty (30) year projections for the City s proposed changes for general employees to provide future service retirement benefits under a new tier of benefits as specified by the City under the City DB Plan. Financial and census data is reported as of October 1, 2014. Census data for regular part time staff is reported. We understand regular part time staff does not currently participate in any City retirement plan. We further understand regular part time would continue to not participate in the proposed retirement plan. If you should have any question concerning the above or if we may be of further assistance with this matter, please do not hesitate to contact us. Sincerest regards, Lawrence F. Wilson, A.S.A. Senior Consultant and Actuary Kelly L. Adams, A.S.A. Consultant and Actuary Enclosures
UPDATED ACTUARIAL PROJECTION STUDY April 29, 2016
TABLE OF CONTENTS Page I. Executive Summary...1 II. Projection Results...8 III. Outline of Principal Provisions of the South Miami Pension Plan...15 IV. Actuarial Assumptions and Cost Methods...20
EXECUTIVE SUMMARY At the request of the City, we have completed thirty (30) year projections illustrating the financial impact of City proposed changes to the South Miami Pension Plan (City DB Plan) and the City of South Miami Defined Contribution Plans (City DC Plans). Background The City DB Plan currently allows participation by full-time General Employees hired before October 1, 2011 and requires participation of all full-time Police Officers of the City excluding Police Chief. The City DB Plan currently provides: Normal Retirement is attained age of 55 and completion of ten (10) years of credited service (attained age 60 and completion of ten (10) years of credited service for benefits earned after September 30, 2011) for General Employees. Future service benefit multiplier is 2.25% for General Employees. Full vesting upon completion of ten (10) years of credited service. Final Average Compensation is the 1/60 th of the final 60 consecutive months of basic compensation but not less than 1/36 th of the final 36 consecutive months of compensation as of September 30, 2011 for General Employees. General Employees contribute 7.0% of pay. City contributions greater than the general employee contributions are split evenly between the City and general employees City pays administrative expenses. 3% cost-of-living increase (subject to consumer price index) to qualifying retires (limited to benefits earned prior to October 1, 2011 for General Employees). The City offers Defined Contribution Plans (City DC Plans) qualified under IRC Section 401(a) for General Employees hired on or after October 1, 2011 and for other select City Employees with a 100% match-up to 7% of pay. Proposed Changes We understand the City wishes to determine the projected effect on future City contributions if the City DB Plan is re-opened to General Employees hired on or after October 1, 2011 under a new tier of benefits. Additionally a new defined benefit pension plan will be established for the Administration Management Service Class (AMSC). - 1 -
The City provided the group of employees who may comprise the AMSC as follows: - City Manager - City Clerk - Assistant City Manager - Finance and Administration Director, C.F.O. - Police Chief - Planning Director - Building Director - Public Works Director - Chief Administrative Officer (currently Finance Office Manager) - Chief Procurement Officer (currently Purchasing Manager) - Personnel Manager - Parks and Recreation Director The proposed retirement programs will provide: General Employees electing the new tier in the City DB Plan will receive the following: o Full vesting upon completion of ten (10) years of credited service. o Future service benefit multiplier is 1.60%. o Final Average Compensation will be the average of the highest eight (8) years of compensation. o Normal Retirement is the earlier of (a) attained age 65 and completion of ten (10) years of credited service or (b) completion of thirty-three (33) years of credited service. o General Employees entering the City DB Plan will contribute three percent (3%) of compensation (current General Employees in the City DB Plan not electing the new tier of benefits will have their contributions capped at ten percent (10%) of compensation). o No cost-of-living adjustments will be provided. General Employees currently in the City DB plan will have the option to freeze their current benefits and receive benefits under the new tier. AMSC employees will receive the following benefits: o Participants currently employed by the City will be vested upon completion of three (3) years of service as of the date of adoption. o Future AMSC participants will be vested upon completion of three (3) years of service. o Benefit multiplier is 3.00%. o Final Average Compensation will be the average of the highest eight (8) years of compensation. - 2 -
o Normal Retirement is the earlier of (a) attained age 65 and completion of three (3) years of credited service or (b) completion of thirty-three (33) years of credited service. o AMSC employees will be required to contribute seven percent (7%) of compensation. o AMSC employees who will receive the above benefits and who are currently participating in the City DB Plan will have their City DB Plan benefits frozen as of the date of adoption. Additionally an Alternative Defined Contribution Plan (Alternative DC Plan) will be offered to all General Employees with the following provisions: o Employees are required to contribute three percent (3%) of compensation. o City will contribute seven percent (7%) of compensation. o Employees will be vested after one (1) year of service. Results The following Tables shows the current City / Employee contribution (cost) and the sum of the projected City / Employee contributions (costs) over the next five (5), ten (10) and thirty (30) years for the baseline (City DB Plan and City DC Plans) and for the proposed changes described above as a dollar amount and as a percentage of projected covered payroll, respectively. - 3 -
Summary of Costs ($1,000s) General Employees Current Proposed Increase / Amount Amount (Decrease) Next Year - Department Payroll $4,145 $4,249 N/A - Net City Cost $ $245 $198 ($47) - Net City Cost % 5.9% 4.7% (1.2%) - Net Employee Cost $ $255 $246 ($9) - Net Employee Cost % 6.2% 5.8% (0.4%) Next 5 Years - Department Payroll $21,549 $22,509 N/A - Net City Cost $ $1,413 $1,066 ($347) - Net City Cost % 6.6% 4.7% (1.9%) - Net Employee Cost $ $1,358 $1,239 ($119) - Net Employee Cost % 6.3% 5.5% (0.8%) Next 10 Years - Department Payroll $47,131 $49,804 N/A - Net City Cost $ $3,162 $2,410 ($752) - Net City Cost % 6.7% 4.8% (1.9%) - Net Employee Cost $ $3,045 $2,604 ($441) - Net Employee Cost % 6.5% 5.2% (1.3%) Next 30 Years - Department Payroll $207,313 $221,968 N/A - Net City Cost $ $14,898 $11,263 ($3,635) - Net City Cost % 7.2% 5.1% (2.1%) - Net Employee Cost $ $14,051 $10,167 ($3,884) - Net Employee Cost % 6.8% 4.6% (2.2%) - 4 -
Actuarial Assumptions and Methods, City DB Plan Provisions, Financial Data and Member Census Data The actuarial assumptions and methods, City DB Plan provisions (as modified above), financial data and member census data employed for purposes of our Actuarial Projection Study are the same actuarial assumptions and methods, City DB Plan provisions (as modified above), financial data and member census data utilized for the October 1, 2014 Actuarial Valuation with the following projection modifications. Two-thirds of current employees in the City DC plans along with two-thirds of future General Employees are assumed to enroll in the new tier of benefits for General Employees (assumption provided by City). The remaining one-third of current employees in the City DC plans along with one-third of future General Employees are assumed to enroll in the Alternative DC Plan (assumption provided by City). All AMSC employees are assumed to enroll in the proposed City AMSC Defined Benefit Plan. Demographic data for twelve AMSC employees was reported by the City. All current General Employees participating in the City DB Plan are assumed to continue to participate in the current City DB Plan (assumption provided by City). No future City contributions are assumed to be made to the current City DC Plans for all General Employees. Under the proposed structure, the City DB Plan future amortization period for the change in unfunded liability is twenty-five (25) years. A payroll growth assumption of 3.25% is used for determining the amortization payments under the re-opened plan for General Employees. New AMSC defined benefit plan will use the same actuarial methods and assumptions as the City DB Plan for General Employees. Under the current City Senior Management DC Plan, participants are eligible for normal retirement at age 45. For all others in the City DC Plans, participants are eligible for normal retirement at age 60. Demographic assumptions of the City DB Plan for General Employees are assumed to apply to the Alternative DC Plan including the retirement age of the earlier of (a) attained 65 or (b) completion of 33 years of service. No upfront contribution to fund additional liabilities under the proposed tier of benefits or the proposed ASMC Plan is assumed. Throughout the forecast period new employees are assumed to be hired each year at a rate sufficient to maintain a constant active headcount stationary population. New - 5 -
employees are assumed to have the same average demographic characteristics (age, gender, salary adjusted each year for inflation) and group (General Employee or AMSC) as those employees hired over the past five (5) years. Under the City DB Plan, expenses paid by the City are assumed to be 0.3% of the projected market value of assets during the projection period. Effective October 1, 2016, the rates of mortality in the projections are the rates of mortality used by the Florida Retirement System (FRS) in the July 1, 2014 and July 1, 2015 FRS Actuarial Valuations. Projections are deterministic throughout the projection period experience is expected to match the assumptions including a 7.375% annual market value investment return for fiscal year ended September 30, 2015 and thereafter. This Actuarial Projection Study is intended to describe the estimated future financial effects of the proposed benefit changes and is not intended as a recommendation in favor of the change nor in opposition to the change. These calculations are based upon assumptions regarding future events. However, the City DB Plan and AMSC Plan long term costs will be determined by actual future events, which may differ materially from the assumptions made. If you have reason to believe the assumptions used are unreasonable, the City DB Plan provisions are incorrectly described or referenced, important City DB Plan provisions relevant to this Actuarial Projection Study are not described or that conditions have changed since the calculations were made, you should contact the undersigned prior to relying on information in this Actuarial Projection Study. If you have reason to believe that the information provided in this Actuarial Projection Study is inaccurate, or is in any way incomplete, or if you need further information in order to make an informed decision on the subject matter of this report, please contact the undersigned prior to making such decision. The Unfunded Actuarial Accrued Liability (UAAL) may not be appropriate for assessing the sufficiency of Plan assets to meet the estimated cost of settling benefit obligations but may be appropriate for assessing the need for or the amount of future contributions. The UAAL would be different if it reflected the market value of assets rather than the actuarial value of assets. Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: City DB 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 City DB Plan s funded status); and changes in City DB Plan provisions or applicable law. Due to the limited scope of the actuary s assignment, the actuary did not perform an analysis of the potential range of such future measurements. - 6 -
This report should not be relied on for any purpose other than the purpose described in the primary communication. Determinations of the financial results associated with the benefits described in this report in a manner other than the intended purpose may produce significantly different results. 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 South Miami Pension Plan as of the valuation date. All calculations have been made in conformity with generally accepted actuarial principles and practices, with the Actuarial Standards of Practice issued by the Actuarial Standards Board and with applicable statutes. The signing actuaries are independent of the Plan sponsor. The undersigned are Members of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. If you should have any question concerning the above or if we may be of further assistance with this matter, please do not hesitate to contact us. Sincerest regards, Lawrence F. Wilson, A.S.A. Senior Consultant and Actuary Kelly L. Adams, A.S.A. Consultant and Actuary Enclosures - 7 -
PROJECTION RESULTS General Employee Re-open the City DB Plan to General Employees hired on or after October 1, 2011 with a new tier of benefits for General Employees. Create a defined benefit plan for AMSC employees. Create an Alternative DC plan. The following Tables show projected covered payroll, comparison of projected City and Employee (EE) costs and Unfunded Actuarial Accrued Liability (UAAL) under the baseline forecast versus providing benefit accruals similar to FRS ($1,000s). UAAL shown is for the Valuation Date two years prior to fiscal year end. Fiscal Department Current Plans Current Department Proposed Plans (Increase) / Cumulative Year Covered Projected City Cost Plan Covered Projected City Cost Reduction in (Inc) / Red in End Payroll Dollar % of Pay UAAL Payroll Dollar % of Pay UAAL City Cost City Cost 2016 4,145 245 5.9% (175) 4,249 198 4.7% 176 47 47 2017 4,127 278 6.7% (762) 4,273 219 5.3% (125) 59 106 2018 4,263 285 6.7% (955) 4,474 211 4.9% (339) 74 180 2019 4,424 296 6.7% (1,347) 4,663 214 4.8% (750) 82 262 2020 4,590 309 6.7% (1,547) 4,850 224 4.9% (956) 85 347 2021 4,748 318 6.7% (1,669) 5,051 245 5.2% (1,091) 73 420 2022 4,932 334 6.8% (1,803) 5,251 257 5.2% (1,227) 77 497 2023 5,111 350 6.8% (1,945) 5,466 259 5.1% (1,387) 91 588 2024 5,301 366 6.9% (2,099) 5,679 289 5.5% (1,591) 77 665 2025 5,490 381 6.9% (2,264) 5,848 294 5.4% (1,790) 87 752 2026 5,685 398 7.0% (2,442) 6,062 312 5.5% (2,060) 86 838 2027 5,881 415 7.1% (2,632) 6,280 328 5.6% (2,354) 87 925 2028 6,081 432 7.1% (2,835) 6,504 334 5.5% (2,682) 98 1,023 2029 6,294 449 7.1% (3,056) 6,748 351 5.6% (3,061) 98 1,121 2030 6,511 467 7.2% (3,293) 6,991 367 5.6% (3,460) 100 1,221 2031 6,735 486 7.2% (3,545) 7,242 381 5.7% (3,915) 105 1,326 2032 6,960 504 7.2% (3,815) 7,477 387 5.6% (4,428) 117 1,443 2033 7,199 524 7.3% (4,106) 7,741 403 5.6% (5,033) 121 1,564 2034 7,451 543 7.3% (4,418) 8,006 416 5.6% (5,718) 127 1,691 2035 7,715 564 7.3% (4,752) 8,294 429 5.6% (6,501) 135 1,826 2036 7,986 586 7.3% (5,111) 8,596 445 5.6% (7,383) 141 1,967 2037 8,269 609 7.4% (5,495) 8,905 462 5.6% (8,360) 147 2,114 2038 8,555 632 7.4% (5,907) 9,222 477 5.6% (9,444) 155 2,269 2039 8,857 656 7.4% (6,351) 9,551 489 5.5% (10,643) 167 2,436 2040 9,169 680 7.4% (6,826) 9,887 507 5.5% (11,973) 173 2,609 2041 9,489 705 7.4% (7,336) 10,226 522 5.5% (13,457) 183 2,792 2042 9,819 731 7.4% (7,884) 10,562 535 5.4% (15,132) 196 2,988 2043 10,154 758 7.5% (8,473) 10,918 553 5.4% (16,990) 205 3,193 2044 10,507 785 7.5% (9,105) 11,288 570 5.4% (19,013) 215 3,408 2045 10,865 812 7.5% (9,783) 11,664 585 5.4% (21,218) 227 3,635 5 Year Totals 21,549 1,413 6.6% (1,547) 22,509 1,066 4.7% (956) 347 1.9% 10 Year Totals 47,131 3,162 6.7% (2,264) 49,804 2,410 4.8% (1,790) 752 1.9% 30 Year Totals 207,313 14,898 7.2% (9,783) 221,968 11,263 5.1% (21,218) 3,635 2.1% - 8 -
Fiscal Projected EE Cost Department Projected EE Cost (Increase) / Cumulative Year Department Current Plans Covered Scenario 1 Reduction in (Inc) / Red in End Payroll Dollar % of Pay Payroll Dollar % of Pay EE Cost EE Cost 2016 4,145 255 6.2% 4,249 246 5.8% 9 9 2017 4,127 257 6.2% 4,273 240 5.6% 17 26 2018 4,263 269 6.3% 4,474 246 5.5% 23 49 2019 4,424 282 6.4% 4,663 251 5.4% 31 80 2020 4,590 295 6.4% 4,850 256 5.3% 39 119 2021 4,748 310 6.5% 5,051 261 5.2% 49 168 2022 4,932 324 6.6% 5,251 267 5.1% 57 225 2023 5,111 337 6.6% 5,466 274 5.0% 63 288 2024 5,301 351 6.6% 5,679 280 4.9% 71 359 2025 5,490 365 6.6% 5,848 283 4.8% 82 441 2026 5,685 379 6.7% 6,062 290 4.8% 89 530 2027 5,881 394 6.7% 6,280 296 4.7% 98 628 2028 6,081 410 6.7% 6,504 303 4.7% 107 735 2029 6,294 425 6.8% 6,748 311 4.6% 114 849 2030 6,511 441 6.8% 6,991 319 4.6% 122 971 2031 6,735 458 6.8% 7,242 328 4.5% 130 1,101 2032 6,960 475 6.8% 7,477 336 4.5% 139 1,240 2033 7,199 492 6.8% 7,741 345 4.5% 147 1,387 2034 7,451 511 6.9% 8,006 354 4.4% 157 1,544 2035 7,715 530 6.9% 8,294 364 4.4% 166 1,710 2036 7,986 550 6.9% 8,596 375 4.4% 175 1,885 2037 8,269 570 6.9% 8,905 387 4.3% 183 2,068 2038 8,555 591 6.9% 9,222 399 4.3% 192 2,260 2039 8,857 612 6.9% 9,551 411 4.3% 201 2,461 2040 9,169 635 6.9% 9,887 424 4.3% 211 2,672 2041 9,489 658 6.9% 10,226 437 4.3% 221 2,893 2042 9,819 681 6.9% 10,562 450 4.3% 231 3,124 2043 10,154 706 7.0% 10,918 463 4.2% 243 3,367 2044 10,507 731 7.0% 11,288 478 4.2% 253 3,620 2045 10,865 757 7.0% 11,664 493 4.2% 264 3,884 5 Year Totals 21,549 1,358 6.3% 22,509 1,239 5.5% 119 0.8% 10 Year Totals 47,131 3,045 6.5% 49,804 2,604 5.2% 441 1.3% 30 Year Totals 207,313 14,051 6.8% 221,968 10,167 4.6% 3,884 2.2% - 9 -
1,250 1,000 750 500 250 0 General Employees Projected City Cost ($1,000s) Current Plans Includes New Entrants into DC Plan Scenario 1 Re open Plan to General Employees. Add new AMSC plan. - 10 -
1,200 1,000 800 600 400 200 0 Projected General Employee Cost ($1,000s) Current Plans Includes New Entrants into DC Plan Scenario 1 Re open Plan to General Employees. Add new AMSC plan. - 11 -
10.0% 5.0% 0.0% General Employees Projected City Cost as a % of Department Pay Current Plans Includes New Entrants into DC Plan Scenario 1 Re open Plan to General Employees. Add new AMSC plan. - 12 -
10.0% 5.0% 0.0% Projected General Employee Cost as a % of Department Pay Current Plans Includes New Entrants into DC Plan Scenario 1 Re open Plan to General Employees. Add new AMSC plan. - 13 -
The following table shows a summary of the reduction in City and Employee Costs. Fiscal Year End Summary of Reduction / (Increase) in Costs - ($1,000s) City Employee 2016 47 9 2017 59 17 2018 74 23 2019 82 31 2020 85 39 2021 73 49 2022 77 57 2023 91 63 2024 77 71 2025 87 82 2026 86 89 2027 87 98 2028 98 107 2029 98 114 2030 100 122 2031 105 130 2032 117 139 2033 121 147 2034 127 157 2035 135 166 2036 141 175 2037 147 183 2038 155 192 2039 167 201 2040 173 211 2041 183 221 2042 196 231 2043 205 243 2044 215 253 2045 227 264 5 Year Savings ($) 347 119 5 Yr Average 69 24 30 Year Savings ($) 3,635 3,884 30 Yr Average 121 129-14 -
OUTLINE OF PRINCIPAL PROVISIONS OF THE RETIREMENT PLAN PRIOR TO ANY PROPOSED CHANGES INCLUDED IN THIS STUDY A. Effective Date: October 1, 1965. Most recently amended by Ordinance 06-14-2184 adopted April 15, 2014. B. Eligibility Requirements: 1. General Employees Any regular full-time employee hired before October 1, 2011 is eligible to enter the plan following the completion of six months of Credited Service and attainment of age 20. 2. Police Officers Any regular full-time Police Officer is eligible to enter the plan as of date of employment. C. Credited Service: 1. General Employees Continuous employment. Credited service shall exclude continuous employment prior to plan participation as follows: (1) If employed prior to October 1, 1973, credited service shall exclude the first two years of continuous employment and any additional year of continuous employment prior to attainment of age 25. (2) If employed on or after October 1, 1973, credited service shall exclude the first six (6) months of continuous employment and continuous employment prior to age 20. 2. Police Officers Continuous employment. For Police Officers who did not participate when first eligible for the plan, credited service shall exclude continuous employment prior to plan participation as follows: (1) If employed prior to October 1, 1973, credited service shall exclude the first two years of continuous employment and any additional year of continuous employment prior to attainment of age 25. (2) If employed on or after October 1, 1973, credited service shall exclude the first six (6) months of continuous employment and continuous employment prior to age 20. - 15 -
D. Final Monthly Compensation (FMC): Final Monthly Compensation is 1/36 th of the final 36 consecutive months of compensation. For Police Officers, not less than 1/5 th of the highest five (5) years out of the last (10) ten years of compensation. Compensation shall mean regular wages and salaries, excluding bonuses, vacation, sick leave and other additional compensation. Effective October 1, 2011, Final Average Compensation for General Employees is 1/60 th of the final 60 consecutive months of basic compensation, provided it is not less than the Final Average Compensation as of September 30, 2011 based on the definition above. Basic compensation shall mean base wages and salaries, excluding commissions, overtime pay, bonuses and any other forms of additional compensation earned outside of base wages. Effective October 1, 2011, Final Average Compensation for members covered under the Police Officers and Sergeants collective bargaining agreement is the best five (5) years of basic compensation, provided it is not less than the Final Average Compensation as of September 30, 2011 based on the definition above. Basic compensation shall mean base wages and salaries, including up to 300 hours of overtime in a fiscal year and excluding payments for accrued unused sick or annual leave, extra duty or special detail work, shift differential, assignment pay, bonuses and any other forms of additional compensation earned outside of base wages. E. Normal Retirement: 1. Eligibility: a. General Employees: Attainment of age 55 and completion of ten (10) years of credited service for benefits accrued as of September 30, 2011. Attainment of age 60 and completion of ten (10) years of credited service for benefits accrued after September 30, 2011, including increases in the accrued benefit as of September 30, 2011 due to increases in the Final Average Compensation. b. Police Officers: Attainment of age 60 and completion of ten (10) years of credited service of completion of twenty-five (25) years of credited service regardless of age. 2. Benefit: The monthly plan benefit is the product of: a. FMC, b. Credited service during the appropriate period and c. The appropriate benefit percentage - 16 -
E. Normal Retirement (cont d): The appropriate benefit percentages are: a. General Employees For Credited Service Percentage Through September 30, 1999 2.50% October 1, 1999 through September 30, 2011 2.75% October 1, 2011 and thereafter 2.25% b. Police Officers For Credited Service Percentage F. Supplemental Benefit: Through September 30, 1995 2.00% October 1, 1995 through September 30, 1996 2.25% October 1, 1996 through September 30, 1997 2.50% October 1, 1997 through September 30, 2001 2.75% October 1, 2001 through September 30, 2002 2.80% October 1, 2002 through September 30, 2003 2.90% October 1, 2003 and thereafter 3.00% A cost-of-living supplemental benefit based upon the consumer price index is provided upon retirement. The annual increase is limited to 3%. For General Employees the cost-of-living supplemental benefit is only provided on the accrued benefit as of September 30, 2011 and does not apply to increases in this accrued benefit due to increases in the Final Average Compensation. G. Early Retirement: 1. Eligibility: Attainment of age 50 and completion of 15 years of credited service for Police Officers. 2. Benefit: Accrued benefit based upon FMC and credited service as of early retirement date, reduced 3% for Police Officers for each year that the benefit commencements date precedes Normal Retirement. H. Delayed Retirement: 1. Eligibility: Retirement subsequent to normal retirement date. 2. Benefit: Accrued benefit based upon FMC and credited service as of delayed retirement date. - 17 -
I. Disability Retirement: 1. Eligibility: Totally and permanently disabled for a six month period while actively employed. 2. Benefit: Accrued benefit based upon FMC and credited service as of date of disability, actuarially reduced as for early retirement for early commencement. J. Pre-Retirement Death Benefit: The beneficiary shall receive the member s accumulated employee contributions. K. Benefit Upon Termination of Service: 1. Benefit payable at normal retirement equal to the greater of: a. Accrued benefit based upon FMC and credited service as of date of termination times the vesting percentage shown below, or b. Benefit which can be supported by the accumulated member contributions with interest to normal retirement date. No Supplemental benefit shall be payable to vested terminees. 2. Vesting Schedule: Years of Credited Service Vesting Percentage Less than 10 0% 10 or more years 100% 3. Refund Options: A terminated member may elect to receive a refund of accumulated contributions without interest in lieu of receiving any other plan benefits. L. Member Contributions: Members contribute 7.0% (7.5% for Police Officers) of member s basic annual compensation. Should the City contribution for General Employees be actuarially determined to exceed 7.0%, not including expenses, both the City and the General Employees will share equally in the amount in excess of 7.0%. - 18 -
Should the City contribution for Police Officers be actuarially determined to exceed 7.5%, not including expenses, both the City and the Police Officers will share equally in the amount in excess of 7.5%. M. Normal Form of Retirement Income: The normal form of payment shall be a life annuity with a guarantee of a refund of accumulated employee contributions. - 19 -
A. Mortality SOUTH MIAMI PENSION PLAN ACTUARIAL ASSUMPTIONS AND METHODS For October 1, 2014 and 2015 the following rates of mortality were utilized: For healthy General Employee participants, RP-2000 Mortality Tables, separate rates for males and females and for annuitants and non-annuitants, with fully generational mortality improvements projected to each future decrement date with Scale AA. For healthy Police Officer participants, RP-2000 Combined Healthy Participant Mortality Tables, separate rates for males and females, with Blue Collar Adjustment and fully generational mortality improvements projected to each future decrement date with Scale AA. For disabled participants, RP-2000 Disabled Mortality Tables, separate rates for males and females, with fully generational mortality improvements projected to each future decrement date with Scale AA. For October 1, 2016 and thereafter the following rates of mortality were utilized: For healthy General Employee male participants, 50% of the RP-2000 Annuitant Mortality Table with White Collar Adjustment - 50% of the RP-2000 Annuitant Mortality Table with Blue Collar Adjustment, with fully generational mortality improvements projected to each future decrement date with Scale BB. For healthy Police Officer male participants, 10% of the RP-2000 Annuitant Mortality Table with White Collar Adjustment - 90% of the RP-2000 Annuitant Mortality Table with Blue Collar Adjustment, with fully generational mortality improvements projected to each future decrement date with Scale BB. For healthy General Employee and Police Officer female participants, 100% of the RP- 2000 Annuitant Mortality Table with White Collar Adjustment, with fully generational mortality improvements projected to each future decrement date with Scale BB. For disabled General Employee participants, 100% of the RP-2000 Disabled Mortality Table with separate rates for males set back four (4) years and females set forward two (2) years, and no future mortality improvement. For disabled Police Officer participants, 60% of the RP-2000 Disabled Mortality Table with separate rates for males set back four (4) years and females set forward two (2) years - 40% of the RP-2000 Annuitant Mortality Table with White Collar Adjustment, and no future mortality improvement. These are the rates of mortality used in the July 1, 2014 FRS Actuarial Valuation. - 20 -
B. Investment Return to be Earned by Fund 7.375%, compounded annually. C. Allowances for Expenses or Contingencies Actual expenses paid in previous year. D. Employee Withdrawal Rates Withdrawal rates for males and for females were used in accordance with the following illustrative example based upon number of years of service: Withdrawal Rates Per 100 Employees Service Police General 1 2 12.00 20.00 3 6 8.00 9.25 7 10 8.00 5.00 11 & Over 3.50 5.00 E. Disability Rates 1985 Disability Study, Class 1 with separate rates for females was used. F. Martial Assumptions 100% of active members are assumed to be married. Where applicable, females are assumed to be three years younger than their male spouses. G. Salary Increase Factors Current salary is assumed to increase in accordance with the following table based upon number of years of service. Service Police General 0 9 5.25% 5.25% 10 14 3.75% 4.75% 15 19 3.75% 4.25% 20 & over 3.75% 3.75% - 21 -
H. Increase in Covered Payroll 4.0% per year, limited to average annual increase over most recent ten years (0.9%) but not less than 0.0% for Police Officers. No increase in covered payroll is assumed for General Employees - Plan was closed to newly hired General Employees October 1, 2011. I. Retirement Rates Rates of early retirement for Police Officers were used in accordance with the following table. Years Preceding Normal Retirement Police 1 6 5% 7 10 10% Rates of normal retirement were used in accordance with the following tables. General Employees who retire prior to age sixty (60) but after attainment of ten (10) years of service (55 & 10) are assumed to receive an actuarially reduced benefit payable immediately upon retirement. I. Cost of Living Increases Future cost of living increases are assumed to be 3.0% per annum. J. Valuation of Assets Age Police General 55 59 N/A 10% 60 61 25% 10% 62 64 40% 25% 65 66 100% 25% 67 & above 100% 100% Date of Hire Service Police Prior to October 1, 2014 25 Years 100% On or after October 1, 2014 30 Years 100% The method used for determining the actuarial value of assets phases in the deviation between the expected and actual return on assets at the rate of 20% per year. The actuarial value of assets will be further adjusted to the extent necessary to fall within the corridor whose lower limit is 80% of the fair market value of plan assets and whose upper limit is 120% of the fair market value of plan assets. - 22 -
K. Cost Methods Normal Retirement, Termination, Disability and Pre-Retirement Death Benefit: Entry-Age-Actuarial Cost Method Under this method the normal cost for each active employee is the amount which is calculated to be a level percentage of pay that would be required annually from his date of hire to his retirement age to fund his estimated benefits, assuming the Plan had always been in effect. The normal cost for the Plan is the sum of the individual normal costs for all active participants. The actuarial accrued liability as of any valuation date for each active employee or inactive employee who is eligible to receive benefits under the plan is the excess of the actuarial present value of estimated future benefits over the actuarial present value of current and future normal costs. The unfunded actuarial accrued liability as of any valuation date is the excess of the actuarial accrued liability over the actuarial value of assets of the plan. - 23 -