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HomeMy WebLinkAbout2004 12 13 Informational Item 307 121304_ COMMJnfonnational_307 _Actuarial_ Valuation jension_ Report COMMISSION AGENDA ITEM 307 Consent Informational X Public Hearing Regular December 13,2004 Regular Meeting fP~ Mgr. / Dept. Authorization REQUEST: The City Manager providing the Commission with the Actuarial Report for plan year ending September 30,2004 of the city's pension plan. PURPOSE: This agenda is needed to provide the Commission with copies of the October 1, 2003 Actuarial Valuation Report for plan year ending September 30, 2004. CONSIDERA TIONS: An Actuarial Report is required by the Governmental Accounting and Standards Board to be performed annually by local govermnent retirement plans for audit purposes. The city is required to provide the State Department of Retirement Services a copy of the report. The result of the report is made on a cash basis for the 12-month period and as such, does not express total assets of the plan, nor does it attempt to project the economic soundness of the plan going forward. 121304_ COMM _lnfomlational_307 _Actuarial_ Valuation_Pensiol1_ Report Since year-end results are affected by interest earnings, the actual amount of plan income is rarely, if ever, exactly the same as plan cost for anyone year. This year's cost on a cash basis exceeded income by 4/1 0 of one percent. In previous years plan income has exceeded cost. Better than average interest earnings in FY 05 could erase the 4/10% loss in FY 04 without any increase in the 11 % employee contribution. In contrast to this study which examines only a 12-month historical period, the studies that were utilized to fund the recent enhancements to the pension plan were based upon projected future cost and contributions FUNDING: N/A RECOMMENDATION: N/A ATTACHMENTS: Actuarial Valuation and Annual Report COMMISSION ACTION: Retirement Plan Specialists, Inc. Employee Bellefits Admillistrators alld COllsultallts P.O. Box 622857 Oviedo, Florida 32762-2857 407-365-3490 (office) 407-366-5154 (fax) 888-3 76-7222(toll free) November 11, 2004 Commissioners City of Winter Springs 1126 East State Road 434 Winter Springs, FL 32708 Re: City of Winter Springs Defined Benefit Pension Plan Dear Commissioners: We are pleased to present the October 1, 2003 Actuarial Valuation Report for the Plan Year ending September 30, 2004. The report presents the funding status of the Pension Plan as of October 1, 2003 and provides the disclosure information required by your auditors for Governmental Accounting Standards Board in Statement No. 25 and 27. The total contribution required for the 2003/2004 Plan Year to continue the funding on a 30 year amortization basis is $1,071,225. The total employer/employee contributions reported by SunTrust for the Plan Year ending September 30, 2004 was $1,013,379. The required contribution as a percentage of covered payroll was 11.4%, .4% over the projected 11 %. The.4% reflects the need to increase the employer/employee rate of 11 % in subsequent years which will be accomplished with the 1.5% increase effective October 1, 2004. We welcome any questions or comments you may have concerning the information provided in the reports. ()/~rf~ Donald D. Chapman Consulting Actuary Sandra R. Turner, CPC, QPA President Cc: City Manager Enclosures I. I I I I I I I I I I I I I I I I I I CITY OF WINTER SPRINGS DEFINED BENEFIT PENSION PLAN LJ COpy ACTUARIAL VALUATION AND ANNUAL REPORT for the Plan Year Ended September 30, 2004 November 4, 2004 . Prepared By Retirement Plan Specialists, Inc. Employee Benefits Administrators, Actuaries & Consultants RECEIVED DEe 0 8 2004 CITY OF VV1NTER SPRINGS Finance Director I' I I I I Part I I Part II Part III I Part IV I Part V Part VI I Part VII I Part VIII APPENDIX A I I I I I I I I I CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN TABLE OF CONTENTS Page Introduction 3 Summary of Plan Provisions 5 Trust Fund Transactions 8 Unfunded Actuarial Liability 10 Determination of Normal Cost 10 Contribution for the Plan Year Commencing October 1, 2003 11 Present Value of Accrued Benefits 12 Actuarial Method and Assumptions 13 GASB Statement No. 27 & GASB Statement No. 25 15 2 ~.- I' I' I I I I I I I I I I I I I I I . I I CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN PART I INTRODUCTION The actuarial valuation presented in this report covers the employees of the City of Winter Springs, Florida that are participants in the City of Winter Springs Defined Benefit Plan, The pension plan is being maintained and administered as a government plan since it covers municipal employees and is sponsored by the City of Winter Springs, The report analyzes the current funding status of the Pension Plan as of October 1, 2003. It also includes the calculation of the annual contribution requirement for the Plan Year beginning October 1, 2003 and ending September 30, 2004. The contributions together with the corresponding items from the immediately preceding valuation, is as follows: October 1 Valuation 'Date for Plan Year Ending: September 30,2003 Change Between Years September 30, 2004 Contribution $ 704,879 $1,071,225 $ 366,346 Percentage of Payroll 10.7% 11.4% .7% The employee census data as of October 1, 2003 was submitted by the City. This data was not audited by us but appears to be sufficient and reliable for purposes of the report. The total participant count is as follows: Active participants Retired participants Terminated participants with vesting Total October 1, 2002 243 13 49 305 October 1, 2003 237 13 56 306 ,The actuarial assumptions and cost method remain unchanged from the preceding year. A review of the actuarial assumptions is performed each year with changes recommended when actual experience under the plan deems it appropriate. Actuarial computations have been made by the Aggregate Entry Age Normal with Frozen Initial Liability Method of calculation, which is designed to keep prior service costs unaffected by any difference that may develop between the actual experiences as it unfolds and the assumptions used for calculations. The effects of any differences that do develop are reflected in current and future normal costs. If additional assumptions are changed or benefits and other plan features are updated at any time, current thinking supposes adjustment of the frozen initial liability to allocate costs between prior and future service once again, It is believed that the actuarial methods and assumptions are individually reasonable, and in combination, they offer the actuary's best estimate of anticipated experience under the Plan. 3 ~~. I I I I I' I I I I I I I - The actuarial valuation report was prepared and completed by me or under my direct supervision, and I acknowledge responsibility for the result. To the best of my knowledge, the results are complete and accurate, and in my opinion, the techniques and assumptions used are reasonable and meet the requirements and intent of Part VII, Chapter 122, Florida Statutes, There is no benefit or expense to be provided by the plan and/or paid from the plan's assets for which liabilities or current costs have not been established or otherwise taken into account in the valuation. All known events or trends that may require a material increase in the plan costs or required contribution rates have been taken into account in the valuation, We would be pleased to provide further information or answer any questions with respect to the results of our actuarial valuation. Respectfully submitted, RETIREMENT PLAN SP!:CI Actu ies for the Pia ///1/0,/ Date ' Donald D. em, ., M,A.A,A., M,S,P.A. Enrolled Actuary No 0 2234 ~z#~ ) Sandra R. Turner C,P.C" Q,P.A. President 4 I' I I I I I I I I I I I I I ~ ~ CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN P ART II SUMMARY OF PLAN PROVISIONS 1. History The Plan was adopted as a Money Purchase Floor Offset plan on October 1, 1997. The Plan was amended and restated as a Defined Benefit Plan effective October 1, 2000. SunTrust Trust and Investment Services is the investment medium, Valuations are made annually, as of October 1 each year. The latest amendment to the Plan was effective October 1, 2000. 2. Eligibility: Continuous Service and Participation Service Each employee working more than 29 hours per week is eligible to join the Plan on the first day of the month following completion of 6 months of service. 3. Normal Retirement The first day of the calendar month following the 65th birthday 4. Normal Form of Pension The normal form of pension is a life annuity with monthly payments commencing on the participant's retirement date 5. Retirement Benefit The yearly amount of pension a participant will receive is equal to the sum of la) and Ib), but for years not greater than Ic) below: la) An amount equal to 2 % of Average Compensation multiplied by years of service completed prior to October 1,. 2000; Ib) For each year of service on and after October 1, 2000, 3 % of Average Compensation multiplied by years of service after October 1, 2000, Ic) The maximum number of years of service for determining benems is the first 30 years, Average Compensation is the 3 highest consecutive compensation periods during employment with the City. 5 ''1l"~;~Cp.~!d' ..~"':.~... II I . - I I I I' I I I I I I l. ~ I CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN SUMMARY OF PLAN PROVISIONS (continued) 6. Late Retirement A Participant may elect a late retirement date any time after normal retirement date, The pension will be the greater of the accrued benefit earned on the Late Retirement Date or the benefit earned at the Normal Retirement Date actuarially increased to the Late Retirement Date, 7. Early Retirement After age 55 and 10 years of service, a Participant is eligible for early retirement, The pension starting immediately is the accrued benefit as of the early retirement date. The benefit will be paid monthly for life. If a participant has 25 years of service, the accrued benefit is not actuarially reduced. A participant with 25 years of service may retire earlier than 55 with the benefit payable as the actuarial equivalent of the benefit at age 55, 8. Death Benefit The beneficiary is entitled to a death benefit equal to the present value of the non- forfeitable accrued benefit at the time of the participant's death, If death occurs after actual retirement, the beneficiary receives whatever is payable under the form of benefit option elected. 9. Disability Benefit The plan does not provide for disability benefits. Disability benefits are provided under the City's long-term disability program 10. Termination Benefit A participant is 100% vested in the required participant contributions made under the plan, Required participant contributions made after October 1, 2000 shall be included in the deferred vested benefit payable at normal retirement date, All other non-forfeitable accrued benefits shall be determined by the following vesting schedule upon termination. Years of Service Percentage Less than 3 years 3 4 5 6 7 none 20% 40% 60% 80% 100% 6 11' IJ II I I I. I I I I I I I I I I I . I I CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN SUMMARY OF PLAN PROVISIONS (continued) 11. Contributions All participants are required to contribute 3 % of compensation 12. Optional Forms of Payment A participant may elect, in writing, to have the normal form of pension converted to an actuarially equivalent optional form. These are (a) the joint and survivor annuity form in which the participant receives a smaller amount monthly in return for the continuing payments to the named beneficiary in the same amount, 2/3rds of the amount, or Y2 of the amount as designated as long as the beneficiary may live after the death of the participant; (b) the life annuity form in which the participant receives a lesser amount monthly in return for the guarantee of continuing payments for a certain year period, - 7 ~ 8 ~~ IJ I I I I I - - II . II II II I I ~ ~ CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN ACTUARIAL VALUE OF ASSETS The Long Range Yield Method of asset valuation is described in the actuarial assumptions and is determined as follows: 1. Actuarial value of assets, October 1, 2002 $6,620,248 903,749 2. Contributions during year 3. Disbursements during year (185,831 ) 4. Interest to September 30, 2003 at 8% 558,337 5. Tentative value, as of September 30,2003 = (1) + (2)- (3) + (4) $7,896,503 $7,039,995 6. Market value of assets, Sept~mber 30. 2003 7. Excess of market value over tentative value as of September 30,2003 = (6) - (5) (856,508) 8. Deferred investment gain (loss) not yet recognized as of September 30. 2003 A. 1999: 0 x .20 = 0 B, 2000: 0 x.40 = 0 C. 2001:'" ($703,034) x .60 = ($421,820) D, 2002: ($1,527,731) x .80 = ($1,222,185) E. Total 9. Deferred investment gain (loss) recognized for 2003: 20% x [(7)] ($1,644,005) ($171,302) 10. Deferred investment gain (loss) recognized during A. 1999: B. 2000: C. 2001:'" D, 2002: E. Total o o ($140,607) ($305,546) ($446,153) 11. Actuarial Value of Assets as of September 30,2003 = (5) + (9) + (10) $7,279,048 '" First year the Long Range Yield Method was used, therefore, there are no gains or (losses) recognized for prior years. Approximate rate of return for period ending September 30, 2003: -0.01% 9 Il 1'1 I' I 1\ IJ I I I I I I I I I ~ ~ I CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN PART IV UNFUNDED ACTUARIAL LIABILITY 1. Unfunded Actuarial liability, October 1 2, Normal Cost for Plan Year 2001-2002 2002-2003 $2,573,368 $2,508,274 593,749 480,030 285,040 239,064 830,581 903,749 29,185 36,249 $2,592,391 $2,287,370 ($84,117) $205,176 $2,508,274 $2.492,5(6 3, Interest at 8 % (2002) on (1) and (2) 4. Contributions for Plan Year 5. Interest on contributions 6, Unfunded Actuarial Liability, September 30, (1.+ 2,+3.-4.-5.) 7, Adjustment due to Actuarial Assumption/Amendment changes 8, Adjusted Unfunded Actuarial Liability, September 30 PART V DETERMINATION OF NORMAL COST 2002-2003 2003-2004 1. Present value of benefits at October. 1 $12,533.461 $15,660,980 2, Actuarial Assets Value 6,620,248 7,426,642 3. Unfunded Actuarial Liability 2,508,274 2.492,546 4, Present value of future normal cost payments, (1.-2.-3.) 3.404,939 5,7 41,792 5, Present value of future compensation 46,716,195 56,032,195 6, Cost as a percentage of compensation, (4/5) 7.288% 10.247% 7. Total current covered participant compensation 6,586,077 8,094,829 8, Current plan year's normal cost at October 1 $480,030 $829,502 10 l.t~...,,,.;... . 1-. I I I I I I I I I I I I I I I I I I CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN PART VI CONTRIBUTION FOR THE YEAR COMMENCING OCTOBER 1,2003 1 . Normal Cost REQUIRED ANNUAL CONJ.RIBUTION $829,502 . 2. 30-Year amortization of the Unfunoed Frozen Initial Liability established October 1 , 2000, and adjustment for change in actuarial assumptions October 1 , 2002 and again October 1, 2003. 24 ],723 3. Total, October], 2003 (1.+ 2.) $ 1,071,225 4. Interest at 8 % to end of Plan Year 85,698 5, Total contribution, September 30,2004, (3,+4.) $1,156,923 6, Total contribution (3) as a percentage of 2003- 2004 payroll ($9,401,417) 11.4% 12.3% 7, Total contribution (5) as a percentage of 2003- 2004 payroll ($9 AO 1 A17) 11 I" I I I I I I I I I . - - I I - I . . I CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN 12 I I I I I I I I I I I I I I I I I I, I CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN PART VIII ACTUARIAL METHOD AND ASSUMPTIONS We have calculated the costs and liabilities for the actuarial valuation of the City of Winter Springs Defined Benefit Plan as of October 1, 2003 using the Aggregate Entry Age Normal Frozen Initial Liability Cost Method, and have analyzed the results. The employee data and the financial information relied on for the report were provided by the Employer and the SunTrust Trust and Investment Services, To the best of our knowledge, the information provided is complete and accurate. The actuarial assumptions used are as follows: a, Long Term Net Investment Return 8 %, compounded annually. b. Mortality 1983 Group Annuity male rate table, with ages of women set back two years. c. Retirement Age Later of age 60 with 10 years of service or age on the valuation date. d. Normal Form Life Annuity with payments for the life of the participant. e. Benefit Level Effective October 1, 2000, 2% of average earnings for years pre October 1, 2000 and 3% of average earnings for each year of service after October 1,2000, f. Salary Projections Current salaries are assumed to increase 3% per year. g. Termination Forfeitures Assumed to occur at rates approximating 11.62% at age 25 graded down to .16% at age 60 and over. (T-8 withdrawal table) h, Expenses Assumed that the City will reimburse the Fund for actual expenses paid, i. Asset Basis Long Range Yield Method of asset valuation as explained on the following page. 13 CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN Long Range Yield Asset Valuation Method The actuarial value of assets is determined as follows: (A) A tentative asset value is determined. This value is equal to the actuarial value of assets on the preceding valuation date multiplied by the valuation rate of interest plus the excess of contributions over disbursements during the preceding Plan Year with interest at the valuation rate from date of payment to end of year, (B) The excess of market value over tentative value is determined. (e) For the first actuarial valuation in which the long range yield method is applied, the actuarial value of assets is (A) plus a write-up equal. to 20% of (B). An identical write-up is made in determining the actuarial value of assets in each of the next four years, thus fully recognizing (B) with five write-ups of equal amount. (D) On the next actuarial valuation, the actuarial value of assets is (A) plus the write-up of the previous year, plus an additional write-up equal to 20% of the excess of (B) on the valuation date over 80% of (B) on the preceding valuation date, A write-up identical to this additional write-up is also made in each of the next four years, (E) Each subsequent valuation includes (A), plus applicable write ups for previous years, plus an additional write up equal to 20% of the excess of (B) on the valuation date over the sum of portions of (B) for the previous years not yet fully recognized by prior write-ups. ~ 14 . I I I I I I I I I - _. I I I I I I I CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN APPENDIX A ANNUAL PENSION COST AND NET PENSION OBLIGATION (GASB Statement No. 27) Employer Fiscal Year End September 30: 2004 2003 2002 A. Annual Required Contribution (ARC) $1,156,923 $761,269 $904,417 B. Interest on Net Pension Obligation (NPO) (23,614) /11.310) (17,771) C. Adjustment to ARC 0 0 0 D. Annual Pension Cost (A + B - C) $1,133,309 $749,959 $886,646 E. Actual Contributions $1.013,379 $903.748 $830,581 F. NPO at beginning of year (295,176) ( 141.387) /197,452) G. Increase (decrease) in NPO (D-E) 119.930 (153,789) (56,065) H. NPO at end of year (F + G) ($175,246) ($295,176) ($141,387) THREE YEAR TREND INFORMATION Percentage of I Fiscal Year Annual Pension Actual APC Net Pension EndinQ Cost CAPCl Contribution Contributed Obligation 9/30/02 886,646 830,581 93.7% ( 141.387) 9/30/03 749,959 903.7 48 120.5% (295.176) 9/30/04 1 ,133,309 1,013,379 89.4% ( 175,246) 15 1-- I I I I I I I I I I I I I I I I I I CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN DISCLOSURE INFORMATION PER STATEMENT NO. 25 OF THE GOVERNMENTAL ACCOUNTING STANDARDS BOARDS SCHEDULE OF FUNDING PROGRESS (GASB Statement No. 25) Actuarial Accrued Actuarial Liability (AAL) Unfunded UAAL as % Actuarial Value of -Entry Age AAL Funded Covered of Covered Valuation Assets (b) (UAAL) Ratlo( a/b) Payroll (c) Payroll (b- Date (a) (b-a) .. alLc 10/1/01 $5,829.453 $8.402,821 $2,573,368 69,9% $6,569,263 39.2% 10/1/02 $6,620,248 $9,128,522 $2,508,274 72,5% $6,586,077 38,1% 10/1/03 $7,279,048 $9.771,594 $2.492,546 74.5% $8,094,829 30,8% The schedule provided above has been prepared in accordance with the requirements of Paragraph 37 of Statement No. 25 of the Governmental Accounting Standards Board SCHEDULE OF EMPLOYER CONTRIBUTIONS (GASB Statement No. 25) Year Ended Annual Actual Percentage September 30 Required Contribution Contributed Contribution 2002 $904.417 $830,581 92% 2003 $761,269 $903,748 118% 2004 $1 , 156,923 $1,013,379 88% The schedule provided above has been prepared in accordance with the requirements of Paragraph 38 of Statement No. 25 of the Governmental Accounting Standards Board, 16