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HomeMy WebLinkAbout2009 01 27 Corresponds with Regular 600 Actuarial Valuation Report for Plan Year Ended 093008~'r ~~ Retirement Plan Specialists, Inc. ~~ Employee Benefits Administrators, Actuaries & Consultants 81 S Eyrie Drive, Suite 4 407-365-3490 (office) P.O. Box 622857 407-366-5154 (fax) Oviedo, Florida 32762-2857 888-376-7222 (toll free) Visit us at www.webpensionplan.c_cnm December 4, 2008 Ron McLemore City of Winter Springs 1126 East State Road 434 Winter Springs, FL 32708 Re: City Of Winter Springs Defined Benefit Plan October 1, 2007 Actuarial Valuation Report Dear Mr. McLemore: Enclosed is the Actuarial Valuation Report for the October 1, 2007 -September 30, 2008 Plan Year as well as a copy of the GASB Report for Plan Year Ending September 30, 2008 which was sent to your auditors, McDirmit Davis & Company, LLC. Do not hesitate to contact us if you have any questions concerning the reports. Sincerely, C Gtl r~_ Camille A. Walker cc: Eldon McDirmit 1RS Circular 230 Notice: To ensure compliance with requirements imposed by the IRS, we inform you that any US pension tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. CITY OF WINTER SPRINGS DEFINED BENEFIT PENSION PLAN ACTUARIAL VALUATION AND ANNUAL REPORT for the Plan Year Ended September 30, 2008 Prepared By Retirement Plan Specialists, Inc. Employee Benefits Administrators, Actuaries 8 Consultants CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN TABLE OF CONTENTS Paae Part I Introduction 2 Part II Summary of Plan Provisions 4 Part III Trust Fund Transactions 7 Part IV Unfunded Actuarial Liability 9 Part V Determination of Normal Cost 9 Part VI Contribution for the Plan Year Commencing 10 October 1, 2006 Part VII Present Value of Accrued Benefits 11 Part VIII Actuarial Method and Assumptions 12 APPENDIX - I Participant Reconciliation 14 APPENDIX - II Age & Service Statistics 15 APPENDIX -III Past Service Funding Illustrations 17 APPENDIX - IV Market Value vs Actuarial Asset Valuation Chart 18 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, 2007. It also includes the calculation of the annual contribution requirement for the Plan Year beginning October 1, 2007 and ending September 30, 2008. The contributions together with the corresponding items from the immediately preceding valuation, are as follows: October 1 Vpluation Date for Plan Year Ending: Change Between September 30, 2007 September 30, 2008 Years Contribution $1,673,817 $1,856,574 $182,757 Percentage of 14.2% 15.1% .9% Payroll The employee census data as of October 1, 2007 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 October 1, 2006 252 October 1, 2007 259 Retired participants 17 26 Terminated participants with vesting ~5 87 Total 354 371 The actuarial assumptions and cost method remain unchanged from the preceding year accept for the addition of a 1.5% expense load assumption to take into consideration future retirements under the alternative normal retirement provision. Cost impact reflects a .5% of payroll increase for this provision. 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 using 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. 2 The Plan was amended effective October 1, 2004 to increase the benefit formula percentage for service prior to October 1, 2000 by .25% increments each year beginning October 1, 2005 until a full 3% is reached effective with the plan year beginning October 1, 2008. In addition, the employer contribution rate was increased effective October 1, 2007. This report reflects the impact of the third incremental increase of .75% in the past service amendment October 1, 2007. 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, RETIREM T PLAN SPECIALI ,INC. Actu e for the Plan _~ ~~%~~ , ~ ~ Date Donald D. h pr}a n .A. I. .A.A., M.S.P.A. Enrolled Actuary No. 08-0 34 ~F'1 San ra R. Turner C.P.C., Q.P.A. President 3 CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN PART 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, 2004. 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 65~h birthday Alternative Normal Retirement: If a participant has 30 years of service and is determined to be disabled under the City's long term disability insurance policy, the accrued benefit is payable without actuarial reduction regardless of age. 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 (a) and (b), but for years not greater than (c) below: (a) An amount equal to 2.75 % of Average Compensation multiplied by years of service completed prior to October 1, 2000 effective October 1, 2007; (b) For each year of service on and after October 1, 2000, 3 % of Average Compensation multiplied by years of service after October 1, 2000. (c) The maximum number of years of service for determining benefits is the first 30 years. Average Compensation is the 3 highest consecutive compensation periods during employment with the City. 4 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 payable under the form of benefit option is 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 none 3 20% 4 40% 5 60% 6 80% 7 100% 5 CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN SUMMARY OF PLAN PROVISIONS (continued) 11. Contributions All participants are required to contribute 3 % of compensation The City is contributing at the rate of 13% of compensation for the Plan Year beginning October 1, 2007. The total City and participant contribution as a percentage of compensation is 16%. 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/s rds of the amount, or'/~ 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, 6 CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN PART III TRUST FUND TRANSACTIONS 2005-2006 2006-2007 Plan Assets, October 1, $11,251,277 $13,527,222 Contributions during the year 1,505,020 1,843,147 Participant service buy back deposit 0 0 Net Investment experience 1,026,962 1,972,363 Participant Payments (171,697) (233,953) Administration Expenses (84,340) (123,197) Plan Assets, September 30, $13,527,222 $16,985,582 Approximate rate of return: 8.6% 13.8% COMPOSITION OF TRUST FUND Cash (304,974) 70,381 Short term Investments 339,294 16,915,201 Bonds 2,066,269 0 Common Stocks 11,426,633 0 Total Assets $13,527,222 $16,985,582 7 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, 2006 $1 1,951,383 2. Contributions during year (includes buy back deposits) 1,843,147 3. Disbursements during year (233,952) 4. Interest to September 30, 2007 at 8% 1,020,477 5. Tentative value, as of September 30, 2007 _ (1) + (2) + (3) + (4) $14,581,055 b. Market value of assets, September 30, 2007 $16,985,582 7. Excess of market value over tentative value as of September 30, 2007 = (b) - (5) 2,404,527 8. Deferred investment gain (loss) not yet recognized as of September 30, 2007 A. 2003: ($856,508) x .20 = $171,301) B. 2004: $237,999 x .40 = $ 95,200 C. 2005: $1,206,666 x .60 = $724,000 D. 2006: $1,734,904 x .80 = $1,387,923 E. Total $2,035,822 9. Deferred investment gain (loss) recognized for 2007: 20%x [(7)] $480,905 10. Deferred investment gain (loss) recognized during A. 2003: ($171,301) B. 2004: $47,600 C. 2005: $241,333 D. 2006: $346,980 E. Total $464,612 11. Actuarial Value of Assets as of September 30, 2007 = (5) + (9) + (10) $15,526,572 * Approximate rate of return on Actuarial Value of Assets for period ending September 30, 2007 is 15.4%. 8 APPENDIX - III CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN PAST SERVICE FUNDING ILLUSTRATIONS AS OF OCTOBER 1, 2007 *30 Year Funding **15 Year Funding ***10 Year Funding Normal Cost $1,445,568 $1,445,568 $1,445,568 Past Service Cost 411,006 496,239 633,010 Total $1,856,574 $1,941,807 $2,078,578 2007/08 Total Comp $12,286,129 $12,286,129 $12,286,129 Percent of Comp 15.1 % 15.8% 16.9% * Balance of Unfunded Actuarial Liability being amortized over 30 years from date of origin. **Unfunded Actuarial Liability ($4,587,354) as of October 1, 2007 amortized over 15 years. ***Same as ** amortized over 10 years. PRESENT VALUE OF ACCRUED BENEFITS AS OF OCTOBER 1, 2007 (Using Ongoing Funding Assumptions) a) Present Value of Accrued Benefits: b) Market Value of Assets: c) Unfunded Present Value of Accrued Benefits: (a-b) $17,602,597 16,985,582 $ 617,015 (96.5%) 17 0 Z W C1. a a 2 gW a. ~ ~ J LL W Z~ W W m ~ W Z ~ LL ~ W W ~~ ~ J Z~ ~~ aW ~~ wa J 2~ ~SLQ rO r r_ Q V ti n ui f^ N ~n ~n ot~ rn ~ `'~ , `. ~ ~ ` ~ ti: n ~ 1 . h~ ~ 4 ~ N , N r N iy i ~' N C'] C ti ~~ c~ ~Cl O ~ C O b O O C C.7 0 0 0 0 0 0 o n 0 0 0 0' o 0 o c+ ° ° ° ° ° c ~ o o c o o OD tCJ et N O 00 <D ci' r r r r r ~n~bn l~ssd ~• 4 4 N ct+ 0 0 N ~n Q N 0 0 N M N N N .-- W 2 Z 2 w m a W g y a f CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN PART IV UNFUNDED ACTUARIAL LIABILITY 2005-2006 2006-2007 1. Unfunded Actuarial Liability, October 1 $3,462,396 $4,091,366 2. Normal Cost for Plan Year 1,130,947 1,299,178 3. Interest at 8 % on (1) and (2) 367,467 431,243 4. Contributions for Plan Year 1,505,020 1,843,147 5. Interest on contributions 60,200 73,725 6. Unfunded Actuarial Liability, September 30, (l .+ 2.+3.-4.-5.) 3,395,590 3,904,915 7. Adjustment due to Actuarial Assumption/Amendment changes 695,776 682,439 8. Adjusted Unfunded Actuarial Liability, September 30 4,091,366 4,587,354 PART V DETERMINATION OF NORMAL COST 2006-2007 2007-2008 1. Present value of benefits at October 1 24,446,082 29,526,958 2. Actuarial Assets Value 1 1,951,383 15,526,572 3. Unfunded Actuarial Liability 4,091,366 4,587,354 4. Present value of future normal cost payments, (l .-2.-3.) 8,403,333 9,413,032 5. Present value of future compensation 67,846,689 72,865,454 6. Cost as a percentage of compensation, (4 / 5) 12.386% 12.918% 7. Total current covered participant compensation 10,489,087 11,190,013 8. Current plan year's normal cost at October 1, (6 x 7) 1,299,178 1,445,568 9 CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN PART VI CONTRIBUTION FOR THE YEAR COMMENCING OCTOBER 1, 2007 REQUIRED ANNUAL CONTRIBUTION 1. Normal Cost 1,445,568 2. 30-Year amortization of the Unfunded Frozen Initial Liability established October 1, 2000, and adjusted for change in actuarial assumptions October 1, 2002, October 1, 2003 and amendment effective October 1, 2004, October 41 1,006 1, 2005, October 1, 2006 and October 1, 2007 3. Total, October 1, 2007 (l .+ 2.) 1,856,574 4. Interest at 8 % to end of Plan Year 5. Total contribution, September 30, 2008, (3.+4.) 2,005,100 6. Total contribution (3) as a percentage of 2007- 15.1% 2008 payroll ($12,286,129) 7. Total contribution (5) as a percentage of 2007- 16.3% 2008 payroll ($12,286,129) 10 CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN PART VII PRESENT VALUE OF ACCRUED BENEFITS OCTOBER 1,2006 OCTOBER 1, 2007 1. Present Value of Accrued Benefits Active Members $1 1,356,490 $12,626,286 Retired Members 1,595,357 3,902,648 Terminated Members with Vesting 991,484 1,073,663 Total $13,943,331 $17,602,597 2. Present Value of Vested Accrued Benefits Active Members $10,877,654 $12,122,534 Retired Members 1,595,357 3,902,648 Terminated Members with Vesting 783,183 851,919 Total $13,256,194 $17,602,597 3. Total Number of Members Active Members: Vested 196 208 Active Members: Non-vested 56 51 Retired Members 17 26 Terminated Members with Vesting 85 86 Total 354 371 4. Market Value of Assets $13,527,222 $16,985,582 5 Actuarial Value of Assets $11,951,383 $15,526,572 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, 2007 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 was 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 b. Mortality c. Assumed Retirement Age d. Normal Form e. Benefit Level f. Salary Projections g. Termination Forfeitures h. Expenses i. Asset Basis 8 %, compounded annually. 1983 Group Annuity male rate table, with ages of women set back two years. Later of age 60 or 10 years of service on the valuation date. A 1.5% expense load is added to make allowance for 30 year unreduced benefit provision with LTD disability program. Life Annuity with payments for the life of the participant. Effective October 1, 2000, 2.75% of average earnings for year's pre October 1, 2000 and 3% of average earnings for each year of service after October 1, 2000. Current salaries are assumed to increase 3% per year. Assumed to occur at rates approximating 11.62% at age 25 graded down to .16% at age 60 and over. (T-8 withdrawal table) Assumed that the City will reimburse the Fund for actual expenses paid. Long Range Yield Method of asset valuation as explained on the following page. 12 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. (C) For the first actuarial valuation in which the long range yield method is applied, the actuarial value of assets is (A) plus awrite-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. 13 APPENDIX - I CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN PLAN PARTICIPANT RECONCILIATION ACTIVE PARTICIPANTS Number Active participants, October 1, 2006 252 Retired -9 Terminated with lump sum Terminated with vesting -7 Terminated without vesting -3 Death (Lallathin -wife receiving benefit) Other: omitted in prior year New entrants 26 Active participants, October 1, 2007 259 October 1, 2006 October 1, 2007 Total covered payroll $10,489,087 $11,190,013 Average Compensation $41,623 $43,205 RETIRED PARTICIPANTS AND BENEFICIARIES Number Monthly Benefit Retired participants, October 1, 2006 17 $14,419.55 Retired during year 9 18,712.66 Died - no further benefits due 0 0.00 C & C benefit expired 0 0.00 Retired participants, October 1, 2007 26 $33,132.21 TERMINATED PARTICIPANTS WITH VESTING Number Terminated participants with vesting, October 1, 2006 85 Terminated with vesting during year 7 Paid lump sum distribution or deemed ineligible -6 Retired during year 0 Previously omitted 0 Terminated participants with vesting, October 1, 2007 86 14 APPENDIX - II CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN FOR THE PLAN YEAR 10/01/2007 THROUGH 09/30/2008 AGE AND SERVICE STATISTICS WEIGHTED AVERAGE BY CURRENT EARNINGS EES EA PA AA RA PP PS FS TS 259 33.1 34.3 43.6 60.5 9.3 10.5 17.0 27.5 ARITHMETIC AVERAGE EES EA PA AA RA PP PS FS TS 259 33.6 34.7 42.7 60.5 8.0 9.1 17.9 27.0 SERVICE GROUPS BY AGE GROUPS AGE GROUPS 0 20 25 30 35 40 45 50 55 60 65 70 SERVICE TO TO TO TO TO TO TO TO TO TO TO TO GROUP 19 24 29 34 39 44 49 54 59 64 69 TOTAL 0 1 1 3 6 4 5 2 1 2 1 25 2 6 5 4 2 1 5 1 2 26 3 2 5 5 6 2 3 1 2 1 27 4 1 2 2 4 1 2 3 1 1 17 ---------- ------------ 0-4 -------- 10 -------- 15 ----------------------------- 17 16 9 12 ------- 6 --- 7 ----- --- 2 --------- 1 ---- 95 5-9 7 12 8 12 9 5 9 3 1 66 10-14 8 6 6 5 4 4 33 15-19 4 9 8 5 5 3 1 35 20-24 3 5 10 1 1 3 23 25-29 1 2 2 1 6 30-34 1 1 35-39 40- TOTAL 10 22 37 34 40 41 33 26 10 6 259 15 CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN FOR THE PLAN YEAR 10/01/2007 THROUGH 09/30/2008 ANNUAL EARNINGS BY AGE GROUP NUMBER TOTAL AVERAGE AGE OF ANNUAL ANNUAL GROUP PEOPLE EARNINGS EARNINGS 0-19 20-24 10 335,924 33,592 25-29 22 797,514 36,250 30-34 37 1,434,451 38,768 35-39 34 1,497,564 44,046 40-44 40 1,863,600 46,590 45-49 41 1,890,326 46,105 50-54 33 1,650,660 50,020 55-59 26 1,151,552 44,290 60-64 10 461,407 46,140 65-69 6 267,322 44,553 70- TOTAL 259 11,350,320 43,824 ANNUAL EARNINGS BY SERVICE NUMBER TOTAL AVERAGE SERVICE OF ANNUAL ANNUAL GROUP PEOPLE EARNINGS EARNINGS 0 1 25 614,932 24,597 2 26 1,009,135 38,812 3 27 1,104,254 40,898 4 17 647,407 38,082 -------- 0-4 --------- 95 ------------- 3,375,728 --------- 35,533 5-9 66 2,725,332 41,292 10-14 33 1,591,913 48,239 15-19 35 1,911,244 54,606 20-24 23 1,314,487 57,151 25-29 6 372,826 62,137 30-34 1 58,790 58,790 35-39 40- TOTAL 259 11,350,320 43,824 16 4~ A N n 0 a N 4A n n ev Q Q N N W c~ ~ z_ N z W m QOC 117 } M Q n N N Q O N v m v Y L f6 G G1 7 io a a .` ro .Q 1