HomeMy WebLinkAbout2009 10 07 Regular 600 GRS -Gabriel Roeder Smith & CompanyGRS
Gabriel Roeder Smith Company
CITY OF WINTER SPRINGS, FLORIDA
PROPOSAL FOR RFP 021/09/JD: PENSION PLAN ACTUARIAL
SERVICES
SEPTEMBER 16, 2009
Gabriel, Roeder, Smith Company One East Broward Blvd., Suite 505 Fort Lauderdale, FL 33301
Contact: Lawrence F. Wilson, A.S.A.
Phone Number: (954) 527 -1616 Fax Number: (954) 525 -0083 E -mail: larry.wilson@gabrielroeder.com
Submit proposal to:
SUBMITTAL COVER SHEET
Purchasing Department
CITY OF WINTER SPRINGS
1126 East State Road 434
Winter Springs, Florida 32708
407- 327 -5959
Proposal Due Date Time: September 16, 2009 3:00 p.m.
REQUEST FOR PROPOSAL (RFP)
#0211091JD
PENSION PLAN ACTUARIAL SERVICES
I hereby certify that the information contained herein is true. I agree and understand that any
misstatement or misrepresentation or falsification of facts shall be cause for disqualification of
the submittal, immediate cancellation of any contract with the City that might arise from the
representations contained herein, and forfeiture of rights for further consideration for work in the
City of Winter Springs.
VENDOR NAME: Gabriel ,Roeder,Smith Company
MAILING ADDRESS: One East Broward Boulevard, Suite 505
City: Fort Lauderdale State: Florida Zip: 33301
Name/Title: Theora P. Braccialarghe/Southeast Regional Director
e.: )A
Authorized Signature /Dat 4 A 97ll,5 I
Email Address: theora.braccialarghe@gabrielroeder.com
Phone #:(954) 527 -1616 Fax #:(954) 525 -0083
6
This Form Must Be Completed and Returned With Your Submittal.
GRS
September 15, 2009
Ms. Nancy Vobomik
City of Winter Springs
ATTN: Purchasing Coordinator
1126 East State Road 434
Winter Springs, Florida 32708
Gabriel Roeder Smith Company
Consultants Actuaries
Re: RFP 021 /09 /JD
Pension Plan Actuarial Services
Dear Ms. Vobomik:
One East Broward Blvd.
Suite 505
Ft. Lauderdale, FL 33301 -1872
954.527.1616 phone
954,525.0083 fax
www.gabrielroeder.com
Gabriel, Roeder, Smith Company (GRS) would be pleased to provide pension plan actuarial
services to the Pension Board and the City of Winter Springs. Our detailed proposal to serve the
City is contained herein.
GRS offers the Pension Board and City of Winter Springs an actuarial firm, uniquely specializing in
public sector retirement systems, with a nationally recognized reputation; an excellent research
center focused on public employer retirement issues; and a clear understanding of local, state and
national political and legislative environments and processes. Our proposed Winter Springs client
service team is highly capable and experienced in the public sector arena and the scope of services
requested.
We will provide you with accurate and timely service, presented in a manner that maximizes its
value to the City. By using state -of -the -art technology, we pledge to maximize efficiency.
The following Senior Consultant and Actuary, located in our Fort Lauderdale office, is authorized
to make representations for GRS:
Lawrence F. Wilson, A.S.A.
One East Broward Boulevard, Suite 505
Fort Lauderdale, Florida 33301
Phone: 954.527.1616
Fax: 954.525.0083
E -mail: larrv. wilsona aabrielroeder. com
Ms. Nancy Vobornik
September 15, 2009
Page Two
GRS is recognized as the leading actuarial firm in public plan actuarial services. Over 95% of our
revenue is derived from providing high quality actuarial and consulting services to the public sector.
GRS staff has extensive familiarity with every type of post- retirement benefit and administrative
system. Our consulting work has involved some of the largest plans in the nation, as well as some
with only a few members. The retirement systems of instrumentalities, counties, municipalities and
large states have been the focus of our attention. Actuarial valuations, funding policy studies and
actuarial audits, as well as analyses of data processing structures in public, non profit and private
plans, have given us an unparalleled perspective on all types of benefit programs.
GRS actuaries and staff have been active participants in professional and regulatory circles
regarding the development of new actuarial techniques, practices and methods. We work closely
with our clients to create, research and implement these and other alternatives to develop more
effective consulting solutions. In our work with public entities, we have developed a keen
sensitivity to the public policy issues that face publicly administered retirement systems. We would
very much like to work with the City of Winter Springs management and staff to assess current
financial obligations, as well as explore new ways of addressing benefit design, education and
funding issues.
We trust that the Pension Board and City of Winter Springs will find our proposal worthwhile —we
look forward to further discussion. Thank you for considering how we may be of service.
Sincerest regards,
Lawrence F. Wilson, A.S.A.
Senior Consultant and Actuary
Enclosures
Gabriel Roeder Smith Company
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
TABLE OF CONTENTS
PROFILE OF PROPOSER
SUMMARY OF QUALIFICATIONS
APPENDICES
GRS
A. REQUIRED FORMS
VENDOR RATE FEE SCHEDULE
DISPUTES DISCLOSURE FORM
INSURANCE REQUIREMENTS FORM
FLORIDA STATUTES ON PUBLIC ENTITY CRIMES FORM
DRUG -FREE WORK PLACE FORM
CONFLICT OF INTEREST STATEMENT
CERTIFICATION OF NON- SEGREGATED FACILITIES
PUBLIC RECORDS FORM
B. SAMPLE LIST OF PUBLIC PENSION CLIENTS
PAGES 1 -10
C. "RESPONDING TO LOCAL GOVERNMENT RETIREMENT -PLAN FUNDING ISSUES"
(REPRINT FROM Pill/ITT CITIES)
D. GRS PUBLICATIONS
E. SAMPLE REPORTS
ACTUARIAL VALUATION REPORT
SUMMARY PLAN DESCRIPTION
PAGES 11 -19
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
PROFILE OF PROPOSER
a. State whether your fr "rin is national, regional, or local.
Gabriel, Roeder, Smith Company (GRS) is a national actuarial and benefit consulting firm
with a full service local office in Fort Lauderdale focused on providing services to public sector
benefit plans. GRS provides pension, health and welfare, OPEB and benefit plan technology
services. GRS has an exceptional reputation for quality work and commitment to the public
sector community.
GRS has served the public sector for over 70 years.
GRS produces over 10,000 public sector valuations and studies annually for over 700
public sector clients.
GRS' work serves over 3 million public sector employees and retirees.
GRS is headquartered in Southfield, Michigan, and has full- service offices in Florida, Colorado,
Illinois and Texas.
Our website address is htta: /www.2abrielroeder.com/.
b. State the location of the office from which your work is to be performed.
SERVICING OFFICE
Professional actuarial and consulting services will be provided from GRS' Fort Lauderdale
office:
Gabriel, Roeder, Smith Company
One East Broward Boulevard, Suite 505
Fort Lauderdale, Florida 33301
954.527.1616
c. Describe the firm, including the size, range of activities, etc.
HISTORY OF FIRM, STRUCTURE, AND OWNERSHIP
Gabriel, Roeder, Smith Company (GRS) was incorporated in 1962 from a merger of A.G.
Gabriel Company, a sole proprietorship established in 1938, and another younger sole
proprietorship, Roeder Company. GRS is a private Michigan corporation that is more than
95% employee owned. Our client base is national in scope, and the firm's growth tends to be
steady and constant.
GRS
1
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
Profile of Proposer
In 2001, GRS entered into an alliance with Watson Wyatt Worldwide through which both firms
have agreed to explore joint consulting opportunities. As part of the alliance, GRS acquired
Watson Wyatt's U.S. -based public sector retirement practice and a group of Watson Wyatt's
consultants and actuaries joined GRS. Watson Wyatt retains a small equity stake in GRS as part
of this alliance.
RELEVANT PUBLIC SECTOR EXPERIENCE
GRS is our nation's largest provider of professional actuarial and consulting services to the
public sector retirement community.
We provide professional actuarial and consulting services, which encourage sound financing,
sensible benefit design, efficient administration and effective communication in employee
benefit plans. What makes GRS unique among actuarial consulting firms is our commitment to
public employee retirement systems.
Some key characteristics of our client base offer an insightful overview of our experience:
GRS
We provide actuarial and benefit consulting services to over 700 public and private
clients;
Our client base is comprised of post retirement benefit systems and employers at city,
public authority, state, county, hospital, private sector and not for profit
organizations;
z1 Nearly 100% of our client base is in the public sector;
Over 95% of our revenue is derived from services to the public sector;
Our services are provided on a fee for service basis only. We sell no products —our
consulting is provided solely in the best interests of our clients;
Our services are offered through full service offices. The local office selected for the
City of Winter Springs is in Fort Lauderdale;
11 We currently serve as actuary to 21 statewide retirement plans with 50,000 or more
participants;
Concurrently, we serve as valuation actuary and consultant to 30 statewide retirement
plans with an average of $17 billion in assets each and
Most GRS clients have multiple retirement structures. In many cases, our clients
have multiple plans because of multiple classes of employees, such as police, fire,
teachers, general and utilities. Often, different groups of employees are subject to
different pension provisions because of different collective bargaining agreements.
2
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
Profile of Proposer
Location of Clients Who Receive Services from GRS
The far ranging locations of our clients, and the long associations we have enjoyed with them,
attest to the quality of our services. We have been associated with more than half of our clients
for at least 10 years, many for more than 40 years and some for 60 years. Our first client, the
City of Detroit, continues to be our client today, after 70 years!
Our broad experience in diverse geographical and political environments is a substantial asset to
our clients. Our commitment to public employee retirement systems is highlighted by the fact
that all of our actuaries have experience in benefit design, plan administration and legislative
issues —as well as valuation- related services. GRS also retains other professional staff to
provide expertise and support to clients in executing the various facets of retirement plan
administration.
Additionally, GRS has more actuaries and consultants devoted to governmental retirement
systems than any other firm in the country. Because all of our actuaries and consultants have
extensive public plan experience, the back needed to deal with unforeseen circumstances is
always available.
Our employees are affiliated with numerous governmental groups, from the national Government
Finance Officers Association (GFOA) and the National Association of State Retirement
Administrators (NASRA) to the Florida Public Pension Trustees Association (FPPTA).
GRS' long history of supporting and educating public sector professionals, governing bodies,
and other stakeholders on actuarial and benefits consulting topics dates back to the 1930s, when
our founders helped governments design their first defined benefit pension plans by providing
consulting support, knowledge, and actuarial services. Today we support hundreds of benefit
plans by providing pension, OPEB, health, retirement technology, and plan administration
services.
GRS
3
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
Profile of Proposer
GRS continues to support the public sector, not only through its provision of services, but by
dedicating its resources to the public sector benefits industry in the form of published articles,
conference presentations, surveys, legislative testimony and membership on committees of
public sector organizations. We are committed to supporting your plan and participants.
OUR PEOPLE
We have 121 employees, including 40 credentialed actuaries and 38 actuarial analysts. All of
our employees are involved in serving public sector agencies, from consultants to administrative
staff.
Our Employees Can Be Categorized Approximately as Follows:
GRS
Pension OPEB Practice
Administrative Support
Health Welfare Practice
Corporate Support
Technology Services
DB Administration Practice
IT Department
Total
74
15
10
9
6
5
2
121
4
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
Profile of Proposer
ORGANIZATIONAL CHART
AVAILABLE SERVICES
GRS
112Al2W9
Gabriel, Roeder, Smith Company Organizational Chart
Board of Directors
Thera Brandalarighe, Milo Drazilov, l lorrn Jaws. Judy Kermans, &tan Murphy, Swve Patinquist
Mark Randal, .Mahn Steinke Lewis Ward
Gabriel, Roeder, Smith 8 Company
President Man Murphy
Midwest Region:
SootrTieldiChiatigo
MW Regional Director
Judy Kemtaes
Consulting Teams
Southwest Region
Dallas'Dener
SW Regional Director h EVP
Mat Randall
Consulting Teams
Sordheast Region
Fort Lauderdale
SE Regional Director
Tlhema Braccialarghe
Consulting Teams
The following is a breakdown of the various business units within GRS:
Corporate Support —Aim=
COFO
Ken Davis
Accounting F #R P IS
Our primary business is providing professional actuarial and consulting services to public
employee retirement systems. We are also involved in the development of software for our
pension clients and in providing actuarial and consulting services for health benefit plans.
GRS provides independent consulting services generated on a fee for service basis. Our
philosophy is to deliver high quality consulting services that meet each of our client's objectives.
We believe our striving for quality, integrity and teamwork will support our continued success.
Actuarial and Consulting Services We provide extensive services in the field of
pension consulting, including actuarial valuations, experience studies, actuarial impact
statements, benefit statements, benefit calculations and Summary Plan Descriptions
(SPDs).
5
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
Profile of Proposer
t1 Health Plan Consulting We provide extensive services in the field of employee health
benefit plans, such as negotiating with vendors, designing benefit packages and actuarial
analysis, including GASB OPEB (retiree medical) accounting valuations and studies.
Internet -Based Administration We can create a website where participants can
review meeting agendas, ordinances, SPDs and other information. The site is also
interactive, and could allow participants to estimate their own benefits.
Software Development Our Retirement Technology Group develops systems to
calculate pensions for those retiring and to keep track of participants, retirees and
beneficiaries. We also develop software for other retirement system applications.
Over 95% of our revenue is derived from services provided to public sector clients.
We would be pleased to provide you with additional information regarding any of these services,
upon request.
OUR APPROACH TO THE WORK
GRS
u Reputation for an unbiased presentation of the facts. Our role is to present unbiased
information and consulting advice so that Boards and governments can make decisions.
u Experienced in providing testimony on benefit issues to city councils, state legislatures
and commissions and county commissions.
Clear understanding that the plan operates towards the beneficial interest of the plan
participants, through the operation of the entire Board of Trustees and City.
Sensitive to the considerations of the various stakeholders, management, labor
management, private citizens and Board members.
TECHNICAL QUALIFICATIONS
Actuarial Valuation Software
The GRS core calculation software, which is used for the actuarial valuation of defined benefit
and hybrid pension plans and other post employment benefit (OPEB Retiree Medical) plans, has
evolved over 30 years of internal use and is a very stable platform.
Because our specialty is public pension plans, this software is uniquely designed to handle public
pension plans. GRS' valuation software is geared to develop the most level funding possible.
Our software design guarantees that the assumptions and methods used in the DB Hybrid
valuation are fully compatible with those used in the retiree health valuation. This eliminates
any double handling of data.
The actuarial valuation of a benefit plan's provisions is usually handled by assigning values to at
least five hundred standard valuation parameters. It has been our experience that most benefit
6
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
Profile of Proposer
plans have some unique features which cannot be handled by standard valuation parameters. To
ensure reasonable and accurate valuation of these features, our valuation software can be
customized for all of our client's benefit plans.
Technologically, we are distinguished from many of our competitors in that our valuation
software can handle eight (8) separate decrements corresponding to the following benefit events:
Normal Retirement,
T1 Early Retirement,
Vested Termination,
Refund of member contribution,
z1 Pre retirement death (duty and non duty), and
Pre retirement disability (duty and non duty).
GRS' software handles both the inflation -based and merit and seniority -based elements of salary
scale, which are a function of:
Age only,
Service only, or
Both age and service.
GRS' software also facilitates use of full generational mortality, as recommended by the Society
of Actuaries.
Our software automatically produces a 100 -year projection. GRS has also developed unique
methods that explicitly value gain -loss analyses and decrement experience investigations.
Actuarial Valuation Software Development and Support
GRS has an Internal Software Training and Processes (ISTP) team that supports and updates
GRS' proprietary core calculation software. The ISTP team also supports the GRS client
services teams.
A GRS client services team interacts directly with a client retirement system in the coordination
and review of valuation data submissions and in the delivery and presentation of reports
containing actuarial valuation results. Typically, the support provided by the ISTP team to a
GRS client services team involves setting up custom modifications to the valuation software.
Support is provided by the ISTP team on an as- needed basis.
The ISTP team currently consists of three full -time employees, with almost 40 years of
combined experience in the public pension field. The ISTP team receives direction and reviews
of its work from a GRS ISTP Oversight Committee and a GRS Board of Directors
Subcommittee.
GRS
7
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
Profile of Proposer
Client Software Solutions
Gabriel, Roeder, Smith Company's Retirement Technology Group (RTG) provides software
to meet our clients' benefit plan administration needs. Our software is developed specifically for
the public sector. GRS developers are subject matter experts in these plans. We specialize in
delivering our solutions using web -based portal technology.
Our software solutions include:
xl Benefit Calculators
Service Credit Purchase Calculator
z1 Death Check Service
Minute Master
Our software is developed using .Net technology. In developing custom applications for clients'
use, the RTG staff meets with the retirement system staff to develop system specifications using
the industry standard for software documentation, Unified Modeling Language (UML).
For more information on our Retirement Technology services and to view our software demos
and videos, please visit www.gabrielroeder.com.
d. Provide a list and description of similar municipal engagements satisfactorily
performed within the past two (2) years. For each engagement listed, include the name
and telephone number of a representative for whom the engagement was undertaken
who can verify satisfactory performance.
REFERENCES
In order for you to have confidence in the actuary and firm performing the requested actuarial
and audit services to the City of Winter Springs, you need to be comfortable that the actuary and
firm have substantial experience in public sector pension work. GRS has over 400 pension
clients already large, small, and mid -size employers. Our experience cannot be easily found
elsewhere and will be a real benefit to the City.
We are providing the name, title and telephone number for our contact person for four clients
similar in scope and size to the City and served out of our Fort Lauderdale offices within the last
two years by members of the Team assigned to Winter Springs. We would be pleased to provide
contact information for additional clients, at your request.
GRS
8
City of Winter Springs
RFP 021 /09 /JD Proposal for Pension Plan Actuarial Services
Profile of Proposer
GRS
City of Winter Park Police Officers' Retirement System
City of Winter Park Firefighters' Retirement System
Mr. Jeff Templeton
Plan Administrator
9154 Lake Burkett Drive
Orlando, Florida 32817
407.758.3490
Each Plan Approximately $29 million in assets, 80 active employees, 55 inactive
employees. GRS provides full valuation services, including actuarial valuation with GASB
information, actuarial studies, state filing, benefit calculations, DROP administration,
annual COLA calculation, individual employee benefit statements and Summary Plan
Description preparation.
City of Pembroke Pines Pension Fund for Police Officers and Firefighters
Ms. Karen Warner
Mr. James Fisher
Plan Administrators
Hampton Professional Center
1951 NW 150th Avenue, Suite 104
Pembroke Pines, Florida 33028
954.431.3124
Approximately $205 million in assets, 400 active employees, 230 inactive employees.
GRS provides full valuation services, including actuarial valuation with GASB
information, actuarial studies, state filing, benefit calculations, DROP administration,
annual COLA calculation, individual employee benefit statements and Summary Plan
Description preparation.
City of Tavares Police Officers' Pension Trust Fund
City of Tavares Firefighters' Pension Trust Fund
Ms. Lori Houghton
Finance Director
City of Tavares
201 East Main Street
Tavares, Florida 32778
352.742.6212
Each Plan Approximately $5 million in assets, 30 active employees, 5 inactive
employees. GRS provides full valuation services, including actuarial valuation with GASB
information, actuarial studies, state filing, benefit calculations, DROP administration,
annual COLA calculation, individual employee benefit statements and Summary Plan
Description preparation.
9
City of Winter Springs
RFP 021 /09 /JD Proposal for Pension Plan Actuarial Services
Profile of Proposer
GRS
City of DeLand General Employees' Retirement Plan
City of DeLand Police Officers' Retirement Plan
Ms. Barbara Jacob
City of DeLand
Senior Accounting Clerk
120 South Florida Avenue
DeLand, Florida 32720
386.626.7072
Each Plan Approximately $18 million in assets, 110 active employees, 100 inactive
employees. GRS provides full valuation services, including actuarial valuation with GASB
information, actuarial studies, benefit calculations, annual COLA calculation and individual
employee benefit statements and Summary Plan Description preparation.
10
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
SUMMARY OF QUALIFICATIONS
Identify the key personnel who will work as part of the team. Include resumes for each person
to be assigned. The resumes may be included as an appendix.
THE GRS TEAM FOR THE CITY OF WINTER SPRINGS
Gabriel Roeder, Smith Company (GRS) is pleased to be considered for the City of Winter
Springs' pension valuation and related consulting work.
The following is the GRS Team selected for the services outlined in our proposal.
Primary Consulting Actuary: Larry Wilson, A.S.A.
Valuation Actuary: Pete Strong, A.S.A.
Senior Analyst: Jennifer Borregard
Analysts: Alex Smith and Valmiki Ramsewak
Back -up actuaries and analysts are available in Fort Lauderdale and in GRS' other offices in
Michigan, Colorado, Illinois and Texas.
We will also use administrative support, as needed.
GRS does not, and will not, utilize subcontractors or sub consultants to provide the services
requested in the City of Winter Springs' RFP. All project team members are current employees
of Gabriel, Roeder, Smith Company.
GRS
11
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
Summary of Qualifications
TEAM ORGANIZATION CHART
GRS
LARRY WILSON
ASA, MAAA
Senior Consultant and Actuary
Primary Consulting Actuary
Overall responsibility for
all aspects of GRS services
PETE STRONG
ASA, MAAA
Consultant and Actuary
Valuation Actuary
JENNIFER
BORREGARD
Senior Actuarial Analyst
Project Manager
ALEX SMITH
VALMIKI RAMSEWAK
Actuarial Analysts
Data Preparation and Computer Set -up
12
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
Summary of Qualifications
Your GRS Team includes Larry Wilson as the project leader. He is a Senior Consultant and
Actuary who has over 25 years of professional experience in the actuarial profession. Mr.
Wilson provides actuarial, administrative and consulting services to municipal retirement
systems. In this capacity, he brings a high level of expertise to his supervision of a GRS team
responsible for a number of governmental plans in Florida and neighboring states.
Mr. Wilson has been an invited speaker at programs, schools and seminars sponsored by the
Florida Public Pension Trustees Association (FPPTA) and the Enrolled Actuaries Annual
Meeting —and at a symposium conducted by former U.S. Senator Bob Graham on Retirement
for the 21st Century. Larry recently spoke on OPEB GASB Nos. 43 and 45 (Retiree Medical)
Accounting at a Stars and Stripes Conference in Key West. He is scheduled to speak at the
41s Annual Police Officers' and Firefighters' Pension Conference sponsored by the State of
Florida Department of Management Services Division of Retirement on October 21 -23,
2009.
Larry graduated from the State University of New York at Binghamton with a Bachelor of
Arts degree in mathematics. His professional designations include Associate of the Society of
Actuaries (A.S.A.), Member of the American Academy of Actuaries (M.A.A.A.), Fellow of
the Conference of Consulting Actuaries (F.C.A.) and Enrolled Actuary (E.A.) under ERISA.
Mr. Wilson is a member of the Pension Committee, and Chairperson of the Public Plan
Subcommittee, of the American Academy of Actuaries.
Mr. Wilson is a Member (and former Chair) of the Public Plans Subcommittee of the
American Academy of Actuaries and a founding Member of the Public Plan Committee of the
Conference of Consulting Actuaries.
Larry is qualified to issue a Public Statement of Actuarial Opinion (PSAO), in accordance
with the Qualification Standards of the American Academy of Actuaries, and to undertake this
project according to Precept 2 of the Code of Professional Conduct of the American Academy
of Actuaries.
Mr. Wilson will advise on Policy matters and selection of actuarial assumptions and methods,
along with other issues brought before him by the City. He will manage all steps of the
valuation process and review the consultants' and analysts' work at various stages in the
project plan. He will give final approval of the reports and will present the results to the City.
Pete Strong is a Consultant with over thirteen years of professional actuarial experience
often dealing with group health plans. He is a recent addition to GRS, coming to us from a
retirement consulting firm where he worked primarily with private sector (subject to ERISA)
pension and cash balance plans, including eight (8) hospital pension plans. Mr. Strong
received his Bachelor of Science degree in mathematical sciences, with an actuarial science
concentration, from the University of North Carolina at Chapel Hill. His professional
designations include Associate of the Society of Actuaries (A.S.A.), Member of the American
GRS
13
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
Summary of Qualifications
Academy of Actuaries (M.A.A.A.) Fellow of the Conference of Consulting Actuaries
(F.C.A.) and Enrolled Actuary (E.A.) under ERISA.
He will serve as the Valuation Actuary for this engagement. He will review the semi -final
version of the valuation reports and consult with Mr. Wilson to ensure that all standards are
satisfied and that all results pass a Peer Review Reasonableness Test.
Jennifer Borregard is a Senior Analyst with over ten years of professional actuarial
experience, including pension and OPEB valuation actuarial and consulting services. Ms.
Borregard received her Bachelor of Science degree in mathematics, with a minor in actuarial
science, from the University of Florida, Gainesville. She is currently pursuing the Associate
designation from the Society of Actuaries.
Alex Smith is an Analyst with Gabriel, Roeder, Smith Company. Mr. Smith received his
Bachelor of Science degree in accounting from the University of Cape Town, South Africa.
He is currently pursuing the Associate designation from the Society of Actuaries.
Valmiki Ramsewak is an Analyst with Gabriel, Roeder, Smith Company. Mr. Ramsewak
received his Bachelor of Science degree in actuarial science, with a second major in finance,
from the University of Illinois at Urbana Champaign. He is currently pursuing the Associate
designation from the Society of Actuaries.
Jennifer, Alex and Valmiki are responsible for reviewing the data and following up with the
client on any issues to ensure integrity. They will set up the valuation parameters for our
Actuarial Modeling System and also write and monitor programming modifications needed to
model the City of Winter Springs' benefit structure. Detail checking is performed on the
output of the Actuarial Modeling System to ensure that liabilities are being calculated
accurately.
Each of these professionals is a highly qualified actuarial or administrative technician. What
sets them apart, however, is that they are also high quality consultants who are sensitive
enough to listen, experienced enough to provide real alternatives and articulate enough to
make themselves understood by any audience on any topic in the retirement area —from
actuarial concepts to benefit administration.
Brief biographies for each of these City of Winter Springs Team Members follow.
GRS
14
City of Winter Springs
RFP 021 /09 /JD Proposal for Pension Plan Actuarial Services
Summary of Qualifications
LAWRENCE F. WILSON
Larry Wilson is a Senior Consultant and Actuary with Gabriel, Roeder, Smith Company. Prior to
joining GRS, Larry worked as a Consulting Actuary and Director of Public Plan Practice in the Boca
Raton, Florida, office of a national consulting firm.
EXPERIENCE
Mr. Wilson has over 25 years of employee benefits consulting experience for public pension retirement
systems, corporations and tax exempt organizations. His responsibilities have included valuations for
funding and accounting purposes, cost analyses of proposed plan changes, experience studies, actuarial
audits, stochastic projections, ERISA reporting and disclosure and defined contribution plan allocations.
PROFESSIONAL ASSOCIATIONS
Mr. Wilson is an Associate of the Society of Actuaries (A.S.A.), a Member of the American Academy of
Actuaries (M.A.A.A.), a Fellow of the Conference of Consulting Actuaries (F.C.A.) and an Enrolled
Actuary (E.A.) under ERISA.
PROFESSIONAL ACTIVITIES
Larry is a Member (and former Chair) of the Public Plans Subcommittee of the American Academy of
Actuaries and a founding Member of the Public Plans Committee of the Conference of Consulting
Actuaries. He is a frequent guest speaker at meetings of employee benefit professionals, including the
Enrolled Actuaries Meeting and the Florida Public Pension Trustees Association. He was a speaker on
OPEB GASB requirements at a recent Stars and Stripes forum and is scheduled to speak at the 41'
Annual Police Officers' and Firefighters' Pension Conference sponsored by the State of Florida
Department of Management Services Division of Retirement on October 21 -23, 2009.
Larry is active in the community, serving as a frequent volunteer and a member of the YATC Advisory
Board. In the past, his community commitments have included serving as Broward County's Director for
the Project MEGSSS Program for secondary mathematics education.
EDUCATION
Larry holds a Bachelor of Arts degree in mathematics from the State University of New York,
Binghamton.
GRS
15
City of Winter Springs
RFP 021 /09 /JD Proposal for Pension Plan Actuarial Services
Summary of Qualifications
PETER N. STRONG
Pete is a Consultant in GRS' Fort Lauderdale, Florida, office. He provides actuarial and consulting
services for public employee retirement systems and OPEB. Pete is responsible for the preparation and
presentation of valuations and plan design studies. His clients include cities, counties, hospitals and
public authorities.
EXPERIENCE
Pete has 13 years of actuarial and benefits consulting experience. Early in his career, he gained a strong
background in the development of valuation liabilities and modeling techniques for long -term disability
programs and life insurance reserve calculations. He further strengthened this valuation and modeling
experience while working on middle market pension plans.
Pete's pension plan experience includes defined benefit plans and hybrid arrangements, covering plan
design features such as final average pay, career average pay, target benefit, and early retirement
windows. Pete's actuarial modeling experience also includes asset /liability studies using deteaninistic
and stochastic approaches. His pension plan administration experience includes a thorough understanding
of the Pension Protection Act of 2006 and Internal Revenue Code Section 401(a), 410 and 415 testing.
Pete has many years of experience with retiree health valuations, derived from providing clients with FAS
106 valuations. This experience has prepared Pete to provide GASB 45 valuations in the public sector.
Pete's knowledge of actuarial software is an added strength. In addition to experience with GRS' internal
actuarial software, he has many years of experience working with ProVal and other actuarial valuation
systems. He also has experience converting actuarial valuations and models from one valuation system to
another. His conversion experience is valuable in transitioning new clients in an efficient and timely
fashion, including ensuring that initial replication work is produced seamlessly.
PROFESSIONAL ASSOCIATIONS
Mr. Strong is an Associate of the Society of Actuaries (A.S.A.), a Member of the American Academy of
Actuaries (M.A.A.A.), a Fellow of the Conference of Consulting Actuaries (F.C.A.) and an Enrolled
Actuary under ERISA (E.A.).
EDUCATION
Pete holds a Bachelor of Science degree in mathematical sciences from the University of North Carolina
at Chapel Hill.
GRS
16
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
Summary of Qualifications
JENNIFER M. BORREGARD
Jennifer Borregard is a Senior Analyst with Gabriel, Roeder, Smith Company. Prior to joining
GRS, Jennifer worked as an Actuarial Analyst in the Boca Raton, Florida, office of a national
consulting firm.
EXPERIENCE
Jen has over ten (10) years of employee benefits consulting experience for public retiree health
care and pension systems, corporations and tax exempt organizations. Her responsibilities have
included valuations for funding and accounting purposes, cost analyses of proposed plan changes,
benefit calculations, client data maintenance, benefit statements, ERISA reporting and disclosure
and defined contribution plan allocation.
PROFESSIONAL ASSOCIATIONS
Ms. Borregard is currently pursuing the Associate designation through the examinations sponsored
by the Society of Actuaries.
EDUCATION
Jennifer holds a Bachelor of Science degree in mathematics, with a minor in actuarial sciences,
from the University of Florida, Gainesville.
GRS
17
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
Summary of Qualifications
ALEXANDER SMITH
Alex Smith is an Analyst with Gabriel, Roeder, Smith Company. Prior to joining GRS, Alex
worked for seven years as an Accountant Finance Manager.
EXPERIENCE
Alex is currently gaining invaluable employee benefits consulting experience for public pension
retirement systems, corporations and tax exempt organizations. His responsibilities have included
valuations for funding and accounting purposes, benefit calculations, client data maintenance and
benefit statements.
PROFESSIONAL ASSOCIATIONS
Mr. Smith is currently pursuing the Associate designation through the examinations sponsored by
the Society of Actuaries.
EDUCATION
Alex holds a Bachelor of Science degree in accounting from the University of Cape Town, South
Africa.
GRS
18
City of Winter Springs
RFP 021/09/JD Proposal for Pension Plan Actuarial Services
Summary of Qualifications
VALMIKI N. RAMSEWAK
Valmiki N Ramsewak is an Analyst with Gabriel, Roeder, Smith Company. Prior to joining
GRS, Valmiki was an undergraduate student at the University of Illinois.
EXPERIENCE
Valmiki is currently gaining invaluable employee benefits consulting experience for public retiree
health and pension systems, corporations and tax exempt organizations. His responsibilities have
included valuations for funding and accounting purposes, benefit calculations, client data
maintenance and benefit statements.
PROFESSIONAL ASSOCIATIONS
Mr. Ramsewak is currently pursuing the Associate designation through the examinations
sponsored by the Society of Actuaries.
EDUCATION
Valmiki holds a Bachelor of Science degree in actuarial science, with a second major in finance,
from the University of Illinois at Urbana Champaign.
GRS
19
APPENDIX A
REQUIRED FORMS
VENDOR RATE /FEE SCHEDULE
Please include a breakdown of the dollar amount of and the basis for your fees as appropriate based on the
following categories (generally defined in Scope of Services):
Benefits Administration Functions (see attached)
Annual Valuation and SPD Preparation (see attached)
Ad hoc Calculations and General Analysis (see attached)
Total proposed annual fee for base services as per scope of work (see attached)
Fee /Rate Schedule for any additional services (above and beyond that stated in the base scope of
services) that may be requested:
Category of Employee
Senior Consultant and Actuary
Consultant and Actuary
Senior Analyst
Analyst
LAdministrative Assistant
7
Hourly Rale
$325 -$395
$250 -$295
5175 -S225
5125 -5170
S 75 -5115
For all additional work, vendor is requested to provide a proposal which shall
include a breakdown of the hourly rate which will be applicable, in determining the
cost of these services, by major category of employee (actuary, associate, clerical,
etc.); for these additional services, billing will be broken down into time per
category by major task. These fees will be fixed for the initial period of two years,
and negotiated thereafter. Prior to accepting an assignment for additional work,
you will be requested to provide a proposed fee for the task on a "not to exceed"
basis prior to receiving authority to proceed.
This Form Must Be Completed and Returned With Your Submittal.
VENDOR RATE /FEE SCHEDULE ATTACHMENT
The following is a detailed fee schedule based upon the scope of services requested:
Service
Annual Fee
Benefits Administration Functions:
Determine eligibility, benefits and vesting of Plan
participants
Perform contribution analysis and review for Plan
participants
Prepare benefit calculations for Plan participants
Prepare pension service time buy -back calculations
Process all documents for payments to terminated or retiring
employees
Prepare and deliver annual employee benefit statements for
Plan participants
Actuarial Valuation and SPD Preparation:
Produce annual actuarial valuation report in accordance with
State laws and regulations to establish required municipal
contribution levels, set forth Fund assets and liabilities,
provide historical data and render observations and opinions
as to the funding of the Plan
Meet with the Board of Trustees of the Fund, the Pension
Board or Commission to explain changes to the Fund and
actuarial assumptions utilized
Prepare a Summary Plan Description (SPD) every two (2)
years
Review Plan mortality tables used to calculate actuarially
equivalent benefit options
Ad hoc Calculations and Analysis:
Calculate and report the cost of changes in benefit structure
as a result of change of direction in City policy or changes in
Federal or State laws impacting upon the Plan
Provide general advice and counsel on the Plan and benefit
structures
Respond to any inquiries by the State of Florida regarding
issues derived from their review of the Actuarial Valuation
Report and obtaining State acceptance
Review current plan design to ensure the retirement program
is meeting the goals of the City in benefits provided and cost
control
Consult with City's financial advisors and /or legal counsel in
the implementation and administration of the plan
(If annually included in
valuation fee)
(If annually included in
valuation fee)
$300 per calculation
$400 per calculation
$150 per employee
(Included in valuation
fee)
$8,862 (includes GASB
accounting information)
(Annual meeting with
Board included in
valuation fee)
$1,950 biannually
$595 for analysis (expect
infrequent update)
Based upon hourly rates
fee is function of scope
of changes contemplated
Unlimited telephone
conferences
Based upon hourly rates
generally included in
valuation fee
Based upon hourly rates
fee is function of scope of
changes
Based upon hourly rates
generally included in
valuation fee
Service Annual Fee
Additional Services:
Additional work above and beyond stated scope of services may, Based upon hourly rates
from time to time, be requested by the City. All such additional
work must be authorized by the City in writing. For all additional
work, vendor is requested to provide a proposal which shall include
a breakdown of the hourly rate which will be applicable, in
determining the cost of these services, by major category of
employee (actuary, associate, clerical, etc.); for these additional
services, billing will be broken down into time per category by
major task. These fees will be fixed for the initial period of two
years, and negotiated thereafter. Prior to accepting an assignment
for additional work, you will be requested to provide a proposed fee
for the task on a "not to exceed" basis prior to receiving authority to
proceed.
Fees and hourly rates will not increase for two (2) years and will be subject to increase
annually thereafter solely based upon the change in the consumer price index (CPI)
Our fee for other projects, such as actuarial impact statements, will be based on our hourly rates.
We normally provide a not -to- exceed fee quote for major special services. Under the not -to-
exceed approach, we would charge the lesser of our costs, based upon our hourly rates and the
quoted not -to- exceed fee. We will provide you with a not -to- exceed fee commitment prior to the
start of any such project.
Based upon the disclosed invoices of the current actuary, our hourly rates may be higher but our
efficiency is superior as measured by the fact that our fees for similar projects for our clients are
lower.
Our hourly rates are quite competitive in the industry and are determined based upon the
experience and abilities of our staff.
Unlike some other firms, our hourly rates include our overhead. We do not load our fees for
computer, technical and administrative services.
Answer the following questions by answering "YES" or "NO If you answer "YES please
explain in the space provided, please add a page(s) if additional space is needed.
1. Has your firm, or any of its officers, received a reprimand of any nature or been suspended by the
Department of Professional Regulation or any other regulatory agency or professional association
within the last five (5) years? N c
2. Has your firm, or any member of your firm, been declared in default, terminated or removed from
a contract or job related to the services your firm provides in the regular course of business within
the last five (5) years? No
3. Has your firm had filed against it or filed any requests for equitable adjustment, contract claims or
litigation in the past five (5) years that is related to the services your firm provides in the regular
course of business? yes If yes, the explanation must state the nature of the request for
equitable adjustment, contract claim or litigation, a brief description of the case, the outcome or
status of suit and the monetary amounts or extended contract time involved.
see.. 4 ttc,
I hereby certify that the statements contained herein are true. I agree and understand that any misstatement or
misrepresentation or falsification of facts shall be cause for disqualification of the submittal, immediate cancellation
of any contract with the City that might arise from the representations contained herein, and forfeiture of rights for
further consideration for work in the City of Winter Springs.
Firm: Gabriel, Roeder, Smith Company
Name/Title:
Authorized Signature Date:
DISPUTES DISCLOSURE FORM
F. Kenneth Davis, Chief Operations Officer
This Form Must Be Completed and Returned with your Submittal
8
DISPUTES DISCLOSURE FORM
3. Has your firm had filed against it or filed any requests for equitable adjustment, contract
claims or litigation in the past five (5) years that is related to the services your firm provides
in the regular course of business? Yes. If yes, the explanation must state the nature of the
request for equitable adjustment, contract claim or litigation, a brief description of the case,
the outcome or status of suit and the monetary amounts or extended contract time involved.
GRS does not currently have any litigation pending at this time. Over the past five years GRS has
been involved in two legal matters. In August 2005, the City of San Diego filed a professional liability
complaint against GRS in San Diego County Superior Court. GRS denied the allegations in the suit.
GRS' client the San Diego City Employees Retirement System, was not a party to the lawsuit, did not
support the plaintiff in the lawsuit and has been publicly supportive of GRS' work. After an election
change in San Diego the litigation was dropped by the city in early 2009 with the settlement having no
material impact on GRS.
In April 2005, a former client filed a professional liability civil complaint in the United States District
Court for the Eastern District of Louisiana against GRS. In March 2007, GRS was successful in
defending the allegations in a bench trial and was awarded its defense costs from the plaintiffs. In May
2008, GRS was successful in defending the plaintiffs' appeal and was again awarded its costs.
INSURANCE REQUIREMENTS FORM
1. The vendor shall be required to provide to the Purchasing Coordinator, prior to signing a contract for or
commencing any wort, a Certificate of Insurance which verifies coverage in compliance with the requirements
outlined below. Compliance of said certificate must be acknowledged by the Purchasing Coordinator prior to
start of work. Any work initiated without completion of this requirement shall be unauthorized and the City of
Winter Springs will not be responsible.
2. The City of Winter Springs reserves the right to require coverage and limits as considered to be in its best
interests. Insurance requirements shall be on a case by case basis determined by the project, conditions and
exposure.
3. Except for Professional Liability and Workers Compensation Policies, when required, ail policies are to be
endorsed to Include the City of Winter Springs as Additional Insured. In the cancellation clause the
number "30" shall be Inserted Into the blank space provided prior to the words "days prior notice...". AU
vendor policies are to be considered primary to City coverage and shall not contain co- insurance provisions.
4. In the event that the insurance coverage expires prior to the completion of services, a renewal certificate shall
be issued 30 days prior to said expiration date.
5. Subvendors or sub -contractors retained by the primary vendor are the responsibility of said primary
vendor in all respects.
B. Insurance requirements:
COVERAGE REQUIRED MINIMUM POLICY LIMITS
Workers' Compensation
Statutory
Commercial General LlabWlfy including Contactual UablUy, Products and
S 1.000,000 Occurrence
Completed Operations, XCU and Owners and Contractors Protective
Comprehensive Auto Liability, CSL, shah include auto" S 1,000.000 CSL
Professional 51,000,000 Occurrence
(NOTE M limits are per occurrence and must include Bodily Injury and Property Damage. Deductibles and
self insured retentions must be approved by the City of Winter Springs. and all insurers must have an A.M. Best
rating of at least A: Vil.)
7. Bonding Required: None This Submittal
8. Vendor will be required to provide a certificate of insurance in compliance with the above, within four (4) days of
notification of award with continuing coverage, without a break.
9. I hereby certify that the insurance and bonding requirements outlined above shall be met as required, if I am
awarded a contract for the services specified herein.
Firm: Gabriel,, Roeder, Smith S Company
Name Title: F. Kenneth Davis /C0F0
Authorized Signature f Date: b
f v
This Form Must Be Completed and Returned with your Submittal
9
FLORIDA STATUTES ON PUBLIC ENTITY CRIMES FORM
THIS FORM MUST BE SIGNED AND SWORN TO IN THE PRESENCE OF A NOTARY PUBLIC
OR OTHER OFFICIAL AUTHORIZED TO ADMINISTER OATHS.
1. This sworn statement is submitted to the City of Winter Springs by:
Theora P. Braccialarghe
on behalf of:
Gabriel, Roeder, Smith Company
whose business address is:
One East Broward Boulevard, Suite 505
Fort Lauderdale, FL 33301
Federal Employer Identification Number (FEIN)
or Social Security of the person signing this statement:
10
38- 1691268
2. I understand that a "public entity crime" as defined in Paragraph 287.133(1)(g), F.S., means a
violation of any state or federal law by a person with respect to and directly related to the
transaction of business with any public entity or with an agency or political subdivision of any
other state or with the United States, including, but not limited to, any bid or contract for goods or
services, any lease for real property, or any contract for the construction or repair of a public
building or public work, involving antitrust, fraud, theft, bribery, collusion, racketeering,
conspiracy, or material misrepresentation.
3. I understand the "convicted" or "conviction" as defined in Paragraph 287.133(1)(b), F.S.,
means a finding of guilt or a conviction of a public entity crime, with or without an adjudication of
guilt, in any federal or state trial court of record relating to charges brought by indictment or
information after July 1, 1989, as a result of a jury verdict, non -jury trial, or entry of a plea of guilt
or nolo contendere.
4. I understand that an "affiliate" as defined in Paragraph 287.133(1)(a), F.S., means:
A predecessor or successor of a person convicted of a public entity crime or an
entity under the control of any natural person who is active in the management of
the entity and who has been convicted of a public entity crime. The term "affiliate"
includes those officers, directors, executives, partners, shareholders, employees,
members, and agents who are active in the management of an affiliate. The
ownership by one person of shares constituting a controlling interest in another
person, or a pooling of equipment or income among persons when not fair market
value under an arm's length agreement, shall be a prima facie case that one
person controls another person. A person who knowingly enters into a joint
venture with a person who has been convicted of a public entity crime in Florida
during the preceding 36 months shall be considered an affiliate.
5. I understand that a "person" as defined in Paragraph 287.133(1)(e), F.S., means any natural
person or entity organized under the laws of any state or of the United States with the legal
power to enter into a binding contract and which bids or applies to bid on contracts let by a public
entity, or which otherwise transacts or applies to transact business with a public entity. The term
"person" includes those officers, directors, executives, partners, shareholders, employees,
members, and agents who are active in management of an entity.
6. Based on information and belief, the statement which I have marked below is true in relation
to the entity submitting this sworn statement. (Please indicate which statement applies.)
X Neither the entity submitting this sworn statement, nor any of its officers, director,
executives, partners, shareholders, employees, members, or agents who are active in the
management of the entity, nor any affiliate of the entity were charged with and convicted of a
public entity crime after July 1, 1989.
The entity submitting this sworn statement, or one or more of the officers, directors,
executives, partners, shareholders, employees, members, or agents who are active in the
management of the entity, or any affiliate of the entity was charged with and convicted of a public
entity crime after July 1, 1989.
The entity submitting this sworn statement, or one of its officers, directors, executives,
partners, shareholders, employees, members, or agents who are active in the management of
the entity, or any affiliate of the entity was charged with and convicted of a public entity crime
subsequent to July 1, 1989. However, there has been a subsequent proceeding before a
Hearing Officer of the State of Florida, Division of Administrative Hearings and the Final Order
entered by the Hearing Officer determined that it was not in the public interest to place the entity
submitting this swom statement on the convicted vendor list. (Attach a copy of the final order.)
I understand that the submission of this form to the City of Winter Springs is for the City of Winter
Springs only, and that this from is valid through December 31, 2007. I also understand that I am
required to inform the City of Winter Springs prior to entering into a contract in excess of $25,000
of any change in the information contained in this form.
Signature
State of Florida, County of Broward On this if day of J,xr tt, 20 o 9, before
me, the undersigned Notary Public of the State of Florida, personally appeared:
Theora P. Braccialarghe
(Name(s) of individuals who appeared before notary)
11
Date
whose name(e) is /ate Subscribed to
4ielsheltliey executed it.
Theora P. Braccialarghe
Sworn to and subsc ibed before me this
day of J.44.441, 20 09
Personally Known
Produced Identification:
(Type)
Did take an Oath
Did Not take an Oath
the within instrument, and l e /shelthey acknowledge that
12
V A 46` t frik
Notary
My Commission expires:
NOTARY PUBLECSTATE OF FLORIDA
Virginia Eleanor Zagari
Commission #DD759786
1., Expires: MAY 11, 2012
13 0100 THRII ATLANTic BONDINGCO., INC.
This Form Must Be Completed and Returned with your Submittal
DRUG -FREE WORK PLACE FORM
The undersigned, in accordance with Florida Statute 287.087 hereby certifies that the company named
below does:
1. Publish a statement notifying employees that the unlawful manufacture, distribution,
dispensing, possession, or use of a controlled substance is prohibited in the workplace and
specifying the actions that will be taken against employees for violations of such prohibition.
2. Inform employees about the dangers of drug abuse in the workplace, the business's policy
of maintaining a drug -free workplace, any available drug counseling, rehabilitation, and
employee assistance programs, and the penalties that may be imposed upon employees for
drug abuse violations.
3. Give each employee engaged in providing the commodities or contractual services that are proposed
a copy of the statement specified in subsection (1).
4. In the statement specified in subsection (1), notify the employees that as a condition of
working on the commodities or contractual services that are under bid, the employee will abide by the
terms of the statement and will notify the employer of any conviction of, or plea of guilty or nolo
contendere to, any violation of Chapter 893 or of any controlled substance law of the United States or
any state, for a violation occurring in the workplace no later than five (5) days after such conviction.
5. Impose a sanction on, or require the satisfactory participation in a drug abuse assistance or
rehabilitation program if such is available in the employee's community, by any employee who is so
convicted.
8. Make a good faith effort to continue lo maintain a drug free workplace through implementation of this
section.
Firm:
Name 1 Title:
Gabriel, Roeder, Smith Company
Authorized Signature 1 Date:
F. Kenneth Davis /COF0
i
13
This Form Must Be Completed and Returned with your Submittal
CONFLICT OF INTEREST STATEMENT
1. F. Kenneth Davis o f Gabriel, Roeder deposes and states that
Gabriel, Roeder, Smith Company
Name of Affiant Name of Company
the above named entity is submitting a proposal to the City of Winter Springs for the project identified
above.
2. The Affiant has made diligent inquiry and provides the information contained in this Affidavit based
upon his own knowledge.
3. The Affiant states that only one submittal for the above project is being submitted and that the above
named entity has no financial interest in other entities submitting qualifications for the same services.
4. Neither the Affiant nor the above named entity has directly or indirectly entered into any agreement,
participated in any collusion, or otherwise taken any action in restraint of free competitive pricing in
connection with the entity's submittal for the above project. This statement restricts the discussion of
pricing data until the completion of negotiations and execution of the Agreement for this project.
5. Neither the entity nor its affiliates, nor anyone associated with them, is presently suspended or
otherwise ineligible from participating in contract lettings by any local, state, or federal agency.
6. Neither the entity, nor its affiliates, nor anyone associated with them have any potential conflict of
interest due to any other clients, contracts, or property interests for these services.
7. I certify that no member of the entity's ownership, management, or staff has a vested interest in any
aspect of or department of the City of Winter Springs.
8. I certify that no member of the entity's ownership or management is presently applying for an
employee position or actively seeking an elected position with City of Winter Springs.
9. In the event that conflict of interest is identified in the provision of services, I, on behalf of the above
named entity, will; immediately notify the City of Winter Springs in writing.
I Signature of Affiant Date
I/ Chief Operations Officer
Title Typed or Printed Name of Affiant
State of Florida, County of D Lt7A iP
On this day of 4U1 C r 20 07 before me, the undersigned Notary Public of the
State of Florida, personally appeared
7� did ,�"7'/z 3 A V 1 S and
14
WITNESS my hand and official seal.
(Name(s) of individuals who appeared before notary)
whose nameCs) is /ace subscribed to the within instrument, and he /s` a /tP y acknowledge that he /sIlelth i
executed it.
NOTARY PUBLIC, STATE OF FLORIDA NOTARY PUBLIC
NOTARY PUBLIC -STATE OF FLORIDA
Virginia Eleanor Zagari
Commission DD759786
SEAL OF OFFICE: Expires: MAY 11, 2012
BONDED THRU ATLANTIC BONDING CO., INC.
(Name of Notary Public: Print, Stamp, or Type as Commissioned.)
(TT/Le
This Form Must Be Completed and Returned with your Submittal
15
By:
CERTIFICATION OF NON SEGREGATED FACILITIES
FORM
By affixing his signature to this form, the consultant certifies that he does not maintain or provide for his
employees any segregated facilities at any of his establishments, and that he does not permit his
employees to perform their services at any location, under his control, where segregated facilities are
maintained. The consultant certifies further that he will not maintain or provide for his employees any
segregated facilities at any location under his control where segregated facilities are maintained. The
consultant agrees that a breach of this certification will be a violation of the Equal Opportunity clause in
any contract resulting from acceptance of this Bid. As used in this certification, the term "segregated
facilities" means any waiting rooms, work areas, restrooms and washrooms, restaurants and other eating
areas, time clocks, locker rooms and other storage and dressing areas, parking lots, drinking fountains,
recreation or entertainment area, transportation and housing facilities provided for employees which are
segregated by explicit directive, or are in fact segregated on the basis of race, color, religious disability or
national origin, because of habit, local custom, or otherwise. The consultant agrees that (except where
he has obtained identical certifications from proposed subcontractors for specific time periods) he will
obtain identical certifications from proposed subcontractors prior to the award of subcontracts exceeding
$10,000 which are not exempt from the provisions of the Equal Opportunity clause, and that he will retain
such certifications in his files.
The nondiscriminatory guidelines as promulgated in Section 202, Executive Order 11246, and as
amended by Executive Order 11375 and as amended, relative to Equal Opportunity for all persons and
implementations of rules and regulations prescribed by the United States Secretary of Labor are
incorporated herein.
NOTE: The penalty for making false statements in offers is prescribed in 18 U.S.C. 1001.
4
F. Kenneth Davis Chief Operations Officer
Print Name Title
16
t I 27 (2_ce
Date:
Official Address: One Towne Square, Suite 800, Southfield, MI 48076
This Form Must Be Completed and Returned with your Submittal
All proposals are subject to the Florida Public Records Act, F.S. 119. The
submission of a proposal authorizes release of your firm's credit data to the City
of Winter Springs. Responsive proposals are "public records" and shall be subject to
public disclosure consistent with Chapter 119.07(3) (o), Florida Statutes. Vendors must
invoke any exemptions to disclosure provided by law in the response to the proposal,
and must identify the data or other materials to be protected, and must state the
applicable statutory exemption for exclusion from public disclosure. Please list below
any exemptions to disclosure as provided by law and sign and date the form where
indicated.: If you are not claiming any Public Records Exemptions, please check the
box below and sign and date the form where indicated.
We are claiming no exemptions
PUBLIC RECORDS FORM
ndor SignaturelDate
This Form Must Be Completed and Returned with your Submittal
17
APPENDIX B
SAMPLE LIST OF PUBLIC PENSION CLIENTS
SAMPLE GRS PENSION CONSULTING CLIENT LIST
AK
Anchorage Police Fire Retirement System
AL
Mobile Housing Board Pension Board
AR
Arkansas Judicial Retirement System
Arkansas Local Police Fire Retirement System
Arkansas Public Employees Retirement System
Arkansas State Highway Employees Retirement System
Arkansas State Police Retirement System
Arkansas State Teacher Retirement System
AZ
Tucson Arizona Supplemental Retirement System
CA
Riverside County
San Jose Federated Employees Retirement System
CO
City of Aurora
Colorado FPPA
Craig Rural Fire Protection District
Denver Employees Retirement Plan
Denver Public Schools Retirement System
Denver Water
WRMF
DC
Washington DC Retirement Board
FL
Alachua County Library
Atlantic Beach Florida Pension Board of Trustees
City of Atlantic Beach Police Officers
Big Corkscrew
Boynton Beach Fire Rescue Employees Retirement System
Boynton Beach Pension Plan for General Employees
Boynton Fire
Boynton Police
Bradenton Police
Broward County
Charlotte County
Cooper City
Cooper City Fire
Cooper City Police
Coral Gables
Coral Springs General
Dania Beach General
Dania Police Fire
Deerfield Beach General
Deerfield Beach City
DeLand General
DeLand Police
Delray General
Dunedin Fire
East Naples
Eustis Police
Florida City Elected Officials Retirement Plan
Florida Division of Retirement
Fort Lauderdale General Employees Retirement System
Fort Meade
Fort Pierce Firefighters
Fort Pierce Retirement and Benefit System
Ft Pierce Police Officers Retirement Fund
Hialeah
Hialeah Elected Officers Retirement System
Hialeah Garden Police
Hollywood General
Homestead Council "Old Plan"
Homestead Elected Officials "New Plan"
Homestead Fire
Homestead General
Homestead Police
Indian River Shores Police
Jacksonville Beach Firefighters
Jacksonville Beach General Employees
Jacksonville Beach Police Officers
Jupiter Island
Key West General
Key West Housing Authority
Kissimmee Fire
Kissimmee General
Lake Worth Fire
Lake Worth General
SAMPLE GRS PENSION CONSULTING CLIENT LIST
Lake Worth Police
Lakeland Employees Retirement System
Lantana Firefighters' Pension Fund
Lantana Police
Largo City
Largo Police Fire
Laud by Sea Fire
Lauderhill General
Maitland Police Fire
Marco Island Fire
Martin County Sheriff
Miami Beach
Miami Beach General
Miami Shores
Miami Shores Police
Miami Springs General
Miami Springs Police Fire
Miramar General
Miramar Senior Management
Mt Dora Fire
Mt Dora General Employees Pension Plan
Mt Dora Police
North Palm Beach General
North Palm Beach Police Fire
Naples Employee Retirement System
Naples Fire
Naples Police
New Port Richey Police
North Miami 691
North Miami 748
North Miami Beach General
Okeechobee Fire
Okeechobee General
Okeechobee Police
OPPAGA State of Florida
Orange Park General
Orlando General Employees
Orlando Utility
Palm Bay
Palm Beach Gardens Firefighters
Palm Beach Garden Police
Palm Beach County Fire Employee Benefits Fund
Palm Beach County Firefighters Employees Insurance Fund
Palm Beach Firefighters Retirement System
Palm Beach General Employees Retirement System
Palm Beach Police Officers Retirement System
Palm Springs Village Hazardous Employees Pension Plan
Palmetto General
Palmetto Police
Pembroke Pines Fire Police
Pinecrest Police
Pinellas Park Police
Plantation Fire
Plantation General
Plantation Police
Pompano Bch Police Fire
Riviera Beach Fire
Riviera Beach General
Riviera Beach Police Pension Fund
Sarasota Firefighters' Health Insurance Trust Fund
Sarasota Firefighters' Pension Fund
Sarasota General Employees Pension Fund
Sarasota Police Officers Pension Fund
Sebring Police
South Miami General Police
St. Lucie County General Employees Retirement System
St. Petersburg College
Starke Firefighters
Starke General Employees
Starke Police Officers
Sunrise General
Sunrise Police
Surfside General Police
Sweetwater Police
Tallahassee Leon County Civic Center
Tamarac Police
Tavares Fire
Tavares Police
Tequesta General
Tequesta Public Safety Plan
Utility Board City of Key West
Venice General
SAMPLE GRS PENSION CONSULTING CLIENT LIST
Vero Fire
Village of Wellington
West Melbourne General Employees Pension Plan
West Melbourne Police
West Palm Beach Employees Defined Benefit Ret. System
West Palm Beach Firefighters Benefit Fund
West Palm Beach Firefighters Pension Fund
West Palm Beach Police Pension Fund
Wilton Manors
Wilton Manors Fire
Winter Garden General
Winter Park Fire
Winter Park Police
III
Hawaii Employees' Retirement System
IL
Chicago Firemens Annuity Benefit Fund
Chicago Laborers' Retirement Board Emp.
Chicago Municipal Employee Annuity Benefit
Chicago Policemens Annuity Ben. Fund
Chicago Transit Authority
Chicago Transit Authority SERP
City of Chicago
East Peoria Police and Fire Pension Funds
Illinois Municipal Retirement Fund
Illinois State Employees Retirement System
Joliet City
Morton Village
State Universities Retirement System of Illinois
MD
Maryland State Retirement and Pension Agency
Prince George County
MI
Archdiocese of Detroit Priests Retirement Plan
Benton Township Police Fire
Berrien County
Charter Township of Harrison
Charter Township of Shelby Fire Police
Charter Township of Ypsilanti Police Fire
City of Alpena Employees' Retirement System
City of Ann Arbor Employees' Retirement System
City of Battle Creek Police and Fire Retirement System -Act 34_
City of Berkley Public Safety Retirement System -Act 345
City of Big Rapids Police Fire Retirement System
City of Birmingham Employees Retirement System
City of Cadillac Police Fire Retirement System
City of Center Line Police and Fire Pension System
City of Dearborn Chapter 21 Retirement System
City of Dearborn Chapter 22 Retirement System
City of Dearborn Chapter 23 Retirement System
City of Dearborn Heights Police -Fire
City of Detroit General Retirement System
City of Eastepointe Employees' Retirement System
City of Escanaba Public Safety Retirement System Act 345
City of Farmington Employees Retirement System
City of Farmington Hills Employees' Retirement System
City of Ferndale Employee Retirement System
City of Ferndale Police and Fire Retirement System
City of Flint Employees Retirement System
City of Fraser Pension Plan
City of Gibraltar Public Safety Officers Ret. System Act 345
City of Grand Rapids General Retirement System
City of Grand Rapids Police and Fire Retirement System
City of Grosse Pointe Farms Employees Retirement System
City of Grosse Pointe Farms Public Safety Retirement System
City of Grosse Pointe Woods Employees Retirement System
City of Highland Park Police and Fire
City of Inkster Policemen and Firemen Retirement System
City of Iron Mountain Policemen and Firemen Retirement Syste
City of Ironwood Public Safety Retirement System -Act 345
City of Ishpeming Policemen and Firemen Ret. System -Act 345
City of Jackson Act 345 Retirement System
City of Jackson Policemen's and Firemen's Pension Fund
City of Kalamazoo
City of Kingsford Policemen and Firemen Retirement System
City of Lansing Employees' Retirement System
City of Lansing Police Fire Retirement System
City of Lincoln Park Employees Retirement System
City of Lincoln Park Police Officers and Firefighters Ret. Systei
City of Marine City Retirement System
City of Marquette Policemen and Firemen Retirement System
City of Melvindale Policemen and Firemen Retirement System
SAMPLE GRS PENSION CONSULTING CLIENT LIST
City of Menominee Police Fire
City of Midland Police and Fire Retirement System
City of Monroe Employees Retirement System
City of Mount Clemens Employees Retirement System
City of Mt Pleasant Fire and Police Pension System
City of Negaunee Policemen's Retirement System -Act 345
City of Oak Park Employees Retirement System
City of Owosso Employees Retirement System
City of Pontiac Employees Retirement System
City of River Rouge Employee Retirement System
City of River Rouge Police Fire
City of Royal Oak Retirement System
City of Saginaw Police Fire
City of Sault Ste. Marie Police Fire
City of Southfield Employees Retirement System
City of Southfield Fire and Police Retirement System
City of Southgate Municipal Employees' Retirement System
City of Southgate Police Fire
City of St Clair Shores Police and Fire Retirement System
City of St. Clair Shores General
City of St. Joseph Employees Retirement Fund
City of Sterling Heights Employees Retirement System
City of Sturgis Employees Retirement System
City of Taylor General Employees Retirement System
City of Taylor Police and Fire Retirement System -Act 345
City of Tecumseh Employees Retirement System
City of Trenton Fire and Police Retirement System
City of Troy Employees Retirement System
City of Wayne Employees' Retirement System
City of Westland Police Fire
City of Wyandotte Employees Retirement System
City of Wyoming Employees Retirement System
County of Volusia
Eastpointe Employees Retirement System Death Benefit
Dickinson County Health Care System
Garden City Employees Retirement System
Gibraltar Public Safety Officers Retirement System -Act 345
Gogebic County Employees Retirement System
Harrison Township Firemen's Pension Fund
Harrison Township General Employees Retirement System
Highland Park Police and Fire Retirement System
Highland Park Police Fire
Huron Clinton Metro Authority
Kalamazoo County Employees' Retirement System
Kent County Employees Retirement Plan and Trust
Kent Library District Employees' Retirement Plan
Macomb County Employees Retirement System
Michigan Employee Retirement System
Michigan Health and Hospital Association
Michigan Municipal Employees' Retirement System
Michigan Public School Employees
Michigan State Judges Circuit and Recorders
Michigan State Legislative Retirement System
Midland County Retirement System Act 345
Monroe County Employees Retirement System
Monroe County Road Commission
Niles City Retirement Systems Plan A B
Oakland County Employees Retirement System
City of Woodhaven Employees and Policemen
Niles Township Employees, Police and Fire Retirement System
Charter Township of West Bloomfield Retirement Plan
Road Commission for Oakland County Retirement System
Sanilac County Employees Retirement System
St. Clair County Employees Retirement System
St. Joseph County Employees Retirement System
The Police and Fire Retirement System of the City of Detroit
Traverse City Act 345 Police and Fire Retirement System
Village of Beverly Hills Public Safety Retirement System
Warren Firefighters Fund Association
Washtenaw County Employees Retirement Commission
Waterford Township General Employees Retirement System
Waterford Township Police and Fire Retirement System -Act 34
Wayne County Employees' Retirement System
Wayne County Circuit Court Comm. Bailiff's Div. Emp. Ret. S:
Ypsilanti Fire and Police Retirement System
MN
Appleton Fire
City of White Bear Lake
Luverne
St. Paul Teachers' Retirement Fund Association
Virginia Minnesota Fire
SAMPLE GRS PENSION CONSULTING CLIENT LIST
MO
City of Columbia Police and Firemen's Retirement Fund
City of Richmond Heights Police Fire
Jefferson City Firemen's Retirement Fund
MO
Missouri Dept. of Trans.& Highway Patrol Emp. Ret.
Missouri Local Government Employees Retirement System
Missouri State Employees Retirement System
St. Louis Fire
ND
North Dakota State Teachers
NE
City of Lincoln Police and Fire Pension Fund
NH
New Hampshire Retirement System
NM
New Mexico Education Retirement Board
Public Employees Retirement Association of New Mexico
OH
Ohio Public Employees Retirement System
Ohio State Highway Patrol Retirement System
OK
Oklahoma City Employee Retirement System
Oklahoma Teachers' Retirement System
RI
Rhode Island Employee Retirement System
Warwick
SD
City of Lead Firemen Pension Fund
City of Sioux Falls Employees' Retirement System
City of Sioux Falls Firefighters' Pension Fund
TX
City of Austin
City of Fort Worth
City of Irving
City of Lamar
City of Plano
Dallas Fort Worth International Airport Board
Dallas County Utility and Reclamation District
Dallas Employee Retirement System
Houston Municipal Employees Pension System
Houston Police Officers' Pension System
Metropolitan Tulsa Transit Authority
Sabine River Authority
Texas Municipal Retirement System
Texas Teacher Retirement System
UT
Utah Retirement System
VA
City of Fairfax Retirement Plan
City of Hampton
Educational Employees' Supp. Ret. System of Fairfax County
Wisconsin Retirement System
WV
City of Huntington
West Virginia
APPENDIX C
"RESPONDING TO LOCAL GOVERNMENT
RETIREMENT -PLAN FUNDING ISSUES"
(reprint from Quality Cities)
GRS GABRIEL, ROEDER, SMITH COMPANY
Consultants Actuaries
Responding to Local Government Retirement -Plan Funding Issues
By Paul Zorn and Lawrence F. Wilson, A.S.A.
Gabriel, Roeder, Smith Company
For Quality Cities Magazine May /June 2003
Significant unfavorable investment performance over the
recent 3 -year period has raised questions about state and local
retirement -plan funding and contributions. While members'
benefits have not been jeopardized, it is likely recent investment
declines will require increased employer contributions and will
result in more realistic expectations among plan members about
future benefit enhancements.
The late 1990s may be seen as the golden age of state and
local retirement plans. A sustained period of low inflation,
coupled with historically high investment returns, resulted in
steady improvements to plan funding, reductions in employer
contributions and often increases in promised benefits. Times
have changed. Annual investment returns declined sharply after
2000, and many retirement plans "earned" negative returns in
2001 and 2002. The dramatic and sustained downturn in the
equity markets has significantly reduced the market value of
fund assets over the most recent three years. Funded ratios have
fallen and contribution rates have increased.
Retirement plan sponsors, administrators, members and
taxpayers now face the question of what to do next.
Analysis of Local Government
Retirement -Plan Funding
To help illustrate the effect that recent investment declines
have had on local government retirement plan funding, we
analyzed data for 109 city and county retirement plans in Florida
and Michigan, with interesting results:
Between 1999 and 2002, the market value of fund assets for
the surveyed plans fell from $13.4 billion in 1999 to $112
billion in 2002. This 16 percent decline represents the average
change for the plans as a whole. For individual plans, the change
in market values varied widely from a high of 30.4 percent to a
low of -28.4 percent. The plan with the 30.4 percent increase in
market value held a high percentage of its assets in fixed income
securities, which have performed well between 1999 and 2002.
1 The funded ratio (i.e., the actuarial value of fund assets
divided by liabilities) fell 9.4 percentage points, from 109.5
percent in 1999 to 100.1 percent in 2002. This decline again
represents the average change for the plans as a whole. For
individual plans, the change in funded ratios again varied widely
from a high of 29.4 percent to a low of -41.9 percent.
The distribution of plans by funded ratios shifted, resulting
in a substantially larger percentage of plans with funded ratios
below 90 percent. As shown in Exhibit 1, in 1999, more than
half of the surveyed plans had funded ratios of 110 percent or
above. By 2002, only one -third were as well funded.
Additionally, while only 10 percent of the plans had funded
ratios below 90 percent in 1999, almost one -third did in 2002.
However, even with the unfavorable investment performance,
the vast majority of plans had funded ratios of 90 percent or
above in 2002.
Employer contribution rates as a percentage of covered
payroll increased an average of 41.9 percent, from an average of
4.3 percent of covered payroll in 1999 to 6.1 percent in 2002.
Although the employer contribution rates among the surveyed
plans remain relatively low as a percentage of covered payroll,
the relative magnitude of the increase raises questions about
potential future contribution increases under the plans. As
Exhibit 2 shows, the majority of surveyed plans have employer
contribution rates below 5 percent of covered payroll; however
this is likely to change as the recent declines in the market value
of assets are more fully reflected in the actuarial value of assets.
In discussing funded ratios, it is important to emphasize that
these ratios reflect long -term actuarial liabilities that will come
due over the next 30 years and longer. Shortfalls in plan funding
typically are amortized over 20 to 30 years. Thus, contributions
can be expected to remain reasonably stable over time, and plans
can take advantage of investment returns that are more typical of
the historic long -term performance of financial markets.
Market Smoothing
Market smoothing is one of the methods used in actuarial
valuations to mitigate the effect of short-term investment
volatility on contribution rates. Most governmental plans use a
3 -year or 5 -year market smoothing approach to determine the
actuarial value of plan assets (AVA). As such, these methods
help to produce the desired stability of employer contributions.
For the surveyed plans in 1999, the AVA was less than the
market value of fund assets (MVA), and it was not uncommon
for the AVA to be only 80 percent to 90 percent of the MVA.
This meant there were prior investment gains being deferred to
future years when they would be available to offset future
investment losses.
In reviewing these statistics, it is important to be aware of
the impact of market value corridors. In Florida, the AVA
generally is subject to an 80 percent 120 percent corridor around
the MVA. Florida has incorporated this IRS corridor
requirement for private plans for its municipal plans.
By 2002, the AVA exceeded the MVA for most plans, and it
was not uncommon for the AVA to be 110 percent to 120 percent
of MVA. This difference represents investment losses from
2000 through 2002 that are yet to be reflected in the retirement
plan's unfunded actuarial accrued liability, the funded ratio and
the employer's contribution rate.
Consequently, if fund investment returns during 2003
through 2005 don't rebound enough, these deferred losses will
increase the plan's unfunded actuarial accrued liability and
contribution rates over the next three to five years, if not longer.
What the Future Holds
The first decade of the 21st Century may not be pretty.
Unless we see double -digit market returns in 2003 and 2004,
funded ratios may continue to decline. Many systems that had
funded ratios over 100 percent in 1999 may well see funded
ratios below 80 percent in the years to come. Moreover,
employer contribution rates may increase for several years. For
retirement systems whose contribution rate is held constant from
year to year, funding margins can be expected to decline or
disappear.
In this environment, plan members should ensure that
employers contribute actuarially determined contribution
Exhibit 1: Funded Ratio of Surveyed Plans, 1999 and 2002
(Actuarial value of assets/actuarial accrued liability)
110%
104109%
I 9099%
5
LL
00-00
7070%
na%
0
10 20 30
69
1899
2002
Percent of Plans
amounts and do not arbitrarily reduce their contribution rates.
This would only serve to make a difficult situation worse.
However, at the same time, members may want to be realistic in
their expectations for benefit enhancements, including ad hoc
retiree increases.
Employers, in turn, should ensure that their fund
management and actuarial valuations reflect best practices.
Steps toward this goal include:
1 Reviewing actuarial methods and assumptions to ensure
they properly dampen the effect of short-term market
fluctuations. This could include consideration of different
funding methods, lengthening amortization periods, and
conducting an experience study of the plan's demographic and
economic assumptions to align them with plan experience and
future expectations.
1 Reviewing asset allocations to ensure that they properly
reflect market risks and returns. This could include rebalancing
the portfolio and consideration of an asset/liability study to
examine the effect that various investment return scenarios
might have on future contributions.
1 Preparing for external reactions to accounting disclosures.
This may include anticipating the response of taxpayers, bond
rating firms, and other interested parties to the accounting
results. Be prepared to respond to interested parties with clear
and concise explanations.
Conclusions
Even with the recent downturn in the financial markets,
benefits offered through defined benefit plans generally have not
decreased. This has not been the case in defined contribution
plans, where many participants have seen substantial reductions
in their account balances. Defined benefit plan members
generally have fared far better than defined contribution plan
members.
Most importantly, the financial health of the vast majority of
state and local retirement plans remains strong even with the
market declines. Moreover, these declines are one of the events
Exhibit 2: Employer Contributions as a Percent of Covered
Payroll, 1999 and 2002
02
50
40
1
2
10 30
20
0.1.9% 5.0 45% 10. -149%
Employer CoM Rats
15.419.9%
pi 1999
■2002
20,0x*
that actuarial funding is designed to mitigate. While the declines
are unfortunate, they come after a 'sustained period of
abnormally high investment returns.
All interested parties are best served by careful planning and
measured response.
Paul Zorn is director of governmental research and Lawrence F. Wilson,
A.SA., is a senior consultant and actuary for Gabriel Roeder Smith Co.,
in Fort Lauderdale. Reprinted with permission from Quality Cities,
published by the Florida League of Cities, Inc.
APPENDIX D
GRS PUBLICATIONS
News Scan
July /August 2009
GRS Presents Papers at Society of Actuaries' Public Pension Finance Symposium
GRS
Gabriel R L d r Sr ri i th Company
Consultants Actuaries
The following news summaries were developed by Gabriel, Roeder, Smith Company to inform clients and
other benefit professionals of news in the benefits industry. Our thanks to Mary Ann Vitale for her diligent work
on this issue. To receive this publication electronically, send an email to web.adminr&Qabrielroeder.com with
"SUBSCRIBE NEWS SCAN" in the subject line. To stop receiving this publication electronically, send
"UNSUBSCRIBE NEWS SCAN" in the same manner. Copies of this and other benefit related publications are
available on the GRS web site at www.aabrielroeder.com.
Note: The authors of these summaries are not attorneys and the statements made are not legal advice or opinion.
Qualified legal advice should be obtained before acting with regard to related laws and regulations.
On May 18, 2009, Gabriel, Roeder, Smith Company (GRS) presented two papers at the Society of Actuaries'
Public Pension Finance Symposium in Chicago. The symposium was held to discuss different perspectives
among actuaries regarding the application of the "market value of liabilities" (MVL) approach to public pension
plans.
One paper, titled: Actuarial Methods and Public Pension Funding Objectives: An Empirical Examination was
presented by Brian Murphy, Senior Consulting Actuary and President of GRS. The paper was authored by Brian
Murphy along with Norm Jones, GRS's Chief Actuary, and Paul Zorn, GRS's Director of Governmental
Research. This paper examines the degree to which certain actuarial methods satisfy public pension plan funding
objectives by comparing the funding patterns that result from a conventional approach used by most public plans
with patterns that result from the MVL approach.
The comparison was made by applying the two approaches to a modeled public plan based on historical
demographic, economic, and investment data over the period from 1978 to 2008. The paper found that funding
under the MVL approach would likely result in rapid and erratic changes to a public plan's normal costs, accrued
liabilities, funded levels, and contributions due to changes in the MVL discount rate. By contrast, the
conventional approach resulted in measures that were more stable and predictable over time.
Consequently, the authors concluded that the conventional approach is more effective in meeting the funding
objectives of public pension plans. The serious instabilities in the MVL measures would most likely lead to
erratic demands on government resources, possibly resulting in plan terminations or else the abandonment of the
MVL approach as too unstable for state and local governments.
This paper is available at: http: /www.soa.ora /files /Ddf /2009- chicauo -nnf- parer- iones- zorn- murah\.adf
The other paper, titled Revisiting Pension Actuarial Science was presented by Krzysztof Ostaszewski, Actuarial
Program Director and Professor of Mathematics at Illinois State University. The paper was coauthored with
GRS's Jim Rizzo, Senior Consultant and Actuary, and Piotr Krekora, Senior Actuarial Analyst. This paper,
which is presented as a five -part series, evaluates the MVL model for pensions under current financial economics
9/4/09 2009 Gabriel Roeder Smith Company Page 1
theory, proposes an alternate fair value model, and explores the best measures of pension liability for the purposes
at hand The first three parts of the paper find that the current MVL model fails to determine the fair value of
currently accrued public pension benefits in three ways:
1. MVL's use of cash flows based on the accumulated benefit obligation fails to accurately represent the
terms of the employment contract and, therefore, violates principles of labor economics.
2. MVL's use of cash flows as if they were fixed and certain fails to recognize the various risks associated
with future benefit payments, including longevity risks, retirement rates, and inflation. Such risks would
be included in a fair value price to protect against adverse experience; therefore their exclusion violates
principles of actuarial finance and pricing.
3. MVL's use of risk -free discount rates fails to adequately reflect the observable and not -so observable
inputs from market participants' behavior, and therefore violates principles of financial engineering.
Part 4 of the series presents an alternate approach to obtaining the "fair value" of the public sector employer's
pension benefit liability. This was done by modeling a public plan's operation over time in order to determine an
employer's "residual benefit liability." However, even with the improvements and alternative approach, Part 5 of
the series finds that the concept of a fair or market value of public pension liabilities has little or no usefulness in
most venues. Moreover, for purposes of advance funding and financial reporting, such measures may be
misleading.
An introduction to the series is at: http: /www.soa.oru /files /Ddf /2009- chicaao -Duf- paper krekora- intro.pdf.
The entire series is at: http: /www.soa.oru /files /Ddf /2009- chicauo -ppf- paper- krekora.pdf.
The papers served as the basis for testimony by Paul Zorn and Jim Rizzo, repectively, to the Governmental
Accounting Standards Board on August 26, 2009, in response to the GASB's Invitation to Comment on possible
changes in public pension accounting and financial reporting standards.
NCSL Releases Report on State Pension Legislation Enacted in 2009
On August 11, 2009, the National Conference of State Legislatures (NCSL) published its report on the major state
pension and retirement plan legislation enacted in 2009. The report provides a comprehensive and detailed
summary of selected state pension and retirement legislation enacted from January 1, 2009, through July 31,
2009.
Consistent with recent economic events, cost containment and long -term sustainability of defined benefit plans
were significant concerns for state legislatures. Several states established committees to study the future of their
retirement systems. Many states enacted legislation in efforts to manage future pension costs through measures to
reduce benefit packages of newly hired employees, increase employee contributions, enforce mandatory furloughs
without pay, establish early retirement incentives, authorize issuance of pension obligation bonds, and other
benefit changes.
Other policy issues addressed by legislation included: benefit eligibility, contribution rates, funding issues, cost
of- living adjustments, governance and investment policy, health coverage, re- employment after retirement, and
purchase of service credit. The report is organized by topics and summarizes the legislation enacted by state.
The report is on the NCSL website at: http: /www.ncsl.oru ?tabid =17594
Medicare Trustees Release Report on Financial Status of Medicare Funds in 2009
On May 12, 2009, the Medicare Trustees released their annual report on the financial status of the Medicare
funds, which finds the overall status of the funds worsening. According to the trustees, Medicare's long -term
liability, based on a 75 -year actuarial projection, is estimated to be $36.4 trillion. Total annual Medicare
9/4/09 2009 Gabriel Roeder Smith Company Page 2
expenditures, which were $468 billion in 2008 or 3.2% of Gross Domestic Product (GDP), are expected to grow
to 7.3% of GDP in 2035, and 11.4% in 2083. The report also warns that, after 2007, projections of Medicare
expenditures are understated due to projections of substantial reductions in physician payments currently
scheduled under current law, but which are unlikely to occur.
The Medicare program consists of two component programs for the elderly and disabled: Hospital Insurance (HI)
and Supplementary Medical Insurance (SMI). The HI program (Medicare Part A) pays primarily for inpatient
hospital care and is financed by a payroll tax of 1.45% of taxable earnings. The SMI program consists of
Medicare Parts B and D. Part B is a voluntary program that pays for physician, outpatient hospital, home health,
and other services. Part D is a voluntary program providing access to outpatient prescription drug benefits.
Approximately one quarter of the SMI program is financed by beneficiary premiums, with the remainder financed
by transfers from the U.S. Treasury's general fund.
According to the Trustee's report, the financial status of the HI Trust Fund has deteriorated and is projected to be
insolvent in 2017, two years earlier than reported last year. After the HI Trust Fund is exhausted, payroll tax
revenues would cover only 81% of projected HI expenses in 2017, declining to 29% by 2083. The drop in
solvency is due to:
Much lower projected payroll tax income as a result of the recession due to higher unemployment and
slower growth in wages; and
Significantly higher HI expenditures than previously estimated due to increased utilization of services.
The financial outlook for the SMI program is better than the HI program, although rapid expenditure growth
remains a serious issue. For both Parts B and D, revenues are projected to equal expenditures for all future years,
but only because beneficiary premiums and general revenue transfers must, by statute, be increased to meet
expected costs for each year. However, the rapid growth of health care costs is expected to greatly accelerate the
need to finance these benefits.
In an effort to address Medicare's long -teen financial challenges, the Medicare Modernization Act created tools
to warn decision makers about financial pressures on the program, including the "Medicare funding warning."
Under this provision, the annual trustees report is required to include an estimate of the year in which general
revenues will account for more than 45% of Medicare funding. If this is projected to occur within the first seven
years, a determination of "excess general revenue Medicare funding" is required. If this determination is made
over two consecutive years, a "Medicare funding warning" is triggered, requiring the President to respond with
proposed legislation. The 2009 Trustees' Report is the fourth consecutive report that projects that the 45- percent
threshold will be reached within the next seven years, (i.e., 2014.) This triggered a Medicare funding warning for
the third consecutive year.
The report is available on the CMS web site at:
httn: /www.cros hhs uov/RenortsTrustFunds /downloads /tr2009.ndf
Social Security Trustees Issue Report on Status of Social Security Funds in 2009
On May 12, 2009, the Social Security Board of Trustees released its annual report on the program's financial and
actuarial status. Benefit payments and administrative expenses are expected to exceed Social Security's tax
revenues starting in 2016, one year earlier than estimated last year. This will be mostly due to the aging and
retirement of the baby boomers combined with increasing life expectancy.
The report indicates that the interest earned on trust fund assets will initially be sufficient to cover the shortfall,
but beginning in 2024 (three years earlier than estimated last year), government securities held by the trust funds
would need to be redeemed to generate sufficient cash to pay benefits. The report projects that Social Security's
trust fund reserves will be exhausted by 2037, which is four years earlier than estimated last year. Should this
9/4/09 2009 Gabriel Roeder Smith Company Page 3
occur, Social Security would be able to pay only 76% of scheduled annual benefits after 2037, declining to 74%
by 2083. The long -range status over the next 75 years has worsened from last year's projection principally due to
revised economic data, significant near -term effects of the current economic recession, and the longer -term effects
of lower mortality rates.
The report presents Social Security's financing shortfall in dollar terms, as well as in percents of taxable payroll
and gross domestic product (GDP). The projected actuarial deficit in Social Security's trust funds is $5.3 trillion
($1.0 trillion more than estimated last year) when measured over the next 75 years and $15.1 trillion when
measured on a perpetual basis. Expressed in relation to the GDP, the annual cost of Social Security benefits is
projected to increase from 4.8% of GDP in 2009 to 6.1% in 2030, and decline to 5.8% in 2083. In the 2009
report, changes were made to several assumptions reflecting near -term economic growth and ultimate mortality in
addition to other changes affecting Social Security's financial condition. The net result of these changes was to
increase the 75 -year actuarial deficit from 1.70% of taxable payroll in 2008 to 2.00% in 2009.
Under current law, Social Security's annual cost will likely grow faster than the program's income due to the
aging of the baby -boom generation, continuing low fertility, and increasing life expectancy. However, the report
indicates that the program could remain solvent throughout the 75 -year projection period, if one or more of the
following changes were made:
Immediately raising the combined employee employer payroll tax rate by 2.0 percentage points from the
current 12.4% to 14.4
Immediately reducing benefits for all current and future recipients by 13.0% on a permanent basis; or
Adopting some combination of these approaches.
If no action is taken until the trust funds are exhausted in 2037, the following changes would keep the program
solvent for the 75 -year period:
Raising the combined employee employer payroll tax rate from the current 12.40% to 16.26% in 2037
and to 16.74% by 2083; or
Reducing benefits for recipients by 24% in 2037, and by 26% in 2083.
The report also indicated that Social Security's solvency beyond 2083 would likely require further changes due to
the increasing average age of the population. The trustees urged that the trust fund deficits be addressed soon in
order to gradually phase -in the necessary changes and protect future generations.
The report is available at: httn://www.ssa.aov/OACT/TR/2009/tr09.ndf
EBRI Examines Public Pension Plan Asset Allocations
In April 2009, the Employee Benefit Research Institute (EBRI) published its monthly newsletter, EBRI Notes,
featuring an article titled "Public Pension Plan Asset Allocations." The article examines:
Public pension plan funding sources from 1997 to 2007;
Public pension plan asset allocations from 2003 to 2007; and
The effects of public plan investment performance on employer contributions.
As discussed in the article, public pension funding comes from three sources: employer (taxpayer) contributions,
employee contributions, and investment earnings. Over the period from 1997 to 2007, annual investment
earnings made up over 70% of all funding sources. As a result of this reliance on investment earnings, the 2008
investment losses have lowered the funding status of many public plans. However, most plans smooth annual
investment gains and losses into the actuarial value of assets over several years to help control the volatility of
contributions.
9/4/09 2009 Gabriel Roeder Smith Company Page 4
The article also discusses whether public plan sponsors are likely to change their investment policies in order to
reduce investment volatility, for example by matching the duration of their liabilities with fixed- income securities.
However, the article finds this is unlikely, mainly because:
1. Duration matching with fixed- income securities would likely lead to lower investment returns, since
fixed- income investments generally have lower returns than equity investments;
2. Asset allocations containing seucrities with higher risks (e.g., equities) are expected to earn investment
income that would not be earned under more conservative approaches;
3. A high expected rate of return can be used as a discount rate to evaluate pension liabilities; and
4. Pension plan investment professionals tend to adhere to peer group investment policies that abide by the
"prudent person" fiduciary standards.
The article concludes that if the current economic challenges indicate permanent changes in future expected
returns, then public plans may adjust their investment policies to either raise or lower expected return. This, in
turn, could result in changes in actuarial discount rates and possibly require higher or lower contributions.
The article is available at: httn:/ /ebri.com /ndf /notesndf/EBRI Notes 04- Aor09.PblcPnsPlnsl.udf
EBRI Finds Social Security Payments Provided Nearly 40% of Elderly Income in 2007
In May 2009, the Employee Benefit Research Institute (EBRI) published an article in EBRI Notes that examines
the sources of income for individuals age 65 and over in 2007. Based on data from the U.S. Census Bureau's
March 2008 Current Population Survey, the analysis shows that Social Security was the largest source of income
for the older population in 2007, accounting for almost 40% of their income on average. The remaining sources
included pension and annuity income (19% of average income), asset income (16 and work related earnings
income (25 Almost 90% of all individuals age 65 and over received income from Social Security, while 53%
received income from assets, 34% received income from pensions and annuities, and 20% received income from
work- related earnings.
EBRI also reported that median income of persons age 65 and over increased from $13,311 in 1974 to $17,898 in
2007. Over the same period, average (mean) income for this group increased from $18,782 to $29,214.
Additionally, EBRI studied income composition based on income group, age, marital status and gender. In 2007,
the lowest- income group (with annual income of less than $8,339) derived 89% of its income from Social
Security. By comparison, the highest- income group (with annual income of greater than $37,062) derived 17%
from Social Security.
The oldest age group (age 85 and over) received a greater share of total income from Social Security than the
younger age group (ages 65 -69). In 2007, individuals age 85 and over received 54% of income from Social
Security compared to 28% for those ages 65 -69. The younger age group received a larger amount of total income
from work related earnings. In 2007, those ages 65 -69 derived 40% of income from work related earnings
compared to 7% of those age 85 and over.
In 2007, nonmarried individuals derived a greater share of income from Social Security (46 than married
individuals (34 and a significantly smaller amount from work related earnings (18% for nonmarried compared
to 30% for married). Also, 46% of elderly women received income from Social Security, compared with 33% of
elderly men.
The article is accessible at: httn: /www.ebri.oru /ndf /notesndf/EBRI Notes 05- Mav09.CstShra- IncEld.ndf
9/4/09 2009 Gabriel Roeder Smith Company Page 5
AARP Urges Congress to Close Medicare Part D Coverage Gap
On May 21, 2009, AARP Legislative Policy Director David Certner indicated during a policy briefing that the
organization will continue to urge Congress to pass legislation to close the Medicare Part D coverage gap, known
as the "doughnut hole." The coverage gap requires many beneficiaries to pay 100% of their prescription drug
costs as well as premiums between the end of the initial coverage period (where beneficiaries pay 25% of their
drug costs) and the catastrophic threshold (limiting beneficiaries' spending to about 5% of their drug costs).
However, since closing the coverage gap would cost nearly $134 billion over 10 years, AARP would support
either narrowing or phasing out the gap over time.
The coverage gap is triggered when annual prescription drug spending for an individual covered by Medicare Part
D reaches a certain level, which changes each year. As illustrated in Figure 1 below, the standard Part D benefit
in 2009 has a $295 deductible and 25% coinsurance up to an initial coverage limit of $2,700 in total drug costs.
Then after reaching the coverage gap, enrollees pay 100% of their drug costs between $2,700 and $6,154. After
reaching the out -of- pocket limit, catastrophic coverage will cover 95% of all additional drug costs and enrollees
pay a 5% copay and Part D plan premiums.
Figure 1
Standard Medicare Prescription Drug Benefit, 2009
Enrolee Pays 5%
PI= Pays 153/4
Yeiore Pays 80%
Farina Pays 100%
Enrolee Pars 753/4
PI= Pars 753/4
1
S.44 Coverage Gap
(Doughnut Hole)
$6,151 Total Drag C.sb
($4,350Mt d
12,700: T.blDreg C.ab
sat d!"am')
1 ',295Ddadile
Over 26 million Medicare beneficiaries obtain prescription drug coverage through Medicare Part D. Each year,
about 3 million beneficiaries fall into the coverage gap. Since the Medicare prescription drug bill became
effective in 2006, the doughnut hole has risen from $2,850 to $3,454 in 2009, an increase of 21 By 2016,
AARP projects that the coverage gap will almost double, increasing to more than $6,000.
Certner warned that the coverage gap is widening very quickly due to rising annual drug spending based on
increasing drug costs, drug utilization, and therapy mix. Furthermore, a 2009 AARP Public Policy Institute report
found that this trend is problematic since the overall average price increase in prescription drugs commonly used
by Medicare Part D beneficiaries outpaced inflation in 2008.
AARP suggested other options for closing the coverage gap which include: 1) basing the increase on CPI rather
than beneficiary drug spending or 2) capping the gap rather than allowing annual increases. AARP has also noted
that closing the gap could reduce preventable hospitalizations, thereby easing the financial burden on both
Medicare and many beneficiaries.
Additional information is available from AARP at:
htta: /www.aaro.ora/ research /DDi/ health care /medicare /articles /fs medicare aao.html
9/4/09 2009 Gabriel Roeder Smith Company Page 6
Ca1PERS Reports Average Health Premiums to Rise 2.9% in 2010, Lowest in 14 Years
On June 17, 2009, the California Public Employees' Retirement System (CalPERS) announced an overall
increase of 2.9% in health care premiums in 2010, down from 4.3% in 2009. The projected premium rate increase
would be the lowest in 14 years. Typically, changes in premium rates negotiated by Ca1PERS serve as indicators
of future health insurance cost trends.
For fiscal year 2010, the Ca1PERS' Board of Administration approved individual plan increases of 3.4% for basic
health maintenance organization (HMO) plans and 3.3% for basic preferred provider organization (PPO) plans.
Premiums for correctional and peace officers are projected to grow by only 1% from 2009 while members
covered by Medicare plans will have an average increase of 1.1 In 2009, Ca1PERS raised its HMO rates by
6.6 which was the lowest increase in six consecutive years, while PPO premiums remained unchanged.
Ca1PERS reported that their cost management efforts resulted in over $600 million in premium savings and
helped to avoid rate increases projected at nearly 9.0 Their efforts included:
New plan options with lower premiums but higher copayments for office visits, prescriptions and
deductibles;
Lower utilization of health care services, but higher consumption of generic drugs by members and their
families;
Effective negotiations by Ca1PERS staff with proactive health care management by health plans; and
Strategic cost reductions that resulted in better health outcomes, such as promoting health and disease
management programs and eliminating high -cost hospitals from its networks.
Ca1PERS is the third largest purchaser of health care in the U.S. and covers over 1.3 million public employees,
retirees, and dependents. In fiscal year 2010, Ca1PERS expects its health care spending to total between $5.7
billion and $6.0 billion.
More information is available on Ca1PERS' web site at:
http: /www. caloers. ca. uov /index. i sp ?bc about /Dress /Dr- 2009 /iune /lowest- health- rates.xml
Survey Finds Financial Crisis Causing Plan Sponsors to Change Plan Design and Retirement Coverage
In May 2009, the International Foundation of Employee Benefit Plans (IFEBP) conducted a survey on the impact
of the financial crisis on pension plans, with responses received from over 1,300 members of the International
Foundation and Certified Employee Benefit Specialist (CEBS) Program. The survey report, Pension Plans:
Impact of the Financial Crisis, is the second in a series designed to gather information at six -month intervals
about the short-term and ongoing impacts of the economic recession. According to the survey, sponsors of both
defined benefit (DB) and defined contribution (DC) plans have been compelled to make changes in plan design
and retirement coverage.
The survey found that some DB plan sponsors (mainly corporate sponsors) have implemented major changes,
with 27% discontinuing pension benefits for some or all employees and 21% closing their plan to new
participants. The survey also found that 42% of DB plan sponsors have made changes to their strategic asset
allocation, up from only 20% six months earlier. In addition, 36% of public employers reported making asset
allocation changes compared to only 13% in the earlier survey. Overall, the most common changes included:
37% increased fixed income assets;
17% reduced U.S. equity allocations; and
13% increased alternative fund investments.
9/4/09 2009 Gabriel Roeder Smith Company Page 7
Of the DC plan sponsors, 13% have changed their investment product offerings due to the financial crisis, up
from only 7% six months earlier. Of those making such changes, 21% added low -risk investment options, 18%
increased diversification, 16% added target -date or money market funds, and 15% added government- backed
options. Moreover, 16% have reduced or eliminated employer matches for DC plans. Of those who changed
their match (mostly corporations), 44% reduced the match and 52% suspended it.
Due to the financial crisis, many DC plan sponsors (44 reported a decrease in employee contributions. About
40% reported their employees have completely stopped making contributions. Additionally, 42% reported an
increase in hardship withdrawals compared to 29% in the previous survey. DC plan loans have also increased
with 40% of respondents reporting an increase compared to 28% six months earlier.
As the economic downturn continues, plan sponsors indicated their employees are primarily concerned about:
Decreased job security (48
Delayed retirement (38
Reduced employer- sponsored retirement benefits (26
Underfunded retirement plans, mostly in multiemployer and public plans (22 and
Reduced health care benefits (16% and even higher for public employees at 28
Importantly, the respondents indicated that employees' views about the severity of the financial crisis were
directly correlated with the plan type. Specifically, 47% of DC plan sponsors reported their employees viewed
the ongoing downturn as severe compared with 23% of DB plan sponsors. In the previous survey, 31% of DC
plan sponsors and 19% of DB plan sponsors reported their employees viewed the long -term financial impact as
severe.
The survey respondents mainly serve as managers, directors, administrative executives, trustees, and professional
advisors. Various employee benefit sectors were represented including corporate plans (52 multiemployer
plans (30 public and governmental plans (17 and other types of plans (1 Of the public sector
respondents, 33% represented municipalities while 27% represented states and 24% represented counties.
Further information is available at: httn: /www.ifebn.oru /AboutUs /PressRoom/Releases /nr 051309.htm
Retiree Health Care Survey Finds States' Unfunded OPEB Liabilities Total Nearly $558 Billion
On July 15, 2009, the Center for State and Local Government Excellence released its report, At a Crossroads: The
Financing and Future of Health Benefits for State and Local Government Retirees. The report contains a broad
assessment of the other postemployment benefit (OPEB) liabilities in all 50 U.S. states and over 2,100 local
governments. Key highlights include:
The estimated aggregate unfunded liabilities for states' retiree health care are about $558 billion.
Nearly all states (92 provide some type of retiree health benefit plan, but differ greatly based on plan
design, coverage, and unfunded liabilities.
A majority of states have created a health care purchasing pool to provide uniform benefit levels for
active and retired members. Some have also included city and county governments to offer the financial
benefits of a large purchasing pool to negotiate lower prices.
In many governmental plans, OPEB unfunded actuarial accrued liabilities are large, both in absolute value
and relative to total state expenditures, debt, and state personal income.
Total unfunded retiree health care liabilities differ substantially based on size of workforce, plan design,
and portion of employer -paid health care costs.
9/4/09 2009 Gabriel Roeder Smith Company Page 8
Most governmental plans have implemented cost containment and cost sharing policies which include
retiree contributions for health care premiums, higher deductibles, higher copayments, and lower benefits
for future retirees.
Many governmental plans are considering changing age and service eligibility requirements for retiree
health care.
Although preventive medicine and wellness programs have become more popular, their use remains
limited.
Traditionally, state and local governments have financed retiree health care on a pay -as- you -go basis. Currently,
GASB Statement No. 45 requires state and local governments to report their OPEB liabilities. About 28% of
states anticipate adopting a governmental trust (established under Internal Revenue Code 115) to fund retiree
health care obligations in the future.
In addition to approaches for funding retiree health care liabilities, the survey examines cost containment and cost
reduction strategies. Some of the different strategies used by states and localities to address their liabilities are
shown in the following table:
Strategy
Partially or Fully Funding Retiree Health Care
Implementing Cost Containment Strategies
Auditing Health Care Costs
Increasing Cost Sharing with Members
Providing Wellness Programs
The report is accessible at: http: /tinvurl.com /atacrossroads
State
32%
64% (avg.)
53% (avg.)
52% (avg.)
42% (avg.)
Survey Shows Public Employees Delaying Retirement Due to Economic Downturn
Localities
16%
27% (avg.)
18% (avg.)
27% (avg.)
16% (avg.)
The report concludes that, as a general principle, a multi- pronged approach to managing OPEB liabilities is the
most effective course of action. The report also provides a short description of each state's retiree health plan.
Additional information is included on a state -by -state basis regarding eligibility requirements, actuarial report
summaries, and estimates of OPEB unfunded liabilities as well as detailed comparisons of premiums, dependent
coverage and Medicare enrollment.
On May 13, 2009, the Center for State and Local Government Excellence released its survey report, A Tidal Wave
Postponed: The Economy and Public Sector Retirements. Based on responses from human resource and state
personnel executives, the survey indicates that state and local government employees are delaying retirement due
to the economic downturn. Approximately 80% of the respondents reported that the economy is affecting the
timing of retirements, with the vast majority indicating their employees are delaying retirement. A smaller
proportion reported their employees are accelerating retirement to avoid benefit changes or are taking early
retirement.
On the bright side, as a result of the delayed retirements, 62% of the respondents indicated they will have more
time to transfer knowledge from departing employees, 51% will have more time to find replacements, and 49%
will have more time to mentor younger employees. However, 38% reported they cannot make the changes as
quickly as desired, 36% cannot hire new workers with necessary skills, and 21% may have to institute early
retirement incentives. Furthermore, 60% of the respondents indicated their state governments are instituting
layoffs, with almost 40% based entirely on seniority. By comparison, over 40% in local governments are
instituting layoffs, with 43% based solely on seniority.
The Center for Excellence also reported that data from the U.S. Census Bureau indicate more than 33% of public
employees are age 50 and over. Workforce planning now may help governments prepare for when employees
9/4/09 2009 Gabriel Roeder Smith Company Page 9
retire. However, only 39% of the total respondents have a formal workforce development plan. Of those with a
plan in place, about 30% have made workforce changes based on their plan, while about 50% have not made any
changes.
The survey results were based on 460 respondents from among over 5,100 members of the International Public
Management Association for Human Resources (IPMA -HR) and the National Association of State Personnel
Executives (NASPE).
The survey is available at:
http: /www.slae.orn /vertical /Sites %7BA260E IDF- 5AEE -459D -84C4-
876EFE1E4032 %7D /uploads/% 7B06A0B8DA- 1B4A- 47B2- A4AC- 5ADA42B4612F %7D.PDF
Citizens Research Council Reports on Michigan Government Retirement Systems
On July 13, 2009, the Citizens Research Council of Michigan (CRC) released its report, Michigan State and Local
Government Retirement Systems. The report includes 138 state and local pension systems in Michigan covering
about 450,000 active members and 300,000 beneficiaries. It provides detailed information for several major
pension systems, compares key measurements to national averages, and explores possible effects of the economic
recession on public defined benefit plans and state and local governments.
In 2007, over 2,500 U.S. state and local government pension plans distributed nearly $163 billion in benefits to
7.5 million retirees, disabled members and beneficiaries. The national average annual benefit was $20,800 for
state and local retired members. According to data from the U.S. Bureau of Labor Statistics, 84% of state and
local government workers had access to a defined benefit (DB) plan compared to only 22% of private sector
workers. The CRC reported that over the last 10 years, 12 states have offered defined contribution (DC) plans.
Of these states, only Michigan and Alaska require all new hires to participate in the DC plan.
As discussed in the CRC report, Michigan is one of only five states with more than 100 state and local
government retirement systems. It is one of nine states with a constitution that guarantees pension benefits earned
by state and local government employees cannot be eliminated or diminished. Also, Michigan is one of 14 states
in which the constitution provides funding standards for retirement systems.
As of April 2009, there were over 640,700 public- sector employees in Michigan's workforce. In fiscal year 2006-
2007, Michigan's state and local government retirement systems had assets totaling $105 billion. However, initial
financial reports for some of the state's largest retirement plans have estimated investment losses of 20 -25% in
asset values for fiscal year 2008. The immediate impact of the investment losses on contribution rates may be
mitigated by using smoothing methods to recognize gains and losses over a period of years and amortization of
unfunded accrued liabilities over up to 30 years. Although public pension plans are focused on long -term
investment returns, recent losses due to the economic downturn will likely change the policies and practices of
federal, state and local governments.
The report is accessible at: httn: /www.crcmich.oru /PUBLICAT /2000s /2009 /rot356.odf
9/4/09 2009 Gabriel Roeder Smith Company Page 10
Visit the GRS website at:
www.gabrielroeder.com
In This Issue
The GASB's Invitation to Com-
ment presents the conceptual
framework that the GASB will
use to evaluate potential changes
in accounting and reporting stan-
dards for public pensions and
possibly other postemployment
benefits.
To respond effectively, it is im-
portant to understand the GASB's
framework and to address the
issues raised.
These discussions will likely play
a significant role in shaping state
and local government pensions
and other postemployment ben-
efits for at least the next decade.
GRS Insight is published by Gabriel, Ro-
eder, Smith &Conrpanil. The information
provided is not intended as legal, incorne
tax, 01 investment advice or opinion.
Articles attributed to individuals do not
necessarily reflect the views of GRS as an
organization.
GRS
The GASB's Invitation to
Comment on Pension Accounting
and Reporting Standards
By Paul Zorn, Director of Governmental Research'
Gabriel, Roeder, Smith Company
May 2009
On March 31, 2009, the Governmental Accounting Standards Board
(GASB) issued its Invitation to Comment (ITC) on potential changes
in accounting and financial reporting standards related to public pen-
sions. The ITC is an early step in the GASB's project to review these
standards, and is intended to encourage comments from interested
parties before the GASB begins its formal deliberations. Written com-
ments are due to the GASB by July 31, 2009, and a public hearing is
scheduled during the Board's regular meeting on August 26, 2009.
This article summarizes the ITC, along with various arguments
suggested in the ITC for and against potential changes to the
standards. However, the article does not provide a detailed
evaluation of the arguments, which will be done in a separate paper.
Basically, the ITC requests comments on the following questions:
Should accounting and reporting standards for state and
local government pensions be focused on the process by
which the benefits are financed? On the process by which
the benefits are incurred? Or both?
What should the measures of pension expense and liability
be for governmental employers participating in defined
benefit pension plans?
The author wishes to thank Norman Jones, Brian Murphy, Chris Conradi, and Mary Ann
Vitale at GRS, and Stephen Gauthier at the Government Finance Officers Association for
their helpful comments on an earlier draft of this article. However, the author retains full
responsibility for the accuracy of the information provided.
While the ITC presents arguments for and against proposed changes in accounting stan-
dards, these arguments do not necessarily reflect the GASB's position. Rather they sum-
marize positions presented to the GASB during its research on the potential changes.
2009 Gabriel Roeder Smith Company
2 GRS Insight 5/09
What actuarial cost method should be used
to determine the employer's "unfunded
accrued benefit obligation What discount
rate?
Should a range of actuarial cost methods
be allowed for determining the unfunded
accrued benefit obligation? Should the
unfunded obligation be immediately
recognized or amortized over future
periods? Should asset smoothing be
allowed?
Are cost sharing multiple employer pen-
sion plans sufficiently different from single
employer and agent multiple employer
plans to warrant different accounting
and reporting standards for participating
employers?
Should state and local pension plans
recognize the accrued benefit obligation
in their financial statements? Should they
provide an annual statement of changes in
the unfunded accrued benefit obligation?
Project Objectives and Evaluation Criteria
The ITC is presented in seven chapters. The first
chapter provides background information on the
project, including its objectives and the key criteria
used to evaluate potential changes. The project's
primary objective is to comprehensively reexamine
the accounting and financial reporting standards
for state and local government pensions and other
postemployment benefits.' To do this, the GASB
will review the standards presented in GASB State-
ments 25 and 27, published in 1994, and amended
by Statement 50 in 2007. In evaluating alternative
accounting and reporting approaches, the GASB
will consider the following criteria.
The ITC specifically addresses pension benefits. However, be-
cause the GASB sees pension benefits as conceptually similar to
retiree health care and other postemployment benefits (OPEB), the
decisions related to the pension standards will likely play an im-
portant role in the decisions related to the OPEB standards.
4 The criteria are further discussed in GASB Concepts Statements
1 and 4.
2009 Gabriel Roeder Smith Company
Accountability. This is considered the primary
objective of governmental accounting and finan-
cial reporting, and stems from the duty of public
officials to provide constituents with an accurate
accounting of financial transactions.
Decision Usefulness. This reflects the extent to
which financial reports provided users with the
information they need to make informed deci-
sions. Governmental report users reflect a broad
range of stakeholders, including: citizens, legisla-
tive and oversight bodies, investors and creditors,
plan members and beneficiaries, plan trustees, and
others. Related decisions include: determining
the size of pension benefits and total compensa-
tion offered to employees; evaluating the cost of
benefit changes; funding the benefits; determining
the plan's funded status and progress; assessing
the employer's overall economic condition and
credit worthiness; determining the overall cost of
government services; and allocating plan assets for
investment purposes.
Interperiod Equity. Another criterion is how well
the financial information helps report users evalu-
ate interperiod equity. As discussed in the ITC,
interperiod equity is achieved when the costs of cur-
rent services are borne by current taxpayers rather
than shifted to future taxpayers. However, the ITC
also notes that interperiod equity is "not a goal that
is expected to be met for any period of time," but is
"a relevant metric to assess accountability."'
Comment: In GASB Statement 27, interpe-
riod equity is considered achieved when
annual contributions for normal costs are
determined as a level percent of payroll over
time. More recently, however, some have
argued that leveling pension costs as a per-
cent of payroll does not allocate the current
pension cost for service to the current year
and, therefore, does not reflect interperiod
GASB Concepts Statement No. 4, paragraph 27.
GASB Statement 27, paragraph 97. "The level contribution design
facilitates budgeting of pension contributions and is consistent
with the budgetary concept of intergenerational equity in terms of
the burden on citizens."
GRS Insight 5/09 3
equity. This difference in focus is a key fea-
ture in the debate over pension accounting
and reporting standards.
Current Pension Accounting and Reporting
Standards for Governmental Employers
Most of the ITC examines accounting and reporting
standards for employers participating in single
employer or agent multiple employer public pen-
sion plans.' Essentially, these employers are solely
responsible for funding the benefits promised to
plan members.
Generally, accounting and reporting standards es-
tablish how financial transactions are defined and
measured (e.g., what constitutes an "expense" or
"liability and where the measures are displayed
in financial reports (e.g., in the financial statements,
notes to the financial statements, or as required
supplementary information). Before discussing
the ITC, it would be useful to briefly review the
GASB's current accounting and reporting standards
for such employers.
Current Governmental Standards. Under cur-
rent standards, pension accounting measures are
closely related to pension financing measures.
The employer's pension expense is the employer's
"annual pension cost" determined using the same
actuarial methods and assumptions that are used to
fund the plan. The annual pension cost consists of
the employer's annual required contribution (ARC),
plus certain adjustments if the employer has con-
tributed more or less than the ARC over time. The
ARC, in turn, is the actuarially determined cost of
benefits earned in a given year (the "normal cost
plus the amortization of any unfunded actuarial
accrued liabilities over time.'
As the name implies, a single employer plan is a plan sponsored
by a single employer. An agent multiple employer plan is a col-
lection of single employer plans that are administered together.
In either case, the employer is solely responsible for funding the
benefits promised to its plan members. By contrast, a cost- sharing
multiple employer plan spreads the benefit costs among multiple
employers.
While the ARC may not be less than zero, the standards do not
otherwise require a minimum ARC.
2009 Gabriel Roeder Smith Company
The GASB standards set certain constrains on the
actuarial methods and assumptions that can be
used, including:
Six actuarial cost methods are acceptable.
For the most part, in determining the annual
normal cost of benefits, these methods
include projected future salary and future
service.'
The assumed rate of investment return
must reflect the long -term expected return
on the plan's investments. This rate is also
used as the discount rate to determine the
present value of plan liabilities.
The period for amortizing unfunded
actuarial liabilities is limited to 30 years.
The actuarial value of plan assets must be
market- related; however, investment gains
and losses may be averaged over time to
smooth the impact of investment volatility
on the plan's funded levels and contribution
rates.
The employer's pension liability, if any, is the dif-
ference between the employer's annual pension
cost and the employer's actual contributions to the
plan, accumulated over time. In essence, it reflects
the difference between the employer's actuarially
required contributions and actual contributions.
This liability is referred to as the "net pension ob-
ligation" (NPO) and is reported in the employer's
financial statements.
The current standards also require employers
participating in single- employer and agent plans
to report extensive information about the plan in
the employer's annual financial report. This in-
formation is disclosed in the notes to the financial
statements and includes (but is not limited to): a
9 The six acceptable actuarial cost methods are entry age, frozen
entry age, attained age, frozen attained age, aggregate and pro-
jected unit credit. A seventh method, the unit credit cost method,
excludes both projected future salary and service. Under current
GASB standards, the unit credit method is only acceptable for
plans in which accumulated benefits are not affected by future sal-
ary levels. (GASB Statement 27, footnote 8)
4 GRS Insight 5/09
description of the plan; annual required contribu-
tions; actual contributions; actuarial value of plan
assets; actuarial accrued liability; funded status;
and related actuarial methods and assumptions.
Private Sector Standards. By contrast, private
sector accounting standards primarily focus on
the process by which the employer incurs a pen-
sion obligation as a result of employee service to
date. As established by the Financial Accounting
Standards Board (FASB), private- sector standards
allow only one actuarial cost method to be used
for accounting purposes, compared with the six
actuarial methods allowed by the GASB.
In determining the pension cost, the FASB stan-
dards limit the maximum amortization period to
the expected remaining service period for active
employees, compared with 30 years under the
GASB standards. In determining the pension liabil-
ity, the FASB standards use the unfunded projected
benefit obligation and recognize it in the employer's
financial statements. Under the GASB's rules, the
employer's unfunded obligation is disclosed in
the notes to the financial statements, but not in the
financial statements themselves.
The Focus of Public Pension Accounting and
Financial Reporting
In discussing potential changes to current stan-
dards, the ITC begins by providing a broad concep-
tual framework and then progressively narrows the
discussion to address various details. The GASB
starts by asking:
What should be the focus of pension
accounting and reporting for state and
local government employers participating
in single employer and agent plans?
What processes and transactions associated
with the pension benefits should be
10 FASB Statements 87 and 158 require the projected unit credit
method, which produces a "projected benefit obligation" reflecting
the cost of benefits eamed to date, including projected future salary
but excluding projected future service.
2009 Gabriel Roeder Smith Company
measured and reported in the employer's
annual financial reports?
Chapter 2 of the ITC discusses the two different
ways of viewing pensions from an accounting and
reporting perspective. The first is by focusing on
the process through which the employer finances
the benefits (referred to the "Financing Focus
The second is by focusing on the process through
which the employer incurs an obligation for ben-
efits as a result of employee's service (referred to
here as the "Incurrence Focus The ITC requests
comments on whether governmental accounting
and reporting standards should focus on one or
the other of these processes, or both.
Financing Focus. The GASB's standards essentially
use the financing focus. This has been a long- stand-
ing focus of pension accounting, even before the
GASB was established. For example, private- sector
accounting principles established in 1966 provided
that pension costs should be related to the actuarial
costs of funding the benefits. In 1979, the GASB's
precursor organization issued a standard applying
the 1966 principles to determining public pension
expenses and liabilities. In 1994, GASB Statement
27 called for the pension cost to be determined us-
ing the same actuarial cost method as used to fund
the plan. As discussed in the ITC, there are several
arguments for and against the financing focus, a
few of which are presented below.
Arguments For the Financing Focus
It harmonizes pension accounting with actuarial
funding.
It provides a measure of the employer's pension cost
that reflects the on -going nature of governments.
It reflects total pension costs while mitigating the
impact of short -term fluctuations.
"Accounting Principles Board (APB), Opinion 8, Accounting for the
Cost of Pension Plans, 1966. Generally, under Opinion 8, the cost of
pension benefits should reflect the actuarially determined contri-
butions needed to fund the plan.
12 National Council on Governmental Accounting, Statement 1,
Governmental Accounting and Financial Reporting Principles, 1979.
Footnote 8 calls for governmental pension plan expenses and li-
abilities to be recognized in conformity with APB Opinion 8.
GRS Insight 5/09 5
Arguments Against the Financing Focus
It does not provide specific information about the
cost of benefits earned to date.
It does not provide specific information about the
current pension cost for service in the current year,
since it levels contribution rates over time.
Incurrence Focus. From this perspective, pen-
sions and other postemployment benefits are part
of an exchange transaction between the employer
and employees related to total compensation. As
employees earn benefits by virtue of their service,
the employer incurs an obligation for the benefits
earned to date. This approach is fundamentally
different from the financing focus, since it would
exclude pension costs associated with future service
and possibly future salary.
Arguments For the Incurrence Focus
It focuses financial reporting on the exchange
transaction.
It reflects the employer's current position by
measuring the liability for unfunded benefits earned
to date.
It provides useful information related to employee
compensation decisions.
Arguments Against the Incurrence Focus
It would inappropriately apply a short -term
perspective to an on -going entity.
It could introduce misleading volatility into the
measurements.
The financing focus is more consistent with public
pension funding and current GASB standards.
Comment: To evaluate the arguments for or
against possible changes in the accounting
standards, the specific actuarial methods
and assumptions would need to be defined.
The use of certain methods and assumptions,
especially with regard to the discount rate,
could affect the results in a way that under-
mines the standard's intended objectives.
2009 Gabriel Roeder Smith Company
Determining the Employer's Pension Liability
and Expense
Chapter 3 of the ITC asks what quantities a gov-
ernmental employer in a single employer or agent
plan should recognize as the "pension expense"
and "pension liability" in its financial statements.
As background, the ITC presents the following
definitions:
An obligation is "a social, legal, or moral
requirement such as a duty, contract, or
promise that compels one to follow or avoid
a particular course of action."
A liability is a present obligation requiring
"a duty or responsibility to sacrifice
resources that the government has little or
no discretion to avoid." The ITC notes that
an obligation generally becomes a liability
when it is legally enforceable, such as in an
exchange transaction.
An expense is "a consumption of net assets
by the government that is applicable to
the reporting period."
The GASB draws a distinction between amounts
"recognized" in financial statements and amounts
"disclosed" in the notes to the financial statements.
To be recognized in financial statements, an item
must be both: (1) an element of financial statements
(e.g., an asset, liability, revenue, expense, etc.) and
(2) measurable with sufficient reliability. The ITC
discusses three alternative approaches to recogniz-
ing the pension expenses and liabilities of govern-
mental employers participating in single employer
and agent plans.
Alternative 1. The first alternative is the current
approach, under which the employer's pension ex-
pense is the annual pension cost and the employer's
pension liability is the net pension obligation.
In addition, there are "constructive liabilities," which are created
as a result of the government's conduct rather than a legal require-
ment, provided there is little or no discretion to avoid sacrificing
resources.
6 GRS Insight 5/09
Both the pension cost and pension liability are
recognized in the employer's financial statements.
However, the employer's "unfunded accrued ben-
efit obligation" is not recognized in the financial
statements, but rather is reported in the notes to the
financial statements. As used in the ITC, the term
"unfunded accrued benefit obligation" is intended
to describe the employer's obligation for pension
benefits attributable to past periods of service, but
is not intended to imply a specific funding meth
odology.
Arguments For Alternative 1
The measure of pension expense accurately reflects
the total cost of pensions over the long -term.
The net pension obligation is a useful measure of
the liability.
The unfunded accrued benefit obligation should
not be used as the liability, since it is based on
assumptions about future events and so would not
be measured with sufficient reliability.
Arguments Against Alternative 1
The unfunded accrued benefit obligation better
meets the conceptual definition of liability and is
measurable with sufficient reliability to warrant
recognition.
By deferring the recognition of past service costs,
Alternative 1 does not provide useful information
about interperiod equity.
Comment: As discussed earlier, arguments
offered for and against the proposed alter-
natives can only be evaluated after the ap-
proaches are fully defined. As presented,
the methods and assumptions related to
the unfunded accrued benefit obligation
14 Unfortunately, this term is very similar to the teen "unfunded
accumulated benefit obligation" which implies the unit credit cost
method. Consequently, if the term "unfunded accrued benefit obli-
gation" is used in the standards resulting from this project, signifi-
cant confusion could result.
2009 Gabriel Roeder Smith Company
are undefined. Consequently, it is difficult
to evaluate the validity of the related argu-
ments.
Alternative 2. Under the second alternative, the
employer's pension liability would be the employ-
er's unfunded accrued benefit obligation and the
employer's pension expense would be the change
in the employer's unfunded accrued benefit obli-
gation each year. Both would be recognized in the
employer's financial statements.
Arguments For Alternative 2
It reflects the effects of the employment exchange on
the employer's pension liability.
The unfunded accrued benefit obligation meets the
conceptual definition of a liability.
Arguments Against Alternative 2
It could result in financial statement volatility that
is not relevant to government employers.
Using different measures to determine the
accounting liability and funding liability would
create confusion among financial report users.
Alternative 3. This alternative brings together
elements of the first two alternatives. It would
recognize the unfunded accrued benefit obligation
as the employer's pension liability in the financial
statements. In addition, it would recognize the
employer's normal cost as the measure of expense.
However, it could also allow for certain end -of -year
adjustments that would amortize and defer com-
ponents of the unfunded accrued benefit obligation
applicable to future periods.
Arguments For Alternative 3
It would allow amortization of costs related to future
periods while immediately recognizing certain costs
related to past periods.
GRS Insight 5/09 7
It offers common ground between Alternatives 1
and 2.
Arguments Against Alternative 3
Supporters of Alternative 1 argue that the unfunded
accrued benefit obligation should not be recognized
as the liability.
Supporters of Alternative 2 argue that deferring any
costs associated with past periods is inconsistent
with interperiod equity.
Measuring the Unfunded Accrued Benefit
Obligation
Chapter 4 examines possible ways of measuring the
unfunded accrued benefit obligation for financial
reporting purposes. Specifically, it asks:
Should projected futurechanges beincluded
in the unfunded accrued benefit obligation
(e.g., cost -of- living adjustments (COLAs),
salary increases, and service credits)?
What discount rate should be used to
determine the present value of benefits?
Should it be the long -term expected return
on plan investments, the "risk free" rate, or
some other rate?
For funding purposes, the vast majority of actu-
arial valuations for public pension plans include
projections of future salary and service, as well as
automatic COLAs. This is done to calculate normal
costs that, to the greatest extent possible, remain a
level percent of payroll over time. This helps the
government allocate total pension costs over cur-
rent and future taxpayers as an approximately level
percentage of their purchasing power. In addition,
it helps the government better budget its pension
contributions.
From the accounting perspective, the measure of
the unfunded accrued benefit obligation will de-
pend on the focus used. If the GASB decides to use
the financing focus, then an appropriate measure
GASB Statement 27, paragraph 10c.
2009 Gabriel Roeder Smith Company
of the unfunded accrued benefit obligation would
likely include projected future salary and service.
However, if the GASB decides the focus should be
on incurred obligations to date, then basing the
unfunded accrued benefit obligation on projected
future service would likely be seen as inappropri-
ate, since such service would not yet be incurred.
If the GASB decides the focus should be on in-
curred obligations to date, the ITC asks which of
the following two actuarial measures should be
used to determine the unfunded accrued benefit
obligation.
Unfunded Projected Benefit Obligation.
This measure includes projected future sal-
ary in the value of benefits and only includes
future service to the extent it determines an
employee's eligibility to receive benefits.
Supporters argue it is appropriate to include
future salary since there is an implied con-
tract that future salary increases will occur.
Opponents argue that such future salary
increases have not yet occurred and, there-
fore, are not relevant to measuring benefits
earned to date.
Unfunded Accumulated Benefit Obliga-
tion. This measure excludes projected future
salary and only includes future service to the
extent it determines an employee's eligibil-
ity to receive benefits. Supporters argue
that this is the proper measure of the plan's
accrued liability. Opponents argue that it is
relevant only in the context of a plan's termi-
nation or settlement and, therefore, is not a
relevant measure for an on -going plan.
The Discount Rate. Discount rates are used to
estimate the value today of one or more payments
to be made in the future. Under current GASB
standards, the discount rate should reflect the ex-
pected long -term rate of return to be earned on the
plan's investments. Since public plans invest in
a diversified mix of equity and debt securities, the
8 GRS Insight 5/09
expected return would reflect that mix. Currently,
public plan discount rates average 8.0% and range
from about 7.0% to 8.5
However, some believe that the discount rate
should reflect a "risk free" rate of return (e.g., yields
on long -term U.S. Treasury bonds or on similar
derivative securities). They argue that basing the
discount rate on long -term expected returns does
not fully reflect investment risks and so will under-
estimate plan costs and liabilities. Moreover, they
argue benefit payments made by public pension
plans are similar to bonds in their amount, timing,
and probability of payment and so should be valued
(i.e., "priced using bond yields.
Comment: It is important to evaluate these
arguments in light of their potential impact
on benefit costs and liabilities. For example,
the yields on 30 -year U.S. Treasury bonds
have varied from about 14% in the mid -1980s
to about 4% today. Such changes would
introduce large variations in the measures
of pension costs and liabilities, even in the
absence of changes in the underlying plan.
Actuarial Methods and Amortization Periods
The above discussion of unfunded accrued benefit
obligations took place in the context of the GASB's
possible future decision to apply the incurrence fo-
cus. However, the GASB may decide the financing
focus is more appropriate. If so, Chapter 5 asks:
Which actuarial methods should be
allowed?
Should unfunded obligations be amortized
and, if so, over what periods?
Should asset smoothing be allowed?
Actuarial Cost Methods. The GASB's current stan-
dards allow one of six actuarial cost methods to be
used to measure pension costs for accounting and
16 Keith Brainard, Public Fund Survey Summary of Findings FY 07,
P. 8.
17 GASB Statement 27, paragraph 99.
2009 Gabriel Roeder Smith Company
reporting purposes, provided it is the same as the
method used to finance the benefits. (See footnote
9 for a list of the allowed cost methods.) The choice
of actuarial cost method determines how the total
pension cost is allocated to past, present, and future
periods, but does not affect the total pension cost
itself. In its deliberations over Statements 25 and
27, the GASB concluded that any one of the six
methods, when properly applied, would produce
an acceptable measure of the annual required con-
tribution and, therefore, an acceptable measure of
the pension expense.
However, as discussed in the ITC, some have sug-
gested that the ability to choose among six cost
methods reduces the decision usefulness of the
financial information, since it allows employers to
select the most advantageous method. In addition,
they argue it reduces the comparability of financial
information, and makes interpreting the informa-
tion more difficult. Consequently, they suggest
reducing the number of acceptable methods.
Arguments offered against reducing the number of
actuarial cost methods include: (1) the flexibility as-
sists employers in funding the benefits; (2) complete
comparability of pension accounting measures is
impossible given the differences among the plans;
(3) comparability is less important than consistency
in reporting over time; and (4) in many governmen-
tal units, the method is statutory and reducing the
number could force a disconnect between pension
cost and pension expense.
If only one actuarial method were to be used, some
suggest it should be the entry age normal cost
method since it is used by the majority of public
plans and is seen as the most effective method for
accumulating plan assets. Others suggest that, for
accounting purposes, the sole actuarial cost method
should be the unit credit cost method, since it is
explicitly intended to measure current benefit ac-
cruals.
GRS Insight 5/09 9
Amortization Periods. Generally, under current
standards, the unfunded actuarial accrued liability
is amortized and included in the employer's annual
required contribution in addition to the normal
cost. The maximum amortization period is 30 years
and can be either open or closed. A closed period
amortizes the unfunded amount over a decreas-
ing period each year. An open period amortizes
the unfunded amount over the same period each
year (e.g., a rolling 30 -year period). The amortized
amount can be calculated as a level dollar amount
or as a level percent of pay.
The GASB tentatively assumes that the normal
cost of benefits would be included in the pension
cost and recognized in the pension expense as
employee services are rendered. Therefore, the
choices discussed below relate to how components
of the unfunded accrued benefit obligation would
be amortized over future periods for the purpose
of determining the pension expense.
Immediate Recognition. Some believe that the
unfunded accrued benefit obligation should be im-
mediately recognized without amortization.
Arguments For Immediate Recognition
Deferring recognition of pension costs that have
already occurred inappropriately shifts these costs
to future taxpayers.
Amortization does not help financial report users
assess whether revenues are sufficient to pay for
services each year.
Arguments Against Immediate Recognition
Immediate recognition would introduce unnecessary
volatility in the pension expense.
It is more appropriate to allocate actuarial gains and
losses over the employee's careers than to recognize
them immediately.
2009 Gabriel Roeder Smith Company
Amortization Over Average Remaining Service
Life. Others believe that while amortizing the un-
funded accrued benefit obligation is appropriate, it
should be limited to the average remaining service
life of the active employees.
Arguments For Amortization Over Average
Remaining Service Life
Amortizing over the average remaining service life
is appropriate, since the active members would be
providing services over that period.
Amortizing retroactive benefit increases is
appropriate, since the increases have the intangible
benefit of improving morale over the employees'
remaining years of employment.
Arguments Against Amortization Over Average
Remaining Service Life
Deferring recognition of pension costs that have
already occurred inappropriately shifts these costs
to future taxpayers.
Amortization does not help financial report users
assess whether revenues are sufficient to pay for
services each year.
Amortization Over Different Periods. Still others
believe that different types of pension costs should
be amortized over different periods. Under this
approach, the incremental pension cost created by
retroactively applied benefit increases would be
amortized over a much shorter period (e.g. 3 years)
than the period for amortizing actuarial gains and
losses.
Open and Closed Amortization Periods. The ITC
also asks whether the amortization period should
be open or closed. Some believe the amortization
period should be closed because it would provide
for the full amortization of specific costs over a spe-
cific period. Others believe the amortization period
should remain open on the grounds that it would
10 GRS Insight 5/09
avoid abrupt changes in pension costs and better
accommodate benefit obligations that continually
change over time. Still others believe a combination
of open and closed periods would be suitable.
The ITC also notes that an open amortization period
may result in amortized amounts that are not suf-
ficient to cover the interest on the unfunded obliga-
tion and so result in increasing obligations. Others
argue that this is not a problem, since the employer
will remain better off so long as the unfunded ob-
ligation is a decreasing percentage of payroll for
active members. Still others suggest that the maxi-
mum amortization period should vary depending
on whether the amortization period is open or
closed (e.g., a maximum of 20 years if the period is
open and 30 years if the period is closed).
Actuarial Value of Plan Assets. Under current
GASB standards, the actuarial value of plan assets
is used to measure the plan's funded status and un-
funded liabilities (and, by extension, amounts am-
ortized in the employer's annual required contribu-
tion). While current standards require the actuarial
value of assets to be market related, investment
gains and losses may be averaged (or "smoothed
into the value of assets over time, typically 3 to 7
years. This is done to reduce the short -term impact
of investment gains and losses on the plan's funded
level and required contributions. However, others
argue that the (unsmoothed) market value of plan
assets should be used.
Arguments For Asset Smoothing
It effectively mitigates the impact of short -term
investment volatility on contribution rates.
It is appropriate from a long -term, on -going
perspective.
It may help reduce the risk of over reaction by
decision- makers in both favorable and unfavorable
times.
2009 Gabriel Roeder Smith Company
Arguments Against Asset Smoothing
Changes in unfunded obligations (including those
due to investment gains and losses) should be
recognized as they occur.
Smoothed assets do not represent the assets that are
currently available to fund the benefit obligation.
The ITC notes that some agree with asset smooth-
ing, but believe more specific parameters should
be set, such as providing a maximum smoothing
period or establishing a corridor limiting the degree
to which smoothed assets may differ from their
market values.
Comment: The GASB standards currently
require the fair (market) value of invested
assets to be reported in the statement of plan
net assets.
Treatment of Employers in Cost Sharing Plans
Up to this point, the discussion has centered
on accounting and reporting for employers in
single employer and agent plans. In these plans,
employers are solely responsible for funding the
benefits of their plan members. By contrast, in
cost sharing multiple employer plans, employers
are collectively responsible for funding the benefits
of members across all participating plans. As dis-
cussed in ITC Chapter 6, key differences between
cost sharing plans and single- employer or agent
plans include:
Cost sharing plan obligations are pooled
across participating employers and are
not directly attributable to any single
employer.
Cost sharing plan contributions are often
determined by statute and payments are
contractually required.
The obligation of any individual employer
is limited to their contractually required
GRS Insight 5/09 11
contribution and the employer has no
control over how contributions are set.
Under current GASB standards, employers in cost
sharing plans recognize their contractually required
contribution as their pension expense, regardless
of whether it reflects their actuarially determined
contribution. The ITC asks whether the relation-
ship of cost sharing employers to their cost sharing
plan is sufficiently different from that of employers
in single employer and agent plans to warrant dif-
ferent accounting standards.
Supporters of the current approach point out that it
accurately reflects the fact that the financial obliga-
tion of cost sharing employers is their contractually
required contribution. Others generally agree that
the current approach is appropriate, but would
like to see additional disclosures in the employer's
financial reports to help readers better understand
the adequacy of the contractually required contri-
butions. Still others believe that the cost sharing
arrangement is not sufficiently different from sin-
gle- employer and agent plans to warrant different
treatment.
Pension Plan Accounting and Reporting
The last chapter of the ITC shifts perspective from
accounting and reporting for employers to account-
ing and reporting for plans. Specifically, Chapter
7 asks:
Should the accrued benefit liability for
defined benefit pensions be recognized in
the plan's statement of financial position?
Should a statement of changes in the
unfunded accrued benefit obligation be
added as a financial statement of the plan?
The current standards for defined benefit pension
plans require the plans to report two financial
statements: (1) the statement of plan net assets
18 Although not discussed in the ITC, the GASB may also consider
narrowing the definition of a cost sharing plan.
2009 Gabriel Roeder Smith Company
and (2) the statement of changes in plan net assets.
The statement of plan net assets shows current
plan assets (including investments) and current
liabilities due and payable, but not actuarial ac-
crued liabilities, which are shown in the notes to
the financial statements. The plan's statement of
changes in plan net assets shows employer and
employee contributions, investment earnings, ben-
efit payments, withdrawals, and other expenses.
The plans are also required to disclose additional
information about annually required contributions,
actual contributions, and funding in the notes to the
financial statements and required supplementary
information.
Arguments For the Current Approach
Benefits that are currently due and payable fit the
definition of liabilities.
The accrued benefit obligation is an obligation of
the employer rather than of the plan.
Arguments Against the Current Approach
Recognizing plan assets without recognizing
accrued benefit obligations provides only half of the
picture.
The accrued benefit obligation is, in effect, the
liability that assets are being accumulated to fund.
Recognizing a Liability for the Accrued Benefit
Obligation. Others believe that the plan's state-
ment of net assets should include the accrued ben-
efit obligation earned to date.
Arguments For Recognizing the Accrued Benefit
Obligation
The accrued benefit obligation is the liability that
assets are being accumulated to fund.
Recognizing plan assets without accrued benefit
obligations provides only half the picture.
12 GRS Insight 5/09
Arguments Against Recognizing the Accrued Benefit Obligation
The accrued benefit obligation pertains to the employer and not the
plan.
The accrued benefit obligation is already reported as required
supplementary information.
Adding a Statement of Changes in the Unfunded Accrued Benefit
Obligation. Some also advocate adding a financial statement show-
ing changes in the unfunded accrued benefit obligation. Supporters
believe this would provide additional information about the economic
condition of the plan. Opponents argue that this information is al-
ready included in the notes to the financial statements and required
supplementary information.
Conclusion
The GASB's Invitation to Comment presents the conceptual frame-
work that the GASB will use to evaluate potential changes in ac-
counting and reporting standards for public pensions benefits.
Consequently, it is important to understand this framework in order
to respond effectively to the GASB.
The ITC and the GASB's plain- language summary are available at:
www,gasb.org
Circular 230 Notice: Pursuant to regulations issued by the IRS, to the extent this
communication concerns tax matters, it is not intended or written to be used, and
cannot be used, for the purpose of (i) avoiding tax related penalties under the Internal
Revenue Code or (ii) marketing or recommending to another party any tax related
matter addressed within. Each taxpayer should seek advice based on the individual's
circumstances from an independent tax advisor.
Gabriel, Roeder, Smith Company has provided consulting and actuarial services for
benefit plans since 1938. We are dedicated to providing services that encourage sound
financing, sensible benefit design, efficient administration, and effective communication
of employee benefits.
Since its inception, GRS has placed special emphasis on services to the public sector.
From our network of offices, we serve over 700 clients nationwide, including retirement
systems, employers, employee organizations, and government agencies. We have
worked with many of our clients for more than 30 years some for more than 60 years.
The far ranging locations of our clients and the long associations we have enjoyed reflect
the quality of the services we provide. Services offered by GRS include:
Pension Plan Consulting
GASB 43/45 OPEB Consulting
Health and Welfare Benefit Consulting
Retirement Technology Applications
1
2009 Gabriel Roeder Smith Company
CHICAGO
DALLAS
DENVER
GRS
Offices
20 North Clark Street, Ste. 2400
Chicago, IL 60602 -5111
(312) 456 -9800
(312) 456 -9801 Fax
Contact: Mike Kivi
5605 N. MacArthur Boulevard, Ste. 870
Irving, TX 75038 -2631
(469) 524 -0000
(469) 524 -0003 Fax
Contact: Mark Randall
7900 East Union Avenue, Ste. 1100
Denver, CO 80237 -2746
(303) 217 -7600
(303) 217 -7609 Fax
Contact: Leslie Thompson
DETROIT
One Towne Square, Ste. 800
Southfield, MI 48076 -3723
(800) 521 -0498
(248) 799 -9000
(248) 799 -9020 Fax
Contact: Judy Kermans
FT. LAUDERDALE
One East Broward Boulevard, Ste. 505
Ft. Lauderdale, FL 33301 -1827
(954) 527 -1616
(954) 525 -0083 Fax
Contact: Theora Braccialarghe
This newsletter and additional
information about the firm may be
found on the GRS website at:
www.gabrielroeder.com
GRS
Gabriel Roeder Smith Company
Consultants Actuaries
RE: The Worker, Retiree, and Employer Recovery Act of 2008
FROM: Paul Zorn
DATE: December 22, 2008
Research
Memorandum
This memorandum summarizes changes to the Internal Revenue Code (Code) and other laws
made by recent legislation. However, the author is not an attorney and the information provided
is not legal advice or opinion. Moreover, the memorandum is not intended to provide a
comprehensive description of the related rules. Plan administrators should consult with qualified
legal counsel to ensure plan provisions comply with applicable laws and regulations.
On December 10, 2008, the U.S. House introduced and passed H.R. 7327, the Worker, Retiree,
and Employer Recovery Act of 2008 (Recovery Act). The next day, the Act was taken up by the
Senate and passed unanimously. The President is expected to sign the Act; however, he has
not done so at the time of this writing. The Act provides funding (and other) relief for private
sector retirement plans along with technical corrections to the 2006 Pension Protection Act.
Several of the provisions are applicable to governmental pension plans, including:
Market Rate of Return Under the Pension Protection Act and related regulations,
certain hybrid defined benefit plans would be deemed to be age discriminatory unless the
plan limited the annual interest credited on member accounts to no more than a "market
rate of return." Such hybrid plans include plans where the participant's accumulated
benefit is "expressed as the balance of a hypothetical account maintained for the
participant" (possibly including deferred retirement option plans, interested credited on
picked -up member contributions, and similar arrangements). Moreover, under related
proposed regulations, "market rate of return" is based on long -term, investment -grade
bond rates.
The Recovery Act amends the Age Discrimination in Employment Act (ADEA) to provide
that a rate for crediting interest established under federal, state, or local law (including
any administrative rule or policy adopted in accordance with such law) will be treated as a
"market rate of return," provided it does not violate other requirements of the ADEA. This
provision is effective as if it had been included in the Pension Protection Act (i.e., for plan
years after December 31, 2007). Generally, this means that governmental plans will not
have to change how they credit interest on DROP accounts and member contribution
accounts, provided the rate for crediting interest is established under law, or under a
related administrative rule or policy.
Retired Public Safety Officer Distributions The Pension Protection Act allows
qualified retired public safety officers to exclude up to $3,000 annually from federal
income taxation for distributions made from an eligible governmental plan to pay
premiums for qualified health insurance or long -term care. In early 2007, the IRS ruled
that this exclusion only applied to coverage provided by an insurance company and not to
coverage provided by self- funded plans. However, the IRS later agreed to interpret the
language to include self- funded plans. The Recovery Act formally corrects the statutory
language to include coverage provided by self- funded plans. The change is effective for
tax years beginning after December 31, 2006.
12/22/08 Gabriel Roeder Smith Company Page 1
415 Mortality Table The Recovery Act changes the mortality table used for benefit
limitation calculations under Code 415 from the 1994 Group Annuity Reserving Table
(with adjustments) to the "Applicable Mortality Table," described under Code
417(e)(3)(B). The change is effective for years beginning after December 31, 2008, but
may be applied to years (or portions of years) beginning after December 31, 2007, if the
plan so elects. The change will have a marginal effect on the 415 dollar limits. Note that
the Applicable Mortality Table is not a fixed table; it will change each year to reflect
improving life expectancy.
Rollovers to Nonspouse Beneficiaries The Pension Protection Act allowed (but did
not require) qualified retirement plans to rollover benefits to nonspouse beneficiaries.
Under the Recovery Act, rollovers to nonspouse beneficiaries are generally subject to the
same rules as other eligible rollovers, including the requirement that plans allow
beneficiaries to make direct rollovers of eligible rollover distributions. This provision is
effective for plan years beginning after December 31, 2009.
Roth Rollovers The Pension Protection Act allowed distributions from qualified
retirement plans, tax sheltered annuities, and governmental 457 plans to be directly rolled
over into a Roth IRA, provided the distribution is recognized as gross income. The
Recovery Act clarifies that rollovers from a Roth account within a tax qualified retirement
plan or tax sheltered annuity to a Roth IRA would not be subject to inclusion in gross
income.
Minimum Distributions Generally, participants in qualified plans are required to take
minimum distributions by April 1 of the year following (1) the year they retire or (2) the
year they attain age 70 whichever is later. The Recovery Act provides a temporary,
one -year moratorium on required minimum distributions from individual retirement plans
(e.g., IRAs) and defined contribution plans qualified under Code 401(a), 403(a),
403(b), and governmental plans under 457(b). The one -year moratorium is effective for
minimum distributions beginning after December 31, 2008. (However, minimum
distributions for 2008 must still be made.)
Additionally, as discussed in the Joint Committee on Taxation's explanation of this
provision, if a qualified plan distributes an amount to an individual in 2009 as an eligible
rollover distribution, but the amount would otherwise have been a required minimum
distribution, the plan is permitted (but not required) to offer the employee a direct rollover
of the amount, and provide the employee with a written explanation of the rollover
requirements. If the employee receives the distribution (instead of directly rolling it over),
the distribution is not subject to the mandatory 20% withholding requirement and the
employee can rollover the distribution by contributing it to an eligible retirement plan
within 60 days of the distribution. Defined contribution plans may need to revise their
Special Tax Notice given to employees receiving a lump -sum or other rollable distribution
in order to reflect these changes.
Health Reimbursement Accounts In Revenue Ruling 2006 -36, the IRS held that
amounts paid under a health reimbursement arrangement (HRA) are not excludable from
gross income if the plan allows amounts to be paid for medical benefits to a beneficiary
who is other than the employee's spouse or dependents. Under the ruling, such an HRA
would be disqualified and no amount paid to any participant would be excludable from
gross income.
12/22/08 Gabriel Roeder Smith Company Page 2
The Recovery Act offers limited protection from Revenue Ruling 2006 -36 by providing
that amounts paid from an HRA will not fail to be excluded from gross income "solely
because such plan, on or before January 1, 2008, provides for reimbursements of health
care expenses of a deceased plan participant's beneficiary." However, this provision only
applies to plans that are funded by a medical trust established in connection with a public
retirement system, and that has been authorized by a state legislature or that received a
favorable ruling under Code 115. The provision applies to payments made before, on,
or after the Recovery Act's date of enactment.
The text of H.R. 7327 is available though the Thomas web site: http: /thomas.loc.aov/
The Joint Committee on Taxation's analysis is at: http: /www.house.aov /ict /x- 85- O8.pdf
Circular 230 Notice
Pursuant to regulations issued by the IRS, to the extent this communication (or any attachment)
concerns tax matters, it is not intended or written to be used, and cannot be used, for the
purpose of (i) avoiding tax related penalties under the Internal Revenue Code or (ii) marketing or
recommending to another party any tax related matter addressed within. Each taxpayer should
seek advice based on the individual's circumstances from an independent tax advisor.
12/22/08 Gabriel Roeder Smith Company Page 3
APPENDIX E
SAMPLE REPORTS
G IR .S Gabriel Roeder Smith Consultants Actuaries
RETIREMENT PLAN FOR EMPLOYEES OF THE CITY OF ANYWHERE
ACTUARIAL VALUATION AS OF OCTOBER 1, 2008
This Valuation Determines the Annual Contribution for the Plan Year October 1, 2008 through September 30,
2009 to be Paid in the Fiscal Year October 1, 2009 to September 30, 2010
May 2009
Gabriel Roeder Smith Company
Retirement Plan for Employees
of the City of Anywhere
TABLE OF CONTENTS
Page
Commentary 1
L Summary of Retirement Plan Costs 4
II. Comparison of Cost Data of Current and Prior Valuations 6
III. Characteristics of Participants in Actuarial Valuation 7
IV. Statement of Assets 8
V. Reconciliation of Plan Assets 9
VI. Development of Actuarial Value of Assets 10
VII. Actuarial Gains (Losses) 11
VIII. Unfunded Actuarial Accrued Liability 12
IX. Accounting Disclosure Exhibit 13
X. Outline of Principal Provisions of the Retirement Plan 17
XI. Actuarial Assumptions and Actuarial Cost Methods Used 20
XII. Distribution of Plan Participants by Attained Age Groups and Service Groups 24
XIII. Statistics for Participants Entitled to Deferred Benefits and Participants
Receiving Benefits 29
XIV. Reconciliation of Participant Data 31
XV. Projected Retirement Benefits 32
XVI. Review of Salary and Termination Experience 33
XVII. Analysis of Investment Yield 35
XVIII. State Required Exhibit 38
Gabriel Roeder Smith Company
GRS
May 20, 2009
Retirement Committee
c/o Mr. John Doe
Administrator
City of Anywhere
1234 Penny Lane
City of Anywhere, FL
Dear Committee Members:
Pension Plan Costs
Gabriel Roeder Smith Company
Consultants Actuaries
October 1. 2008 Actuarial Valuation
One East Broward Blvd. 954.527.1616 phone
Suite 505 954.525.0083 fax
Ft. Lauderdale, FL 33301 -1872 www.gabrielroeder.corn
We are pleased to present our October 1, 2008 Actuarial Valuation for the Retirement Plan for Employees of
the City of Anywhere. The purpose of this report is to indicate appropriate contribution levels, comment on the
actuarial stability of the Plan and to satisfy State requirements. Gabriel, Roeder, Smith Company (GRS), as
Plan actuary, is authorized by the Board of Trustees to prepare an annual actuarial valuation under Section 5.06
of the Plan.
This report consists of this commentary, detailed Tables I through XVII and the State Required Exhibit on
Table XVIII. The Tables contain basic Plan cost figures plus significant details on the benefits, liabilities and
experience of the Plan. We suggest that you thoroughly review the report at your convenience and contact us
with any questions that may arise.
Our Actuarial Valuation develops the required minimum Retirement Plan payment for fiscal year beginning
October 1, 2008 under the Florida Protection of Public Employee Retirement Benefits Act. The minimum
payment consists of payment of annual normal costs plus amortization of the components of the unfunded
actuarial accrued liability over various periods as prescribed by law. The total required contribution for the
fiscal year ending September 30, 2010 is $3,614,450 (27.7 The figure in parentheses is the Plan cost
expressed as a percentage of covered annual payroll ($13,029,957) as of October 1, 2008.
This total cost is to be met by Member and City contributions. We anticipate that Member contributions will be
$912,097 (7.0 leaving $2,702,353 (20.7 which must be contributed to the Plan by the City for the fiscal
year ending September 30, 2010.
The anticipated City Contribution by Department may be summarized as follows:
Net City Cost Percent of Payroll
General 1,954,596 20.7%
Water 607,875 20.7%
Sewer 80,108 20.7%
Storm Water 59,774 20.7%
Retirement Committee
May 20, 2009
Page Two
Changes in Actuarial Assumptions. Methods and Plan Benefits
Plan benefits have not changed since our October 1, 2007 Actuarial Valuation. Plan provisions are outlined on
Table X.
The Board adopted the following updated actuarial assumptions based upon the results of our Experience
Investigation covering the period October 1, 2001 through September 30, 2007.
1. Assumed mortality rates for healthy members have been updated to the RP -2000 Mortality Table, with
separate rates for males and females and annuitants and non annuitants, with fully generational mortality
improvements projected to each future payment date.
2. Assumed mortality rates for disabled participants have been updated to the RP -2000 Disabled Mortality
Table, with separate rates for males and females, with fully generational mortality improvements projected
to each future payment date.
3. Assumed investment return has been updated to 8.25 compounded annually, net of investment expenses.
4. Assumed retirement rates, withdrawal rates and salary increase rates have been updated as outlined in Table
XI.
The remaining actuarial assumptions and methods remain unchanged from our October 1, 2007 Actuarial
Valuation. The actuarial assumptions and methods are outlined on Table XI.
Comparison of October 1, 2007 and October 1, 2008 Valuation Results
Table II of our report provides information of a comparative nature. The left columns of the Table indicate the
costs as calculated for October 1, 2007. The center columns indicate the costs as calculated for October 1, 2008
prior to the change in actuarial assumptions. The right columns indicate the costs as calculated for October 1,
2008 after the update in actuarial assumptions.
Comparing the left and center columns of Table II shows the effect of Plan experience during the year. The
number of active participants decreased by approximately 5% while covered payroll decreased by
approximately 1 The normal cost increased both as a dollar amount and as a percentage of covered payroll.
The unfunded actuarial accrued liability increased both as a dollar amount and as a percentage of covered
payroll. The City's required contribution also increased both as a dollar amount and as a percentage of payroll.
Comparing the center and right columns of Table II shows the effect of the update in actuarial assumptions.
The unfunded actuarial accrued liability, total normal cost and the City's required contribution all increased.
Your Plan no longer has assets in excess of the value of vested accrued benefits, resulting in a Vested Benefit
Security Ratio of 79.4% (81.8% prior to assumption changes) which is a decrease from 103.4% as of October 1,
2007.
Plan Experience
Table VII indicates that the Plan experienced an actuarial loss of $2,518,093. This suggests actual overall
experience was less favorable than expected. This actuarial loss resulted in an increase in the amortization
component of the City funding requirement of approximately 1% of covered pay.
Gabriel Roeder Smith Company
Retirement Committee
May 20, 2009
Page Three
Our Actuarial Valuation report tracks the actual experience in three areas that are very significant in
determining whether an actuarial gain or loss occurs. Table XVI presents salary experience and tracks
employee turnover. Table XVII provides information on investment return.
The salary experience indicates actual salary increases averaged approximately 5.8 This was in excess of our
prior assumption for salary increases of 5.5% and was, generally, a source of actuarial loss. Three, five and ten
year average salary increases are 6.2 5.8% and 6.3 respectively. Employee turnover this year was 150% of
the prior assumed turnover and was, generally, an offsetting source of actuarial gain. Three, five and ten year
average turnover rates are 130 120% and 110 respectively of the prior assumed turnover rates.
The actuarial value investment return of 5.0 net of investment expense, was less than the 8.5% prior
investment return assumption. Three, five and ten year average actuarial value net investment returns are 7.0
4.5% and 4.8 respectively. Investment return was a significant source of actuarial loss during the previous
year. Market value net returns for the one, three, five and ten year periods have been 13.8 1.6 4.4% and
3.3 respectively.
Member Census and Financial Data
The Board provided the Member census data used for this valuation to us. This information contains name,
Social Security number, date of birth, date of hire, date of participation, October 1, 2008 rate of pay, actual
salary paid and employee contributions deducted for the previous year. Dates of tennination and retirement are
provided where applicable. The Board updated information on inactive participants including retirees,
beneficiaries and vested terminees.
We receive financial information concerning fund assets from the Board. We do not audit the Member census
data and asset information that is provided to us. However, we perform certain reasonableness checks and on
this basis we believe that the information that we received is reliable.
Summary
In our opinion the benefits provided for under the current Plan will be sufficiently funded through the payment
of the amount as indicated in this and future Actuarial Valuation reports. We will continue to update you on the
future payment requirements for the Plan through our actuarial reports. These reports will also continue to
monitor the future experience of the Plan.
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 opinions contained in this report. We are available
to respond to any questions with regards to matters covered in our report.
Very truly yours,
Consultant
Lawrence F. Wilson, A.S.A. Peter N. Strong, A. S.A.
Senior Consultant and Actuary
Gabriel Roeder Smith SL Company
A. Participant Data Summary
1. Active employees
2. Terminated vested
3. Receiving benefits (including DROPs)
4. Annual payroll of active employees
B. Total Normal Costs
Summary of Retirement Plan Costs as of October 1, 2008
1. Age retirement benefits
2. Termination benefits
3. Death benefits
4. Disability benefits
5. Estimated expenses
6. Total annual normal costs (City and Member)
C. Total Actuarial Accrued Liability
1. Age retirement benefits active employees
2. Termination benefits active employees
3. Death benefits active employees
4. Disability benefits active employees
5. Retired or terminated vested participants
receiving benefits (including DROPs)
6. Terminated vested participants entitled to
future benefits
7. Deceased participants whose beneficiaries
are receiving benefits
8. Disabled participants receiving benefits
9. Miscellaneous liability
10. Total actuarial accrued liability
D. Net Assets
Retirement Plan for Employees
of the City of Anywhere
Prior
Assumptions
Cost
Data
301
24
192
13,029,957
1,616,966
126,322
104,480
98,807
119,945
2,066,520
38,205,663
203,419
1,281,105
1,406,403
2,386,907
3,693,290
1,481,406
39,140
72,480,699
1. Actuarial value 56,504,858
2. Market value 47,981,513
Gabriel Roeder Smith Company
°/0 of
Payroll
N/A
N/A
N/A
100.0%
12.4%
1.0%
0.8%
0.8%
0.9%
15.9%
293.2%
1.6%
9.8%
10.8%
23,783,366 182.5%
28.3%
11.4%
0.3%
556.3%
433.7%
368.2%
E. Unfunded Actuarial Accrued Liability (C. D.1.) 15,975,841 122.6%
Current
Assumptions
Cost
Data
Table I
of
Payroll
301 N/A
24 N/A
192 N/A
13,029,957 100.0%
1,714,728 13.2%
144,703 1.1%
63,826 0.5%
177,049 1.4%
119,945 0.9%
2,220,251 17.0%
37,279,829 286.1%
308,721 2.4%
874,273 6.7%
2,376,119 18.2%
24,940,522 191.4%
18.3% 2,606,366 20.0%
3,772,986 29.0%
1,950,378 15.0%
39,140 0.3%
74,148,334 569.1%
56,504,858 433.7%
47,981,513 368.2%
17,643,476 135.4%
F. Total Minimum Funding Requirement
1. Total normal cost (City and Member)
2. Amortization of unfunded liability
3. Interest adjustment
4. Total payment
G. Expected Contribution by Source
1. Member
2. City
H. Allocation of Expected City Contribution
1. General (20.7% of 9,424,488)
2. Water (20.7% of 2,930,995)
3. Sewer (20.7% of 386,259)
4. Storm Water (20.7% of 288,215)
I. Actuarial Gains (Losses)
J. Actuarial Present Value of Vested Accrued Benefits
1. Retired, terminated vested, beneficiaries
and disabled receiving benefits
2. Terminated vested participants entitled
to future benefits and miscellaneous
3. Active participants entitled to future
benefits
4. Total actuarial present value of vested
accrued benefits
K. Unfunded Actuarial Present Value of Vested
Accrued Benefits (J. D.2.)
L. Vested Benefit Security Ratio (D.2. J.)
Retirement Plan for Employees
of the City of Anywhere
Summary of Retirement Plan Costs as of October 1. 2008
-5-
Prior
Assumptions
Cost
Data
2,066,520
992,658
312,517
3,371,695
912,097
2,459,598
1,779,012
553,269
72,912
54,405
(2,518,093)
10,671,146
Gabriel Roeder Smith Company
0 /0 of
Payroll
15.9%
7.6%
2.4%
25.9%
Current
Assumptions
Cost
Data
2,220,251
1,063,129
331,070
3,614,450
7.0% 912,097
18.9% 2,702,353
13.7%
4.2%
0.6%
0.4%
(19.3
1,954,596
607,875
80,108
59,774
(2,518,093)
Table I
(Cont'd)
0 /0 of
Payroll
17.0%
8.2%
2.5%
27.7%
7.0
20.7%
15.0%
4.7%
0.6%
0.5%
(19.3
28,958,062 222.2% 30,663,886 235.3%
2,426,047 18.6% 2,645,506 20.3%
27,268,550 209.3% 27,137,258 208.3%
58,652,659 450.1% 60,446,650 463.9%
81.9% 12,465,137 95.7%
81.8% N/A 79.4% N/A
Retirement Plan for Employees
of the City of Anywhere
Comparison of Cost Data of October 1. 2007 and October 1, 2008 Valuations
Prior Assumptions Current Assumptions
October 1, 2007 October 1, 2008 October 1, 2008
Cost of Annual Cost of Annual Cost of Annual
Data Compensation Data Compensation Data Compensation
A. Participants
1. Active employees 317 N/A 301 N/A 301 N/A
2. Terminated vested 19 N/A 24 N/A 24 N/A
3. Receiving benefits 186 N/A 192 N/A 192 N/A
4. Annual payroll of active employees 13,111,784 100.0% 13,029,957 100.0% 13,029,957 100.0%
B. Total Normal Costs 1,928,768 14.7% 2,066,520 15.9% 2,220,251 17.0%
C. Total Actuarial Accrued Liability 67,210,104 512.6% 72,480,699 556.3% 74,148,334 569.1%
D. Actuarial Value of Assets 53,575,555 408.6% 56,504,858 433.7% 56,504,858 433.7%
E. Unfunded Actuarial Accrued Liability 13,634,549 104.0% 15,975,841 122.6% 17,643,476 135.4%
F. Expected City Contribution 2,126,565 16.2% 2,459,598 18.9% 2,702,353 20.7%
G. Unfunded Actuarial Present Value of
Vested Accrued Benefits 0 0.0% 10,671,146 81.9% 12,465,137 95.7%
H. Actuarial Gain (Loss) 1,682,494 12.8% (2,518,093) (19.3 (2,518,093) (19.3
I. Vested Benefit Security Ratio 103.4% N/A 81.8% N/A 79.4% N/A
Gabriel Roder Smith Company
Table II
A. Active Plan Participants Summary
C. Proiected Annual Retirement Benefits
Retirement Plan for Employees
of the City of Anywhere
Characteristics of Participants in Actuarial
Valuation as of October 1, 2008
1. Active participants fully vested 238
2. Active participants partially vested 0
3. Active participants non vested 63
4. Total active participants 301
5. Annual rate of pay of active participants 13,029,957
B. Retired and Terminated Vested Participant Summary
1. Retired or terminated vested participants receiving benefits
(including DROPs) 126
2. Terminated vested participants entitled to future benefits 24
3. Deceased participants whose beneficiaries are receiving benefits 51
4. Disabled participants receiving benefits 15
1. Retired or terminated vested receiving benefits (including DROPs) 2,434,988
2. Terminated vested entitled to future benefits 357,885
3. Beneficiaries of deceased participants receiving benefits 458,654
4. Disabled participants 190,340
-7-
Gabriel Roeder Smith Company
Table III
Retirement Plan for Employees
of the City of Anywhere
Statement of Assets as of October 1, 2008
Market Value
A. Cash 826
B. Investments
1. Short term investments 1,339,873
2. Mutual funds
Pacific Investment Management Company
American Euro Pacific Growth CI A
Templeton Institutional Fund Foreign Equity Series
Franklin Balance Sheet Inc. Fd.
3. Corporate bonds 0
4. Government and agency fixed income obligations 0
5. Common stocks 19,567,636
C. Receivables
1. Accrued interest and dividends 107,037
2. Receivable from other funds 0
D. Payables (33,403)
E. Total Fund
(A. B. C. D.) 48,230,393
F. DROP Accounts Balances as of October 1, 2008
G. Net Fund
(E. F.)
-8-
Gabriel Roeder Smith Company
Table IV
19,498,122
2,855,937
2,823,862
2,070,503
248,880
47,981,513
Retirement Plan for Employees
of the City of Anywhere
Reconciliation of Plan Assets
A. Total Market Value of Assets as of October 1, 2007
B. Receipts During Period
1. Contributions
a. Employee 1,054,435
b. City 2,333,440
c. Total 3,387,875
2. Investment income
a. Interest and dividends 2,699,584
b. Investment expense (98,169)
c. Net 2,601,415
3. Net realized and unrealized appreciation (depreciation) (10,278,741)
4. Total receipts during period (4,289,451)
C. Disbursements During Period,
1. Pension payments 2,723,937
2. DROP distributions 0
3. Refunds of accumulated employee contributions 116,040
4. Administrative expenses 119,945
5. Total disbursements during period 2,959,922
D. Total Market Value of Assets as of September 30, 2008 48,230,393
E. Reconciliation of DROP Account Balances,
1. DROP account balances as of October 1, 2007 77,846
2. Benefit payments into DROP accounts during year 160,922
3. Investment gains (losses) during year 10,112
4. Distributions from DROP accounts during year 0
5. DROP account balances as of October 1, 2008 248,880
F. Net Market Value of Assets as of September 30, 2008. 47,981,513
-9-
Gabriel Roeder Smith Company
Table V
55,479,766
Retirement Plan for Employees
of the City of Anywhere
Development of Actuarial Value of Assets as of September 30
Table VI
2008 2009 2010 2011 2012
A. Preliminary total actuarial value from prior year 53,653,401 56,753,738
B. Total market value end of year 48,230,393
C. Total market value beginning of year 55,479,766 48,230,393
D. Non- investment net cash flow 427,953
E. Investment return
1. Total market value return: B. C. D. (7,677,326)
2. Amount for immediate recognition (8.5 4,733,968
3. Amount for phased -in recognition: E.1. E.2. (12,411,294)
F. Phased -in recognition of investment return
1. Current year: 20% of E.3. (2,482,259)
2. First prior year 493,608 (2,482,259)
3. Second prior year (115,937) 493,608 (2,482,259)
4. Third prior year 156,743 (115,937) 493,608 (2,482,259)
5. Fourth prior year (113,739) 156,742 (115,939) 493,608 (2,482,258)
6. Total phased -in recognition of investment return (2,061,584) (1,947,846) (2,104,590) (1,988,651) (2,482,258)
G. Total actuarial value end of year
1. Preliminary actuarial value end of year:
A. D. E.2. F.6. 56,753,738
2. Upper corridor limit: 120% of B. 57,876,472
3. Lower corridor limit: 80% of B. 38,584,314
4. Total actuarial value end of year:
G.1., not more than G.2., nor less than G.3. 56,753,738
H. Difference between total market value and total actuarial value (8,523,345)
I. Actuarial value rate of return 5.0%
J. Market value rate of return (13.8
K. DROP account balances 248,880
L. Net actuarial value of assets 56,504,858
-10-
Gabriel Roeder Smith Company
A. Derivation of Actuarial Gain (Loss'
1. City net normal cost previous valuation 1,010,943
2. Unfunded actuarial accrued previous valuation 13,634,549
3. City contributions previous year 2,333,440
4. Interest on:
(a) City net normal cost 85,930
(b) Unfunded actuarial accrued liability 1,158,937
(c) Contributions 99,171
(d) Net interest: (a) (b) (c) 1,145,696
5. Increase (decrease) in unfunded actuarial accrued liability
due to assumption changes 1,667,635
6. Expected unfunded actuarial accrued liability current year:
(1. 2. 3. 4. 5.) 15,125,383
7. Actual unfunded actuarial accrued liability current year 17,643,476
8. Actuarial gain (loss): (6. 7.) (2,518,093)
B. Approximate Portion of Gain (Loss)
Due to Investments
1. Net actuarial value of assets previous year 53,575,555
2. Contributions during year 3,387,875
3. Net benefits and administrative expenses during year 3,120,844
4. Expected appreciation for period 4,565,271
5. Expected net actuarial value of assets current year:
(1. 2. 3. 4.) 58,407,857
6. Net actuarial value of assets current year 56,504,858
7. Approximate gain (loss): (6. 5.) (1,902,999)
C. Approximate Portion of Gain (Loss)
Due to Liabilities: A. B.
Retirement Plan for Employees
of the City of Anywhere
Actuarial Gain (Loss) for
Plan Year Ended September 30, 2008
Gabriel Roeder Smith Company
Table VII
(615,094)
October 1, 2008
October 1, 2009
October 1, 2010
October 1, 2011
October 1, 2012
Retirement Plan for Employees
of the City of Anywhere
Amortization of Unfunded Actuarial Accrued Liability
A. Unfunded Actuarial Accrued Liability
Unfunded Amortization
Date Liability Payment
17,643,476 1,063,129
17,948,226 1,105,654
18,232,084 1,149,880
18,491,486 1,195,875
18,722,499 1,243,710
October 1, 2038 0 0
B. Covered Payroll History
Covered Annual
Date Payroll Increase
October 1, 2008 13,029,957 (0.6
October 1, 2007 13,111,784 2.0%
October 1, 2006 12,852,968 0.8%
October 1, 2005 12,748,757 2.3%
October 1, 2004 12,467,338 3.6%
October 1, 2003 12,035,255 11.0%
October 1, 2002 10,842,137 11.7%
October 1, 2001 9,707,885 9.4%
October 1, 2000 8,874,568 10.4%
October 1, 1999 8,038,335 10.9%
October 1, 1998 7,247,356 N/A
Ten Year Average Annual Increase 6.0%
-12-
Gabriel Roeder Smith Company
Table VIII
Retirement Plan for Employees
of the City of Anywhere
Accounting Disclosure Exhibit
I. Number of Plan Participants
a. Retirees, beneficiaries and disableds
receiving benefits
b. Terminated plan participants entitled to
but not yet receiving benefits
c. Active plan participants
d. Total
II. Financial Accounting Standards Board Allocation
As of October 1, 2008
A. Statement of Accumulated Plan Benefits
1. Actuarial present value of accumulated
vested plan benefits
a. Participants currently receiving benefits
b. Other participants
c. Total
2. Actuarial present value of accumulated
non vested plan benefits
3. Total actuarial present value of accumulated
plan benefits
B. Statement of Change in Accumulated Plan Benefits
1. Actuarial present value of accumulated plan
benefits as of October 1, 2007
2. Increase (decrease) during year attributable to:
a. Plan amendment
b. Change in actuarial assumptions and methods
c. Benefits paid (including DROP benefits and refunds)
d. Other, including benefits accumulated and increase
for interest due to decrease in the discount period
e. Net increase
3. Actuarial present value of accumulated plan benefits
as of October 1, 2008
C. Significant Matters Affecting Calculations
1. Assumed rate of return used in determining actuarial present values
2. Change in plan provisions
3. Change in actuarial assumptions and methods
-13-
10/01/2007
25,030,419
28,532,860
53,563,279
617,703
Gabriel Roeder Smith Company
186
19
317
522
Prior
Assumptions
10/01/2008
192
24
301
517
28,958,062
29,694,597
58,652,659
527, 191
Table IX
Current
Assumptions
10/01/2008
192
24
301
517
30,663,886
29,782,764
60,446,650
555,641
54,180,982 59,179,850 61,002,291
54,180,982
0
1,822,441
(3,000,899)
7,999,767
6,821,309
61,002,291
8.25%
None.
See Table XI. Item L.
Retirement Plan for Employees
of the City of Anywhere
Accounting Disclosure Exhibit
III. Annual Pension Cost For the Current Year and Related Information:
Contribution rates:
City
Members
-14-
20.7%
7.0%
8.25%
4.75% 7.50%
2.25%
Investment rate of return
Projected salary increases
Cost of living adjustments
Includes inflation at 3.50%
Gabriel Roeder Smith Company
Table IX
(Cont'd)
Annual pension cost (thousands) 2,702
Contributions made (thousands) To be determined
Actuarial valuation date October 1, 2008
Actuarial cost method Entry Age Normal
Amortization method Level percent of pay, closed
Remaining amortization period 30 Years
Asset valuation method Smoothed market value
Actuarial assumptions:
IV. Historical Trend Information (thousands)
A.
B.
Schedule of Emnlover Costs GASB 25
Fiscal Year Annual Required
Ending Contribution (ARC)
09/30/2003 1,548
09/30/2004 1,695
09/30/2005 1,739
09/30/2006 1,830
09/30/2007 2,115
09/30/2008 2,272
Schedule of Emnlover Costs GASB 27
Fiscal Year
Ending
09/30/2003
09/30/2004
09/30/2005
09/30/2006
09/30/2007
09/30/2008
Annual Pension
Cost (APC)
1,550
1,697
1,731
1,823
2,107
2,263
Fiscal Year Ended
Annual Required Contribution (ARC)
Interest on NPA
Adjustment to ARC
APC
City Contribution
Increase (Decrease) in NPA
NPA (beginning of year)
NPA (end of year)
Retirement Plan for Employees
of the City of Anywhere
Accountint Disclosure Exhibit
V. Annual Pension Cost and Net Pension Asset (NPA)
1 5
Gabriel Roeder Smith Company
Percentage of
ARC Contributed
98%
102%
100%
102%
101%
103%
Percentage of
APC Contributed
98%
102%
100%
102%
101%
103%
9/30/2008
2,271,608
(33,300)
24,506
2,262,814
2,333,440
70,626
391,770
462,396
Table IX
(Cont'd)
Net Pension
(Obligation) Asset
289,002
321,630
329,624
365,129
391,770
462,396
9/30/2009
2,126,565
(38,148)
28,103
2,116,520
V. Schedule of Funding Progress
Actuarial
Actuarial Value of Assets
Valuation Date (a)
10/01/2003
10/01/2004
10/01/2005
10/01/2006
10/01/2007
10/01/2008
10/01/2008
Based upon audit report
Prior Assumptions
44,423
44,968
45,628
48,554
53,576
56,505
56,505
Retirement Plan for Employees
of the City of Anywhere
Schedule of Funding Progress
(Dollar Amounts in Thousands)
Actuarial Accrued
Liability (AAL)
Entry Age
(b)
Unfunded
AAL Funded Covered
(UAAL) Ratio Payroll
(b a) (a/b) (c)
50,447 6,024 88.1% 12,035
54,772 9,804 82.1% 12,467
58,943 13,315 77.4% 12,749
63,645 15,091 76.3% 12,853
67,210 13,634 79.7% 13,112
72,481 15,976 78.0% 13,030
74,148 17,643 76.2% 13,030
-16-
Gabriel Roeder Smith Company
Table IX
(Cont'd)
UAAL as a
Percentage of
Covered Payroll
((b -a) /c)
50.1%
78.6%
104.4%
117.4%
104.0%
122.6%
135.4%
A. Effective Date:
July 1, 1957 as Amended and Restated under Ordinance No. 89.19. Most recently amended
under Ordinance No. 2008 -2.
B. Eligibility Requirements:
1. Permanent full -time or contract employees excluding Police Officers, Firefighters, City
Councilmen and the City Attorney.
2. Completion of two (2) years of credited service.
C. Credited Service:
Service measured in completed calendar months from date of employment to date of retirement
or prior termination.
D. Final Monthly Compensation (FMC):
Average monthly rate of basic compensation during the best 60 successive calendar months out
of the last 120 calendar months preceding date of retirement or prior termination. Basic
compensation is defined as compensation actually paid to a participant excluding commissions,
bonuses, overtime, expense allowances and all other extraordinary compensation.
E. Normal Retirement:
a. Elinibility:
b. Benefit:
F. Early Retirement:
a. Elinibility:
Retirement Plan for Employees
of the City of Anywhere
Outline of Principal Provisions of the Retirement Plan
Attainment of age 62, or attainment of age 55 with 20 years of service.
3.0% of FMC times credited service.
-17-
Gabriel Roeder Smith Company
Table X
Attainment at age 55 and completion of 15 years of credited service, or
completion of 20 years of service.
b. Benefit: Benefit accrued to date of retirement, actuarially reduced to reflect
commencement of benefit at an earlier age.
G. Deferred Retirement:
(i)
I. Death Benefit:
Retirement Plan for Employees
of the City of Anywhere
Outline of Principal Provisions of the Retirement Plan
a. Eligibility: Retirement subsequent to normal retirement date.
-18-
Gabriel Roeder Smith Company
Table X
(Cont'd)
b. Benefit: Benefit calculated as for normal retirement based upon FMC and credited
service as of deferred retirement date.
H. Disability Retirement:
a. Eligibility: Total and permanent disability prior to normal retirement age for 6 months.
b. Benefit: The greater of (i) or (ii) below, payable for the lifetime of the participant.
A B, where A is 60% of FMC at date of disability and B is 64% of the monthly Social
Security disability benefit to which the participant is entitled.
(ii) The participant's accrued benefit as of date of disability.
Monthly disability retirement income payable until the earliest of recovery from disability, death
or normal retirement date. If the participant remains disabled until normal retirement date, the
same benefit will be payable for 10 years certain (measured from normal retirement date) and life
thereafter.
If death of a disabled participant occurs prior to normal retirement date, benefit to beneficiary
payable for 10 years certain and life thereafter, which can be supported by the greater of A or B,
where A is the single -sum value of the accrued deferred benefit at date of death assuming
continued credited service and assuming continued pay at last monthly rate to date of death and B
is the lesser of (1) and (2), where (1) is 24 times FMC at date of disability and (2) is 100 times the
anticipated monthly normal retirement benefit.
Benefit to beneficiary (payable for 10 years certain and life thereafter) which can be supported by
the greater of A or B, where A is the single -sum value of the accrued deferred benefit at date of
death and B is the lesser of (i) and (ii), where (i) is 24 times monthly rate of pay on October 1
preceding date of death and (ii) is 100 times anticipated normal retirement benefit.
If death occurs subsequent to normal retirement date, benefit to beneficiary payable for 10 years
certain and life thereafter, which can be supported by the single sum value of the accrued benefit
as of date of death.
Retirement Plan for Employees
of the City of Anywhere
Table X
(Cont'd)
Outline of Principal Provisions of the Retirement Plan
J. Emp lovee Contributions:
7% of basic annual compensation contributed on a pre -tax basis beginning after completion of two
years of service eligibility requirement continuing until termination or actual retirement date.
K. Vested Benefit Upon Termination:
a. Eligibility: 100% vesting upon completion of six (6) years of credited service.
b. Benefit: Accrued benefit as of date of termination multiplied by vesting percentage, payable
as of normal retirement date in the normal form. After 20 years of credited service,
an immediate, actuarially reduced benefit is optional.
L. Termination Benefit:
a. Eligibility: Less than six (6) years of credited service at date of termination.
b. Benefit: Return of employee contributions plus interest at the rate of 3 compounded
annually.
M. Normal Form of Payment of Retirement Income:
10 years certain and life thereafter, subject to COLA adjustments of 2.25% per annum.
N. Deferred Retirement Option Program (DROP).
1. Eligibility The earlier of attainment of age 55 and completion of 20 years of service or
attainment of age 62.
2. The maximum period of participation in the DROP is sixty (60) months.
3. The COLA is first payable following DROP participation period.
4. Interest is credited at the fixed rate of 6.5% per annum.
O. Changes from Previous Actuarial Valuation
None.
-19-
Gabriel Roeder Smith Company
D. Employee Withdrawal Rates
Age
Retirement Plan for Employees
of the City of Anywhere
Actuarial Assumptions and Actuarial Cost Methods
Used in the Valuation
A. Mortality
For healthy participants, the RP -2000 Mortality Table was used, with separate rates for males
and females and for annuitants and non annuitants, and with fully generational mortality
improvements projected to each future decrement date.
For disabled participants, the RP -2000 Disabled Mortality Table was used, with separate rates
for males and females, and with fully generational mortality improvements projected to each
future decrement date.
B. Investment Return
8.25 compounded annually, net of investment expenses.
C. Allowances for Expenses or Contingencies
Provision for payment of administrative costs added to normal cost based upon non
investment expenses paid in previous year.
Withdrawal Rates
Per 100 Employees
Males Females
First 4 Years 4+ Years First 4 Years 4+ Years
20 8.0 8.0 17.0 10.0
25 8.0 8.0 17.0 10.0
30 8.0 6.9 17.0 8.0
35 8.0 5.2 17.0 8.0
40 8.0 3.9 7.0 7.0
45 8.0 2.9
50 8.0 1.9
55 8.0 0.7
60 Over 0.0 0.0
1
5.5
3.0
1.0
0.0
5.5
3.0
1.0
0.0
E. Disability Incidence
1985 Class One Disability Study Table with separate rates for males and females.
-20-
Gabriel Roeder Smith Company
Table XI
F. Salary Increase Factor
Retirement Plan for Employees
of the City of Anywhere
Actuarial Assumptions and Actuarial Cost Methods
Used in the Valuation
Service
0 -5
6- 10
11- 14
15 years
Salary
Increase
7.50%
6.25%
6.00%
4.75%
G. Increase in Covered Payroll
4.0 per year not greater than the average annual increase over most recent ten years (6.0
H. Rates of Retirement
Rates of
Age Retirement
55 2%
55 15%
56 -60 10%
61 20%
62 30%
63 -64 15%
65 -69 20%
70 Over 100%
Table XI
(Cont'd)
35% of employees enter the DROP when first eligible.
Employees eligible for normal retirement as of the valuation date are assumed to retire one year
after the valuation date.
I. Deferred Retirement Option Provram (DROP)
The assumed period of DROP participation (COLA deferral) is four (4) years.
-21-
Gabriel Roeder Smith Company
J. Actuarial Value of Assets
Retirement Plan for Employees
of the City of Anywhere
Actuarial Assumptions and Actuarial Cost Methods
Used in the Valuation
Table XI
(Cont'd)
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.
K. Actuarial Cost Method
Normal Retirement, Termination, Disability, and Death Benefits: Entry -Aae- Normal 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 entry age to his assumed
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 such amounts for all employees. 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 assets of the Plan.
L. Changes from Previous Actuarial Valuation
1. The mortality assumption for healthy lives was based on the 1983 Group Annuity Mortality
Table with separate rates for males and females.
2. The mortality assumption for healthy lives was based on the 1985 Pension Disability Table
with separate rates for males and females.
3. Investment return was 8.5 compounded annually, net of investment expenses.
-22-
Gabriel Roeder Smith Company
Retirement Plan for Employees
of the City of Anywhere
Actuarial Assumptions and Actuarial Cost Methods
Used in the Valuation
L. Changes from Previous Actuarial Valuation (contd.)
4. Employee withdrawal rates were:
Withdrawal Rates
Per 100 Employees
Age Males Females
20 22.4 37.4
25 14.9 22.4
30 10.4 14.9
35 7.4 10.4
40 4.3 7.4
45 2.7 4.3
50 0.9 2.7
55 0.0 0.9
60 Over 0.0 0.0
5. Salary increase factor was 5.5% per annum.
6. Rates of retirement were:
Rates of
Age Retirement
55 25%
56 10%
57 10%
58 10%
59 10%
60 20%
61 20%
62 Over 100%
-23-
Gabriel Roeder Smith Company
Table XI
(Cont'd)
Attained COMPLETED YEARS OF SERVICE
Retirement Plan for Employees
of the City of Anywhere
Distribution by Attained Aee Groups
and Service Groups as of October 1, 2008
All Active Participants
Ate Group 0 -4 5 -9 10 -14 15 -19 20 -24 25 -29 30 Over Total
Under 25 2 2
25 -29 10 10 20
30 -34 9 12 3 24
35 -39 4 10 14 1 29
40 -44 5 12 14 2 33
45 -49 5 12 17 5 9 2 50
50 -54 8 7 19 7 5 8 2 56
55 -59 1 13 18 4 3 4 1 44
60 -64 3 10 9 4 3 4 33
65 Over 6 2 1 1 10
TOTAL 47 92 96 24 21 18 3 301
Average Attained Age
Average Hire Age
Average Pay
Percent Female
Prior Year
47.50 years
36.09 years
41,362
29.0%
-24-
Gabriel Roeder Smith Company
Current Year
47.60 years
35.97 years
43,289
29.9%
Table XII
Retirement Plan for Employees
of the City of Anywhere
Distribution by Attained Aee Groups
and Service Groups as of October 1, 2008
General Active Employees
Attained COMPLETED YEARS OF SERVICE
Ate Group 0 -4 5 -9 10 -14 15 -19 20 -24 25 -29 30 Over Total
Under 25 2 2
25 -29 9 7 16
30 -34 6 6 3 15
35 -39 4 9 13 1 27
40 -44 4 6 12 22
45 -49 2 9 11 2 4 2 30
50 -54 4 3 16 3 3 5 2 36
55 -59 1 11 16 4 3 1 1 37
60 -64 3 8 9 4 3 2 29
65 Over 4 1 5
TOTAL 35 63 81 14 13 10 3 219
Prior Year Current Year
Average Attained Age 47.51 years 47.62 years
Average Hire Age 36.21 years 36.25 years
Average Pay 41,047 43,034
Percent Female 32.6% 32.9%
-25-
Gabriel Roeder Smith Company
Table XII
(Cont'd)
Average Attained Age
Average Hire Age
Average Pay
Percent Female
Retirement Plan for Employees
of the City of Anywhere
Distribution by Attained Aee Groups
and Service Groups as of October 1, 2008
Water Active Employees
Attained COMPLETED YEARS OF SERVICE
Ate Group 0 -4 5 -9 10 -14 15 -19 20 -24 25 -29 30 Over Total
Under 25 0
25 -29 1 1 2
30 -34 3 3 6
35 -39 1 1 2
40 -44 1 4 2 1 8
45 -49 1 2 5 2 5 15
50 -54 3 4 3 3 2 3 18
55 -59 2 2 3 7
60 -64 2 2
65 Over 2 1 1 4
TOTAL 9 21 13 7 8 6 0 64
Prior Year
48.50 years
36.42 years
44,253
23.2%
-26-
Gabriel Roeder Smith Company
Current Year
48.26 years
35.58 years
45,797
25.0%
Table XII
(Cont'd)
Retirement Plan for Employees
of the City of Anywhere
Distribution by Attained Aee Grouns
and Service Grouns as of October 1, 2008
Sewer Active Emnlovees
Attained COMPLETED YEARS OF SERVICE
Ate Group 0 -4 5 -9 10 -14 15 -19 20 -24 25 -29 30 Over Total
Under 25 0
25 -29 0
30 -34 3 3
35 -39 0
40 -44 2 2
45 -49 1 1 1 3
50 -54 1 1
55 -59 0
60 -64 1 1
65 Over 0
TOTAL 2 6 0 1 0 1 0 10
Prior Year Current Year
Average Attained Age 42.63 years 43.05 years
Average Hire Age 33.45 years 34.13 years
Average Pay 36,187 38,626
Percent Female 7.7% 10.0%
-27-
Gabriel Roeder Smith Company
Table XII
(Cont'd)
Average Attained Age
Average Hire Age
Average Pay
Percent Female
Retirement Plan for Employees
of the City of Anywhere
Distribution by Attained Aee Groups
and Service Groups as of October 1, 2008
Storm Water Active Employees
Attained COMPLETED YEARS OF SERVICE
Ate Group 0 -4 5 -9 10 -14 15 -19 20 -24 25 -29 30 Over Total
Under 25 0
25 -29 2 2
30 -34 0
35 -39 0
40 -44 1 1
45 -49 1 1 2
50 -54 1 1
55 -59 0
60 -64 1 1
65 Over 1 1
TOTAL 1 2 2 2 0 1 0 8
Prior Year
46.32 years
33.96 years
33,796
12.5%
-28-
Gabriel Roeder Smith Company
Current Year
47.32 years
33.64 years
36,027
12.5%
Table XII
(Cont'd)
A. Entitled to Deferred Benefits
Total Average
Current Age Annual Annual
Group Count Benefit Benefit
Less than 50 11 141,766 12,888
50 -54 9 174,906 19,434
55 -59 3 31,343 10,448
60 -64 1 9,870 9,870
65 -69 0 0 0
70 Over 0 0 0
TOTAL 24 357,885 14,912
B. Retirees Receiving Benefits DROPs
Retirement Plan for Employees
of the City of Anywhere
Statistics for Participants Entitled to Deferred Benefits
and Participants Receiving Benefits
Total Average
Current Age Annual Annual
Group Count Benefit Benefit
Less than 50 0 0 0
50 -54 1 11,574 11,574
55 -59 11 383,058 34,823
60 -64 16 443,886 27,743
65 -69 23 585,720 25,466
70 -74 25 451,153 18,046
75 -79 16 202,943 12,684
80 Over 34 356,654 10,490
TOTAL 126 2,434,988 19,325
-29-
Gabriel Roeder Smith Company
Table XIII
C. Beneficiaries Receiving Benefits
Statistics for Participants Entitled to Deferred Benefits
and Participants Receiving Benefits
Total Average
Current Age Annual Annual
Group Count Benefit Benefit
Less than 50 10 49,522 4,952
50 -54 6 54,130 9,022
55 -59 5 49,398 9,880
60 -64 7 78,102 11,157
65 -69 7 53,827 7,690
70 -74 6 78,021 13,004
75 Over 10 95,654 9,565
TOTAL 51 458,654 8,993
D. Disabled Participants Receiving Benefits
Retirement Plan for Employees
of the City of Anywhere
Total Average
Current Age Annual Annual
Grouj Count Benefit Benefit
Less than 50 4 52,537 13,134
50 -54 2 28,487 14,244
55 -59 4 71,591 17,898
60 -64 0 0 0
65 -69 3 25,725 8,575
70 -74 0 0 0
75 Over 2 12,000 6,000
TOTAL 15 190,340 12,689
-30-
Gabriel Roeder Smith Company
Table XIII
(Cont'd)
Retirement Plan for Employees
of the City of Anywhere
Reconciliation of Employee Data
A. Active Participants
1. Active participants previous year 317
2. Retired during year (9)
3. Entered DROP during year
4. Deceased during year (1)
5. Disabled during year 0
6. Terminated refunded during year
7. Terminated not refunded during year
8. Terminated vested (8)
9. Leave of absence 0
10. New active participants 17
11. Rehired participants 0
12. Active participants current year 301
B. Participants Receiving Benefits
1. Participants receiving benefits previous year 182
2. New retired participants 9
3. New terminated vested receiving benefits 0
4. New disabled receiving benefits 1
5. New beneficiaries receiving benefits 2
6. Deceased or ceased payment during year (11)
7. Retirees refunded during the year 0
8. Retired or terminated vested receiving benefits current year 183
C. DROP Participants
1. DROP participants previous year 4
2. Died during year 0
3. Became disabled during year 0
4. Employment terminated and retired during year 0
5. Entered DROP during year 5
6. DROP participants current year 9
D. Terminated Vested Participants Entitled to Future Benefits
1. Terminated vested entitled previous year 19
2. Deceased during year (2)
3. Commenced receiving benefits during year 0
4. New terminated vested 8
5. Terminated vested paid lump sum
6. Terminated vested entitled current year 24
-3 1
Gabriel Roeder Smith Company
Table XIV
Retirement Plan for Employees
of the City of Anywhere
Projected Retirement Benefits
Projected Total
Fiscal Year Annual Payout
2009 3,497,633
2010 3,794,760
2011 4,031,650
2012 4,388,303
2013 4,722,322
2014 5,118,833
2015 5,518,336
2016 5,910,130
2017 6,437,846
2018 6,888,727
The above projected payout of plan benefits during the next ten years is based on assumptions
involving all decrements. The actual payout may differ from the above estimates depending upon
death, salary and retirement experience of the plan. However, since the projected payment is
recomputed each valuation date, there is an automatic correction to the extent that actual experience
varies from expected experience.
-32-
Gabriel Roeder Smith Company
Table XV
Retirement Plan for Employees
of the City of Anywhere
Review of Salary and Termination Experience
A. Salary Experience Current Year
Under 25 1 5.7% N/A
25 -29 11 7.6% N/A
30 -34 27 6.9% N/A
35 -39 18 7.5% N/A
40 -44 31 5.9% N/A
45 -49 54 5.9% N/A
50 -54 40 5.0% N/A
55 -59 46 5.0% N/A
60 -64 18 5.5% N/A
65 Over 8 4.8% N/A
TOTAL 254 5.8% 5.5%
B. Recent Salary Experience
Table XVI
October 1, 2008 Actual Assumed
Age Groups Employees* Increase Increase
Actual Assumed
Year Ended Employees* Increase Increase
09/30/2007 270 6.9% 5.5%
09/30/2006 275 5.9% 5.5%
09/30/2005 284 6.3% 5.5%
09/30/2004 271 3.9% 5.5%
09/30/2003 253 9.3% 5.5%
09/30/2002 238 5.2% 5.5%
09/30/2001 228 6.1% 5.5%
09/30/2000 251 6.4% 5.5%
09/30/1999 241 7.6% 5.5%
Last 3 Years 799 6.2% 5.5%
Last 5 Years 1,354 5.8% 5.5%
Last 10 Years 2,565 6.3% 5.5%
Participants who have full years of pay for both years considered.
-33-
Gabriel Roeder Smith Company
Retirement Plan for Employees
of the City of Anywhere
Review of Salary and Termination Experience
C. Termination Experience Current Year
Table XVI
(Cont'd)
Number of Ratio of
October 1, 2007 Participants Expected Actual Actual to
Age Groups October 1, 2007 Terminations Terminations Expected
19 Under 0 0.0 0 N/A
20 -24 1 0.2 0 0.0
25 -29 20 3.0 3 1.0
30 -34 31 3.2 3 0.9
35 -39 26 1.8 3 1.7
40 -44 39 1.7 1 0.6
45 -49 59 1.5 2 1.3
50 -54 47 0.3 2 6.7
55 -59 55 0.0 3 N/A
60 -64 27 0.0 1 N/A
65 Over 12 0.0 0 N/A
TOTAL
D. Recent Termination Experience
317 11.7 18 1.5
Number of Ratio of
Participants Expected Actual Actual to
Period Previous Year Terminations Terminations Expected
09/30/2007 312 11.0 16 1.5
09/30/2006 324 12.5 10 0.8
09/30/2005 327 12.6 16 1.3
09/30/2004 336 14.5 14 1.0
09/30/2003 314 13.8 7 0.5
09/30/2002 295 13.4 7 0.5
09/30/2001 278 13.0 16 1.2
09/30/2000 263 14.1 16 1.1
09/30/1999 251 13.4 18 1.3
Last 3 Years 953 35.2 44 1.3
Last 5 Years 1,616 62.3 74 1.2
Last 10 Years 3,017 130.0 138 1.1
-34-
Gabriel Roeder Smith Company
Table XVII
Retirement Plan for Employees
of the City of Anywhere
Analysis of Investment Yield as of October 1, 2008
This Table sets forth the results of an analysis made of investment yields on the assets held under the
Retirement Plan for Employees of the City of Anywhere.
The basic sources for this analysis were the Statements produced by the City.
The basic data was initially checked for internal consistency. Since no difficulties were encountered
with the data, yield rates were calculated directly from the transaction information submitted. A
summary of the transaction information is set forth on the following page.
-35-
Gabriel Roeder Smith Company
Retirement Plan for Employees
of the City of Anywhere
Summary of Transaction Information
Net
Year Benefits Administrative Member City Actuarial
Ended Paid* Expenses Contributions Contributions Value
09/30/2008 3,000,899 S 119,945 1,054,435 2,333,440 56,504,858
09/30/2007 2,849,780 S 43,851 900,620 2,133,251 53,575,555
09/30/2006 2,528,070 S 116,727 898,852 1,858,727 48,553,562
09/30/2005 2,433,315 S 111,722 863,779 1,738,722 45,627,713
09/30/2004 2,140,131 100,910 851,458 1,694,679 44,967,792
09/30/2003 1,964,374 76,039 799,182 1,547,537 44,459,457
09/30/2002 1,798,589 65,132 707,765 701,935 39,872,430
09/30/2001 1,798,795 84,346 639,170 634,989 44,382,287
09/30/2000 1,578,287 88,104 599,825 576,257 43,650,926
09/30/1999 1,539,900 79,210 545,770 533,119 40,229,429
09/30/1998 1,579,002 83,104 411,522 411,522 35,879,000
09/30/1997 1,624,618 48,768 371,603 349,350 33,630,000
09/30/1996 1,185,418 61,130 365,210 274,533 28,099,000
09/30/1995 962,600 138,626 358,078 344,348 25,474,000
09/30/1994 971,140 179,416 357,215 109,396 21,909,000
Includes refunds and DROP benefit credits
Market value prior to 2001, thousands prior to October 1, 1998
-36-
Gabriel Roeder Smith Company
Table XVII
(Cont'd)
Retirement Plan for Employees
of the City of Anywhere
Recent Plan Experience
Assumed Market Actuarial
Investment Yield Value Yield' Value Yield 1 2
09/30/2008 8.5% (13.8 5.0%
09/30/2007 8.5% 13.6% 10.0%
09/30/2006 8.5% 7.2% 6.2%
09/30/2005 8.5% 10.4% 1.3%
09/30/2004 8.5% 7.0% 0.5%
09/30/2003 8.5% 13.3% 10.7%
09/30/2002 8.5% (9.0 (10.1
09/30/2001 8.5% (13.6 3.5%
09/30/2000 9.0% 9.8% 9.8%
09/30/1999 7.5% 13.7% 13.7%
Last 3 Years 8.5% 1.6% 7.0%
Last 5 Years 8.5% 4.4% 4.5%
Last 10 Years 8.4% 3.3% 4.8%
'Yield calculated as 2I/(A +B -I)
2 Actuarial value was market value prior to September 30, 2001
-37-
Gabriel Roeder Smith Company
Table XVII
(Cont'd)
A. Participant Data
1. Active participants
2. Retired participants and beneficiaries
receiving benefits (including DROPs)
3. Disabled participants receiving benefits
4. Terminated vested participants
5. Annual payroll of active participants
6. Annual benefits payable to those currently
receiving benefits (including DROPs)
B. Assets
1. Actuarial Value
2. Market Value
C. Liabilities
1. Actuarial present value of future expected benefit
payments for active members
a.
b.
c.
d.
e.
Retirement benefits
Vesting benefits
Death benefits
Disability benefits
Total
2. Actuarial present value of future expected benefit
payments for terminated vested members
3. Actuarial present value of future expected benefit
payments for members currently receiving benefits
a.
b.
c.
d.
e.
Service retired (including DROPs)
Disability retired
Beneficiaries
Miscellaneous
Total
Retirement Plan for Employees
of the City of Anywhere
Actuarial Valuation as of October 1, 2008
State Required Exhibit
-38-
10/01/2007
317
172
14
19
S 13,111,784
48,436,900
1,255,322
2,023,316
2,081,327
53,796,865
1,503,767
20,265,352
1,262,254
3,502,813
36,040
25,066,459
Gabriel Roeder Smith Company
Prior
Assumptions
10/01/2008
301
177
15
24
S 13,029,957
Table XVIII
Current
Assumptions
10/01/2008
301
177
15
24
13,029,957
S 2,749,171 3,083,982 3,083,982
53,575,555 56,504,858 56,504,858
55,401,920 47,981,513 47,981,513
48,539,796
1,247,467
1,987,867
2,088,007
53,863,137
2,386,907
23,783,366
1,481,406
3,693,290
39,140
28,997,202
50,822,057
1,621,551
1,369,821
3,804,768
57,618,197
2,606,366
24,940,522
1,950,378
3,772,986
39,140
30,703,026
4. Total actuarial present value of future expected
benefit payments
5. Actuarial accrued liabilities
6. Unfunded actuarial liabilities
D. Statement of Accumulated Plan Benefits
Retirement Plan for Employees
of the City of Anywhere
Actuarial Valuation as of October 1, 2008
State Required Exhibit
1. Actuarial present value of accumulated vested
benefits
a. Participants currently receiving benefits
b. Other participants
c. Total
2. Actuarial present value of accumulated non vested
plan benefits
3. Total actuarial present value of accumulated
plan benefits
E. Statement of Chance in Accumulated Plan Benefits
1. Actuarial present value of accumulated plan benefits
as of October 1, 2007
2. Increase (decrease) during year attributable to:
a. Plan amendment
b. Change in actuarial assumptions and methods
c. Benefits paid (including DROPs and refunds)
d. Other, including benefits accumulated and increase
for interest due to decrease in the discount period
e. Net increase
3. Actuarial present value of accumulated plan benefits
as of October 1, 2008
-39-
10/01/2007
Gabriel Roeder Smith Company
80,367,091 85,247,246
67,210,104 72,480,699
13,634,549 15,975,841
Prior
Assumptions
10/01/2008
25,030,419 28,958,062
28,532,860 29,694,597
53,563,279 58,652,659
617,703
527,191
Table XVIII
(Cont'd)
Current
Assumptions
10/01/2008
90,927,589
74,148,334
17,643,476
30,663,886
29,782,764
60,446,650
555,641
54,180,982 59,179,850 61,002,291
54,180,982
0
1,822,441
(3,000,899)
7,999,767
6,821,309
61,002,291
F. Pension Cost
1. Total normal cost
2. Payment required to amortize unfunded liability
3. Interest
4. Total required contributions
5. Item 4 as a percentage of payroll
6. Estimated employee contributions
7. Item 6 as a percentage of payroll
8. Expected City contribution
9. Item 8 as a percentage of payroll
G. Past Contributions
1. Total contribution required (Prior Actuarial
Valuation)
2. Actual contributions made:
a. Employee
b. City
c. Total
H. Net Actuarial Gain (Loss)
I. Disclosure of Following Items:
1. Actuarial present value of future salaries
attained age
2. Actuarial present value of future
employee contributions attained age
3. Actuarial present value of future
contributions from other sources
4. Amount of active members' accumulated
contributions
5. Actuarial present value of future salaries
and future benefits at entry age
6. Actuarial present value of future
employee contributions at entry age
Retirement Plan for Employees
of the City of Anywhere
Actuarial Valuation as of October 1, 2008
State Required Exhibit
-40-
Gabriel Roeder Smith Company
Prior
Assumptions
10/01/2007 10/01/2008
1,928,768 2,066,520
840,549 992,658
275,073 312,517
3,044,390 3,371,695
23.2% 25.9%
917,825 912,097
7.0% 7.0%
2,126,565 2,459,598
16.2% 18.9%
3,171,316 3,044,390 3,044,390
1,054,435
2,333,440
3,387,875
N/A
N/A
N/A
N/A
1,682,494 (2,518,093)
6,918,632 6,773,301
N/A
Table XVIII
(Cont'd)
Current
Assumptions
10/01/2008
2,220,251
1,063,129
331,070
3,614,450
27.7%
912,097
7.0%
2,702,353
20.7%
N/A
N/A
N/A
(2,518,093)
98,837,599 96,761,444 108,841,386
7,618,897
N/A
7,734,830 7,859,958 7,859,958
Not provided by software
Not provided by software
Retirement Plan for Employees
of the City of Anywhere
Actuarial Valuation as of October 1, 2008
State Required Exhibit
J. Retirement Experience
Nonnal Retirement Eligibility: Earlier of age 62 or age 55 with 20 years of credited service.
Table XVIII
(Cont'd)
9/30/1999
Attained 9/30/2005 9/30/2006 9/30/2007 9/30/2008
Age Elieible Retired Eligible Retired Elieible Retired Elieible Retired
55 13 3 2 0 4 0 5 3
56 14 3 1 0 2 0 4 1
57 14 2 1 0 2 0 2 0
58 11 1 2 0 1 1 2 1
59 9 1 3 0 3 0 0 0
60 9 0 2 1 3 0 3 0
61 10 0 1 0 1 0 3 0
62 30 8 8 2 4 3 6 1
63 19 4 3 0 6 0 1 0
64 14 1 2 0 3 0 7 1
65 13 3 2 1 2 0 2 1
66 9 1 1 0 1 0 3 1
67 5 1 2 0 1 0 1 0
68 3 0 2 0 2 2 1 0
69 3 0 1 0 2 0 0 0
70 5 1 0 0 1 0 2 1
71 4 1 1 1 0 0 1 0
72 3 0 1 0 0 0 0 0
73 2 0 1 0 1 0 0 0
74 3 0 0 0 1 0 1 0
75 4 1 0 0 0 0 1 0
76 4 0 0 0 0 0 0 0
77 4 2 0 0 0 0 0 0
78 1 0 1 1 0 0 0 0
79 1 0 0 0 0 0 0 0
80 1 0 0 0 0 0 0 0
81 0 0 1 0 0 0 0 0
82 0 0 0 0 1 0 0 0
83 0 0 0 0 0 0 1 1
Total 208 33 38 6 41 6 46 11
Data prior to September 30, 2001 as reported by the prior actuary.
-41-
Gabriel Itocdcr Smith Company
10/01/2001
10/01/2001
10/01/2002
10/01/2003
10/01/2004
10/01/2005
10/01/2005
10/01/2006
10/01/2007
10/01/2008
10/01/2008
Unfunded Actuarial Accrued Liabilities
Assumption Method Change
Plan Amendment
Actuarial Loss (Gain)
Actuarial Loss (Gain)
Actuarial Loss (Gain)
Actuarial Loss (Gain)
Plan Amendment
Actuarial Loss (Gain)
Actuarial Loss (Gain)
Actuarial Loss (Gain)
Assumption Change
TOTAL
Enrollment Number: 08 -02802
Dated: May 20, 2009
Retirement Plan for Employees
of the City of Anywhere
Actuarial Valuation as of October 1. 2008
State Required Exhibit
-42-
Current Unfunded Amortization Remaining Funding
Liabilities Payment Period
(2,598,566)
35,257
8,794,197
(169,845)
4,133,782
3,482,323
38,118
1,413,843
(1,671,361)
2,518,093
1,667,635
Gabriel Roeder Smith Company
(169,483)
2,300
559,059
(10,541)
250,834
206,873
2,264
82,333
(95,517)
141,378
93,629
17,643,476 1,063,129
Table XVIII
(Cont'd)
23 years
23 years
24 years
25 years
26 years
27 years
27 years
28 years
29 years
30 years
30 years
This actuarial valuation and /or cost determination was prepared and completed by me or under my direct
supervision, and I acknowledge responsibility for the results. 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 112, 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 for in the valuation. All known events or trends which may require a material
increase in plan costs or required contribution rates have been taken into account in the valuation.
Lawrence F. Wilson, A.S.A.
RETIREMENT PLAN
FOR EMPLOYEES OF THE
CITY OF ANYWHERE
SUMMARY PLAN DESCRIPTION
Prepared September 2009
Table of Contents
INTRODUCTION
PLAN HIGHLIGHTS 4
CONTRIBUTIONS TO THE PLAN 5
ELIGIBILITY REQUIREMENTS 5
VESTING 5
ELIGIBILITY FOR BENEFITS 6
DETERMINING YOUR BENEFIT 8
HOW BENEFITS ARE CALCULATED 9
DISABILITY BENEFITS 11
PRE RETIREMENT DEATH BENEFITS 13
PAYMENT OF YOUR BENEFITS 13
BENEFIT LIMITATIONS 15
IMPORTANT FACTS ABOUT YOUR PLAN 16
GLOSSARY 18
REPORT OF FINANCIAL AND ACTUARIAL INFORMATION 20
PAGE
INTRODUCTION
Providing for yourself and your family when you retire is an important long -range goal. Should
you continue to work as an employee with the City until you retire, the benefits available from
the Retirement Plan for Employees of the City of Anywhere (the Plan) will provide you with a
lifetime income when you retire. The Plan also has disability and certain death benefits.
This summary explains the provisions of the Plan as amended. Highlights of the Plan are listed
below and are followed by a description of the Plan in more detail. The end of this booklet
includes a glossary of key terms and phrases that have special meanings in the Plan. When these
words first appear in the text, they are underlined to remind you to refer back to the Glossary.
Knowing what these terms mean will help you to understand the Plan.
As required by State rules, you must receive a copy of this booklet when you become eligible for
participation in the Plan. Every second year thereafter, you will receive a new booklet. If
changes to the Plan occur prior to the publication of a new booklet, you will receive a summary
of those changes. Any changes made subsequent to this document will be included in the next
publication.
Please read this booklet carefully. If any details are not clear or if you have any questions, please
contact the Pension Board.
As much as possible, this summary plan description has been written in non technical terms,
avoiding the formal language of the Plan. If questions of interpretation arise as a result of the
attempt to make such retirement provisions easy to understand, the Plan remains, as it must, the
final authority.
The information provided in this summary plan description is based on the Plan in existence
September 2009, and is subject to modification based upon changes in the Plan, subsequent
interpretations of the Plan and changes in other laws that affect the Plan. The Board of Trustees
is not responsible for erroneous information provided by an individual Trustee or provided by
any other person purportedly representing the Plan, except as specifically set forth in writing
executed by the Chairman or Administrator.
Circular 230 Notice: Pursuant to regulations issued by the IRS, to the extent this communication
(or any attachment) concerns tax matters, it is not intended or written to be used, and cannot be
used, for the purpose of (i) avoiding tax related penalties under the Internal Revenue Code or (ii)
marketing or recommending to another party any tax related matter addressed within. Each
taxpayer should seek advice based on the individual's circumstances from an independent tax
advisor.
This communication shall not be construed to provide tax advice, legal advice or investment
advice.
PLAN HIGHLIGHTS
The Retirement Plan for Employees of the City of Anywhere provides eligible employees with:
A monthly income for life upon retirement with automatic cost of living adjustment.
Normal Retirement, for sworn Police Officers, is the earliest of the date when you:
Reach age 52 and complete 20 years of Creditable Service
or
Complete 25 years of Creditable Service
Reach age 62.
or
For the City Manager, Normal Retirement is the date when you:
Reach age 64 and complete 7 years of Creditable Service
For all other employees, Normal Retirement is the earlier of the date when you:
Reach age 62 and complete 15 years of Creditable Service
or
Reach age 65 and complete 10 years of Creditable Service.
Early Retirement is the earlier of the date when you:
Reach age 55 and complete 15 years of Creditable Service
or
Complete 20 years of Creditable Service.
Benefits in the event of your Total and Permanent Disability.
Certain survivor benefits in the event of your death.
The right to future retirement benefits if you leave the City before you are eligible for
retirement but after you are vested in the Plan. If you are a General Employee, you are
partially vested in the Plan when you complete 5 years of Creditable Service. The City
Manager will be deemed fully vested upon completion of 7 years of Creditable Service. If
you are a Police Officer, you are fully vested in the Plan when you complete 5 years of
Creditable Service.
If you are a Police Officer or a dispatcher, you have the option to elect the Deferred
Retirement Option Plan (the DROP) in the event you remain employed beyond your normal
retirement date.
These important features are explained in more detail on the pages that follow.
CONTRIBUTIONS TO THE PLAN
There are two sources of contributions for your Plan: the City and your own contributions. The
City is required to contribute amounts as mandated by State Statute and determined by an
actuary.
Your contribution rate is the following percent of your Covered Compensation:
General Employees 5% as irrevocably elected by you if you were contributing 5% prior
to February 1, 2003 otherwise 6
Police Officers 8
Your contributions will cease upon your retirement, death, employment termination or
completion of the number of years of Creditable Service sufficient to produce an annuity equal to
90% (60% for General Employees) of your Average Monthly Salary. Interest is credited to your
contributions made after December 31, 1978 at the annual rate of 4 compounded annually.
Contributions from all sources are deposited and accumulated in a special trust fund under which
you and your dependents are the beneficiaries. Money in this trust fund is set aside to pay
benefits and expenses of the Plan. The assets of the trust fund are invested by the Pension Board.
ELIGIBILITY REQUIREMENTS
You are eligible to be a Member of the Plan if you are a Police Officer or other employee of the
City. Your employment must be full -time, as determined by the City. Individuals in the
following categories may not become Members of the Plan:
VESTING
part time or temporary full -time employees
employees under contract for a definite period or for a particular special service.
Vesting refers to that portion of your retirement benefit which is eligible for payment starting at
age 65 for General Employees and at age 62 for Police Officers, even if you leave the
employment of the City prior to your Normal or Early Retirement Date. General Employees
become partially vested in retirement benefits after completing 5 years of Creditable Service with
the City. This vesting percentage increases by 10% for the next 5 years until fully vested in
retirement benefits after completing 10 years of Creditable Service. The City Manager becomes
fully vested in retirement benefits after completing 7 years of Creditable Service. Police Officers
become fully vested in retirement benefits after completing 5 years of Creditable Service.
-5-
Your Accumulated Employee Contributions are always 100% vested. You always have a non
forfeitable right to receive your Employee Contributions after your termination of service with
the City for any reason.
ELIGIBILITY FOR BENEFITS
Normal Retirement
If you are a Police Officer, your Normal Retirement Date is the first day of the month coincident
with or next following the earliest of (1) the date you both reach age 52 and you complete 20
years of Creditable Service, (2) the date you reach age 62 regardless of your service or (3) the
date you complete 25 years of Creditable Service. If you are a General Employee, your Normal
Retirement Date is the first day of the month coincident with or next following the earlier of (1)
the date you both reach age 62 and you complete 15 years of Creditable Service or (2) the date
you both reach age 65 and you complete 10 years of Creditable Service. If you are the City
Manager, your Normal Retirement Date is the first day of the month coincident with or next
following the date you both reach age 64 and you complete 7 years of Creditable Service.
Delayed Retirement
If you continue your employment beyond your Normal Retirement Date, your Delayed
Retirement Date will be the first day of the month coincident with or next following your last
date worked.
Early Retirement
If you have both reached age 55 and have completed 15 years of Creditable Service or if you
have completed 20 years of Creditable Service regardless of age, you are eligible for early
retirement with reduced benefits. Your Early Retirement Date will be the first day of the month
after you satisfy these requirements and retire from the City.
Deferred Vested Retirement
General Employees You become 50% vested in your benefits when you complete 5 years of
Creditable Service. Your vesting percent will increase by 10% for each of the next 5 years until
you become 100% vested in your benefits when you complete 10 years of Creditable Service.
The City Manager will be deemed fully vested upon completion of 7 years of Creditable Service.
Police Officers You become 100% vested in your benefits when you complete 5 years of
Creditable Service.
If you leave the City after you have become vested, but before you become eligible for normal or
early retirement, you are entitled to a deferred vested benefit starting at age 65 for General
Employees and age 62 for Police Officers. Alternatively, you may elect to withdraw your
Accumulated Employee Contributions instead of receiving deferred retirement benefits. If you
elect to withdraw your Accumulated Employee Contributions your retirement benefit will be
-6-
irrevocably forfeited. If you have completed at least 20 years of Credited Service you may
receive reduced early retirement benefits. If you leave the City before you are vested in whole or
in part, your Accumulated Employee Contributions will be refunded.
Disability Retirement
If you suffer a Total and Permanent Disability before your Normal Retirement Date, you are
eligible for disability retirement unless your disability is as a result of non admissible causes such
as excessive use of drugs or narcotics. (See the section of this booklet entitled Benefit
Limitations for additional non admissible causes of disability).
Death Benefit after Normal Retirement Date but before Actual Retirement
In the event of your death after your Normal Retirement Date while actively employed, your
beneficiary will be entitled to benefits from the Plan based upon the optional form of benefit that
you have selected.
Death Benefit before Normal Retirement Date
In the event of your death before your Normal Retirement Date while actively employed, your
beneficiary will be entitled to a refund of your Accumulated Employee Contributions.
Deferred Retirement Option Plan (DROP)
If you are a Police Officer or dispatcher and you continue employment beyond your Normal
Retirement Date, you may elect to participate in the DROP for no longer than 5 years following
your earliest Normal Retirement Date.
DETERMINING YOUR BENEFIT
Your retirement benefit is based on a formula that takes into account:
Your Covered Compensation
Your Average Monthly Salary
Your years of Creditable Service, and
Your current and prior contribution rates, i.e., 5 6 7% or 8
If you are a Police Officer, the following table shows the benefit multiplier that applies to
different portions of your Creditable Service based upon your contribution rate:
If You Have Service
Before 10/1/1979
From 10/1/1979 to 6/30/1996
From 10/1/1979 to 6/30/1996
I From 7/1/1996 to 1/31/2003
1 From 7/1/1996 to 1/31/2003
From 7/1/1996 to 1/31/2003
1 From 2/1/2003 to 9/30/2005
From 2/1/2003 to 9/30/2005
1 From 10/1/2005 to 9/30/2006
After 10/1/2006
If You Have Service
Before 10/1/1979
1 From 10/1/1979 to 6/30/1996
1 From 10/1/1979 to 6/30/1996
From 7/1/1996 to 1/31/2003
1 From 7/1/1996 to 1/31/2003
From 7/1/1996 to 1/31/2003
1 After 1/31/2003
After 1/31/2003
And The Contribution Rate
You Elected During That
Time Is
N/A
5%
7%
5%
7%
8%
5%
6%
8%
8%
If you are a General Employee, the following table shows the benefit multiplier that applies to
different portions of your Creditable Service based upon your contribution rate:
And The Contribution Rate
You Elected During That
Time Is
N/A
5%
7%
5%
7%
8%
5%
6%
Your Benefit Multiplier
For That Time Is
1%%
1%%
2.0%
1%%
2.0%
2.5%
2.0%
2.5%
3.0%
3.5%
Your Benefit Multiplier
For That Time Is
1%%
1%%
2.0%
1%%
2.0%
2.5%
2.0%
2.5%
HOW BENEFITS ARE CALCULATED
Normal Retirement
The monthly benefit you will receive if you retire on or after your Normal Retirement Date is
your Average Monthly Salary at retirement multiplied by the benefit multiplier and your
Creditable Service for each period. Your monthly benefit as calculated above will be paid in the
Normal Form of Payment.
For Police Officers, the monthly benefit may not exceed 90% (75% for retirement prior to
October 1, 2006) of Average Monthly Salary. For General Employees, the monthly benefit may
not exceed 60% of Average Monthly Salary.
Other payment options are also available. The section of this booklet entitled Payment of Your
Benefits describes the Normal Form of Payment and the different ways you can receive your
monthly payments.
Example: Normal Retirement
If you are a Police Officer, the calculation of your Normal Retirement Benefit may be illustrated
by the following hypothetical example where you were hired on 10/1/1987, contributed 7% of
salary from 10/1/1987 through 6/30/1996, contributed 8% of salary from 7/1/1996 through
1/31/2003, contributed 6% of salary from 2/1/2003 through 9/30/2005 and contribute 8% of
salary from 10/1/2005 through your assumed normal retirement on 9/30/2012. If we further
assume that your Average Monthly Salary at retirement is $2,500, then your Normal Retirement
Benefit is calculated as follows:
($2,500 x 2.0 x 8.750 years 437.50
($2,500 x 2.5 x 6.583 years 411.44
($2,500 x 2.5 x 2.667 years 166.69
($2,500 x 3.0 x 1.000 years 75.00
($2,500 x 3.5 x 6.000 years 525.00
Total $1,615.63
In as much as the actual computed pension benefit is less than the maximum (90 allowed by
the Plan ($1,615.63 is less than 90% of $2,500) you would receive a monthly retirement benefit
of $1,615.63 from the Plan payable under the Normal Form of Payment commencing on your
Normal Retirement Date.
If you are a General Employee, the calculation of your Normal Retirement Benefit may be
illustrated by the following hypothetical example where you were hired on 10/1/1987,
contributed 7% of salary from 10/1/1987 through 6/30/1996, contributed 8% of salary from
7/1/1996 through 1/31/2003 and contribute 6% of salary from 2/1/2003 through your assumed
normal retirement on 9/30/2012. If we further assume that your Average Monthly Salary at
retirement is $2,500, then your Normal Retirement Benefit is calculated as follows:
-9-
Early Retirement
($2,500 x 2.0 x 8.750 years 437.50
($2,500 x 2.5 x 6.583 years 411.44
($2,500 x 2.5 x 9.667 years 604.19
Total $1,453.13
In as much as the actual computed pension benefit is less than the maximum (60 allowed by
the Plan ($1,453.13 is less than 60% of $2,500) you would receive a monthly retirement benefit
of $1,453.13 from the Plan payable under the Normal Form of Payment commencing on your
Normal Retirement Date.
Delayed Retirement
Your delayed retirement benefit is determined in the same way as your normal retirement benefit
based on your Average Monthly Salary and your years of Creditable Service on your Delayed
Retirement Date.
Your early retirement benefit is determined in the same way as your normal retirement benefit,
based on your Average Monthly Salary and your years of Creditable Service as of your Early
Retirement Date. You may choose to start receiving your early retirement benefit effective the
first day of any month on or after the earlier of the date that you have completed 20 years of
Creditable Service or when you have both reached age 55 and have completed 15 years of
Creditable Service, but in no event earlier than age 55. This benefit is reduced because you will
be receiving a benefit sooner than anticipated and over a longer period of time.
The early retirement reduction that applies if you receive your benefit before your Normal
Retirement Date depends on the number of years and months that your Early Retirement Date
precedes your Normal Retirement Date. Examples of early retirement factors are shown below.
The factors shown are multiplied by your accrued deferred benefit payable at your Normal
Retirement Date to determine your early retirement benefit.
Number of Early Retirement Number of Early Retirement
Years Early Factor Years Early Factor
1
2
3
4
5
0.94
0.88
0.82
0.76
0.70
If you retire early, you may elect to defer receipt of your benefit until your Normal Retirement
Date. If you choose to defer receipt of your benefit until your Normal Retirement Date no
reduction will be applied.
-10-
6
7
8
9
10
0.64
0.58
0.52
0.46
0.40
Deferred Vested Retirement
General Employees You become 50% vested in your benefits when you complete 5 years of
Creditable Service. Your vesting percent will increase by 10% for each of the next 5 years until
you become 100% vested in your benefits when you complete 10 years of Creditable Service.
The City Manager will be deemed fully vested upon completion of 7 years of Creditable Service.
Police Officers You become 100% vested in your benefits when you complete 5 years of
Creditable Service.
If you leave the City after becoming vested, but before you become eligible for Normal or Early
retirement, you are entitled to your vested accrued deferred benefit starting at age 65 for General
Employees and age 62 for Police Officers.
Your vested accrued deferred benefit is determined under the same formula used for normal
retirement, based upon your Average Monthly Salary, your years of Creditable Service at the
time you leave the City, your contribution rate(s) during your career and your vested percentage
at date of termination. Alternatively, you may withdraw your Accumulated Employee
Contributions. If you withdraw your Accumulated Employee Contributions, you will not be
eligible for any other Plan benefits.
DISABILITY BENEFITS
If you suffer a Total and Permanent Disability prior to your Normal Retirement Date, you may
apply for disability retirement.
Disability retirement from the Plan is subject to approval by the Pension Board. The Pension
Board has the right to require that you receive physical exams certifying your disability prior to
commencement and after disability benefits commence for continuance of disability. Certain
causes of disability are not admissible. See the Benefit Limitations section for a further
description of these benefits.
Service Incurred Disability
In order to be eligible for a service connected disability, the disability must result from
performance of service to the City and General Employees must be approved by the Federal
Social Security System for disability benefits.
If you become disabled due to a service incurred disability, the amount of your benefit is 75%
of your rate of monthly compensation in effect on your date of disability provided such disability
was a direct result of physical injury. However, if such service connected disability was not a
direct result of physical injury, the amount of your benefit is 45% of your rate of monthly
compensation in effect on your date of disability. This monthly benefit will be payable to you
under the Normal Form of Payment on the first day of each month until the earliest to occur of
your date of recovery from disability, your date of death or your normal retirement date.
For General Employees, your monthly disability retirement income is reduced by any regular
monthly disability benefits you are entitled to from Workers' Compensation and the Federal
Social Security System to the extent permitted by law.
Your service incurred disability benefit shall not be less than your non service incurred disability
benefit described below.
Payment of service incurred disability benefits as described above, shall commence as of the first
day of the month for which the first Social Security disability benefit is due.
If a service incurred disabled member is not eligible for Workers' Compensation, then such
member will receive temporary Plan benefits equal to what would be payable to a totally and
permanently disabled worker under Workers' Compensation, reduced by any amounts payable
from any formal plan of disability insurance. Such temporary benefits will commence on the
first day of the month following the day that sick pay and vacation would have been exhausted if
drawn on the regular cycle. Any temporary service incurred disability benefits will cease with
the payment, if any, due in the month preceding commencement of the long term service incurred
disability pension.
If your qualifying disability continues to your Normal Retirement Date, your benefits will be
recomputed to be your accrued benefit based upon your Creditable Service and your Average
Monthly Salary as of your date of disability, but not less than your disability benefit prior to your
Normal Retirement Date, payable under the Normal Form of Payment.
Non Service Incurred Disability
In order for a member to be eligible for a non service disability benefit at least two of the
following must certify in writing that such member is "wholly prevented from engaging in any
occupation for wages or profits, and that he is likely to remain so disabled continuously and
permanently
a. A duly licensed physician selected by and paid by the Board;
b. A duly licensed physician selected by and paid by the member;
c. A duly licensed physician mutually agreeable to by the physicians selected in a. and b.
above to be paid by the Board.
If you become disabled due to disability which is not service incurred, your disability benefit
is equal to the portion of your normal retirement benefit that you have accrued at your date of
disability. Your disability benefit is determined under the same formula used for normal
retirement, based upon your Average Monthly Salary, your years of Creditable Service at the
time you become disabled and your contribution rate(s) during your career with the City. This
monthly benefit will be payable to you under the Normal Form of Payment on the first day of
each month until the earliest to occur of your recovery from disability, your date of death or your
Normal Retirement Date.
For General Employees, your monthly disability retirement income is reduced by any regular
monthly disability benefits you are entitled to from Workers' Compensation and the Federal
Social Security System to the extent permitted by law.
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Non service incurred disability pensions will commence on the first day of the month following
approval by the Pension Board.
If your qualifying disability continues to your Normal Retirement Date, your benefits will be
recomputed to be your accrued benefit based upon your Creditable Service and your Average
Monthly Salary as of your date of disability, but not less than your disability benefit prior to your
Normal Retirement Date, payable under the Normal Form of Payment.
PRE RETIREMENT DEATH BENEFITS
If you die before your Normal Retirement Date, your Accumulated Employee Contributions will
be paid to your beneficiary. If you die after reaching your Normal Retirement Date but before
you have retired, survivor benefits will be paid as though you had retired immediately before
your death. Upon reaching Normal Retirement Date, you may select which type of survivor
benefits would be payable in the event of your death before actually retiring.
PAYMENT OF YOUR BENEFITS
This section summarizes the various ways and conditions under which your retirement benefit
can be paid.
Normal Form of Payment
When you retire, you will receive a monthly retirement benefit for life. Upon your death no
further benefits will be payable, subject to your receipt of a minimum of your employee
contributions.
If you wish, however, you may choose an optional payment method as described below. If you
choose an optional form of payment, your benefit amount will be reduced to be the actuarial
equivalent of the Normal Form of Payment.
Optional Payment Methods
Joint Last Survivor Annuity (Option 1): Under this option, you will receive a reduced
monthly benefit payable to you during your lifetime. Following your death, a fraction, as
designated by you, of this reduced monthly amount will be payable to your beneficiary
(spouse or relative if not a police officer) for the remaining lifetime of your beneficiary.
Ten Years Certain and Life Thereafter Annuity (Option 2): Under this option, you will
receive a reduced monthly benefit payable to you for life. Upon your death, your beneficiary
will continue to receive the same benefit you were receiving for the remainder, if any, of the
10 year certain period (120 monthly payments).
Deferred Retirement Option Plan (DROP)
If you are a Police Officer or dispatcher, you continue employment beyond your normal
retirement date and you elect to join the DROP, your Plan benefit will be determined as of your
DROP participation date. Mandatory member contributions will cease.
Your Plan benefit will be paid to your DROP account. Your DROP account will share in
investment gains /losses less investment expenses during your period of active DROP
participation.
After your participation in the DROP (maximum 5 years), termination of employment or death
no further Plan benefits will be paid to your DROP account. Any further Plan benefits due will
be paid directly to you or your beneficiaries. Your DROP account will be paid according to the
DROP provisions.
Cost of Living Adjustment
Beginning on January 1, 2004 and each January 1 thereafter, your retirement benefit will be
increased by 1.5% provided you have been retired for at least one (1) year. However, you will
receive a pro -rata increase for any fractional year in excess of one (1) year as of a January 1
adjustment date.
BENEFIT LIMITATIONS
This Plan is maintained for the benefit of eligible employees to provide financial security upon
retirement. However, the following circumstances could cause a loss or reduction in benefits
from the Plan:
(1) If you stop working before you become vested under the Plan, then you are entitled solely
to the refund of your Accumulated Employee Contributions.
(2) If you fail to properly file all necessary information and applications as required by the
Pension Board, then you may be denied benefits.
(3) If the Plan terminates and the assets in the trust fund are insufficient, then you may not
receive full payment of your accrued benefit under the plan.
(4) In no event can your annual retirement benefit from the Plan nor your compensation
considered exceed the legal limit for benefits and compensation established by the
Internal Revenue Service.
(5) Failure to provide information that the Pension Board deems necessary or desirable to
administer the Plan may result in reduction or cessation of any benefits otherwise
payable. Portions of your Plan benefits may be subject to Federal income tax when paid
to you or your beneficiary. The Pension Board will withhold payment for taxes from your
benefits or you may pay the taxes yourself along with your personal income tax.
(6) If you withdraw your Accumulated Employee Contributions no further Plan benefits are
payable.
(7) If your employment with the City is not on at least 32 hours per week and at least six
months per year you are not eligible for Plan participation.
(8) If you are employed on a part -time basis or employed under contract for a definite period
or for the performance of a specific special service you are not eligible for Plan
participation.
(9) You will not be entitled to receive disability benefits if you do not provide satisfactory
proof of actual and continued disability. Disability retirement is subject to the approval
of the Pension Board based upon established methods and procedure.
(10) You are not entitled to receive any disability benefits if the Pension Board finds that your
disability is a result of
Excessive and habitual use of drugs, intoxicants, or narcotics,
Injury or disease sustained while willfully and illegally participating in fights, riots,
civil insurrections or while committing a felony,
Injury or disease sustained while serving in the armed forces,
Injury or disease sustained, diagnosed or discovered after termination of
employment,
Injury or disease sustained while working for anyone other than the City and arising
out of such employment, and
Injury or disease sustained as a result of act of war, whether or not a formally
declared state of war.
(11) For General Employees, disability benefits will be reduced by your entitlement to
disability benefits from Workers' Compensation and the Federal Social Security System
to the extent permitted by law.
(12) You will not receive a cost of living increase if you have not been retired for a full year
preceding the January 1 cost of living adjustment date.
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IMPORTANT FACTS ABOUT YOUR PLAN
Name of Plan
Retirement Plan for Employees of the City of Anywhere
Plan Year
The Plan year begins on October 1 and ends the following September 30. The records of the
Plan are kept on a Plan year basis.
Employer
City of Anywhere
Plan Administrator /Trustee
Pension Board
City of Anywhere
123 Street
City, State 12345
(123) 456 -7890
Designated Agent for Service of Legal Process
Chairman of the Pension Board
Type of Administration
The Pension Board is responsible for the overall administration of the Plan. The Pension Board
has discretionary authority to construe the terms of the Plan and to make determinations on
questions which may affect your eligibility for benefits. The Pension Board may retain the
services of attorneys, accountants, actuaries, investment advisors and other professionals.
Custodian
The custodian of the Plan is responsible for the safe keeping of securities owned by the Pension
Fund. At the direction of the Pension Board, the custodian also pays benefits to eligible persons
and pays expenses incurred by the Plan. The custodian is:
SunTrust, N.A.
Orlando, Florida
Investment Manager(s)
The investment manager is responsible for selecting the securities to be bought and sold by the
Pension Fund, in accordance with guidelines established by the Pension Board. The investment
manager is:
ICC Capital Management, Inc.
Orlando, Florida
Relevant Provisions of Local, State and Federal Laws
The Plan is set forth in Chapter 2, Article V, Division 2 of the Code of Ordinances.
The most recent amendment to the Plan which is reflected in this Summary Plan Description is
Ordinance No. 1492.
Your Plan is also governed by certain provisions of Part VII, Chapter 112, Florida Statutes (F.S.),
Chapter 185 F.S., the collective bargaining agreement and various federal laws.
Relevant Provisions of Collective Bargaining Agreements
Certain employees covered by the Plan are members of the following collective bargaining unit:
State Lodge Fraternal Order of Police
The current collective bargaining agreement between the Collective Bargaining unit and the City
covers the period from October 1, 2007 through September 30, 2010. Article 31 of the
agreement provides for exploration of sworn Police Officer pension and retirement benefits.
Claims Procedure
There shall be written notice given to any member or beneficiary whose claim for benefits has
been denied. The notice shall indicate the specific reasons for denial and will clearly indicate
that a review is possible and the manner in which to apply for such a review.
GLOSSARY
Accumulated Employee Contributions
This is the total of your required employee contributions plus interest credited on employee
contributions made after December 31, 1978 at the rate of 4 compounded annually.
Average Monthly Salary
For Police Officers, this is your Average Monthly Salary from the City for the highest three years
of Creditable Service out of the last ten years of Creditable Service preceding termination of
employment. For General Employees, this is your Average Monthly Salary from the City for the
highest five years of Creditable Service out of the last ten years of Creditable Service preceding
termination of employment.
Covered Compensation
This is basic salary or wages paid by the City for services rendered including regular longevity
pay and your Section 457 deferred compensation, if any, but excluding any bonuses, overtime or
any other nonregular payments.
Creditable Service
This is service that is used to determine both the amount and eligibility for benefits that you may
receive. Creditable Service is measured in years and completed months, generally, from your date
of employment to the date of your retirement or other termination of service.
Delayed Retirement Date
If you continue your employment beyond your Normal Retirement Date, this is the first day of
the month coincident with or next following your last date worked.
Early Retirement Date
You may retire on the first day of any month following the completion of 20 years of Credited
Service or after 15 years, if you have reached age 55.
Employee Contributions
Your contribution rate, currently 5% (if elected by a General Employee member contributing 5%
prior to February 1, 2003), 6% (for all other General Employee members) or 8% (for all Police
Officer members).
Normal Retirement Date
The first day of the month coincident with or next following the earliest of the date that you have
reached age 52 and have completed 20 years of Creditable Service, have reached age 62
regardless of service or have completed 25 years of Creditable Service regardless of age; if you
are a sworn Police Officer. If you are the City Manager, the first day of the month coincident
with or next following the date you have reached age 64 and have completed 7 years of
Creditable Service. For all other employees, the first day of the month coincident with or next
following the earlier of the date that you have reached age 62 and have completed 15 years of
Creditable Service or have reached age 65 and have completed 10 years of Creditable Service.
Police Officer Member
Anyone who is elected, appointed or employed fulltime by the City and who is certified or
required to be certified as a law enforcement officer as defined in Florida Statutes 943.1395. A
police officer member's main duty is the prevention and detection and crime and enforcement of
laws of the State. This includes full-time, and not part-time or auxiliary law enforcement,
certified personnel whose duties include supervision, training, guidance and management of law
enforcement officers.
Total and Permanent Disability
Disability approved by the Pension Board based on medical evidence supplied by a Medical
Board appointed by the Pension Board. If the disability is as a result of certain conditions or
actions such as from participation in illegal activities, disability benefit will not be approved.
RETIREMENT PLAN FOR EMPLOYEES OF THE
CITY OF ANYWHERE
REPORT OF FINANCIAL AND ACTUARIAL INFORMATION,
10/01/2008
A. Participant Data
1. Active participants 96
2. Retired, disabled and beneficiaries receiving benefits 27
3. Terminated vested participants 2
4. Annual payroll of active participants 4,568,544
5. Annual benefits payable to those currently
receiving benefits 477,803
B. Assets
1. Actuarial value 11,701,487
2. Market value 9,876,061
C. Liabilities
1. Actuarial present value of future expected benefit
payments for active members
a. Retirement benefits 11,741,913
b. Vesting benefits 672,611
c. Disability benefits 1,008,618
d. Return of member contributions 172,586
e. Total 13,595,728
2. Actuarial present value of future expected benefit
payments for terminated vested members 219,618
3. Actuarial present value of future expected benefit
payments for members currently receiving benefits 5,079,159
4. Total actuarial present value of future expected
benefit payments 18,894,505
5. Actuarial accrued liabilities 10,971,286
6. Unfunded accrued liabilities (730,201)
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RETIREMENT PLAN FOR EMPLOYEES OF THE
CITY OF ANYWHERE
REPORT OF FINANCIAL AND ACTUARIAL INFORMATION (CONTINUED)
10/01/2008
D. Statement of Accumulated Plan Benefits,
1. Actuarial present value of accumulated vested benefits
a. Participants currently receiving benefits 5,079,159
b. Terminated vested members 219,618
c. Other participants 3,237,354
d. Total 8,536,131
2. Actuarial present value of accumulated non
vested plan benefits 1,092,038
3. Total actuarial present value of accumulated
plan benefits 9,628,169
E. Pension Cost
1. Total normal cost 884,294
2. Payment required to amortize unfunded liability (74,889)
3. Interest 58,235
4. Total required contributions 867,640
5. Item 4 as a percentage of payroll 19.0%
6. Estimated employee contributions 313,721
7. Item 6 as a percentage of payroll 6.9%
8. Net amount payable by City 553,919
9. Item 8 as a percentage of payroll 12.1%