HomeMy WebLinkAbout2009 11 18 Document Referenced During the Board of Trustees Regular Meeting Date: November 18, 2009
The following document was referenced during
the Board of Trustees Special Meeting on
November 18, 2009.
GRs
Gabriel Roeder Smith & Company One East Broward Blvd. 954.527.1616 phone
Consultants &Actuaries Suite 505 954.525.0083 fax
Ft. Lauderdale, FL 33301-1872 www.gabrielroeder.com
NOV 0 5 2009
March 20, 2009 CITY O G Mn anaoe P PRINGS
Mr. Donald Chapman, EA
Ms. Sandra Turner, President
Retirement Plan Specialists, Inc.
P.O. Box 622857
Orlando, Florida 32762 -2857
Re: City of Winter Park Springs Defined Benefit Pension Plan
Actuarial Valuation Report for PYE September 30, 2006
Impact Statement dated April 19, 2007 for Resolution No. 2007 -20
Dear Mr. Chapman and Ms. Turner:
As requested by the Florida Division of Retirement, Bureau of Local Retirement Systems, we reviewed
the materials forwarded by them regarding the City of Winter Park Springs Defined Benefit Pension
Plan. The purpose of our review is to help the State assess whether the plan is operating in compliance
with Part VII, Chapter 112, Florida Statutes and related regulations relating to local retirement systems.
The purpose of the statute is to prohibit the use of any procedure, methodology, or assumption that would
transfer to future taxpayers any portion of the cost of retirement benefits that may reasonably be expected
to be paid by current taxpayers.
The statute requires that the reports be prepared using acceptable actuarial methods and assumptions and
include specific disclosure items so that another actuary would arrive at reasonably similar results. If the
State does not accept the reports the entity sponsoring the plan may be subject to certain penalties as
outlined in s. 112.63 (4), F.S. and withholding of state premium tax moneys for the fire and police plans
operating under Chapters 175 and 185, F.S.
We reviewed the actuarial valuation report as of PYE September 30, 2006, and the impact statement dated
April 19, 2007 for Resolution No. 2007 -20 prepared by your firm. Please see the attachments for
additional information.
• Attachment A discusses the items that must be resolved in order for us to recommend that
the State accept the report. Please respond directly to us regarding our comments.
We will consider any additional information you provide.
• Attachment B lists additional items that we recommend you address in future reports.
You do not need to respond to us about these items.
• Attachment C is a memorandum from Keith Brinkman that describes our assignment and
requests your cooperation in helping us complete it.
This work product was prepared solely for the Florida Department of Management Services for the purposes described herein
and may not be appropriate to use for other purposes. Gabriel, Roeder, Smith & Company assumes no duty or liability to other
parties who receive this work.
Mr. Donald Chapman, EA
Ms. Sandra Turner, President
March 20, 2009
Page 2
This letter only addresses the compliance of the actuarial report and actuarial impact statement with the
specific items required by sections 112.63 and 112.64 of Chapter 112, Florida Statutes and related
regulations. Our review of those items does not constitute an audit of the results of the reports and we
express no opinion on the reasonableness of the estimates of the financial status of the Plan. An audit
may or may not uncover additional material issues in the actuarial work performed.
We are consulting actuaries for Gabriel, Roeder, Smith & Company. We are members of the Society of
Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the
actuarial opinion contained herein.
Please let us know if you have any questions or comments about our review.
Sincerely,
J r/Lid - 14_6 , , /
Theora P. Braccialarghe, FSA Duane Howison, FSA
Senior Consultant & Actuary Consultant & Actuary
cc: Keith Brinkman
Local Retirement System Bureau Chief
This work product was prepared solely for the Florida Department of Management Services for the purposes described herein
and may not be appropriate to use for other purposes. Gabriel, Roeder, Smith & Company assumes no duty or liability to other
parties who receive this work.
l,atriei F;oede: Smith mpany
Attachment A
City of Winter Park Springs Defined Benefit Pension Plan
Actuarial Valuation Report for PYE September 30, 2006
Issues to be Resolved for a Recommendation of State Acceptance
The items that must be resolved in order for us to recommend that the State accept the report are listed
below. Please respond directly to us regarding our comments.
1. The retirement benefit rate for service prior to October 1, 2000, was increased to 3.00% effective
October 1, 2008. For purposes of those leaving the plan before that date, the increase is phased in
at 0.25% per year. The actuarial valuation appears to value only the first 0.25% increase.
However, the majority of the active members covered by the valuation will actually be eligible
for the full 3.00% benefit. Funding should cover the full benefit for those assumed to leave the
plan from October 1, 2008 forward.
2. It appears that actual contributions to the plan are less than the minimum required amount. The
minimum required contribution as of October 1, 2004 shown on page 2 is $1,318,612. It appears
that this is a beginning of the year amount - i.e. without any interest adjustment for payment
during the year - and that is does not include administrative expenses. Actual contributions
during 2004/05 shown on page 7 were $1,260,627. If in fact this is the case, the shortfall should
be mentioned in the report
3. There is an assumption that the City will reimburse the Fund for actual expenses paid. There is
no indication that the City is doing that. The minimum required contribution should include
administrative expenses.
4. The BOY and EOY contribution amounts shown on page 10 are divided by anticipated 2005/06
payroll of $10,947,426. This is 13% higher than the October 1, 2005 payroll shown on page 14.
Please explain the basis for the 2005/06 payroll amount.
5. Please provide a three year history of investment returns on a valuation asset basis. Also, please
note that we could not match the return shown on page 8 for PYE 9/30/05 (Regulation 1.003(3)).
6. Please provide more detail to support the amortization payment shown on page 10. At a
minimum the outstanding bases, funding periods, and amortization payments should be shown for
each base (Regulation 1.003(3)).
7. Please provide the present value of benefits, broken down by group and, for active members, by
decrement (split: active by decrement, vested terminated, retired, beneficiary) (Regulation
1.003(4)).
8. Please show a calculation of the net actuarial gain/(loss) (Regulation 1.003(4)).
This work product was prepared solely for the Florida Department of Management Services for the purposes described herein
and may not be appropriate to use for other purposes. Gabriel, Roeder, Smith & Company assumes no duty or liability to other
parties who receive this work.
Gabriel Roeder Smith 8. Company
Impact Statement dated April 19, 2007 for Resolution No. 2007
Generally more actuarial information is required for an impact statement. However, due to the
nature of the change — adding an unreduced accrued benefit for a member with 30 years of
service who qualifies for the City's long term disability insurance policy — it is unlikely to add
significant cost, especially considering unreduced retirement is already available at age 55 with
25 years of service.
This work product was prepared solely for the Florida Department of Management Services for the purposes described herein
and may not be appropriate to use for other purposes. Gabriel, Roeder, Smith & Company assumes no duty or liability to other
parties who receive this work.
isabi e, Rc•cder Srmth & Company
Attachment B
City of Winter Park Springs Defined Benefit Pension Plan
Actuarial Valuation Report for PYE September 30, 2006
Items to Address in Future Reports
We recommend that you improve future reports as described below. You do not need to respond to us
regarding these items.
l . Please provide an amortization schedule showing the expected level of the UFAAL annually for
the three years following the valuation date and for the final year (Regulation 1.003(3)).
2. Please provide a reconciliation of the Present Value of Accrued Benefits from the beginning of
the year to the end of the year, separating changes due to amendments, assumption changes,
decrease in the discount period, benefits paid, other changes (Regulation 1.003(4)).
3. Please show the amount expected to be contributed by members (Regulation 1.003(4)).
4. Per Regulation 1.003(4) the report should separately disclose:
a. Contributions by source — City vs. member
b. Investment income by type: (i) interest and dividends, (ii) realized gains / (losses), (iii)
unrealized gains / (losses), and (iv) investment expenses
c. Pension benefit payments
d. Refunds
5. Actual average salary increases have been greater than the amount expected by the actuarial
assumption. This assumption should be reviewed before continuing to use it in the future
(Regulation 1.003(6)).
6. Consideration should be given to updating the mortality table from the 1983 Group Annuity
Mortality Table (Regulation 1.003(6)).
This work product was prepared solely for the Florida Department of Management Services for the purposes described herein
and may not be appropriate to use for other purposes. Gabriel, Roeder, Smith & Company assumes no duty or liability to other
parties who receive this work.
ac c Rce,ae .rnur Cc- nipanv
Attachment C Division of Retirement
Bureau of Local Retirement Systems
PO Box 9000
Tallahassee, Florida 32315 -9000
Toll Free: 877.738.5622
DEPARTMENT •F MANAGEMENT Te1:850.488.2784
e r v 1 c e s Faxc850.921.2161
www.dms.MyFlorida.com
Governor Charlie Crist Secretary Linda H. South
TO: Florida Local Government Pension Plan��,Q
FROM: Keith Brinkman, Chief
Bureau of Local Retirement Systems
SUBJECT: Special actuarial review project
DATE: December 15, 2008
The State of Florida has more than 500 defined benefit pension plans that are sponsored by an entity of
local government, such as a municipality or special district. The responsibility for monitoring these plans
for actuarially sound funding and compliance with part VII of Chapter 112, F.S., rests with the Bureau of
Local Retirement Systems in the Division of Retirement. However, over time, insufficient resources
have resulted in a backlog of plans that have not been reviewed in a timely manner.
In order to catch up on all overdue plan reviews, the Division has entered into a short term actuarial
services contract with State Term Contract Vendors to perform some of the actuarial reviews required
by s. 112.63, F.S. The legislature has granted budgetary authorization for this contract through the
state's fiscal year ending June 30, 2009, therefore, we are working in a highly compressed time frame
to ensure that all selected plans are reviewed, and any required follow -up is performed by that time.
Your plan(s) is being reviewed by one of the authorized external vendors, Gabriel, Roeder, Smith &
Company (GRS).
To accomplish this ambitious goal, we are asking that you provide your full cooperation to GRS as they
review your plan and, if necessary, contact you to request additional information or corrections. If the
actuarial review generates questions, please provide a response to GRS within 30 days of receipt of
the request. This is a shorter response time than normally requested, but with your assistance and
support, we hope to eliminate the entire backlog this fiscal year. Any unresolved issues raised by the
external actuary's review will be handled by our in -house actuaries and may be grounds for a
determination of not state acceptance, with the related penalties outlined in s. 112.63(4), F.S. This
project is being undertaken to improve the timeliness of service provided to the state's local
government pension plans and ensure the security of all plan participant benefits. Your assistance in
achieving this goal would be greatly appreciated.
Written requests for additional information or corrections are usually directed to the plan's administrator;
however, due to the time constraints of this project, we have requested that the external actuary send
such inquiries directly to your plan actuary for response. Any correspondence to the plan actuary will be
copied to the administrator (if one is identified) and the board of trustees' chairman, so all parties will be
advised of the information being requested. Please instruct your plan actuary to provide a prompt
response to these requests, in order to expedite the approval process. Please also promptly report any
change in administrator (if one is identified) or change in the board of trustees' chairman.
If you have any questions or concerns related to this project, please contact our office at (850) 488-
2784 and either myself or one of our actuaries, Charles Slavin or Doug Beckendorf, will respond to your
inquiries.
We serve those who serve Florida.
60T -1.003 Actuarial Reports.
(1) Each plan sponsor shall on its own or through the administrator or trustees of the plan have an actuarial report prepared for
each of its defined benefit retirement plans or systems by an enrolled actuary at least every three (3) years commencing from the
date of the last actuarial report of the plan or system on October 1, 1980, if no actuarial report has been issued within the three year
period prior to October 1, 1979. In addition, actuarial cost determinations recommending the contribution amount, rate or other basis
applicable to periods for which an actuarial valuation has not been specifically prepared are to be also provided to the Division
within 60 days of receipt by the plan administrator. No actuarial report is required for defined contribution retirement plans or
systems. However, the plan sponsor of each defined contribution plan shall provide such information and financial statements, as are
necessary to gather, catalog, and maintain complete information on all public employee retirement systems to the Division upon its
request.
(2) The results of each actuarial report shall be filed with the plan administrator within 60 days after completion and
certification by the actuary and made available for inspection upon request. Also, the system or plan shall provide a copy of each
actuarial report to the Division of Retirement within 60 days of receipt from the actuary.
(3) Actuarial reports shall contain all data required by Section 112.63(1), Florida Statutes which consist of the following:
(a) The values of the present assets, based on market value and "statement value ":
Cash
Bonds
Stocks
Other (specify)
Disclose the derivation of the actuarial asset value used in determining the annual funding requirement.
(b) A plan to amortize any unfunded liability pursuant to Section 112.64, Florida Statutes.
(c) A schedule illustrating the amortization of unfunded liabilities as they exist on the date of the valuation, on an annual basis
for the three years immediately following the current valuation date and the final year of the amortization schedule must be
disclosed, as well as a statement as to how the method was derived.
(d) A description of actions taken by the governmental entity to reduce the unfunded liability, especially those taken since the
last actuarial report.
(e) A description and explanation of all actuarial assumptions.
(f) A comparative review illustrating the rates of salary increases granted and investment return realized over the three -year
period preceding the current actuarial report with the assumptions used. The actual salary increase rate may be determined for the
period between the immediately preceding actuarial valuation date and the current valuation date; however, such rate shall be shown
on an annualized basis. Rate of actual salary increases shall be determined by using the aggregate of actual salary increases granted,
excluding new entrants and terminations. Investment return rates shall be determined for each year and reported on a consistent basis
for each year in the three -year period. There should also be an explanation of how the investment return rate was determined.
(g) A statement by the enrolled actuary, in the form of a certification signed and dated by the actuary, as follows:
Statement by Enrolled Actuary "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 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."
Signature
Date
Enrollment Number
(4) Actuarial valuation reports shall, at a minimum, disclose such information that another actuary, unfamiliar with the situation,
would find the information sufficient to appraise the reports' conclusions and to arrive at reasonably similar results. In order for the
Division to determine the completeness, accuracy, and reasonableness of the assumptions, such information shall, at a minimum,
include the following items:
(a) The date as of which the valuation was prepared, and the beginning and ending dates of the period for which the
recommended contributions are applicable.
(b) The overall valuation results, the adequacy of employer and employee contribution rates in meeting the levels of employee
benefits provided in the system and changes, if any, needed in such rates to achieve or preserve a level of funding deemed adequate
to enable payment through the indefinite future of the benefit amounts prescribed by the system.
(c) A brief summary of the retirement plan provisions.
(d) The funding method explained in sufficient detail so that another actuary could, using the same method, arrive at similar
results.
(e) For actuarial valuation reports which cover more than one employee group, benefit program, and/or more than one plan, and
the valuation calculations are made separately, the applicable valuation results shall be disclosed separately.
(f) Disclosure of any benefit and expense to be provided by the plan and/or paid from the plan's assets for which no liabilities or
current costs have been established or otherwise provided for, including an explanation of the omission and the cost effect thereof.
(g) Disclosure of any event which the actuary has not taken into account and any trend which, for purposes of the actuarial
assumptions used, was not assumed to continue in the future, but only if, to the best of the actuary's knowledge, such event or trend
may require a material increase in plan costs or required contribution rates.
(h) Disclosure, for each plan year, of the derivation of the current unfunded actuarial accrued liability from the amount
established as of the immediately preceding valuation date. (Unfunded actuarial accrued liabilities are amortized by nonemployee
contributions in excess of normal cost and interest requirements.) The disclosure shall, minimally, include the following:
1. Total unfunded actuarial accrued liability for the immediately prior $
actuarial valuation date (state date)
2. Plan sponsor normal cost for this plan year $
3. Interest accrued on 1. and 2. $
4. Plan sponsor contributions for this plan year (including amounts $
expected to be paid)
5. Interest on 4. $
6. Changes due to a. + b. + c. + d ,$
a. assumptions $
b. funding method $
c. plan amendments $_
d. actuarial gain /loss $_
7. Total current unfunded actuarial
accrued liability 1. + 2. + 3. - 4. - 5. + 6.
(i) Demographic and financial statistics on the members (active, terminated with rights to deferred benefits, and retired and
beneficiaries) in the retirement system including but not limited to an age and service distribution table for active members. This
section shall provide a reconciliation between current data and data in the most recent state approved valuation of the active,
terminated with rights to deferred benefits, and retired membership (and beneficiaries). (A projection of emerging liabilities/cash
flow needs for the next 10 -15 years would be beneficial.)
(j) An annual reconciliation of the plan's assets from the balance determined as of the immediately preceding valuation date to
the balance as of the current valuation date. If the reconciliation is done on a basis other than that used for annual funding
requirements, the reconciliation shall show the dollar relationship to actuarial value of assets as used in determining the annual
funding requirements. The reconciliation should show separately, at a minimum:
Contributions by source
Interest and dividends
Realized gains (losses)
Increase (decrease) in unrealized appreciation, if applicable (net)
Pension payments
Contribution refunds
Expenses
Other receipts (identify)
Other disbursements (identify)
(k) The amount of active members accumulated contributions (with interest, if provided by plan).
(I) A comparative summary of principal valuation results, essentially in the following format:
COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS
(Not a required format — to be used as a guide only)
Actuarial Valuation Prepared as of
1. Participant Data Current Date Prior Date
Active members # #
Total annual payroll $ $
Retired members and # #
beneficiaries (other than
disabled)
Total annualized benefit $ $
Disabled members receiving
benefits
Total annualized benefit $ $
Terminated vested members # #
Total annualized benefit $ $
2. Assets
Actuarial value of assets $ $
Market value of assets $ $
3. Liabilities
Present value of all future
expected benefit payments:
Active members
Retirement benefits $ $
Vesting benefits $ $
Disability benefits $ $
Death benefits $ $
Return of contribution $ $
Total $ $
Terminated vested members $ $
Retired members and
beneficiaries:
Retired (other than
disabled) and
beneficiaries $ $
Disabled members $ $
Total $ $
Total present value of all
future expected benefit $
payments $ $
Liabilities due and unpaid $ $
*Actuarial accrued liability $ $
*Unfunded actuarial $ $
accrued liability
*Refers to liabilities not
funded by future normal
cost contributions. Show
amount, date and
amortization period at
establishment, and current
amount of each such
liability not amortized
4. Actuarial present value
of accrued benefits (to be
determined in accordance
with a. and b. below)
Statement of actuarial
present value of all accrued
benefits
Vested accrued benefits $ $
Inactive members
and beneficiaries $ $
Active members $ $
(includes nonforfeitable
accumulated member
contributions in the
amount of ) $ $
Total value of all vested $ $
accrued benefits
Non - vested accrued benefits $ $
Total actuarial present value $ $
of all accrued benefits
Statement of changes in
total actuarial present value
of all accrued benefits
Actuarial present value of
accrued benefits at
beginning of year $
Increase (decrease) during
year attributable to (where
applicable):
Plan amendment $
Changes in actuarial $
assumptions
Increase for interest and $
probability of payment due
to decrease in discount
period and benefits accrued
Benefits paid $
Other changes (identify and $
state amount)
Net increase (decrease) $
Actuarial present value of $
accrued benefits at end of
year
a. Accrued benefits are those future promised benefits that are determined in accordance with the plan's provisions based on the
service members have rendered to the actuarial valuation date. Accrued benefits are those payable under all applicable plan
circumstances — retirement, death, disability, and termination of employment — to the extent they are deemed attributable to member
service rendered to the valuation date. Benefits to be provided by insured contracts for which the plan sponsor has no future liability
and which are excluded from plan assets are to be excluded from plan benefits.
b. All determinations are to be on a consistent basis. Any change is to be disclosed, together with an explanation. The exhibit
entries for the actuarial valuation date as of which a change is made shall show the entries on a before and after change basis.
5. Pension cost (specify applicable funding period)
Normal cost (show cost for $ $
each benefit if so calculated
and amount for
administrative expenses, if
applicable.)
Payment to amortize $ $
unfunded liability
Expected plan sponsor $ $
contribution (including
normal cost, amortization
payment and interest, as
applicable)
As % of payroll
Amount to be contributed $ $
by members
As % of payroll
6. Past contributions
For each plan year since last
report:
Required plan sponsor $ $
contribution
Required member $ $
contribution
Actual contributions made
by:
Plan's sponsor $ $
Members $ $
Other (e.g., Chapters
175 or 185, F.S.) $ $
7. Net actuarial gain (loss) $ $
(if applicable)
8. Other disclosures (where
applicable)
Present value of active
member:
Future salaries
at attained age $ $
at entry age $ $
Future contributions
at attained age $ $
at entry age $ $
Present value of future $ $
contributions from other
sources (identify)
Present value of future $ $
expected benefit payments
for active members at entry
age
(5) The actuarial cost methods utilized for establishing the amount of the annual actuarial normal cost to support the promised
benefits shall only be those methods approved in the Employee Retirement Income Security Act of 1974, and as permitted under
regulations prescribed by the Secretary of the Treasury.
The funding method utilized for the actuarial report and the resulting recommendation for contributions required to fund the
retirement plan shall minimally provide a contribution sufficient to meet the normal cost and to amortize the unfunded liability, if
any, in accordance with Section 112.64, Florida Statutes.
(6) Actuarial assumptions selected for the actuarial valuation report should reflect the actuary's best judgment of future events.
They should take into account the actual experience of the covered group. The actuary should consider the impact of inflation on
appropriate assumptions. The preferred approach in selecting actuarial assumptions is the use of explicit assumptions which more
nearly represent the actuary's best estimates of anticipated plan experience under each assumption. Actuarial assumptions which
consistently generate experience gains or losses are prima facie indications of unreasonable actuarial assumptions.
(7) Whenever an actuarial valuation is based on actuarial assumptions or cost methods different from those used in the
preceding valuation, the current valuation must clearly indicate the effect on projected liabilities and costs resulting from the new
assumptions and/or funding methods.
(8) Administrative expenses paid from the funds being accumulated to support the promised benefits shall be paid on a current
basis in addition to the annual funding costs otherwise determined.
(9) Annual funding costs or cost contribution rates determined as of a valuation date but to be paid at a later date or applicable
to a period beginning at a later date are to be appropriately adjusted to reflect the intervening time interval. The adjustment shall
provide for, but not be limited to, adjustments to account for interest and /or salary increase, as appropriate.
(10) Recommended changes in contributions or contribution rates determined as of a valuation date shall be effective not later
than the first of the next fiscal year following the valuation date.
(11) Unless otherwise indicated or contrary to Chapter 112, Florida Statutes, all actuarial procedures and determinations are to
be in accordance with commonly accepted procedures and determinations. Internal Revenue Service publications should be used as
the standard.
Specific Authority 112.665(1) FS. Law Implemented 112.61, 112.63 FS. History —New 5 -6 -81, Amended 9- 19 -83, 8- 15 -84, Formerly 22D -1.03,
Amended 11- 14 -91, Formerly 22D- 1.003, Amended 2- 23 -95.
60T -1.004 Actuarial Impact Statements.
(1) Regardless of funding source, no unit of local government shall agree to a proposed change in the retirement benefits or
liabilities of a local system subsequent to October 1, 1980, unless the administrator of the system, prior to adoption of the change by
the governing body, has issued a statement of actuarial impact of the proposed change upon the local retirement system prior to the
last public hearing thereon and has furnished a copy of such statement to the Division. Also, such statement shall incorporate by
reference and have attached a copy of the proposed ordinance, amendment, resolution, collective bargaining agreement, insurance
contract, or other legal instrument necessary to implement the proposed change to the retirement system. The adoption of a new plan
shall require submission of an impact statement.
(2) The statement of actuarial impact may be based upon an actuarial valuation that has been prepared within 12 months of the
proposed effective date for the amendments. The statement may be prepared by either the plan administrator or an enrolled actuary.
The plan administrator shall transmit such statement to the Division along with his/her statement that the prepared information
reflects the estimated costs of the proposed amendment(s).
(3) The statement of actuarial impact required by Section 112.63(3), Florida Statutes, should be in the form of a certification
signed and dated by the plan administrator and contain the following information:
(a) A description of the proposed amendment and a statement that the actuary was provided the information necessary to
evaluate the proposed amendment;
(b) An estimate of the cost of implementing the amendment, signed and dated by an enrolled actuary, which discloses, at a
minimum, sufficient information on both the before and after amendment basis, so that another actuary, unfamiliar with the
situation, would be able to appraise the estimate. If any actuarial assumptions, techniques or methods are also changed, additional
information disclosing the effect of such actuarial changes must be provided;
(c) A statement indicating whether the proposed change is in compliance with Part VII, Chapter 112, Florida Statutes and
Section 14, Article X of the State Constitution.
(4) Actuarial impact statements supporting benefit changes shall provide for contribution and contribution rate changes to be
effective as follows:
(a) For prospective or retroactive increases in the benefit formula of active or inactive employees — not later than the first day of
the fiscal year next following the enactment date of the legal instrument providing the benefit increase.
(b) For retroactive retiree benefit increases required by litigation or federal or state regulations — not later than the first day of
the fiscal year next following the effective date of the order or the regulation.
(c) For retroactive retiree benefit increases not required by litigation or federal or state regulation — not later than the first day of
the fiscal year next following the enactment date of the legal instrument providing the benefit increase. A lump sum payment shall
be required to fund the retroactive portion of the contribution increase from the effective date of such increase to the date of the
contribution rate change and shall also be paid no later than the first day of the fiscal year next following such enactment date.
Specific Authority 112.665(1) FS. Law Implemented 112.61, 112.63(3), (4) FS. History New 5 -6 -81, Amended 8- 15 -84, Formerly 22D -I.04,
Amended 11- 14 -91, Formerly 22D - 1.004, Amended 8 -4 -94.
Retirement Plan Specialists, Inc.
Employee Benefits Administrators, Actuaries & Consultants
815 Eyrie Drive, Suite 2 407 -365 -3490 (office)
Oviedo, Florida 32765 -8602 407 - 366 -5154 (fax)
888 - 376 -7222 (toll free)
Visit us at www.webpensionplans.com
April 30, 2009
ji
Theora P. Braccialarghe, FSA
Gabriel, Roeder, Smith & Company
One East Broward Blvd.
Suite 205
Ft. Lauderdale, FL 33301 -1872
RECEIVED
Re: City of Winter Springs Defined Benefit Pension Plan MAY
Actuarial Valuation Report for the PYE September 30, 2006 - 4 2009
Impact Statement dated April 19, 2007 for Resolution No. 2007 -20 13y.
Dear Ms. Braccialarghe:
This letter is in reference to your correspondence dated March 30, 2009 advising us of your
firm's contract to assist the Florida Division of Retirement, Bureau of Local Retirement Systems
in reviewing the actuarial valuation reports submitted for local government plans. The purpose
is to ascertain if the plans are operating in compliance with Part VII, Chapter 112, Florida
Statutes and related regulations. In that correspondence were attachments requesting additional
information needed in order to complete this review for the above referenced plan.
Due to the current economy, we are aware many governmental agencies are finding themselves
with reduced tax revenues and available funds with which to fund their retirement programs. We
are pleased the state is taking a proactive stance in reviewing these plans. Attached is the
information requested to support the actuarial valuation PYE September 30, 2006 provided to the
City of Winter Springs by our firm. The City has been very proactive in reviewing the funding
status throughout the life of their plan requesting numerous interim impact studies and a full
actuarial valuation report every year, as opposed to every three years as required by state
mandate.
Significant changes to the City of Winter Springs demographics, benefit formulas and actuarial
funding method will be reflected in the October 1, 2008 Actuarial valuation report, as well as the
recommended changes stated in your Attachment B: Items to Address in Future Reports.
Page 2
We are including the following attachments:
(1) Attachment A Responses, Item (1) through (4) in commentary form
(2) Attachment A Responses , Items (5) through (8) under our Attachment B responses
(3) Copy of our Preliminary Cost Illustrations presented to the City and Commissioners
in July, 2006 demonstrating the cost impact of implementing the 3% for past service
immediately, in supplement to Attachment A (1)
(4) Copy of our November 2, 2005 letter presented to the City along side of the actuarial
valuation report, as referenced in Attachment A responses, item (2). The City did
respond with an increase in contribution the following year.
We trust our responses will be sufficient for you to complete your audit and provide the City of
Winter Springs with a Recommendation for State Acceptance.
Please do not hesitate to contact us with any additional questions or concerns you may have.
Sincerely,
011.
/
Sandra R. Turner CPC QPA Donald D. ap.m.n, EA, MAAA
Senior Consultant Consulting Actuary
cc: Keith Brinkman
Local Retirement System Bureau Chief
IRS Circular 230 Notice:
To ensure compliance with requirements imposed by the IRS, we inform you that any US pension tax advice
contained in this communication (including any attachments) is not intended to be used, and cannot be used, for the
purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to
another party any transaction or matter addressed herein.
Attachment A Responses
City of Winter Springs Defined Benefit Pension Plan
Actuarial Valuation Report for PYE September 30, 2006
1. Although the actuarial valuation was prepared valuing the first .25% increment which was in
effect on October 1, 2005, cost illustrations of the necessary funding for the full 3% formula (not
effective until October 1, 2008), were presented each year to the City Manager for distribution
to the commissioners. Attached is the cost illustration dated July 11, 2006 that gives the impact
of funding to the full 3% and also with the anticipation of participants that may retire with the
full 3% formula between 2008 and 2013.
The certainty of continuing the .25% increment was to be reviewed each year by the City to
ascertain if they could continue to afford the increase or make recommendations to the
Commissioners for a decision to stop, delay or continue the implementation of future
increments. Thus, the funding reflects each increment as it became effective on each October 1.
We have continually advised the City of the full impact of the 3% formula.
2. The issue regarding actual contributions vs. required minimum amount was addressed in the
previous year's reporting to the Commissioners as noted in the attached cover letter to the
October 1, 2004 Actuarial Valuation Report. It was felt the issue was significant enough to
warrant urgent comment as presented to the Commissioners in the valuation cover letter for
the applicable year.
3. Based on Article XVI, Section 16.05 of the Plan Document, the fund can pay all reasonable fees
and expenses incurred for ordinary and necessary administration and operation of the plan
unless the employer pays the expenses directly. Since the inception of the plan, the City has
advised us they elected to pay all administrative /actuarial /legal fees directly from the City's
General Fund. The administrative expenses shown on page 7 of the report are for SunTrust
investment advisory fees. The wording was taken from the SunTrust annual report, however it
is our understanding they are investment advisory fees only. If and when the City decides to pay
administrative expenses from the fund, our valuations will definitely reflect an added cost for
expenses.
4. The total payroll shown on page 14 represents total covered compensation for the plan year
ending September 30, 2005 for those eligible on October 1, 2005. It excludes compensation for
terminations, retirees and deaths during the prior year which explains the 13% difference. The
2005/2006 payroll on page 10, item 6 & 7 represents the total actual payroll from the City's
financial office records upon which contributions to the trust have been made during the plan
year ended September 30, 2006. This comparison was at the City's request.
5. Response provided on attachment B.
6. Response provided on attachment B.
7. Response provided on attachment B.
8. Response provided on attachment B.
Retirement Plan Specialists, Inc.
April 30, 2009
Attachment B responses
CITY OF WINTER SPRINGS DEFINED BENEFIT PENSION PLAN
Actuarial Valuation Report for PYE September 30, 2006
5. Investment return on actual and valuation basis for three year period ending September 30, 2006
Plan Year End Rate of Return on:
Mkt Value Actuarial Value Assumed
9/30/2004 12.60% 0.60% 8%
9/30/2005 11.50% 4.20% 8%
9/30/2006 8.60% 9.50% 8%
Rate of Return = 21 /(A +B -I)
6. Amortization Schedule for amortization amounts shown on page 10
Date Years 10/1/2005 Amort
Established Remaining Amount Amount
Initial base 10/1/2000 25 $2,623,812 $227,588
Assumption Change 10/1/2002 27 ($32,354) ($2,740)
Plan Amendment 10/1/2003 28 $201,409 $16,875
Plan Amendment 10/1/2004 29 $301,147 $24,989
Plan Amendment 10/1/2005 30 $616,436 $50.700
Total $3,710,450 $317,412
Funding method utilized: Aggregate Entry Age Normal Cost with Frozen Initial Liability,
gains and losses spread into future normal cost. This method was elected by the City
to fund gains and losses over a shorter period of time.
7. Present Value of Benefits broken down by group:
Active Members $18,742,263
Retired Members $1,401,890
Terminated Vested $665,194
Total Present Value of Benefits $20,809,347
Retirement Plan Specialists, Inc.
April 30, 2009
8. Analysis of gains /losses as spread into future normal costs
Paticipant Covered Normal Normal Percentage
Count Payroll Cost % Cost of Total
10/01/04 239 $8,982,189 11.711% $1,051,900 93.00%
Increase(Decrease) due to:
Retired -2 - $101,763 11.711% - $11,917 -1.05%
Terminations -19 - $510,536 11.711% - $59,788 -5.29%
10/01/05 218 $8,369,890 11.711% $980,195 86.67%
Increase(Decrease) due to:
Salary net inc. $379,189 11.711% $44,407 3.93%
Net Investment, turnover - 0.003% -$241 0.00%
& mortality experience
New Entrants 33 $910,367 11.708% $106,586 9.42%
10/01/05 251 $9,659,446 11.708% $1,130,947 100.00%
Under the actuarial cost method (EAN -FIL), actuarial experience is reflected by the change in the normal cost
as a percentage of covered payroll between valuation dates. If the Normal Cost percentage decreases, there
is an actuarial gain; conversely, if normal cost percentage increases, there is an actuarial loss.
Retirement Plan Specialists, Inc.
April 30, 2009
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
PRELIMINARY COST ILLUSTRATIONS
AS OF OCTOBER 1, 2005
WITH FUNDING METHOD AND ASSUMPTIONS UNCHANGED
PRESENT PLAN WITH 2.25% PS INCREASE
30 Year Funding 15 Year Funding 10 Year Funding
Normal Cost $1,130,947 $1,130,947 $1,130,947
Past Service Cost 317,412 417,476 532,538
Total $1,448,359 $1,548,423 $1,663,485
Expected 2005/06
Est Covered Comp $10,947,426 $10,947,426 $10,947,426
Percent of Comp 13.2% 14.1% 15.2%
a) Present Value of Accrued Benefits: $11,290,585
b) Market Value of Assets: 11,251,277
c) Unfunded Present Value of Accrued Benefits: (a -b) $ 39,308 (99.7 %)
COST IF 3% FORMULA FOR ALL SERVICE WERE EFFECTIVE 10/1/2005
30 Year Funding 15 Year Funding 10 Year Funding
Normal Cost $1,155,671 $1,155,671 $1,155,671
Past Service Cost 478,416 629,234 802,660
Total $1,634,087 , $1,784,905 $1,958,331
Expected 2005/06
Est Covered Comp $10,947,426 $10,947,426 $10,947,426
Percent of Comp 15.0% 16.3% 17.9%
a) Present Value of Accrued Benefits: $13,009,606
b) Market Value of Assets: 11,251,277
c) Unfunded Present Value of Accrued Benefits: (a -b) $1,758,329 (86.5 %)
Retirement Plan Specialists, Inc.
7/11/2006
COST IF 3% FORMULA FOR ALL SERVICE WERE EFFECTIVE 10/1/2005
JREFLECTS SELECTED PARTICIPANTS EXPECTED TO RETIRE IMMEDIATELY
BETWEEN 10/1/2008 TO 10/1/20131
30 Year Funding 15 Year Funding 10 Year Funding
Normal Cost $1,178,517 $1,178,517 $1,178,517
Past Service Cost 583,783 767,818 979,439
Total 51,762,300 $1,946,335 $2,157,956
Expected 2005/06
Est Covered Comp $10,947,426 $10,947,426 $10,947,426
Percent of Comp 16.1% 17.8% 19.7%
a) Present Value of Accrued Benefits: $14,002,742
b) Market Value of Assets: 11,251,277
c) Unfunded Present Value of Accrued Benefits: (a -b) $2,751,465 (80.4 %)
Retirement Plan Specialists, Inc.
7/11/2006
v?
Retirement Plan Specialists, Inc.
Employee Benefits Administrators and Consultants
P.O. Box 622857 407 -365 -3490 (office)
Oviedo, Florida 32762 -2857 407 - 366 -5154 (fax)
November 2, 2005
Corn m issioners
City of Winter Springs
1126 East State Road 434
Winter Springs, FL 32708
Re: City of Winter Springs Defined Benefit Pension Plan
Dear Commissioners:
We are pleased to present the October 1, 2004 Actuarial Valuation Report for the Plan Year ending
September 30, 2005. The report presents the funding status of the Pension Plan as of October 1, 2004 and
provides the disclosure information required by your auditors for Governmental Accounting Standards Board in
Statement No. 25 and 27.
The total contribution required for the 2004/2005 Plan Year to continue the funding on a 30 year amortization
basis is $1,318,612. The total employer /employee contributions reported by SunTrust for the Plan Year ending
September 30, 2005 was $1,260,627. The required contribution as a percentage of covered payroll was
12.9 %, .4% over the projected 12.5% effective October 1, 2004.
The increase is attributable, in part, to the differential between expected and actual investment experience as
using of the long range yield asset valuation method for smoothing out fluctuations in plan assets. This
method spreads the gains and losses over a five year period. Although the investment experience has been
favorable over the past two years, we are still feeling the impact of losses from the previous two years.
Future impact of this method and other actuarial assumption factors are to be evaluated during the October 1,
2005 actuarial study requested by the City and present to the Commissioners at that time.
We welcome any questions or comments you may have concerning the information provided in the reports.
Sin ely,
CV det_
Donald D. Cha• an E.) M.A.A.A., M.S.P.A. Sandra R. Turner, CPC, QPA
Consulting Actuary President
Cc: City Manager
Enclosures