HomeMy WebLinkAbout2006 08 23 Other Handout Given During Meeting
Date: August 23, 2006
The attached document was distributed to the
City Commission during the August 23, 2006
City Commission Special Meeting.
CITY OF WINTER SPRINGS
DEFINED BENEFIT PENSION PLAN
ACTUARIAL VALUATION AND ANNUAL REPORT
for the Plan Year Ended
September 30, 2006
August 23, 2006
Prepared By
Retirement Plan Specialists, Inc.
Employee Benefits Administrators, Actuaries & Consultants
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
TABLE OF CONTENTS
Paqe
Part I Introduction 2
Part II Summary of Plan Provisions 4
Part III Trust Fund Transactions 7
Part IV Unfunded Actuarial Liability 9
Part V Determination of Normal Cost 9
Part VI Contribution for the Plan Year Commencing 10
October 1, 2005
Part VII Present Value of Accrued Benefits 11
Part VIII Actuarial Method and Assumptions 12
APPENDIX - I Participant Reconciliation 14
APPENDIX - II Age & Service Statistics 15
APPENDIX - III Past Service Funding Illustrations 17
APPENDIX - IV Market Value vs Actuarial Asset Valuation Chart 18
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
PART I
INTRODUCTION
The actuarial valuation presented in this report covers the employees of the City of Winter
Springs, Florida that are participants in the City of Winter Springs Defined Benefit Plan. The
pension plan is being maintained and administered as a government plan since it covers
municipal employees and is sponsored by the City of Winter Springs.
The report analyzes the current funding status of the Pension Plan as of October 1, 2005. It also
includes the calculation of the annual contribution requirement for the Plan Year beginning
October 1, 2005 and ending September 30, 2006.
The contributions together with the corresponding items from the immediately preceding
valuation, are as follows:
October 1 Valuation Date for Plan Year Ending:
September 30. 2005
September 30, 2006
Change Between
Years
Contribution
$1.318,612
12.9%
$1 .448,359
$129.747
Percentage of
Payroll
13.2%
.3%
The employee census data as of October 1, 2005 was submitted by the City. This data was not
audited by us but appears to be sufficient and reliable for purposes of the report. The total
participant count is as follows:
Active participants
Retired participants
Terminated participants with vesting
Total
October 1 . 2004
239
12
Zl
322
October 1 . 2005
251
14
84
349
The actuarial assumptions and cost method remain unchanged from the preceding year. A
review of the actuarial assumptions is performed each year with changes recommended when
actual experience under the plan deems it appropriate.
Actuarial computations have been made by the Aggregate Entry Age Normal with Frozen Initial
Liability Method of calculation, which is designed to keep prior service costs unaffected by any
difference that may develop between the actual experiences as it unfolds and the assumptions
used for calculations. The effects of any differences that do develop are reflected in current and
future normal costs. If additional assumptions are changed or benefits and other plan features
are updated at any time, current thinking supposes adjustment of the frozen initial liability to
allocate costs between prior and future service once again. It is believed that the actuarial
methods and assumptions are individually reasonable, and in combination, they offer the
actuary's best estimate of anticipated experience under the Plan.
2
The Plan was amended effective October 1, 2004 to increase the benefit formula percentage
for service prior to October 1, 2000 by .25% increments each year beginning October 1, 2005
until a full 3% is reached effective with the plan year beginning October 1, 2008. In addition, the
employer contribution rate was increased effective October 1, 2004. This report reflects the
impact of the first incremental increase of .25% in the past service amendment I October 1, 2005.
The actuarial valuation report was prepared and completed by me or under my direct
supervision, and I acknowledge responsibility for the result. To the best of my knowledge, the
results are complete and accurate, and in my opinion, the techniques and assumptions used
are reasonable and meet the requirements and intent of Part VII, Chapter 122, Florida statutes.
There is no benefit or expense to be provided by the plan and/or paid from the plan's assets for
which liabilities or current costs have not been established or otherwise taken into account in the
valuation. All known events or trends that may require a material increase in the plan costs or
required contribution rates have been taken into account in the valuation.
We would be pleased to provide further information or answer any questions with respect to the
results of our actuarial valuation.
Respectfully submitted,
8/23/06
Date
Donald D. Chapman, E.A., M.A.A.A, M.S.P.A.
Enrolled Actuary No. 05- 2234
Sandra R. Turner c.P.C., Q.P.A.
President
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
PART II
SUMMARY OF PLAN PROVISIONS
1. History
The Plan was adopted as a Money Purchase Floor Offset plan on October 1, 1997. The Plan
was amended and restated as a Defined Benefit Plan effective October 1, 2000. SunTrust
Trust and Investment Services is the investment medium. Valuations are made annually, as of
October 1 each year. The latest amendment to the Plan was effective October 1, 2004.
2. Eligibility: Continuous Service and Participation Service
Each employee working more than 29 hours per week is eligible to join the Plan on the first
day of the month following completion of 6 months of service.
3. Normal Retirement
The first day of the calendar month following the 65th birthday
4. Normal Form of Pension
The normal form of pension is a life annuity with monthly payments commencing on the
participant's retirement date
5. Retirement Benefit
The yearly amount of pension a participant will receive is equal to the sum of (a) and (b), but
for years not greater than (c) below:
(a) An amount equal to 2.25 % of Average Compensation multiplied by years of
service completed prior to October 1, 2000 effective October 1, 2005;
(b) For each year of service on and after October L 2000, 3 % of Average
Compensation multiplied by years of service after October 1, 2000.
(c) The maximum number of years of service for determining benefits is the first 30
years.
A verage Compensation is the 3 highest consecutive compensation periods
during employment with the City.
4
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
SUMMARY OF PLAN PROVISIONS (continued)
6. Late Retirement
A Participant may elect a late retirement date any time after normal retirement date. The
pension will be the greater of the accrued benefit earned on the Late Retirement Date or
the benefit earned at the Normal Retirement Date actuarially increased to the Late
Retirement Date.
7. Early Retirement
After age 55 and 10 years of service, a Participant is eligible for early retirement. The pension
starting immediately is the accrued benefit as of the early retirement date. The benefit will
be paid monthly for life.
If a participant has 25 years of service, the accrued benefit is not actuarially reduced. A
participant with 25 years of service may retire earlier than 55 with the benefit payable as the
actuarial equivalent of the benefit at age 55.
8. Death Benefit
The beneficiary is entitled to a death benefit equal to the present value of the non-
forfeitable accrued benefit at the time of the participant's death. If death occurs after
actual retirement, the beneficiary receives whatever is payable under the form of benefit
option elected.
9. Disability Benefit
The plan does not provide for disability benefits. Disability benefits are provided under the
City's long-term disability program
10. Termination Benefit
A participant is 100% vested in the required participant contributions made under the plan.
Required participant contributions made after October 1, 2000 shall be included in the
deferred vested benefit payable at normal retirement date. All other non-forfeitable
accrued benefits shall be determined by the following vesting schedule upon termination.
Years of Service
Percentaqe
Less than 3 years
3
4
5
6
7
none
20%
40%
60%
80%
100%
5
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
SUMMARY OF PLAN PROVISIONS (continued)
11. Contributions
All participants are required to contribute 3 % of compensation
The City is contributing at the rate of 11% of compensation for the Plan Year beginning
October 1,2005.
The total City and participant contribution as a percentage of compensation is 14%.
12. Optional Forms of Payment
A participant may elect, in writing, to have the normal form of pension converted to an
actuarially equivalent optional form. These are (a) the joint and survivor annuity form in
which the participant receives a smaller amount monthly in return for the continuing
payments to the named beneficiary in the same amount, 2/3rds of the amount, or Y:z of the
amount as designated as long as the beneficiary may live after the death of the participant;
(b) the life annuity form in which the participant receives a lesser amount monthly in return
for the guarantee of continuing payments for a certain year period,
6
CiTY OF WINTER SPRINGS DEFINED BENEFIT PLAN
Plan Assets. October 1.
PART III
TRUST FUND TRANSACTIONS
2003-2004 2004-2005
$7.039.995 $8.942.442
1.013.379 1.260.627
147.594 151.645
944.208 1.098.012
(140.509) ( 132.697)
(62.225) (68.752)
$8.942.442 $11.251.277
12.6% 11.5%
Contributions during the year
Participant service buy back deposit
Net Investment experience
Participant Payments
Administration Expenses
Plan Assets. September 30.
Approximate rate of return:
COMPOSITION OF TRUST FUND
Cash 0 0
Short term Investments
484.057
173.367
Bonds
1 .884.433
1.587.392
Common Stocks
6.573.952
9.490.518
Total Assets
$8.942.442
$11.251.277
7
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
ACTUARIAL V AWE OF ASSETS
The Long Range Yield Method of asset valuation is described in the actuarial assumptions and is
determined as follows:
1. Actuarial value of assets, October 1, 2004 $8,134,588
2. Contributions during year (includes buy back deposits) 1 .412,272
3. Disbursements during year (201,449)
4. Interest to September 30, 2005 at 8% 699,200
5. Tentative value, as of September 30,2005
= (1) + (2) - (3) + (4) $10,044,611
6. Market value of assets, September 30,2005 $11,251,277
7. Excess of market value over tentative value as of
September 30,2005 = (6) - (5) 1,206,666
8. Deferred investment gain (loss) not yet
recognized as of September 30, 2005
A. 2001 :* ($703,034) x .20 = ($140,606)
B. 2002: ($1,527,731) x.40 = ($611,092)
C. 2003: ($856,508) x .60 = ($513,904)
D. 2004: $237,999 x .80 = $190,399
E. Total ($1,075,203)
9. Deferred investment gain (loss) recognized
for 2005: 20% x [(7)] 241 ,333
10. Deferred investment gain (loss) recognized during
A. 2001:* ($140,607)
B. 2002: ($305,546)
C. 2003: ($171,302)
D. 2004: $47,600
E. Total ($569,855)
11. Actuarial Value of Assets as of
September 30,2004 = (5) + (9) + (10) $9,716,089
* First year the Long Range Yield Method was used, therefore, there are no gains or (losses)
recognized for prior years. Approximate rate of return on Actuarial Value of Assets for period ending
September 30,2005 is .015%.
8
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
PART IV
UNFUNDED ACTUARIAL LIABILITY
1. Unfunded Actuarial liability, October 1
2003-2004 2004-2005
$2.492,546 $2,797,186
829,502 1,051,900
265,763 307,926
1,013,379 1,260,627
81,076 50.425
$2.493,357 $2,845,960
$303,829 616.436
$2,797,186 $3.462,396
2. Normal Cost for Plan Year
3. Interest at 8 % (2004) on (1) and (2)
4. Contributions for Plan Year
5. Interest on contributions
6. Unfunded Actuarial liability, September 30, (1.+2.+3.-4.-5.)
7. Adjustment due to Actuarial Assumption/Amendment changes
8. Adjusted Unfunded Actuarial liability, September 30
PART V
DETERMINATION OF NORMAL COST
2004-2005 2005-2006
1. Present value of benefits at October 1 $18,077,134 $20,809,347
2. Actuarial Assets Value 8,134,588 $9,716,089
3. Unfunded Actuarial liability 2,797,186 3,462,396
4. Present value of future normal cost payments, (1.-2.-3.) 7,145,360 7,630,862
5. Present value of future compensation 61,014,389 65,175,360
6. Cost as a percentage of compensation, (4/5) 11.711% 11 .708%
7. Total current covered participant compensation 8,982,189 9,659.446
8. Current plan year's normal cost at October 1, (6 x 7) $1,051,900 $1,130,947
9
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
PART VI
CONTRIBUTION FOR THE YEAR COMMENCING OCTOBER 1, 2005
1 . Normal Cost
REQUIRED ANNUAL
CONTRIBUTION
$1,130,947
2. 30-Year amortization of the Unfunded Frozen Initial
Liability established October I, 2000, and
adjusted for change in actuarial assumptions
October 1 , 2002, October 1 , 2003 and
amendmentn effective October I, 2004 and
October I, 2005
317.412
3. Total. October 1,2005 (1.+ 2.)
$ 1.448,359
4. Interest at 8 % to end of Plan Year
115,869
5. Total contribution, September 30,2006, (3.+4.)
$ 1,564,228
6. Total contribution (3) as a percentage of 2005-
2006 payroll ($ 10,947.426)
13.2%
7. Total contribution (5) as a percentage of 2005-
2006 payroll ($10,947.426)
14.2%
10
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
PART VII
PRESENT VALUE OF ACCRUED BENEFITS
OCTOBER 1.2004 OCTOBER 1. 2005
1. Present Value of Accrued Benefits
Active Members $7.770.794 $9.059.318
Retired Members 933.045 1 .401 .890
Terminated Members with Vesting 658.442 829 .377
Total $9.362.281 $11.290.585
2. Present Value of Vested Accrued Benefits
Active Members $7.234.016 $8.571.292
Retired Members 933,045 1.401 ,890
Terminated Members with Vesting 658.442 665.196
Total $8,825,503 $10.638,378
3. Total Number of Members
Active Members 239 251
Retired Members 12 14
Terminated Members with Vesting Zl 84
Total 322 349
4. Market Value of Assets $8,942.442 $11.251.277
5 Actuarial Value of Assets $8.134,588 $9.716.089
11
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
PART VIII
ACTUARIAL METHOD AND ASSUMPTIONS
We have calculated the costs and liabilities for the actuarial valuation of the City of Winter Springs
Defined Benefit Plan as of October 1, 2005 using the Aggregate Entry Age Normal Frozen Initial Liability
Cost Method, and have analyzed the results. The employee data and the financial information relied on
for the report were provided by the Employer and the SunTrust Trust and Investment Services. To the best
of our knowledge, the information provided is complete and accurate. The actuarial assumptions used
are as follows:
a. Long Term Net Investment Return
8 %, compounded annually.
b. Mortality
1983 Group Annuity male rate table, with ages
of women set back two years.
c. Retirement Age
Later of age 60 with 10 years of service or age
on the valuation date.
d. Normal Form
Life Annuity with payments for the life of the
participant.
e. Benefit Level
Effective October 1, 2000, 2% of average
earnings for years pre October 1, 2000 and 3%
of average earnings for each year of service
after October 1, 2000.
f. Salary Projections
Current salaries are assumed to increase 3% per
year.
g. Termination Forfeitures
Assumed to occur at rates approximating
11.62% at age 25 graded down to .16% at age
60 and over. (T-8 withdrawal table)
h. Expenses
Assumed that the City will reimburse the Fund
for actual expenses paid.
i. Asset Basis
Long Range Yield Method of asset valuation as
explained on the following page.
12
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
Long Range Yield Asset Valuation Method
The actuarial value of assets is determined as follows:
(A) A tentative asset value is determined. This value is equal to the actuarial value of assets on the
preceding valuation date multiplied by the valuation rate of interest plus the excess of
contributions over disbursements during the preceding Plan Year with interest at the valuation rate
from date of payment to end of year.
(Bl The excess of market value over tentative value is determined.
(e) For the first actuarial valuation in which the long range yield method is applied, the actuarial
value of assets is (Al plus a write-up equal to 20% of (B). An identical write-up is made in
determining the actuarial value of assets in each of the next four years, thus fully recognizing (B)
with five write-ups of equal amount.
(0) On the next actuarial valuation, the actuarial value of assets is (Al plus the write-up of the previous
year, plus an additional write-up equal to 20% of the excess of (B) on the valuation date over 80%
of (B) on the preceding valuation date. A write-up identical to this additional write-up is also
made in each of the next four years.
(E) Each subsequent valuation includes (A), plus applicable write ups for previous years, plus an
additional write up equal to 20% of the excess of (B) on the valuation date over the sum of
portions of (B) for the previous years not yet fully recognized by prior write-ups.
13
APPENDIX - I
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
PLAN PARTICIPANT RECONCILIATION
ACTIVE PARTICIPANTS
Active participants, October 1, 2004
Number
239
Retired
Terminated with lump sum
Terminated with vesting
Terminated without vesting
Death
Other: omitted in prior year
New entrants
-2
o
-13
-6
o
o
33
Active participants, October 1, 2005
251
October 1. 2004
Total covered payroll on October 1,2005
Average Compensation
$8,982,189
$ 37,582
RETIRED P ARTICIP ANTS AND BENEFICIARIES
Number
Retired participants, October 1, 2004
12
Retired during year
Died - no further benefits due
C & C benefit expired
2
o
o
Retired participants, October 1, 2005
14
TERMINATED PARTICIPANTS WITH VESTING
Number
Terminated participants with vesting, October 1,2004
71
Terminated with vesting during year
Paid lump sum distribution or deemed ineligible
Retired during year
Previously omitted
13
o
o
o
Terminated participants with vesting, October 1,2005
84
14
October 1. 2005
$9,659,446
$38,483
Monthly Benefit
$8,441.66
2,381.70
0.00
0.00
$10,823.36
APPENDIX - II
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
AGE AND SERVICE STATISTICS
WEIGHTED AVERAGE BY CURRENT EARNINGS
FOR THE PLAN YEAR 10/01/2005 THROUGH 09/30/2006
EES EA PA M RA PP PS FS TS
251 33.1 34.3 43.1 60.4 8.8 10.1 17.4 27.4
ARITHMETIC AVERAGE
EES EA PA M RA PP PS FS TS
251 33.4 34.5 42.0 60.4 7.4 8.6 18.5 27.1
SERVICE GROUPS BY AGE GROUPS
AGE G R 0 UPS
0 20 25 30 35 40 45 50 55 60 65 70
SERVICE TO TO TO TO TO TO TO TO TO TO TO TO
GROUP 19 24 29 34 39 44 49 54 59 64 69 TOTAL
0
1 4 8 5 5 1 5 2 1 31
2 6 2 2 6 5 4 3 1 29
3 2 7 3 3 1 4 1 1 22
4 1 2 5 3 2 2 1 16
--------------------------------------------------------------------------------------------------
0-4 13 19 15 14 10 15 8 2 2 98
5-9 1 6 12 10 11 6 4 10 2 62
10-14 7 4 5 7 1 4 3 1 32
15-19 5 7 10 7 4 2 35
20-24 5 3 3 2 3 16
25-29 3 2 1 6
30-34 1 1 2
35-39
40-
TOTAL 1 13 25 34 33 38 45 26 22 11 251
15
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
FOR THE PLAN YEAR 10/01/2005 THROUGH 09/30/2006
ANNUAL EARNINGS BY AGE GROUP ANNUAL EARNINGS BY SERVICE
NUMBER TOTAL AVERAGE NUMBER TOTAL AVERAGE
AGE OF ANNUAL ANNUAL SERVICE OF ANNUAL ANNUAL
GROUP PEOPLE EARNINGS EARNINGS GROUP PEOPLE EARNINGS EARNINGS
0-19 1 45,025 45,025 0
20-24 13 295,355 22,719 1 31 910,840 29,381
25-29 25 782,926 31,317 2 29 905,804 31,234
30-34 34 1,229,154 36,151 3 22 655,855 29,811
35-39 33 1,398,621 42,382 4 16 504,673 31,542
40-44 38 1,561,543 41,093 ---------------------------------------
45-49 45 1,967,254 43,716 0-4 98 2,977 ,172 30,379
50-54 26 1,141,051 43,886 5-9 62 2,509,960 40,483
55-59 22 926,227 42,101 10-14 32 1,411,004 44,093
60-64 11 534,207 48,564 15-19 35 1,778,465 50,813
65-69 3 87,402 29,133 20-24 16 787,313 49,207
70- 25-29 6 356,257 59,376
30-34 2 148,596 74,297
TOTAL 251 9,968,766 39,716 35-39
40-
TOTAL 251 9,968,766 39,716
16
APPENDIX - III
CITY OF WINTER SPRINGS DEFINED BENEFIT PLAN
PAST SERVICE FUNDING ILLUSTRATIONS
AS OF OCTOBER 1, 2005
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:
b) Market Value of Assets:
c) Unfunded Present Value of Accrued Benefits: (a-b)
$11,290,585
11,251,277
$ 39,308
(99.7%)
17
Appendix IV
City of Winter Springs Defined Benefit Plan
Market Value vs. Acturial Asset Value and Expected Asset Value