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