Fort Walton Beach — Comprehensive Financial Report September 30, 2021 — reading text

Long Term Expected Asset Class Target Allocation Real Rate of Return Domestic equity 50.00% 7.50% International equity 15.00% 8.50% Broad market fixed income 20.00% 2.50% Fixed income (non-core) 2.50% 2.50% Global fixed income 2.50% 3.50% Real estate 10.00% 4.50% Total 100.00% Discount Rate The discount rate used to measure the total pension liability was 7.20%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that sponsor contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 64  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Changes in Net Pension Liability – FRF Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (Asset) (a) (b) (a) – (b) Balances at September 30, 2020 (Valuation Date of 10/01/2019) $ 28,063,048 $ 17,559,808 $ 10,503,240 Changes: Service cost 546,149 - 546,149 Interest 2,063,083 - 2,063,083 Contributions – employer - 1,231,466 (1,231,466) Contributions – state - 209,723 (209,723) Contributions – employee - 204,865 (204,865) Net investment income - 1,922,011 (1,922,011) Changes of assumptions 66,865 - 66,865 Differences between expected and actual experience 231,328 - 231,328 Benefit payments, including refunds of employee contributions (1,459,394) (1,459,394) - Administrative expenses - (55,253) 55,253 Net changes 1,448,031 2,053,418 (605,387) Balances at September 30, 2021 (Measurement Date of 9/30/2020) $ 29,511,079 $ 19,613,226 $ 9,897,853 Sensitivity of the Net Pension Liability to changes in the Discount Rate Current Discount 1% Decrease Rate 1% Increase 6.20% 7.20% 8.20% Sponsor's net pension liability $ 13,745,938 $ 9,897,853 $ 6,740,223 Pension Plan Fiduciary Net Position Detailed information about the pension Plan's fiduciary net position is available in a separately issued Plan financial report. A separate audited financial report of the Plan is not available. 65  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions – FRF For the year ended September 30, 2021, the City recognized a pension expense of $1,865,605. On September 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources City and State contributions subsequent to measurement date $ 1,625,961 $ - Net difference between projected and actual earnings on pension plan investments - 195,192 Changes of assumptions 735,960 - Differences between expected and actual experience 437,634 39,870 Total $ 2,799,555 $ 235,062 Deferred outflows of resources related to pensions of $1,625,961 resulting from the City’s and State’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending September 30, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended September 30: 2022 $ 387,045 2023 427,358 2024 247,674 2025 (123,545) $ 938,532 Pension Expense For the fiscal year ended September 30, 2021, the City recognized an aggregate pension expense of $3,167,497 on all defined benefit pension plans. 66  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Fund Financial Statements The following are the financial statements for the individual pension trust funds (GERF, PORF and FRF) for the year ended September 30, 2021: COMBINING STATEMENT OF PLAN NET POSITION Employee Retirement Funds Total General Police Employee Employees' Officers' Firefighters' Retirement Retirement Retirement Retirement Funds ASSETS Cash and cash equivalents $ 1,647,745 $ 2,093,289 $ 1,760,338 $ 5,501,372 Investments, at market U.S. Government and Agency obligations 7,146,437 3,951,415 2,644,212 13,742,064 Corporate obligations 2,999,874 1,199,083 866,553 5,065,510 Corporate equity 16,215,155 - - 16,215,155 Mutual and exchange-traded funds 25,854,439 18,181,215 16,488,339 60,523,993 Commingled real estate investment funds 6,134,611 2,256,743 2,022,467 10,413,821 Total investments, at market 58,350,516 25,588,456 22,021,571 105,960,543 TOTAL ASSETS 59,998,261 27,681,745 23,781,909 111,461,915 LIABILITIES Accounts payable 40,030 66,202 99,007 205,239 NET POSITION RESTRICTED FOR PENSIONS $ 59,958,231 $ 27,615,543 $ 23,682,902 $ 111,256,676 67  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Fund Financial Statements – Continued COMBINING STATEMENT OF CHANGES IN PLAN NET POSITION Employee Retirement Funds Total General Police Employee Employees' Officers' Firefighters' Retirement Retirement Retirement Retirement Funds ADDITIONS Contributions Employer $ 989,560 $ 1,193,572 $ 1,390,526 $ 3,573,658 Plan members 136,164 147,074 226,099 509,337 State of Florida - 223,280 235,435 458,715 Total contributions 1,125,724 1,563,926 1,852,060 4,541,710 Investment income 10,988,422 4,591,037 3,946,912 19,526,371 Less investment expense (148,781) (36,886) (33,918) (219,585) Net investment income 10,839,641 4,554,151 3,912,994 19,306,786 Miscellaneous revenue 1,094 - - 1,094 TOTAL ADDITIONS 11,966,459 6,118,077 5,765,054 23,849,590 DEDUCTIONS Benefits and refunds paid Retirement payments 3,327,874 1,728,228 1,520,886 6,576,988 Disability payments 33,582 156,874 5,894 196,350 Other - 21,261 73,650 94,911 Total benefits and refunds paid 3,361,456 1,906,363 1,600,430 6,868,249 Administrative expenses Legal 4,820 3,344 5,035 13,199 Contractual 70,202 60,425 59,161 189,788 Other 23,754 17,180 19,944 60,878 Total administrative expenses 98,776 80,949 84,140 263,865 TOTAL DEDUCTIONS 3,460,232 1,987,312 1,684,570 7,132,114 INCREASE IN PLAN NET POSITION 8,506,227 4,130,765 4,080,484 16,717,476 NET POSITION