Fort Walton Beach — Annual Comprehensive Financial Report, September 30, 2025 — reading text

table and were projected generationally with Scale MP-2018 with the following adjustments: Males – (Below Median) for Employees and Healthy Retirees set forward one-year Females – (Below Median) for Employees and Healthy Retirees set forward one-year Mortality rates for disabled lives were obtained from the PubH-2010 table and were projected generationally with Scale MP-2018 with the following adjustments: Males – 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees Females – 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees The above mortality assumption rates were mandated by Chapter 2015-157, Laws of Florida. This mandate requires the use of assumptions used by the Florida Retirement System (FRS). The above rates are those outlined in Milliman’s July 1, 2021, FRS valuation report for special risk employees, with appropriate adjustments made based on plan demographics. The other significant actuarial assumptions used in the October 1, 2023, valuation were based on the results of an actuarial experience study dated June 4, 2018. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. For 2024, the inflation rate assumption of the investment advisor was 2.50%. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of the September 30, 2024, measurement date are summarized in the table below: Long Term Expected Asset Class Target Allocation Real Rate of Return Domestic equity 45.00% 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% Infrastructure 5.00% 4.50% Total 100.00% Discount Rate The discount rate used to measure the total pension liability was 7.00%. 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. 53  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Changes in Net Pension Liability – PORF Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a) – (b) Balances at September 30, 2024 (Valuation Date of 10/01/2023) $ 32,744,351 $ 25,984,001 $ 6,760,350 Changes: Service cost 902,915 - 902,915 Interest 2,280,478 - 2,280,478 Differences between expected and actual experience 1,333,735 - 1,333,735 Contributions – employer - 1,760,809 (1,760,809) Contributions – state - 288,411 (288,411) Contributions – employee - 187,008 (187,008) Net investment income - 5,236,088 (5,236,088) Benefit payments, including refunds of employee contributions (2,138,041) (2,138,041) - Administrative expenses - (74,185) 74,185 Net changes 2,379,087 5,260,090 (2,881,003) Balances at September 30, 2025 (Measurement Date of 9/30/2024) $ 35,123,438 $ 31,244,091 $ 3,879,347 As of the measurement date, the Plan’s fiduciary net position as a percentage of the total pension liability was 88.96%. Sensitivity of the Net Pension Liability to changes in the Discount Rate Current Discount 1% Decrease Rate 1% Increase 6.00% 7.00% 8.00% City's net pension liability $ 8,382,887 $ 3,879,347 $ 179,205 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. 54  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions – PORF For the year ended September 30, 2025, the City recognized actuarial pension expense of $1,098,157. On September 30, 2025, 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 $ 1,809,215 $ - Net difference between projected and actual earnings on pension plan investments - 1,586,162 Differences between expected and actual experience 1,000,302 657,886 Total $ 2,809,517 $ 2,244,048 Deferred outflows of resources related to pensions of $1,809,215 resulting from the City 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, 2026. 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: 2025 $ (331,112) 2026 298,287 2027 (527,647) 2028 (683,274) $ (1,243,746) Plan Description – Firefighters’ Retirement Fund (FRF) Plan Administration The Plan is administered by the Firefighters’ Retirement Board of Trustees (Fire Board) comprised of: a. Two members of the fund elected by a majority of the membership, b. Two City residents appointed by the City Council, c. Fifth member elected by other four and appointed by City Council as a ministerial duty. Each person employed by the City’s fire department as a full-time firefighter becomes a member of the plan as a condition of this employment. All firefighters are therefore eligible for plan benefits as provided for in the plan document and by applicable law. 55  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Plan Membership as of October 1, 2023: Inactive Plan Members or Beneficiaries Currently Receiving Benefits 29 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 14 Active Plan Members 42 85 Benefits Provided The plan provides retirement, disability and death benefits. A member may retire at age 45 with 10 years of credited service (early retirement) or at age 55 and 10 years of credited service or 25 years of credited service regardless of age (normal retirement). Benefits become 100% vested upon completion of 10 years of credit service. The plan provides a retirement benefit which is 3.25% of average final compensation times credited service with maximum of 100% of current compensation. Benefits are reduced 0.25% for each month prior to the normal retirement date. Varied benefits exist for disability and pre-retirement death. Benefits for service retirees are adjusted for a 3% cost of living increase on the January 1 following the later of age 58 or the date of retirement. Contributions Contributions to the Plan are established based on an actuarially determined rate recommended by an independent actuary. For the year ended September 30, 2025, the participants’ contribution rate was 8.0% of payroll. The State of Florida was required to contribute 8.8% of payroll and the City was required to contribute the difference between the actuarially determined rate and the contribution rate of the participants and the State of Florida. For the year ended September 30, 2025, the City was required to contribute 46.5% of payroll. Net Pension Liability – FRF The measurement date is September 30, 2024. The measurement period for the pension expense was October 1, 2023 to September 30, 2024. The reporting period is October 1, 2024 through September 30, 2025. The City’s net pension liability was measured as of September 30, 2024. The total pension liability used to calculate the net pension liability was determined as of that date. Actuarial Assumptions The