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

63,251 171,843 125,500 360,594 NET POSITION RESTRICTED FOR PENSIONS $ 60,160,500 $ 34,029,347 $ 31,409,924 $ 125,599,771 60  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 COMBINING STATEMENT OF CHANGES IN PLAN NET POSITION Pension Trust Funds General Police Employees' Officers' Firefighters' Total Pension Retirement Retirement Retirement Trust Funds ADDITIONS Contributions Employer $ 228,642 $ 1,502,419 $ 1,646,848 $ 3,377,909 Plan members 71,535 195,826 234,103 501,464 State of Florida - 306,796 356,631 663,427 Total contributions 300,177 2,005,041 2,237,582 4,542,800 Investment income 7,176,538 3,284,140 3,188,872 13,649,550 Less investment expense (72,089) (63,285) (75,305) (210,679) Net investment income 7,104,449 3,220,855 3,113,567 13,438,871 Miscellaneous revenue 888 2,274 - 3,162 TOTAL ADDITIONS 7,405,514 5,228,170 5,351,149 17,984,833 DEDUCTIONS Benefits and refunds paid Retirement payments 3,663,813 2,004,775 1,607,706 7,276,294 Disability payments 33,583 156,874 5,894 196,351 Other - 98,548 65,852 164,400 Total benefits and refunds paid 3,697,396 2,260,197 1,679,452 7,637,045 Administrative expenses Legal 13,399 9,925 11,307 34,631 Contractual 89,355 88,683 97,440 275,478 Other 42,432 29,758 34,009 106,199 Total administrative expenses 145,186 128,366 142,756 416,308 TOTAL DEDUCTIONS 3,842,582 2,388,563 1,822,208 8,053,353 INCREASE IN PLAN NET POSITION 3,562,932 2,839,607 3,528,941 9,931,480 NET POSITION RESTRICED FOR PENSIONS Beginning of year 56,597,568 31,189,740 27,880,983 115,668,291 End of year $ 60,160,500 $ 34,029,347 $ 31,409,924 $ 125,599,771 61  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 9. DEFINED CONTRIBUTION PENSION PLAN City of Fort Walton Beach Defined Contribution Plan In December 2009, City Council closed the General Employees’ Defined Benefit Plan. All general, full- time employees hired on or after January 1, 2010, are members of the Defined Contribution Retirement Plan (the Plan). The Plan is a money purchase defined contribution retirement plan administered by ICMA Retirement Corporation and Mission Square Retirement, with the City serving as trustee. All funds are held in the ICMA Retirement Corporation Governmental Money Purchase Plan & Trust in the name of each participant. The City finance director serves as the coordinator for the Plan. The Plan requires a 5% payroll contribution by the employee with a 5% employer (City) match. Employees can increase their contribution; however, only an additional 2½% is eligible for City match. Members of the General Employees’ Defined Benefit Pension Plan, who were not fully or partially vested at the time the Plan was opened, were permitted to transfer their contributions to the Plan as a one-time, irrevocable election. The Plan participants individually select and make changes in funding options, which are made available by the independent plan administrator. Since participants select the investment fund or funds in which their deferred compensation accounts are invested, the city has no liability for investment losses. The authority for establishing and amending the Plan’s provisions lies with the City Council. The City Council also has the authority for amending contribution requirements. Contributions made to the Plan by the employees and by the City were $449,161 and $450,996, respectively, for the fiscal year ending September 30, 2025. The City’s contributions vest 20% each year beginning after one year of employment. Participants are fully vested after 5 years of service. 10. DEFERRED COMPENSATION PLAN The City offers employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457 (the Plan). The Plan is a tax-deferred supplemental retirement program that allows City employees to contribute a portion of their salary, before federal income taxes, to a retirement account. The assets are held in trust for the employees’ benefit. The Plan participants individually select and make changes in funding options, which are made available by the independent plan administrator. Since participants select the investment fund or funds in which their deferred compensation accounts are invested, the City has no liability for investment losses. The City’s fiduciary responsibility is to administer the Plan properly and to assure the investment alternatives made available are reasonable. Contributions made to the Plan by the employees and by the City were $119,353 and $44,269, respectively, for the fiscal year ending September 30, 2025. Assets of the Plan have a fair value of $3,295,088, as of September 30, 2025. 62  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 11. OTHER POST EMPLOYMENT BENEFITS (OPEB) Plan Description The Fort Walton Beach’s Retiree Health Care Plan (the Plan) is a single employer defined benefit postemployment health care plan that covers eligible retired employees of the City. The Plan, which is administered by the City, allows employees who retire and meet retirement eligibility requirements under one of the City’s retirement plans to continue medical, dental, and life insurance coverage as a participant in the City’s plan. Plan Membership as of September 30, 2024: Inactive Plan Members or Beneficiaries Current Receiving Benefits 113 Inactive Plan Members Entitled to But Not Yet Receiving Benefits - Active Plan Members 254 367 Benefits Provided The benefits provided are the same as those provided for active employees. Spouses and dependents of eligible retirees are also eligible for medical coverage. All employees of the City are eligible to receive postemployment health care benefits. Contributions Retirees participating in the group insurance plans offered by the City are required to contribute 100% of the active premiums. In future years, contributions are assumed to increase at the same rate as premiums. Total OPEB Liability The City’s total OPEB liability was measured as of September 30, 2024. The total OPEB liability was determined by an actuarial valuation. The measurement period for OPEB expense was October 1, 2023 to September 30, 2024. The reporting period is October 1, 2024 to September 30, 2025. Actuarial Assumptions The total OPEB liability was determined by an actuarial valuation as of September 30, 2024, using the following actuarial assumptions: Inflation 2.50% Salary Increases Service based Discount Rate 4.06% Initial Trend Rate 6.75% Ultimate Trend Rate 4.00% Years to Ultimate 50 For general employees, mortality rates were based on the Pub-2010 mortality tables with fully generational improvement using Scale MP-2021. For female lives, the headcount-weighted PubG-2010 female employee table was used. For male lives, the headcount-weighted PubG-2010 male below median income employee table, set back one year, was used. For disabled female lives, 100% of the Disabled Female table was used, set forward three years. For disabled male lives, 100% of the Disabled Male table was used, set forward three years. 63  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 For police and fire employees, mortality rates were also based on the Pub-2010 mortality tables with fully generational improvement using Scale MP-2021. For both males and females, the PubS.H-2010 below median income employee table, set forward one year, was used. For both disabled males and females, the 80% PubG.H-2010 and 20%PubS.H-2010 for Disabled Retirees was used. Discount Rate Given the City’s decision not to fund the program, all future benefit payments were discounted using a high-quality municipal bond rate of 4.06%. The high-quality municipal bond rate was based on the week closest but not later than the measurement date of the Bond Buyer 20-Bond Index as published by the Federal Reserve. The 20-Bond Index consists of 20 general obligation bonds that mature in 20 years. The average rating of the 20 bonds is roughly equivalent to Moody's “Aa2” rating and S&P's “AA” rating. Changes in Total OPEB Liability Increase (Decrease) Total OPEB Plan Fiduciary Total OPEB Liability Net Position Liability (a) (b) (a) – (b) Balances at September 30, 2024 $ 4,919,554 $ - $ 4,919,554 Changes for the year: Service cost 270,609 - 270,609 Interest 247,233 - 247,233 Differences between expected and actual experience (656,654) - (656,654) Changes of assumptions 235,921 - 235,921 Contributions – employer - 232,826