Fort Walton Beach Council agenda — 04-26-11 regular — reading text

1, 862, 358 Assumed payable quarterly at the end of each quarter as determined from prior actuarial valuation. Note: dollar amounts are for illustrative purposes only; actual payments based on actual FYE 2011 and 2012 Includes administrative expenses of $64,485 in 2009 and $55, 167 in 2010. Discussion of Valuation Results If the participating group remained unchanged and all the actuarial assumptions were realized, the Plan' s experience would be as anticipated, and there would be no actuarial gains or losses. If the experience were less favorable than anticipated, actuarial losses would result; if more favorable, actuarial gains would result. Plan experience over the last 12 months in aggregate was less favorable than anticipated, resulting in an actuarial loss of approximately $ 1, 120, 000. This loss was mostly attributable to smaller than expected investment returns on actuarial assets actuarial yield of 4.21% versus the assumed rate of 8. 00 %). The loss was partially offset by gains due to salary increases less than assumed ( actual increases of 0.47% versus assumed increases of 5. 21 %). Future valuations will monitor the Plan' s' experience to determine whether actuarial gains or losses have occurred since the previous valuation. Recognition of these actuarial gains or losses will be made through adjustments to the UAAL and amortized over the same period as used for the pre- adjusted UAAL. It should be noted that the true costs of a retirement plan cannot be determined until its future unfolds. No one can precisely predict the interest earnings on retirement fund assets, mortality rates to be experienced, member termination rates, future salary levels, Con  3 -3 etc. Estimates based on experience with similar groups, along with the judgment of the actuary and the plan sponsor, can provide a reasonable approximation of this true cost. As actual experience emerges under the Plan, it will be necessary to study the continued appropriateness of the techniques and assumptions employed and to adjust the contribution rates as necessary. Effect of Amortization Policy on Contribution Requirements Any change in each Plan's UAAL due to actuarial gains or losses, changes in actuarial assumptions and / or changes in Plan provisions will be amortized as a series of level dollar payments over a period of 15 years from its inception. The outstanding balances of the combined UAAL bases for each plan for selected years are: May be disparity due to rounding.  3- 4 2009- 2010 6, 193, 272 606, 673 2010- 2011 6,064, 152 755, 775 2011- 2012 5, 765, 410 870, 389 2012- 2013 5, 325, 112 798, 620 2013- 2014 4, 923, 891 887,520 2014- 2015 4, 399, 482 1, 003,438 2015- 2016 3, 714, 347 1, 051, 674 2016- 2017 2, 925, 444 802,387 2017-2018 2, 330, 773 810, 747 2018- 2019 1, 680, 519 657,065 2019- 2020 1, 137, 058 313, 003 2020- 2021 904, 756 207,619 2021- 2022 762, 560 452,721 2022- 2023 356, 882 252, 216 2023- 2024 125, 506 131, 584 2024- 2025 1 ComlComl  3 -5 Comparison of Actual and Assumed Salary Increases Actual rates of increase in salary ( including promotion) for Plan members common to two consecutive valuations are measured and compared to the assumed valuation rates as shown below. e e \\ g. a MINOR 1999 7.95% 5.49% 2000 7.65% 5.45% 2001 5. 87% 5.44% 2002 7.67% 5.43% 2003 5. 80% 5.46% 2004 6. 59% 5. 41% 2005 8. 84% 5. 29% 2006 5. 24% 5. 28% 2007 6. 86% 5. 29% 2008 6. 38% 5. 22% 2009 4.98% 5. 23% 2010 0. 47% 5. 21% Note actual rates of salary increase greater than the assumed rate do not necessarily translate to actuarial losses; actuarial experience is measured as the difference between actual actuarial accrued liabilities and those expected if all members' salaries were to increase by the assumed salary increase rate. Thus, salary experience is value weighted and tracks the difference in actual liability growth from that expected.  3 -6 Comparison of Actual and Assumed Investment Returns* Actual rates of return are annualized rates adjusted for timing of payments and take into account dividends and interest and realized and unrealized gains and losses. These rates are compared to the assumed valuation rates as shown below 1999 13. 72% 8. 00% 2000 12. 15% 8. 00% 2001 8. 59% 8. 00% 2002 0. 03% 8. 00% 2003 6. 65% 8. 00% 2004 2. 52% 8. 00% 2005 2. 61% 8. 00% 2006 5. 53% 8. 00% 2007 10. 56% 8. 00% 2008 4. 12% 8. 00% 2009 1. 42% 8. 00% 2010 4. 21% 8. 00% Investment Investment returnreturn measuredmeasured onon actuarialactuarial valuevalue ofof assets.assets. CalculationCalculation ofof ActualActual RateRate ofof InvestmentInvestment ReturnReturn ActualActual ratesrates ofof investmentinvestment returnreturn areare calculatedcalculated inin accordanceaccordance withwith ERISAERISA guidelinesguidelines andand areare basedbased onon actuarialactuarial valuevalue ofof assets.assets. RR= = 2I2I, , wherewhere M1M1 + + M2M2 - - II II== thethe interest,interest, dividends,dividends, plusplus appreciationappreciation oror( ( depreciation),depreciation), netnet ofof investmentinvestment expensesexpenses M1M1 = = beginningbeginning actuarialactuarial valuevalue M2M2 = = endingending actuarialactuarial valuevalue RR= = 22 XX$ $ 1,1, 395,395, 705705 33,33, 336,336, 278278 +$+$ 34,34, 352,352, 072072 -$ -$ 1,1, 395,395, 705)705) RR= =$ $ 2,2, 791,791, 410410 66,66, 292,292, 645645 RR= = 4.4. 21% 21%  3 -7 Documentation of Past Excess Contributions 1. ( a) Cumulative Past Excess Contributions as of 09/ 30/ 09 $ 1, 615, 178 b) Interest on 1( a) 129, 214 2. Required Contributions 1, 521, 400 3. Plan Contributions Made Including Interest 1, 527,333 4. Cumulative Past Excess Contributions as of 09/ 30/ 10 $ 1, 750,325 1a) +( 1b)- (2) +( 3)] Additional Disclosures There are no additional disclosures required under Rules 22D- 1. 003(4)( f) and ( g) of the State of Florida, Department of Management Services, Division of Retirement.  APPENDIX A -1 CITY OF FORT WALTON BEACH GENERAL EMPLOYEES' RETIREMENT FUND SUMMARY OF PLAN PROVISIONS THAT AFFECT THE VALUATION Definitions 1. Ordinances: Article II, Chapter 17, Sections 17 -11 through 17 -23, of the City of Fort Walton Beach Code of Ordinances ( Ordinance # 1526, # 1599, # 1640 and #1686). 2. Eligible Employee: All full -time City employees, including the City Manager, Finance Director and the Chief of Police if they elect to participate, but not including City Council members, police officers other than the Chief of Police, and firefighters. 3. Member Contributions: 5% of Compensation by contributed Employees. City pays Employee Contributions for City Manager and Finance Director. 4. Credited Service: The number of full and fractional years worked from date of hire to date of termination or retirement. Members may purchase Credited Service for periods of full -time employment by the City during which time the Member did not participate in the Plan. Employees hired