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

18/ 20113: 37 PM Carole Jones Completed 04/ 19/ 2011 10: 16 AM City Manager Completed 04/ 19/ 2011 12: 58 PM City Council Pending CITY OF FORT WALTON BEACH GENERAL EMPLOYEES' RETIREMENT FUND 2010 ACTUARIAL VALUATION MARCH 2011 ACTUARIAL VALUATION AS OF OCTOBER 1, 2010 TO DETERMINE CONTRIBUTIONS TO BE PAID FOR FISCAL YEAR 2011 -2012 Con,  Con; s Management Advisors Bendts Specialists March 3, 2011 Ms. Brandy Wunker Finance Director City of Fort Walton Beach P.O. Box 4009 Fort Walton Beach, Florida 32549 Dear Ms. Wunker: This report presents the results of the 2010 actuarial valuation of the City of Fort Walton Beach General Employees' Retirement Fund. Actuarial Concepts was retained by the Board to perform the actuarial valuation and prepare this report. This actuarial valuation was prepared and completed by us or under our direct supervision, and we acknowledge responsibility for the results. To the best of our knowledge, the results are complete and accurate and, in our opinion, the techniques and assumptions used are reasonable and meet the requirements and intent of Part VII, Chapter 112, 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 require a material increase in plan costs or required contribution rates have been taken into account in the valuation. The use of the valuation results for financial or administrative purposes, other than those outlined in the report, is not recommended without an advance review by Actuarial Concepts of the appropriateness of such application. Members of our staff are available to discuss this report and related issues. Very truly yours, ACTUARIAL CONCEPTS By: Michael J. Tierney ASA, MAAA, FCA, EA #08 -1337 3CaO Hartley Pd., & itc 250. jaasouviuc. n =7 MOM-- (904) 262 -3020. tax: (904) 268-3374 E - mail°accactuarlalwncepta.coa TABLE OF CONTENTS SECTION 1 1 1 KEY VALUATION RESULTS SUMMARY ............................................. ............................ 1 1 KeyResults Synopsis ...................................................................... ............................ Effect of Shortfalls in Investment Return .................................... ............................ 1 1 Changes Since Last Valuation ....................................................... ............................ 1 2 1 3 PlanExperience ............................................................................... ............................ Contribution Requirements ........................................................... ............................ 1 4 Current Funded Status - Current Liabilities ............................... ............................ 1 5 Current Funded Status - Projected Liabilities ............................. ............................ 1 6 1 7 Funded Trend (Projected Liability) .............................................. ............................ ValuationTrend .............................................................................. ............................ 1 8 ParticipationTrend ......................................................................... ............................ 1 9 TrueCosts ........................................................................................ ............................ 1 9 SECTION 2 ACTUARIAL VALUATION DEVELOPMENT ..................................... ............................ 2 1 Date and Basis of Valuation .......................................................... ............................ 2 1 MemberReconciliation .................................................................. ............................ 2 2 Valuation Financial Values ............................................................ ............................ 2 3 Explanation of Financial Values ................................................... ............................ 2 4 Derivation of Current UAAL ........................................................ ............................ 2 6 SECTION 3 ANALYSIS OF VALUATION RESULTS ................................................. ............................ 3 -1 Valuation Comparison Table ........................................................ ............................ 3 -1 Discussion of Valuation Results ................................................... ............................ 3 -2 Effect of Amortization Policy on Contribution Requirements . ............................ 3 -3 Comparison of Actual and Assumed Salary Increases ............. ............................3 -4 Comparison of Actual and Assumed Investment Returns ....... ............................ 3 -5 Calculation of Actual Rate of Investment Returns .................. ............................... 3 -5 Documentation of Past Excess Contributions ............................. ............................ 3 -6 Additional Disclosures ................................................................ ............................... 3 -6 APPENDIX A PLAN PROVISIONS SUMMARY ................................................ ............................ A -1 APPENDIX B ACTUARIAL ASSUMPTIONS AND ACTUARIAL COST METHOD SUMMARY ............................. ............................ B -1 APPENDIX C DEVELOPMENT OF ACTUARIAL VALUE OF ASSETS ....... ............................0 -1 APPENDIX D CENSUSDATA .............................................................................. ............................ D -1 COAd  1 -1 SECTION 1 KEY VALUATION RESULTS SUMMARY The 2010 valuation of the City of Fort Walton Beach General Employees' Retirement Fund presents a statement of the estimated financial position of the Plan as of October 1, 2010. Information in the report provides bases for determining contribution requirements and current funded status. Key Results Synopsis The major conclusions of the report are: Plan experience has been less favorable than expected, mostly due to smaller investment returns than expected. The net City contribution for the 2010 -2011 plan year is 20. 92% of actual fiscal year end 2011 payroll. The net City contribution for the 2011 -2012 plan year is 25. 55% of actual fiscal year end 2012 payroll. The City should be aware that current contribution requirements will increase by about $250, 000 over the next four years as prior gain amortizations are completed and the payment toward amortizing $ 7.6 million in remaining unfunded liabilities takes full effect. Also, the asset smoothing method will recognize additional losses over the next three years that will increase the amortization requirements (see below and page 3 -3 for details). The Plan' s funded status has deteriorated over the past year due to the shortfall in investment returns and changes in actuarial assumptions. Changes Since Last Valuation There have been no changes to Plan provisions or the actuarial cost method since the last valuation. Several changes have been made to the actuarial assumptions. The investment return assumption has been lowered from 8% to 7.9 %. The assumed future rate of salary increase has been lowered, and salaries were assumed not to increase for the next two fiscal years. The payroll growth rate has been lowered to 3 %. Appendix A contains a summary of current Plan provisions. Actuarial assumptions and cost method are summarized in Appendix B.  1 -2 Plan Experience 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