Fort Walton Beach — Comprehensive Financial Report September 30, 2015 — reading text

59  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2015 7. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability – FRF Effective October 1, 2014, the City implemented provisions of GASB Statement No. 68, Accounting and Reporting for Pensions – an amendment of GASB Statement No. 27, which significantly changed the City’s accounting for pension amounts. The information below is presented in accordance with this new standard. The City’s net pension liability was measured as of September 30, 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation. Actuarial Assumptions The total pension liability was determined by an actuarial valuation as of October 1, 2013 updated to September 30, 2014 using the following actuarial assumptions: Inflation 3.00% Salary Increases 6.50% Discount Rate 8.00% Investment Rate of Return 8.00% Mortality rates are obtained from the RP 2000 Combined Healthy Mortality Table. For disabled lives, they are set forward 5 years. Based upon other studies of municipal firefighters, we feel this assumption sufficiently accommodates future mortality improvements. 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. Best estimates of arithmetic real rates of return for each major asset class included in the Pension Plan's target asset allocation as of September 30, 2014 are summarized in the following table: Long Term Expected Asset Class Target Allocation Real Rate of Return Domestic Equity 45% 7.50% International Equity 15% 8.50% Domestic Core Fixed Income 30% 2.50% Real Estate 10% 4.50% Total 100% 60  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2015 7. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability – FRF – Continued Discount Rate The discount rate used to measure the total pension liability was 8.00 percent. 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. 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, 2014 (Valuation Date of 9/30/2013) $ 18,336,190 $ 12,501,663 $ 5,834,527 Changes: Service cost 414,836 - 414,836 Interest 1,425,875 - 1,425,875 Change in excess state money 89,886 Contributions – employer - 715,439 (715,439) Contributions – state - 214,272 (214,272) Contributions – employee - 135,622 (135,622) Contributions – buy back - - - Net investment income - 1,201,162 (1,201,162) Benefit payments, including refunds of employee contributions (1,071,302) (1,071,302) - Administrative expenses - (34,536) 34,536 Net changes during 2013-14 859,295 1,160,657 (301,362) Balances at September 30, 2015 (Measurement Date of 9/30/2014) $ 19,195,485 $ 13,662,320 $ 5,533,165 61  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2015 7. DEFINED BENEFIT PENSION PLANS – CONTINUED Changes in Net Pension Liability – FRF – Continued Sensitivity of the Net Pension Liability to changes in the Discount Rate: Current Discount 1% Decrease Rate 1% Increase 7.00% 8.00% 9.00% Sponsor's Net Pension Liability (Asset) $ 7,817,066 $ 5,533,165 $ 3,784,205 Pension Plan Fiduciary Net Position Detailed information about the pension Plan's fiduciary net position is available in a separately issued Plan actuarial report. A separate audited financial report of the Plan is not available. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions – FRF For the year ended September 30, 2015, the City recognized a pension income of $96,173. On September 30, 2015, 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 Contributions Subsequent to Measurement Date $ 672,369 $ - Net difference between Projected and Actual Earnings on Pension Plan investments - 162,119 Total $ 672,369 $ 162,119 Deferred outflows of resources related to pensions of $572,369 resulting from the City’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension (asset)/liability in the year ending September 30, 2016. 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: 2016 $ (40,530) 2017 (40,530) 2018 (40,530) 2019 (40,529) $ (162,119) 62  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2015 7. 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, 2015: 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 $ 1,565,133 $ 857,342 $ 576,737 $ 2,999,212 Due from State of Florida - 175,025 5,907 180,932 Investments, at market U.S. Government and Agency obligations 7,585,674 6,343,319 3,619,973 17,548,966 Corporate obligations 1,255,423 1,047,256 605,034 2,907,713 Corporate equity 22,226,942 3,612,508 7,404,106 33,243,556 Mutual funds 5,453,717 7,115,536 1,378,750 13,948,003 Total investments, at market 36,521,756 18,118,619 13,007,863 67,648,238 TOTAL ASSETS $ 38,086,889 $ 19,150,986 $ 13,590,507 $ 70,828,382 LIABILITIES Accounts payable $ 46,579 $ 40,167 $ 16,021 $ 102,767 NET POSITION HELD IN TRUST FOR PENSION BENEFITS AND OTHER PURPOSES $ 38,040,310 $ 19,110,819 $ 13,574,486 $ 70,725,615 63  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2015 7. 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 $ 1,355,041 $ 628,975 $ 672,369 $ 2,656,385 Plan members 209,567 101,886 222,770 534,223 State of Florida - 175,025 205,007 380,032 Total