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Agenda Item 4C CITY OF ATLANTIC BEA CH POLICE OFFICERS’ RETIREMENT SYSTEM ACTUARIAL VALUATION REPORT SEPTEMBER 30, 2012 ANNUAL EMPLOYER CONTRIBUTION IS DETERMINED BY THIS VALUATION TO BE PAID IN THE EMPLOYER FISCAL YEAR ENDING SEPTEMBER 30, 2014 March 28, 2013 The Board of Trustees City of Atlantic Beach Police Officers’ Retirement System Atlantic Beach, Florida Dear Board Members: We are pleased to submit herein our September 30, 2012 Actuarial Valuation Report for the City of Atlantic Beach Police Officers’ Retirement System. The contribution results apply to the City's fiscal year ending September 30, 2014. This report was prepared at the request of the Board of Trustees and is intended for use by the Pension Plan and those designated or approved by the Board of Trustees. This report may be provided to parties other than the Pension Plan only in its entirety and only with the permission of the Board of Trustees. The purpose of the valuation is to measure the Plan’s funding progress, to determine the employer contribution rate for the fiscal years ending September 30, 2014 and to determine the actuarial information for Governmental Accounting Standards Board (GASB) Statement No. 25 and No. 27. This report should not be relied on for any purpose other than the purpose described above. The developed findings included in this report consider data or other information through September 30, 2011. Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan’s funded status); and changes in plan provisions or applicable law. The calculations are based upon assumptions regarding future events, which may or may not materialize. They are also based upon present and proposed plan provisions that are outlined in the report. If you have reason to believe that the assumptions that were used are unreasonable, that the plan provisions are incorrectly described, or that conditions have changed since the calculations were made, you should contact the author of this report prior to relying on information in the report. The valuation was based upon information furnished by the City, concerning Plan benefits, financial transactions, plan provisions and active members, terminated members, retirees and beneficiaries. We checked for internal and year-to-year consistency, but did not otherwise audit the data. We are not responsible for the accuracy or completeness of the information provided by the City. The Board of Trustees March 28, 2013 Page 2 Gabriel, Roeder, Smith and Company This actuarial valuation and/or cost determination was prepared and completed by me or under my direct supervision, and I acknowledge responsibility for the results. To the best of my knowledge, the results are complete and accurate. In my opinion, the techniques and assumptions used are reasonable, meet the requirements and intent of Part VII, Chapter 112, Florida Statutes, and are based on generally accepted actuarial principles and practices. 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 which may require a material increase in plan costs or required contribution rates have been taken into account in the valuation. The signing actuaries are independent of the plan sponsor. Gabriel, Roeder, Smith & Company will be pleased to answer questions pertaining to the valuation and to meet with you to review this Report. Respectfully submitted, GABRIEL, ROEDER, SMITH AND COMPANY James J. Rizzo, ASA, MAAA Senior Consultant & Actuary Piotr Krekora, ASA, MAAA Consultant & Actuary STATEMENT BY ENROLLED ACTUARY This actuarial valuation and/or cost determination was prepared and completed by me or under my direct supervision, and I acknowledge responsibility for the results. To the best of my knowledge, the results are complete and accurate. In my opinion, the techniques and assumptions used are reasonable, meet the requirements and intent of Part VII, Chapter 112, Florida Statutes, and are based on generally accepted actuarial principles and practices. 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 which may require a material increase in plan costs or required contribution rates have been taken into account in the valuation. Signature March 28, 2013 Date 11-03355 Enrollment Number TABLE OF CONTENTS SECTION TITLE PAGE A EXECUTIVE SUMMARY A-1 B VALUATION RESULTS 1. Participant Data B-1 2. Annual Required Contribution B-2 3. Actuarial Value of Benefits and Assets B-3 4. State Premium Tax Revenues B-4 5. Financial Soundness B-5 6. Actuarial Gains and Losses B-9 7. Recent History of Valuation Results B-13 8. Recent History of Required and Actual Contributions B-15 9. Actuarial Assumptions and Cost Method B-16 C PENSION FUND INFORMA TION 1. Summary of Assets C-1 2. Summary of Fund's Income and Disbursements C-2 3. Reconciliation of DROP Accounts C-3 4. Actuarial Value of Assets C-4 5. Investment Rate of Return C-6 D FINANCIAL ACCOUNTING INFORMATION 1. FASB No. 35 D-1 2. GASB No. 25 D-2 3. GASB No. 27 D-4 E MISCELLANEOUS INFORM ATION 1. Reconciliation of Membership Data E-1 2. Statistical Data E-2 F SUMMARY OF PLAN PROVISIONS F-1 G COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS G-1 Circular 230 Notice: Pursuant to regulations issued by the IRS, to the extent this communication (or any attachment) concerns tax matters, it is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) marketing or recommending to another party any tax-related matter addressed within. Each taxpayer should seek advice based on the individual’s circumstances from an independent tax advisor. SECTION A EXECUTIVE SUMMARY City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | A-1 EXECUTIVE SUMMARY Comparison of Required Employer Contributions The following is a comparison of required contributions developed in this year's and the last actuarial valuations: Gross Contribution Requirement $770,313 $688,746 $81,567 As % of Expected Payroll 46.92 %40.45 %6.47 % Expected Employee Contribution $79,058 $82,005 $(2,947) As % of Covered Payroll 4.815 %4.815 %0.00 % Required Employer/State Contribution $691,255 $606,741 $84,514 As % of Expected Payroll 42.10 %35.63 %6.47 % Estimated State Contribution $88,806 $88,806 $0 As % of Covered Payroll 5.41 %5.21 %0.20 % Required Employer Contribution (If Made in Equal Monthly Installments)$602,449 $517,935 $84,514 As % of Covered Payroll 36.69 %30.41 %6.28 % Required Employer Contribution (If Made in Whole at the Beginning of the Year)$577,427 $496,423 81,004 As % of Covered Payroll 35.17 %29.15 %6.02 % Based on 9/30/2012 (Decrease)Valuation Valuation IncreaseBased on 9/30/2011 For FYE 9/30/2014 For FYE 9/30/2013 Minimum Required Contribution As illustrated in the preceding chart, the contribution necessary from the City and State to support the current benefits for the Police Officers is $691,255 for the fiscal year ending September 30, 2014. The City may be able to use up to $88,806 of State premium tax moneys to satisfy part of that requirement, leaving the City contribution at $602,449. However, the City may need to contribute more, should receipts from the State fall short of the expected amount presented in the table above. In no event, the combined City and State contribution should be less than 42.10% of the total payroll for the contribution year, unless made in full on the first day of that year. Please note that the Required Employer Contribution for that fiscal year is assumed to be deposited in monthly intervals throughout the year. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | A-2 Revisions in Benefits There were no revisions in benefits for the current year. Pending changes being considered would not have an effective date until many months following the October 1, 2012 valuation date. The current financial and actuarial effects of any such amendment, if adopted in the next few months, would be reflected in an Actuarial Impact Statement that will be prepared shortly. Depending on the nature of the amendment, the Minimum Required Contribution for the fiscal year ending September 30, 2014 may change from what is described herein. Revisions in Actuarial Assumptions or Methods There were no revisions in actuarial assumptions or methods for the current year. Actuarial Experience Actuarial gains occur in a year whenever the experience of the plan is better than was assumed. For example, if investment performance were better than the level being assumed in the actuarial valuation and costing process, then an actuarial gain results and would have the effect of lowering the Minimum Required Contribution for the year. Whenever more employees terminate employment than were assumed would terminate, fewer employees are then expected to actually retire from the City, resulting in an actuarial gain for the plan. Actuarial losses occur in a year whenever the experience of the plan is worse than was assumed. In the examples given above, if the reverse were to occur, then actuarial losses would result. As another example, if salaries increased in one year were higher than assumed or more new employees were hired than terminated, an actuarial loss would occur. The actuarial valuation cost method which determines the Minimum Required Contribution is designed to produce contribution requirements which remain level as a percent of payroll whenever the experience of the plan matches the actuarial assumptions used. Contribution Requirements are also level whenever actuarial losses exactly offset actuarial gains. Analysis of Change in Employer Contribution The components of change in the actuarially required contribution are as follows: Contribution rate last year 30.41% Payment on UAAL 7.12 Experience (gain)/loss 0.26 Change in administrative expense (0.81) Change in normal cost before expenses (0.11) Revision in benefits 0.00 Revision in assumptions/methods 0.00 Change in State Revenue (0.18) Contribution rate this year 36.69% There was a net actuarial loss this year which is primarily due to a vested terminated participant who was retroactively approved for disability retirement during the past year. This loss was partially offset by lower than expected salary increases (-0.8% vs. 7.6% assumed). Administrative expenses were less than the previous year by 0.81% of pay. The dollar amount of the State Revenue is expected to remain at the same level but due to a recent payroll reduction it will represent a larger City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | A-3 percentage of the projected payroll. There was a decrease in the 10-year average payroll growth rate (from 3.35% to 2.62%). The covered payroll is expected to grow at the rate of 4% in the long term. However, in accordance with the requirements of Ch. 112.64 (5) (a), F.S. this assumed payroll growth used in developing the amortization payments, cannot exceed the actual average annual payroll growth rate based on the last 10 years. This limit has been affecting amortization amounts for the last three years. Due to a decrease in the 10-year average, the amortization payment of the UAAL increased this year, adding to the actuarial losses described previously, which ultimately increased the contribution. The remainder of this Report includes detailed actuarial valuation results, financial information, miscellaneous information and statistics, and a summary of plan provisions. SECTION B VALUATION RESULTS City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-1 ACTIVE MEMBERS Number 26 26 Covered Annual Payroll $1,548,109$1,605,814 Average Annual Payroll $59,543$61,762 Average Age 37.9 37.9 Average Past Service 7.9 8.1 Average Age at Hire 30.0 29.8 RETIREES, BENEFICIARIES, & DROP MEMBERS Number 15 14 Annual Benefits $544,324$493,822 Average Annual Benefit $36,288$35,273 Average Age 60.7 60.6 DISABILITY RETIREES Number 4 3 Annual Benefits $74,159$56,032 Average Annual Benefit $18,540$18,677 Average Age 55.1 57.9 TERMINATED VESTED MEMBERS Number 4 5 Annual Benefits $41,865$55,564 Average Annual Benefit $10,466$11,113 Average Age 48.9 46.8 PARTICIPANT DATA September 30, 2012 September 30, 2011 City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-2 A.Valuation Date B.ARC to Be Paid During Fiscal Year Ending 9/30/2014 9/30/2013 C.Assumed Date(s) of Employer Contrib.Monthly Monthly D.Annual Payment to Amortize Unfunded Actuarial Liability if Paid on the Valuation Date $375,564$278,845 E.Employer Normal Cost (including Administrative Expenses) if Paid on the Valuation 237,903 259,619 F.Annual Required Contribution (ARC) if Paid on the Valuation Date: D+E 613,467 538,464 G.ARC Adjusted for Frequency of Payments and Interest to Required Time of Contribution 691,255 606,741 H.Covered Payroll for Contribution Year 1,641,918 1,703,120 I.ARC as % of Expected Covered Payroll in the Contribution Year G ÷ H 42.10%35.63% J.Estimate of State Revenue in Contribution Year*88,806 88,806 K.Required Employer Contribution (REC) in Contribution Year 602,449 517,935 L.REC as % of Covered Payroll in Contribution Year: K ÷ J 36.69%30.41% M.Required Employer Contribution (REC) if Paid on the First Day of the Contribution Year 577,427 496,423 ANNUAL REQUIRED CONTRIBUTION (ARC) September 30, 2012 September 30, 2011 * Chapter 185 Florida Statutes. The City contribution amount may need to be increased if the amount received under the provisions of Chapter 185, Florida Statutes, is not sufficient to meet the total employer contribution requirement. CAUTION: If the amount received under the provisions of Chapter 185, Florida Statutes, exceeds $88,806, the City may NOT use any of the excess to reduce the City contribution shown. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-3 A.Valuation Date B.Actuarial Present Value of All Projected Benefits for 1.Active Members a. Service Retirement Benefits $5,649,742 $5,958,209 b. Vesting Benefits 436,838 444,331 c. Disability Benefits 222,369 230,062 d. Preretirement Death Benefits 48,102 50,614 e. Return of Member Contributions 76,094 77,178 f. Total 6,433,145 6,760,394 2.Inactive Members a. Service Retirees & Beneficiaries 5,799,923 5,241,594 b. Disability Retirees 757,569 541,226 c. Terminated Vested Members 194,822 216,786 d. Total 6,752,314 5,999,606 3. Total for All Members 13,185,459 12,760,000 C.Actuarial Accrued (Past Service) Liability per GASB No. 25 10,600,187 10,065,007 D.Actuarial Value of Accumulated Plan Benefits per FASB No. 35 9,068,198 8,408,268 E.Plan Assets 1.Market Value 6,934,693 6,056,405 2. Actuarial Value 6,880,124 6,305,176 F.Actuarial Present Value of Projected Covered Payroll 13,864,778 14,472,886 G.Actuarial Present Value of Projected Member Contributions 668,282 697,593 ACTUARIAL VALUE OF BENEFITS AND ASSETS September 30, 2012 September 30, 2011 City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-4 STATE PREMIUM TAX REVENUES A.Additional premium tax revenues as of 9/30/2011 $ 120,454 -$ B.Chapter 185 receipts during fiscal year ending 9/30/2012 88,795 1,240,299 C.Chapter 185 "frozen" receipts during fiscal year ending 9/30/1998 70,289 974,785 D.Qualifying benefit improvements since Chapter 99-1 effective date 18,517 148,136 E.Additional premium tax revenues (Excess Premium Tax Reserves) as of 9/30/2012 [ A + B - C - D] not less than beginning of the year.120,454 Minimum Compliance ($18,517) A. Early retirement eligibility at 50 & 10 B.Normal retirement eligibility at 55 & 10 C.10 year certain and life normal form Extra Benefits A.None proposed Potential Future Benefits Prior Year Cumulative Note: During the Fiscal Year ended 9/30/2012, “Chapter 185 receipts” totaled $88,795. This amount is lower than the maximum amount of State premium tax moneys that can be used by the City to satisfy part of the Annual Required Contribution. The current such maximum, equal $88,806, is a sum of (i) the “frozen” amount of $70,289 and (ii) amount equal to initial annual cost of qualifying benefit improvements of $18,517. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-5 FINANCIAL SOUNDNESS The purpose of this portion of the Report is to provide certain measures which indicate the financial soundness of the program. These measures relate to short term solvency and long term solvency. The various percentages listed in this Section as of a single valuation date are not that significant. What is significant, however, is the trend of the rates over a period of years. It is also important to keep in mind that each time benefits or assumptions are revised; actuarial liabilities are created or diminished. Any newly created liabilities are financed systematically over a period of future years. All actuarially computed values in this analysis are based on the actuarial assumptions utilized in the respective years' actuarial valuations. Short Term Solvency The ultimate test of financial soundness is the program's ability to pay all promised benefits when due. The program's progress in accumulating assets to pay all promised benefits can be measured by comparing the market value of assets with: 1. The actuarial present value of projected benefits payable to those already receiving benefits and to vested terminations, and 2. The actuarial present value of accrued benefits payable to active participants. This amount is based on benefits earned to date without future credited service or salary increases. The total of the two items should generally be fully covered by assets. That portion of the total of the two items covered by assets should increase over time. Often assets continue to grow beyond the actuarial present value of these two items. Increases in benefits will, of course, adversely affect the trend in the years when such increases are first reflected in the actuarial values. Although different actuarial assumptions would be used in the event of a termination of the program, this test shows how much of the benefits accrued to date might be covered by assets in the event of a plan freeze using the valuation assumptions. 1.Accumulated Contributions of Active Members $381,408 $333,818 $298,857 2.APV of Projected Benefits in Pay Status and for Vested Terminations 6,752,3145,999,6065,122,509 3.APV of Accrued Benefits for Active Participants (Employer Portion)1,934,476 2,074,844 2,454,890 4.Total 9,068,1988,408,2687,876,256 5.Market Value of Assets 6,934,6936,056,4056,010,877 6.Assets as % of Total 76%72%76% Police Officers 9/30/2012 9/30/2011 9/30/2010 City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-6 0% 50% 100% 150% $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 2009 2010 2011 2012 Ra t i o Mi l l i o n s Actuarial Valuation Date (September 30) Ratio of Market Value of Assets to Present Value of Accrued Benefits Market Value of Assets PV Accrued Benefits Ratio City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-7 Long Term Solvency Over the longer term, the solvency of an ongoing plan can be measured by comparing the Actuarial Value of Assets to an amount known as the Actuarial Accrued Liability (AAL) under the Entry Age Actuarial Cost Method. This item has often been called the "past service liability". Its derivation differs from the short term solvency value derivation in several ways. The short term solvency liability number is based on the benefits accrued to date by the participants while the long term solvency liability number is based on what the normal costs accrued to date by the employer. In addition, the short term solvency asset number is the market value, while the long term asset number is the actuarial value of assets. As in the case of the short term solvency values, the AAL is affected immediately by any revisions in benefits or assumptions. The accumulation of assets to equal the AAL can be considered a long range funding goal. 9/30/02 $4,230 $5,334 79 % 9/30/03*4,373 5,986 73 9/30/04 4,534 6,405 71 9/30/05 4,775 6,997 68 9/30/06 5,175 7,034 74 9/30/07*5,663 7,620 74 9/30/08 5,764 8,112 71 9/30/09*5,922 8,689 68 9/30/10*6,164 9,449 65 9/30/11 6,305 10,065 63 9/30/12 6,880 10,600 65 Valuation Date Actuarial Value of Assets (in Thousands) Actuarial Accrued Liability (in Thousands) % of AAL Covered by Assets *Reflects change in benefits, actuarial assumptions and/or method. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-8 0% 50% 100% 150% $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 2006 2007 2008 2009 2010 2011 2012 Ra t i o Mi l l i o n s Actuarial Valuation Date (September 30) Actuarial Assets Accrued Liability Ratio City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-9 ACTUARIAL GAINS AND LOSSES The assumptions used to anticipate mortality, employment turnover, investment income, expenses, salary increases, and other factors have been based on long range trends and expectations. Actual experience can vary from these expectations. The variance is measured by the gain and loss for the period involved. If significant long term experience reveals consistent deviation from what has been expected and that deviation is expected to continue, the assumptions should be modified. The net actuarial gain (loss) for the past year is computed as follows: 1.Last Year's UAAL $3,759,831 2.Last Year's Employer Normal Cost 270,003 3.Last Year's Actual City Contibution 628,898 4.Interest at the assumed rate on: a. 1 for one year 300,786 b. 2 for half a year 10,800 c. 3 from dates paid 25,156 d. a + b - c 286,430 5.This Year's Expected UAAL 1 + 2 - 3 + 4d 3,687,366 6.This Year's Actual UAAL (before any changes in benefits or assumptions)3,720,063 7.Net Actuarial Gain (Loss): (5) - (6)(32,697) 8.Gain (Loss) due to investments 16,160 9.Gain (Loss) due to other sources (48,856) Derivation of Experience Gain (Loss) City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-10 Net actuarial gains (losses) in previous years have been as follows: Year Ended 9/30/1997 249,395 249,395 9/30/1998 95,019 344,414 9/30/1999 117,618 462,032 9/30/2000 (103,871) 358,161 9/30/2001 1,389 359,550 9/30/2002 (128,212) 231,338 9/30/2003 (339,563) (108,225) 9/30/2004 (207,808) (316,033) 9/30/2005 (287,225) (603,258) 9/30/2006 411,559 (191,699) 9/30/2007 (137,906) (329,604) 9/30/2008 (308,022) (637,626) 9/30/2009 (323,582) (961,208) 9/30/2010 154,731 (806,477) 9/30/2011 (451,201) (1,257,678) 9/30/2012 (32,697) (1,290,375) Actuarial Gain (Loss) Cumulative Gain (Loss) ($3) ($2) ($1) $0 $1 $2 $3 ($1) $0 $1 M i l l i o n s M i l l i o n s Plan Year End Actuarial Gain (+) or Loss (-) Gain or Loss Cumulative City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-11 The fund earnings and salary increase assumptions have considerable impact on the cost of the Plan so it is important that they are in line with the actual experience. The following table shows the history of actuarial fund earnings and salary increase rates compared to the assumed rates. 9/30/20022.6%8.0%7.5%6.7% 9/30/20032.2 8.0 8.8 6.5 9/30/20042.4 8.0 11.2 6.5 9/30/20054.4 8.0 15.1 6.3 9/30/20067.8 8.0 1.5 6.7 9/30/20079.4 8.0 12.8 6.6 9/30/20084.6 8.0 2.1 6.6 9/30/20093.8 8.0 11.0 6.4 9/30/20104.7 8.0 (0.0)6.4 9/30/20112.2 8.0 3.8 7.4 9/30/20127.9 8.0 (0.8)7.6 Average 4.7%---6.5%--- Assumed Salary Increases Actual Investment Return Year Ending Actuarial Assumed The actual investment return rates shown above are based on the actuarial value of assets. The actual salary increase rates shown above are the increases received by those active members who were included in the actuarial valuations both at the beginning and the end of each year. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-12 -5% 0% 5% 10% 15% -5% 0% 5% 10% 15% Plan Year End History of Investment Return -Actuarial Value of Assets Actual Assumed 0% 5% 10% 15% -5% 0% 5% 10% 15% 20% Plan Year End Compared to Previous Year History of Salary Increases Actual Assumed Ci t y o f A t l a n t i c B e a c h P o l i c e O f f i c e r s ’ Re t i r e m e n t S y s t e m 9/ 3 0 / 2 0 1 2 Ac t u a r i a l V a l u a t i o n | B-13 Active Members Inactive Members 9/30/022512 $ 1,195 $ 4,230 $ 1,104 $ 18415.44 % 9/30/03 *2215 1,129 4,373 1,613 18216.12 9/30/042716 1,360 4,534 1,871 22016.21 9/30/052618 1,402 4,775 2,222 22816.25 9/30/062419 1,254 5,175 1,859 21116.84 9/30/07 *2519 1,453 5,663 1,957 20013.74 9/30/082619 1,476 5,764 2,348 20713.99 9/30/09 *2720 1,697 5,922 2,767 24414.36 9/30/10 *2721 1,639 6,164 3,285 24715.08 9/30/112622 1,606 6,305 3,760 26016.17 9/30/1226 23 1,548 6,880 3,720 23815.37 Amount (in Thousands) UAAL (in Thousands) RECENT HISTORY OF VALUATION RESULTS Number of Employer Normal Cost** Valuation Date Reported Covered Annual Payroll (in Thousands) Actuarial Value of Assets (in Thousands) % of Covered Payroll * Reflects change in benefits, actuarial assumptions and/or method. **For Valuations prior to 2009, Normal Cost is a mid-year amount, excluding any administrative expenses. Beginning with 9/30/2009 valuation, Normal Cost is a beginning of the year figure, including administrative expenses. For all years, % of Covered Payroll is Normal Cost shown expressed as a % of Covered Valuation Payroll. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-14 0 10 20 30 40 50 Actuarial Valuation Date Recent History of Number of Members Active Members Inactive Members $0.0 $0.3 $0.5 $0.8 $1.0 $1.3 $1.5 $1.8 Mi l l i o n s Actuarial Valuation Date Recent History of Covered Annual Payroll City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-15 9/30/059/30/07 $390,49425.70 %$390,494 9/30/069/30/08 309,84122.80 309,842 9/30/07 *9/30/09 345,28021.93 345,280 9/30/089/30/10 425,82326.62 425,823 9/30/09 *9/30/11 487,03226.49 487,032 9/30/10 *9/30/12 628,90936.18 628,898 9/30/119/30/13 606,74135.63 --- 9/30/129/30/14 691,25542.10 --- RECENT HISTORY OF REQUIRED AND ACTUAL CONTRIBUTIONS Required Contributions Actual Contributions Valuation End of Year To Which Valuation Applies Amount % of Expected Payroll * Reflects change in benefits, actuarial assumptions and/or method. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-16 ACTUARIAL ASSUMPTIONS AND COST METHOD Valuation Methods Actuarial Cost Method - The actuarial cost method is a procedure for allocating the actuarial present value of benefits and expenses to time periods. Normal cost and the allocation of benefit values between service rendered before and after the valuation date were determined using the Entry-Age Actuarial Cost Method. The entry-age actuarial cost method allocates the actuarial present value of each member's projected benefits on a level basis over the member's pensionable compensation between the entry age of the member and the estimated active status exit ages. The portion of the actuarial present value allocated to the valuation year is called the normal cost. The portion of the actuarial present value not provided for by the actuarial present value of future normal costs is called the actuarial accrued liability. Deducting accrued assets from the actuarial accrued liability determines the unfunded actuarial accrued liability. Financing of Unfunded Actuarial Accrued Liabilities - The unfunded actuarial accrued liability was financed as a level percent of member payroll. Actuarial Value of Assets - The Actuarial Value of Assets phases in the difference between the expected and actual return on market value of assets at the rate of 25% per year. The Actuarial Value of Assets will be further adjusted to the extent necessary to fall within the corridor whose lower limit is 80% of the Market Value of plan assets and whose upper limit is 120% of the Market Value of plan assets. During periods when investment performance exceeds the assumed rate, Actuarial Value of Assets will tend to be less than Market Value. During periods when investment performance is less than assumed rate, Actuarial Value of Assets will tend to be greater than Market Value. Valuation Assumptions The actuarial assumptions used in the valuation are shown in this Section. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-17 Economic Assumptions The investment return rate assumed in the valuations is 8.00% per year, compounded annually (net of investment expenses). The Wage Inflation Rate assumed in this valuation was 4% per year. The Wage Inflation Rate is defined to be the portion of total pay increases for an individual that are due to macro economic forces including productivity, price inflation, and labor market conditions. The wage inflation rate does not include pay changes related to individual merit and seniority effects. The price inflation rate assumed in this valuation was 3% per year. The plan does not provide for automatic post-retirement cost of living adjustments (COLA) of retiree benefits. Ad-hoc COLA increases have been adopted in the past upon approval by the City. Most recently, such increases have been granted in 1987, 1996 and 2001. No assumptions are made regarding future adjustments. Any such increases will be recognized as they occur. The payroll growth rate would be 4%, except that it is limited this year due the lower actual payroll growth rate over the last 10 years in accordance with the requirements of Ch. 112.64 (5) (a), F.S. The rate used to amortize the unfunded actuarial accrued liabilities is 2.62% per year. The total rate of return is defined as earnings resulting from interest, dividends, realized gains (losses) and unrealized appreciation (depreciation) divided by the beginning market value of the fund, adjusted for cash flow during the year. Total rate of return is as the assumed to be 8.00% per year, net of investment-related expenses. The rates of salary increases used in the valuation are illustrated in the following table. Annual Rates for Salary Increase for Sample Ages Age:2030405060 Expected Increase 23.0%9.8%6.6%5.7%5.0% City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-18 Demographic Assumptions The mortality table is a gender specific RP-2000 Mortality Table with generational projections per the Society of Actuaries’ Scale AA. Ages Men Women Men Women 45 $142.54 $144.21 36.75 39.03 50 137.46 139.60 32.00 34.22 55 130.46 133.31 27.31 29.50 60 121.38 125.21 22.80 24.94 65 110.29 115.34 18.56 20.66 70 97.44 103.87 14.69 16.73 75 82.54 90.81 11.18 13.18 80 66.51 76.26 8.15 10.01 $1 Monthly for Life Expectancy (Years) RP2000 Table Projected to Valuation Year Value of Future Life This assumption is used to measure the probabilities of each benefit payment being made after retirement. For active members, the probabilities of dying before retirement were based upon the same mortality table as members dying after retirement. All deaths before retirement are assumed to be non-service connected. The rates of retirement used to measure the probability of eligible members retiring under normal and early retirement eligibility during the next year were as follows: Retirement Percent of Eligible Ages Employees Retiring 45 40% 46 10% 47 10% 48 10% 49 40% 50 50% 51 50% 52-58 50% 59 50% 60 50% 61-64 50% 65 100% Normal Retirement/DROP Retirement Percent of Eligible Ages Employees Retiring 50 10% 51 10% 52 10% 53 10% 54 10% Early Retirement/DROP City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-19 Rates of separation from active membership were as shown below (rates do not apply to members eligible to retire and do not include separation on account of death or disability). This assumption measures the probabilities of members remaining in employment. SampleYears of AgesServiceAssumptions ALL 0 34.00% 1 23.00% 2 16.00% 3 12.00% 4 9.00% 25 5 & Over5.88% 30 5.32% 35 4.40% 40 3.70% 45 3.20% 50 2.40% 55 1.40% 60 1.00% Rates of Separationg from Active Employment Rates of Disability among after members Sample Ages Men Women 200.14%0.14% 250.15%0.15% 300.18%0.18% 350.23%0.23% 400.30%0.30% 450.51%0.51% 501.00%1.00% 551.55%1.55% 600.00%0.00% Percent Becoming Disabled Within Next Year The mortality table was set forward ten years for projecting disability costs. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-20 Miscellaneous and Technical Assumptions Administrative & Investment Expenses Annual administrative expenses are assumed to be equal to the actual expenses paid during the preceding fiscal year. Investment expenses are offset against gross investment income. Assumed administrative expenses are added to the Normal Cost. Benefit Service Exact fractional service is used to determine the amount of benefit payable. Decrement Operation Disability and mortality decrements do not operate during the first 5 years of service. Disability and separation do not operate during retirement eligibility. Decrement Timing Decrements of all types are assumed to occur mid year. Eligibility Testing Eligibility for benefits is determined based upon the age nearest birthday and service nearest whole year on the date the decrement is assumed to occur. Forfeitures Vested members who terminate with a benefit worth less than 100% of their own accumulated contributions were assumed to forfeit their vested benefit. Incidence of Contributions Employer contributions are assumed to be received in 12 equal monthly installments. Member contributions are assumed to be received continuously throughout the year based upon the computed percent of payroll shown in this report, and the actual payroll payable at the time contributions are made. Marriage Assumption 80% of members are assumed to be married for purposes of death-in- service benefits. Male spouses are assumed to be three years older than female participants and female spouses are assumed to be three years younger than male participants for active member valuation purposes. Normal Form of Benefit The normal form of benefit is a life annuity with 10 year certain. Pay Increase Timing Beginning of fiscal year. This is equivalent to assuming that reported pays represent the actual amount paid during the previous fiscal year. Service Credit Accruals It is assumed that members accrue one year of service credit per year. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | B-21 GLOSSARY OF TERMS Actuarial Accrued Liability The difference between (i) the actuarial present value of future plan benefits, and (ii) the actuarial present value of future normal cost. Sometimes referred to as “accrued liability” or “past service liability.” Accrued Service The service credited under the plan which was rendered before the date of the actuarial valuation. Actuarial Assumptions Estimates of future plan experience with respect to rates of mortality, disability, turnover, retirement, rate or rates of investment income and salary increases. Decrement assumptions (rates of mortality, disability, turnover and retirement) are generally based on past experience, often modified for projected changes in conditions. Economic assumptions (salary increases and investment income) consist of an underlying rate in an inflation-free environment plus a provision for a long-term average rate of inflation. Actuarial Cost Method A mathematical budgeting procedure for allocating the dollar amount of the “actuarial present value of future plan benefits” between the actuarial present value of future normal cost and the actuarial accrued liability. Sometimes referred to as the “actuarial funding method.” Actuarial Equivalent A single amount or series of amounts of equal value to another single amount or series of amounts, computed on the basis of the rate(s) of interest and mortality tables used by the plan. Actuarial Present Value The amount of funds presently required to provide a payment or series of payments in the future. It is determined by discounting the future payments at a predetermined rate of interest, taking into account the probability of payment. Amortization Paying off an interest-bearing liability by means of periodic payments of interest and principal, as opposed to paying it off with a lump sum payment. Experience Gain (Loss) A measure of the difference between actual experience and that expected based upon a set of actuarial assumptions during the period between two actuarial valuation dates, in accordance with the actuarial cost method being used. Normal Cost The annual cost assigned, under the actuarial funding method, to current and subsequent plan years. Sometimes referred to as “current service cost.” Any payment toward the unfunded actuarial accrued liability is not part of the normal cost. Reserve Account An account used to indicate that funds have been set aside for a specific purpose and is not generally available for other uses. Unfunded Actuarial Accrued Liability The difference between the actuarial accrued liability and valuation assets. Sometimes referred to as “unfunded accrued liability.” Valuation Assets The value of current plan assets recognized for valuation purposes. Generally based on market value plus a portion of unrealized appreciation or depreciation. SECTION C PENSION FUND INFORMA TION City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | C-1 Cash and Securities - Market Value Cash and Cash Equivalents $26,902 $29,766 Short Term Investments 149,346 228,286 Treasury and Agency Bonds & Notes 2,119,032 1,813,241 Corporate Bonds 1,209,542 1,377,738 Common & Preferred Stocks 3,507,733 2,614,717 Other Fixed Income 24,535 83,532 Mutual or Pooled Bond Funds 0 0 Mutual Funds 0 0 Other Securities - Participant Directed 68,961 16,316 Total 7,106,051 6,163,596 Receivables and Accruals Member Contribution 0 0 Additional Employer Contribution 0 0 Interest and Dividends 18,265 29,883 Total 18,265 29,883 Payables Benefits-DROP Reserve 69,169 16,620 Lump Sum Distributions 0 0 Excess Premium Tax Liability 120,454 120,454 Other 0 0 Total 189,623 137,074 Net Assets - Market Value $6,934,693 $6,056,405 SUMMARY OF ASSETS 9/30/2012 9/30/2011 Year Ending Year Ending City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | C-2 Market Value at Beginning of Period $6,056,405$6,010,957 Income Member Contributions 75,667 79,200 State Contributions 88,795 86,391 Employer Contribution 540,103 400,641 Interest and Dividends 144,410 144,229 Realized and Unrealized Gain (Loss)698,385 (69,342) Total Income 1,547,360 641,119 Disbursements Monthly Benefit Payments 599,459 512,386 Lump Sum Distributions 0 0 Refund of Contributions 5,478 6,853 Increase in Excess Premium Tax Liability 0 0 Investment Related Expenses 38,225 37,299 Other Administrative Expenses 25,910 39,133 Insurance Premiums 0 0 Total Disbursements 669,072 595,671 Net Increase During Period $878,288 $45,448 Market Value at End of Period $6,934,693 $6,056,405 PENSION FUND INCOME AND DISBURSEMENTS Year Ending 9/30/2011 Year Ending 9/30/2012 City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | C-3 DEFERRED RETIREMENT OPTION PLAN (DROP) BENEFITS HELD IN RESERVE State Statutes require that the value of assets be offset by the total accumulated balance of DROP payments being held in reserve for those participating in the DROP plan. A reconciliation of the accumulated balance to be recognized is provided in the table below. $ + + - Value at end of year Value at beginning of year RECONCILIATION OF DROP ACCOUNTS Payments credited to accounts Investment Earnings credited Withdrawals from accounts 16,316 51,860 785 0 68,961 City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | C-4 ACTUARIAL VALUE OF ASSETS As of September 30, 2012 Valuation assets are calculated using a smoothed market value over a period of four (4) years, as prescribed under Internal Revenue Procedure 2000-40. The asset value determined under this method will be adjusted to be no greater than 120% and no less than 80% of the fair market value. Under this method, the actuarial value of assets is equal to the market value of assets less a decreasing fraction (1/nth per year, where n equals the number of years in the smoothing period) of the gain or loss for each of the preceding 3 years. Under this method, a gain or loss for a year is determined by calculating the difference between the expected market value of the assets at the valuation date and the actual market value of the assets at the valuation date. The expected value of the assets for the year is the market value of the assets at the valuation date for the prior year brought forward with interest at the valuation interest rate to the valuation date for the current year plus contributions minus disbursements (i.e., benefits paid and expenses), all adjusted with interest at the valuation rate to the valuation date for the current year. If the expected value is less than the market value, the differen ce is a gain. Conversely, if the expected value is greater than the market value, the difference is a loss. Calculation of Valuation Assets is shown on the following page. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | C-5 2010 20112012 2013 A.Preliminary actuarial value from prior year 5,921,648$ 6,164,269$ 6,305,176$ 6,880,124$ B.Market value beginning of prior year 5,457,4796,010,9576,056,4056,934,693 C.Market value end of prior year 6,010,9576,056,4056,934,693 D.Non-investment net cash flow [contributions-(benefits & expenses)](35,838)7,86073,718 E.Investment return 1.Actual market value return net of investment expenses: C - B - D 589,31737,588804,570 2.Expected return of 8.00%435,165 481,191 487,461 3.Excess/(shortfall) to be phased-in: E1 - E2 154,152(443,603)317,109 F.Phased-in recognition of investment return (4 Year Recognition) 1.Current year: 25% of E3 38,538(110,901)79,277 2.25% of excess/(shortfall) from first prior year 6,85538,538(110,901)79,277 3.25% of excess/(shortfall) from second prior year (282,636)6,85538,538(110,901) 4.25% of excess/(shortfall) from third prior year 80,537(282,636)6,85538,538 5.Total phased-in recognition of investment return (156,706)(348,144)13,769 6,914 G.Actuarial value end of year 1.Preliminary actuarial value end of year: A + D + E2 + F5 6,164,2696,305,1766,880,124 2.Upper corridor limit: 120% of C 7,213,1497,267,6868,321,632 3.Lower corridor limit: 80% of C 4,808,7664,845,1245,547,754 4.Actuarial value end of year *6,164,2696,305,1766,880,124 H.Difference between market value and actuarial value (153,312)(248,771)54,569 I.Ratio of Funding Value to Market Value 103%104%99% DEVELOPMENT OF FUNDING VALUE OF ASSETS AS OF SEPTEMBER 30 * Offset for DROP Reserve made prior to the calculation of valuation assets. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | C-6 INVESTMENT RATE OF RETURN The investment rate of return has been calculated on the following bases: Basis 1 - Cost Value: Interest, dividends and realized gains (losses) divided by the beginning cost value of the fund, adjusted for cash flow during the year. Not illustrated below. Basis 2 - Market Value: Interest, dividends, realized gains (losses) and unrealized appreciation (depreciation) divided by the beginning market value of the fund, adjusted for cash flow during the year. This figure is normally called the Total Rate of Return. Basis 3 - Actuarial Value: Investment earnings recognized in the Actuarial Value of Assets divided by the weighted average of the Actuarial Value of Assets during the year. 9/30/02 (6.8) %2.6 % 9/30/03 9.5 2.2 9/30/04 6.7 2.4 9/30/05 8.5 4.4 9/30/06 8.8 7.8 9/30/07 14.2 9.4 9/30/08 (11.7) 4.6 9/30/09 8.5 3.8 9/30/10 10.8 4.7 9/30/11 1.2 2.2 9/30/12 13.9 7.9 4.1%4.6 % 6.8%4.9 % Actuarial ValueYear Ended Investment Rate of Return Average Compounded Rate of Return for 5 Years 10 Years Market Value SECTION D FINANCIAL ACCOUNTING INFORMATION City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | D-1 A.Valuation Date B.Actuarial Present Value of Accumulated Plan Benefits 1.Vested Benefits a.Members Currently Receiving Payments$6,557,492$5,782,820 b.Terminated Vested Members 194,822 216,786 c.Other Members 2,188,725 2,206,538 d.Total 8,941,039 8,206,144 2.Non-Vested Benefits 127,159 202,124 3.Total Actuarial Present Value of Accumulated Plan Benefits: 1d + 2 9,068,198 8,408,268 4.Accumulated Contributions of Active Members 381,408 333,818 C.Changes in the Actuarial Present Value of Accumulated Plan Benefits 1.Total Value at Beginning of Year 8,408,268 7,876,256 2.Increase (Decrease) During the Period Attributable to: a.Plan Amendment 0 0 b.Change in Actuarial Assumptions 0 0 c.Latest Member Data, Benefits Accumulated and Decrease in the Discount Period 1,264,867 1,051,251 d.Benefits Paid (Including DROP Reserve)(604,937)(519,239) e.Net Increase 659,930 532,012 3.Total Value at End of Period 9,068,198 8,408,268 D.Market Value of Assets 6,934,693 6,056,405 E. Total Actuarial Present Value of Accumulated Plan Benefits using FRS discount rate 9,311,897 8,636,760 F.Actuarial Assumptions - See page entitled Actuarial Assumptions and Methods FASB NO. 35 INFORMATION September 30, 2012 September 30, 2011 Ci t y o f A t l a n t i c B e a c h P o li c e O f f i c e r s ’ Re t i r e m e n t S y s t e m 9/ 3 0 / 2 0 1 2 Ac t u a r i a l V a l u a t i o n | D -2 SCHEDULE OF FUNDING PROGRESS (Dollar amounts in thousands) (GASB Statement No. 25) 9/30/2003 *$4,373 $5,986 $1,613 73.1 %$1,129 142.9 % 9/30/2004 4,534 6,405 1,871 70.81,360 137.6 9/30/2005 4,775 6,997 2,222 68.21,402 158.5 9/30/2006 5,175 7,034 1,859 73.61,254 148.2 9/30/2007 *5,663 7,620 1,957 74.31,453 134.7 9/30/2008 5,764 8,112 2,348 71.11,476 159.1 9/30/2009 *5,922 8,689 2,767 68.21,697 163.1 9/30/2010 *6,164 9,449 3,285 65.21,639 200.4 9/30/2011 6,305 10,065 3,760 62.61,606 234.1 9/30/2012 6,880 10,600 3,720 64.91,548 240.3 Actuarial Accrued Liability (AAL) - Entry Age (b) Actuarial Valuation Date UAAL As % of Covered Payroll (b - a) / c Covered Payroll ( c ) Funded Ratio (a) / (b) Actuarial Value of Assets (a) Unfunded AAL (UAAL) (b) - (a) City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | D-3 SCHEDULE OF CONTRIBUTIONS FROM EMPLOYER (GASB Statement No. 25) Fiscal Year Ending 9/30/2003 *18.05%$225,991$226,041 100% 9/30/2004 18.74 242,637 242,637 100 9/30/2005 24.31 297,361 297,361 100 9/30/2006 23.76 350,161 350,160 100 9/30/2007 *25.70 390,494 390,494 100 9/30/2008 22.80 309,841 309,842 100 9/30/2009 *21.93 345,280 345,280 100 9/30/2010 *26.62 425,823 425,823 100 9/30/2011 26.49 487,032 487,032 100 9/30/2012 36.18 628,909 628,898 100 Percentage Contributed Annual Required Contribution Contribution ActualContribution Rate As a % of Payroll * Reflects change in benefits, actuarial assumptions and/or method. Note: Annual Required Contribution (if any), above, is payable by the City and includes185/175 State Premium Tax Money up to allowable limit. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | D-4 Employer FYE September 30 A.Annual Required Contribution (ARC)628,909$ 487,032$ 425,823$ B.Interest on Net Pension Obligation (Asset) - - - C.Adjustment to ARC - - - D.Annual Pension Cost (APC): (A + B - C)628,909 487,032 425,823 E.Contributions made 628,898487,032425,823 F.Increase (decrease) in Net Pension Obligation(Asset): (D -E) - - - G.Net Pension Obligation(Asset) at beginning of year - - - H.Net Pension Obligation(Asset) at end of year: (F+ G)- - - ANNUAL PENSION COST AND NET PENSION OBLIGATION (GASB STATEMENT NO. 27) 2012 2011 2010 Fiscal Annual PensionActual Year EndingCost (APC)Contribution 9/30/2010$ 425,823$ 425,823100.0%-$ 9/30/2011 487,032 487,032100.0 - 9/30/2012 628,909 628,898100.0 - THREE YEAR TREND INFORMATION Percentage of APC Contributed Net Pension Obligation City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | D-5 REQUIRED SUPPLEMENTARY INFORMATION GASB Statement No. 25 and No. 27 The information presented in the required supplementary schedules was determined as part of the actuarial valuation at the dates indicated. Additional Information as of the latest actuarial valuation: Valuation Date Contribution Rates: Employer Plan Members Actuarial Cost Method Amortization Method Equivalent Single Amortization Period Asset Valuation Method Actuarial Assumptions: Investment rate of return Projected salary increases Includes price inflation Cost-of-living adjustments Payroll Growth Assumption September 30, 2012 36.69% 4.815% Entry Age Closed, Level % of Pay Method 13.31 Years See Section entitled “Actuarial Value of Assets” 8.0% 5.0% - 23.0% 3.0% None 2.62% SECTION E MISCELLANEOUS INFORM ATION City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | E-1 A. 1.Number Included in Last Valuation 26 27 2.New Members Included in Current Valuation 2 3 3.Non-Vested Employment Terminations (1)(2) 4.Vested Employment Terminations 0 0 5.Service Retirements 0 (1) 6.Disability Retirements 0 0 7.Deaths 0 0 8.DROP Retirement (1)(1) 9.Transfer to Another Division 0 0 10.Number Included in This Valuation 26 26 B. 1.Number Included in Last Valuation 5 6 2.Additions from Active Members 0 0 3.Lump Sum Payments/Withdrawals 0 0 4.Payments Commenced (1)0 5.Deaths 0 0 6.Other-Returned to Work 0 (1) 7.Number Included in This Valuation 4 5 C. 1.Number Included in Last Valuation 17 15 2.Additions from Active Members 0 1 3.Additions entering the DROP 1 1 4.Additions from Terminated Vested Members 1 0 5.Deaths Resulting in No Further Payments 0 0 6.Deaths Resulting in New Survivor Benefits 0 0 7.End of Certain Period - No Further Payments 0 0 8.Other -- Lump Sum Distributions 0 0 9.Number Included in This Valuation 19 17 RECONCILIATION OF MEMBERSHIP DATA Active Members Service Retirees, Disability Retirees, Beneficiaries & DROP Terminated Vested Members From 9/30/10From 9/30/11 To 9/30/11To 9/30/12 City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | E-2 STATISTICAL DATA Active Members as of September 30, 2012 Age Group 0-4 5-9 10-14 15-19 20-24 25-29 30 & Up TotalsAvg. Pay 20-24 NO.1000000139,071 25-29 NO.3100000445,654 30-34 NO.1200000349,593 35-39 NO.3421000 10 62,566 40-44 NO.1110000356,799 45-49 NO.0110100380,673 50-54 NO.0101000269,785 55-59 NO.00000000 0 60-64 NO.00000000 0 65&UP NO.00000000 0 TOT NO.9 10 42100 26 59,543 City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | E-3 Active Year Members Ended VestedOther End of September 30AEAEAEAEAAAEYear 2002 3400.100.100.00441.7 25 2003 3600.110.100.02351.3 22 2004 9400.300.000.02241.1 27 2005 3420.600.000.01121.9 26 2006 2411.000.000.01231.8 24 2007 4310.200.000.00221.5 25 2008 5410.100.000.00331.6 26 2009 5410.100.000.00331.6 27 2010 3300.4 1*0.000.0 1*131.4 27 2011 3421.000.000.00222.5 26 2012 2 2 1 1.0 0 0.1 0 0.0 0 1 1 2.5 26 5-yr. Totals 2008-2012 1817 52.610.100.0 12 9.5 Expected for 2013 0.40.10.0 2.2 A Represents actual number. E Represents expected number. * Member retroactively approved for duty disability benefits NUMBER ADDED TO AND REMOVED FROM ACTIVE MEMBERSHIP Number Added Terminations During Year Year Retirement Retirement Service Total During Normal Disability Died-in Withdrawal City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | E-4 Year Ended September 30 No. Annual Pensions No. Annual Pensions No. Annual Pensions No. Annual Pensions No. Annual Pensions 2002 9 205,162 0.1 1,960 2003 2 30,148 2 30,148 11235,310 0.1 2,072 2004 11235,310 0.2 2,683 2005 2 106,731 2 106,731 13342,041 0.2 2,933 2006 1 34,521 1 9,796 0 24,724 13366,765 0.2 3,809 2007 1 43,455 1 43,455 14410,220 0.2 3,922 2008 2 63,781 2 63,781 16474,001 0.2 4,510 2009 16474,001 0.2 5,200 2010 6,319 *1 14,935 (8,616)15465,385 0.2 5,200 2011 2 84,469 0 2 84,469 17549,854 0.2 5,200 2012 2 68,629 **0 2 68,629 19 618,483 0.3 5,761 Expected for 2013 0.2 4,950 * **Includes member retroactively approved for duty disabililty On-time adjustment correcting past underpayments Retired Members and Beneficiary Data Historical Schedule** Expected Added Removed Net Increase End of Year Removals SECTION F SUMMARY OF PLAN PROV ISIONS City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | F-1 A. Ordinances: Plan established under the Code of Ordinances for the City of Atlantic Beach, Florida, Part II, Chapter 2, Article VI, Division 4 and was most recently amended and restated under Ordinance No. 58-08-34 passed and adopted on August 11, 2008. The Plan is also governed by certain provisions of Part VII, Chapter 112, Florida Statutes (F.S.), F. S. 185 and the Internal Revenue Code. B. Effective Date December 22, 1975, Restated under Division 4 on July 10, 2000 C. Plan Year October 1 through September 30 D. Type of Plan Qualified, governmental defined benefit retirement plan; for GASB purposes it is a sole employer plan. E. Eligibility Requirements All full time sworn City police officers, who normally work more than 1,000 hours annually and are not an elected officials, temporary or contractual employees, or executives or departments heads who have elected not to participate, will become members on the date of employment. F. Credited Service Service is measured as the total number of years and fractional parts of years, but credited to the nearest one-twelfth (1/12) of a year. No service will be credited for any periods of employment for which the member received a refund of their employee contributions. G. Compensation Base salary or wages paid for services rendered to the City including longevity pay, overtime pay, cost of living payments, holiday and personal leave taken and incentive pay. Compensation excludes payments of unused personal leave, uniform or equipment allowances, extra duty or special detail pay on behalf of a second party employer, or any reimbursement of expenses. H. Final Average Compensation (FAC) Average monthly rate of Compensation during the highest 60 consecutive months of Credited Service out of the last 120 months preceding the date of termination or retirement. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | F-2 I. Normal Retirement Eligibility: A participant may retire on the first day of the month coincident with or next following the earlier of: (1) 25 years of Credited Service regardless of age, or (2) age 50 with 20 years of Credited Service, or (3) age 55 with 10 years of Credited Service, or (4) age 60 with 5 years of Credited Service. Benefit: 3.00% of FAC times Credited Service. Benefit is limited to 100% of FAC. Normal Form of Benefit: 10 Years Certain and Life thereafter; other options are also available. J. Early Retirement Eligibility: A member may elect to retire earlier than the Normal Retirement Eligibility upon attainment of age 50 with 10 years of Credited Service. Benefit: The Normal Retirement Benefit is actuarially reduced by 3% for each year by which the member’s Early Retirement date precedes the member’s normal retirement age. Normal Form of Benefit: 10 year certain and life thereafter; other options are also available. K. Delayed Retirement Same as Normal Retirement taking into account compensation earned and service credited until the date of actual employment termination. L. Service Connected Disability Eligibility: Any member who becomes totally and permanently disabled due to a service related injury or illness and is deemed unable to render useful and efficient service to the City as a police officer is eligible for a disability benefit. Benefit: The benefit is calculated as if the member was eligible for Normal Retirement and is payable retroactively to the later of; the last day on payroll, or the date of application for disability benefits. The minimum for a service connected disability benefit is 42% of FAC. Normal Form of Benefit: 10 year certain and life thereafter. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | F-3 M. Non-Service Connected Disability Eligibility: Any member with 5 or more years of Credited Service who becomes totally and permanently disabled and is deemed unable to render useful and efficient service to the City as a police officer is eligible for a disability benefit. Benefit: The benefit is calculated as if the member was eligible for Normal Retirement and is payable retroactively to the later of; the last day on payroll, or the date of application for disability benefits. The minimum for a non-service connected disability benefit is 25% of FAC if the member had at least 8 1/3 years of Credited Service. Normal Form of Benefit: 10 year certain and life thereafter. N. Pre-Retirement Death Eligibility: Any member with 5 or more years of Credited Service is eligible for a death benefit. Benefit: Upon the death of a member, the designated beneficiary shall be paid an actuarially reduced standard ten (10) year certain and life survivor pension notwithstanding that the member may not have satisfied the conditions for retirement. If there are no beneficiaries designated by the member, then a benefit shall be paid to the surviving spouse or, if no surviving spouse, a reduced benefit will be paid to the member’s unmarried children. If spouse is receiving benefits described above, no children’s benefits are payable. If spouse is not receiving benefits, children under age 19, or age 23 if an unmarried fulltime student, will receive equal shares of 50% of the member’s Normal Retirement Benefit under the Life Annuity option based upon service and FAC as of the date of death. Normal Form of Benefit: Payable for the life of the member’s beneficiary or spouse. Children’s benefits are payable until age 19 or age 23 if an unmarried fulltime student. O. Post Retirement Death Benefit determined by the form of benefit elected upon retirement. P. Optional Forms In lieu of electing the Normal Form of benefit, the optional forms of benefits available to all retirees are a Life Annuity, or the 50%, 66 2/3%, 75% or 100% Joint and Survivor options. A Social Security option is also available for members retiring prior to the time they are eligible for Social Security retirement benefits. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | F-4 Q. Vested Termination Eligibility: A participant has earned a non-forfeitable right to Plan benefits after the completion of 5 or more years of Credited Service. Benefit: The benefit is the member’s vested portion of the accrued Normal Retirement Benefit as of the date of termination. Benefit begins on the Normal Retirement date. Normal Form of Benefit: 10 year certain and life thereafter; other options are also available. Member’s terminating employment with less than 5 years of Credited Service will receive a refund of their own accumulated contributions. R. Refunds Eligibility: All members with less than 5 years are eligible. Optionally, vested participants may also withdraw their contributions in lieu of the deferred benefits otherwise due. Vested members may delay withdrawal of funds for up to five years. Benefit: The member who terminates employment receives a lump-sum payment of their employee contributions. S. Member Contributions 4.815% of Compensation. T. Premium Tax Monies A distribution of casualty insurance premium tax monies collected by the State pursuant to Chapter 185 Florida Statutes. U. Employer Contributions The amount determined by the actuary to pay the normal cost and an amortization of the unfunded actuarial accrued liabilities, along with employee contributions and Chapter 185 monies. Following are contribution rates per recent valuations: Plan Year Beginning CitySec 185Member*Total 10/1/200716.27%6.53%4.82%27.62% 10/1/200816.44%5.49%4.82%26.75% 10/1/200921.07%5.55%4.815%31.44% 10/1/201021.66%4.83%4.815%31.31% 10/1/201130.46%5.21%4.815%40.49% 10/1/201236.69%5.41%4.815%46.92% * Weighted average of member contribution rates. City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | F-5 V. Cost of Living Increases The plan does not provide for automatic post-retirement cost of living adjustments (COLA) of retiree benefits. W. Changes from Previous Valuation See the Discussion of Valuation Results Section of this report under the Revisions in Benefits heading. X. Gain-sharing benefits Not applicable. Y. Deferred Retirement Option Plan Eligibility: Upon obtaining Normal or Early Retirement eligibility All members must make a written election to participate in the DROP. Benefit: The member’s Credited Service and FAC are frozen upon entry into the DROP. The monthly retirement benefit as described under Normal Retirement is calculated based upon the frozen Credited Service and FAC. Benefits for members entering the DROP upon Early Retirement eligibility will be actuarially reduced as described for Early Retirement. Maximum DROP Period: 60 months Interest Credited: Earnings to the DROP account will be accordance with the self-directed options selected by the participant. Normal Form of Benefit: Lump Sum or roll-over to a qualified retirement account. SECTION G COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | G-1 A.Participant Data Number Included: Actives 26 26 Service Retirees & Beneficiaries 15 14 Disability Retirees 4 3 Terminated Vested Members 4 5 Total Members and Beneficiaries 49 48 Total Annual Payroll $1,548,109 $1,605,814 Expected Annual Payroll in Contribution Year 1,641,918 1,703,120 Total Annualized Benefits Service Retirees & Beneficiaries 544,324 493,822 Disability Retirees 74,159 56,032 Terminated Vested Members 41,865 55,564 B.Assets (Market Value) Cash and Short Term Investments 176,248 258,052 Treasury and Agency Bonds & Notes 2,119,032 1,813,241 Corporate Bonds 1,209,542 1,377,738 Common & Preferred Stocks 3,507,733 2,614,717 Mutual Fund Bonds 0 0 Mutual Fund Stocks 0 0 Other Securities 93,496 99,848 Net Receivables & Payables (171,358)(107,191) Total 6,934,693 6,056,405 Actuarial Value 6,880,124 6,305,176 Assets include: Accumulated active member contributions 381,408 333,818 (with interest if applicable) C.Actuarial present value of accrued benefits (i)Vested accrued benefits Retired members and benefitciaries (incl DROP)6,557,492 5,782,820 Terminated members 194,822 216,786 Active members (includes non-forfeitable members contributions of 381,408 and 333,818)2,188,725 2,206,538 Total 8,941,039 8,206,144 (ii)Non-vested accrued benefits 127,159 202,124 (iii)Total actuarial p.v. of accrued benefits 9,068,198 8,408,268 (iv)Actuarial p.v. of accrued benefits at begin. of year 8,408,268 7,876,256 (v)Changes attributable to: Amendments none none Assumption change none none Operation of decrements 1,264,867 1,051,251 Benefit payments (604,937)(519,239) Other (Method Change)0 0 (vi)Net change 659,930 532,012 (vii)Actuarial p.v. of accr. benefits at end of year 9,068,198 8,408,268 September 30, 2011September 30, 2012COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | G-2 D.Liabilities- Actuarial Present Value of Future Benefits 1. Active Members Service Retirement Benefits $5,649,742 $5,958,209 Vesting Benefits 436,838 444,331 Disability Benefits 222,369 230,062 Preretirement Death Benefits 48,102 50,614 Return of Member Contributions 76,094 77,178 Total Actives 6,433,145 6,760,394 2. Inactive Members Service Retirees & Beneficiaries 5,799,923 5,241,594 Disability Retirees 757,569 541,226 Terminated Vested Members 194,822 216,786 Total Inactive Members 6,752,314 5,999,606 3. Total Present Value for All Members 13,185,459 12,760,000 Total Present Value of: Future Salaries 13,864,778 14,472,886 Future Employee Contributions 668,282 697,593 Future Contributions from Other Sources 5,637,053 5,757,231 Derivation of Current Employer Unfunded Actuarial Accrued Liability (UAAL) a.Total UAAL for Prior Valuation Date $3,759,831 $3,284,921 b.Employer Normal Cost for this period 270,003 257,142 c.Interest acccrued on (a) and (b)311,586 273,080 d.Contributions for this period 628,898 487,032 e.Interest accrued on (d)25,156 19,481 f.Changes due to: Assumptions 0 0 Plan Amendment 0 0 Cost Method (Asset Method)0 0 Actuarial (Gain) Loss 32,697 451,201 g.Total Current UAAL: a+b+c-d-e+f 3,720,063 3,759,831 September 30, 2011COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS September 30, 2012 Present Value of Accrued Benefits Vested 132,553 209,718 Non-Vested 9,179,344 8,427,042 Total 9,311,897 8,636,760 Market Value of Assets 6,934,693 6,056,405 Funded Ratio 74.5%70.1% September 30, 2012Present Value of Accrued Benefits at FRS Discount Rate September 30, 2011 City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | G-3 Date Item Description Years Remaining Amortization Payment Original Amount 9/30/1993Original 1($9,686) 9/30/1998Experience Gain 1(17,138)(95,019) 9/30/1999Experience Gain 2(20,969)(117,618) 9/30/2000Experience Loss 317,584103,871 9/30/2001Experience Gain 4 (223)(1,389) 9/30/2002Experience Loss 519,517128,212 9/30/2003Experience Loss 649,146339,563 9/30/2004Experience Loss 728,642207,808 9/30/2005Experience Loss 837,740287,225 9/30/2006Experience Gain 9(51,597)(411,559) 9/30/2007Experience Loss 1016,507137,906 9/30/2008Experience Loss 1135,220308,022 9/30/2009Experience Loss 1233,841323,582 9/30/2010Experience Gain 13(15,421)(154,731) 9/30/2011Experience Loss 1442,453451,201 9/30/2012Experience Loss 153,04232,697 9/30/1993Benefit Changes 1166,268442,232 9/30/1994Benefit Changes 12(1,804)(12,597) 9/30/1996Benefit Changes 144,70035,914 9/30/1997Benefit Changes 151,113 8,892 9/30/2001Benefit Changes 198,54281,627 9/30/2003Benefit Changes 2112,991144,006 9/30/2007Benefit Changes 25(3,931)(49,157) 9/30/1995Assumption/Method Change1344,297323,633 9/30/1997Assumption/Method Change1529,003231,795 9/30/2009Assumption/Method Change272,89840,694 9/30/2010Assumption/Method Change2842,829630,507 TOTAL $375,564$3,167,921 (827) 88,339 260,522 11,961 254,236 32,697 572,072 (16,598) 48,216 (381,874) 431,660 $3,720,063 132,596 106,548 (56,930) (40,895) (17,138) 172,913 Original and Current Unfunded Actuarial Accrued Liabilities Current Unfunded ($9,686) 50,170 304,048 171,656 311,743 311,434 654,376 43,554 (150,276) 435,546 City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | G-4 E.Pension Cost Entry Age Normal Cost for: Service Retirement Benefits $232,620 $242,113 Vesting Benefits 22,001 23,295 Disability Benefits 14,029 14,607 Preretirement Death Benefits 2,239 2,388 Return of Member Contributions 15,711 16,460 Total Actives 286,600 298,863 Administrative Expenses 24,913 37,628 Expected Member Contributions 73,610 76,872 Total Employer Normal Cost 237,903 259,619 Payment Required to Amortize Unfunded Actuarial Accrued Liability 375,564 278,845 Total Contribution at Valuation Date 613,467 538,464 Total Contribution Adjusted for Frequency of Payments and Interest to Next Following Fiscal Year 691,255 606,741 % of Expected Payroll 42.10%35.63% Amount Expected to be Contributed by Members 79,058 82,005 % of Expected Payroll 4.815%4.815% F.Past Contributions- For the Fiscal Years Ended September 30 of 2011 and 2012: Required Contribution Determined in the Valuation as ofSeptember 30, 2010September 30, 2009 by the Plan Sponsor $628,909 $487,032 by Members $83,708 $88,530 Actual Contribution for the Fiscal Year ended September 30, 2012September 30, 2011 by the Plan Sponsor 628,898 $487,032 by Members $75,667 $79,200 G.Net experience (gain) loss during year:$32,697 $451,201 H.1. Plan to Amortize Unfunded Actuarial Accrued Liability 20 year funding of the Original Unfunded Actuarial Accrued Liability, 15 year funding of any Gains or Losses and 30 year of adjustments due to benefit or assumption changes. 2. Schedule Illustrating the Amortization of the Unfunded Actuarial Accrued Liability (UAAL) Year Projected UAAL 2013 $3,612,066 2014 3,455,052 2015 3,249,929 2016 3,036,290 2017 2,792,869 2022 1,626,532 2028 716,164 2030 617,335 2034 404,678 2035 357,262 3. Action taken since last actuarial valuation. Contribution sufficient to satisfy the total required contribution. September 30, 2011COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS September 30, 2012 City of Atlantic Beach Police Officers’ Retirement System 9/30/2012 Actuarial Valuation | G-5 I.1. Three-Year Comparison of Actual and Assumed Salary Increases (Annualized) ActualAssumed 0.0%6.4% 3.8%7.4% (0.8)%7.6% 2. Three-Year Comparison of Investment Return (Actuarial Value) ActualAssumed 4.7%8.0% 2.2%8.0% 7.9%8.0% 3. Average Annual Growth in Covered Payroll, Last Ten Years (if applicable) Total % Increase Last Ten Years29.55% Annual % Increase 2.62% Thirty-year Forecast 4.00% J.Benefits and Expenses of Plan not Explicitly or Implicitly Provided in Valuation NONE K.Trends not taken into Account but which are likely to Result in Future Cost Increases NONE COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS Year Ended Total Covered PayrollValuation Date 9/30/2010 9/30/2011 9/30/2012 Year Ended 9/30/2010 9/30/2011 9/30/2012 9/30/2010 9/30/2011 1,254,264 9/30/2005 1,476,074 9/30/2006 1,696,746 9/30/2002 $1,194,950 1,129,034 1,360,051 1,402,444 1,639,155 1,605,814 1,548,109 9/30/2008 9/30/2007 9/30/2003 9/30/2004 1,452,926 9/30/2012 9/30/2009 CITY OF ATLANTIC BEACH GENERAL EMPLOYEES’ RETIREMENT SYSTEM ACTUARIAL VALUATION REPORT SEPTEMBER 30, 2012 ANNUAL EMPLOYER CONTRIBUTION IS DETERMINED BY THIS VALUATION TO BE PAID IN THE EMPLOYER FISCAL YEAR ENDING SEPTEMBER 30, 20 14 April 2, 2013 The Board of Trustees City of Atlantic Beach General Employee Retirement System Atlantic Beach, Florida Dear Board Members: We are pleased to submit herein our September 30, 2012 Actuarial Valuation Report for the City of Atlantic Beach General Employees’ Retirement System. The contribution results apply to the Plan Year ending September 30, 2013 and to the City's fiscal year ending September 30, 2014. This report was prepared at the request of the Board of Trustees and is intended for use by the Pension Plan and those designated or approved by the Board of Trustees. This report may be provided to parties other than the Pension Plan only in its entirety and only with the permission of the Board of Trustees. The purpose of the valuation is to measure the Plan’s funding progress, to determine the employer contribution rate for the fiscal years ending September 30, 2014 and to determine the actuarial information for Governmental Accounting Standards Board (GASB) Statement No. 25 and No. 27. This report should not be relied on for any purpose other than the purpose described above. The developed findings included in this report consider data or other information through September 30, 2012. Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan’s funded status); and changes in plan provisions or applicable law. The calculations are based upon assumptions regarding future events, which may or may not materialize. They are also based upon current plan provisions that are outlined in the report. If you have reason to believe that the assumptions that were used are unreasonable, that the plan provisions are incorrectly described, or that conditions have changed since the calculations were made, you should contact the author of this report prior to relying on information in the report. The valuation was based upon information furnished by the City, concerning Plan benefits, financial transactions, plan provisions and active members, terminated members, retirees and beneficiaries. We checked for internal and year-to-year consistency, but did not otherwise audit the data. We are not responsible for the accuracy or completeness of the information provided by the City. This actuarial valuation and/or cost determination was prepared and completed by me or under my direct supervision, and I acknowledge responsibility for the results. To the best of my knowledge, the results are complete and accurate. In my opinion, the techniques and assumptions used are reasonable, meet the requirements The Board of Trustees April 2, 2013 Page 2 Gabriel, Roeder, Smith and Company and intent of Part VII, Chapter 112, Florida Statutes, and are based on generally accepted actuarial principles and practices. 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 which may require a material increase in plan costs or required contribution rates have been taken into account in the valuation. The signing actuaries are independent of the plan sponsor. Gabriel, Roeder, Smith & Company will be pleased to answer questions pertaining to the valuation and to meet with you to review this Report. Respectfully submitted, GABRIEL, ROEDER, SMITH AND COMPANY James J. Rizzo, ASA, MAAA Senior Consultant & Actuary Piotr Krekora, ASA, MAAA Senior Actuarial Analyst STATEMENT BY ENROLLED ACTUARY This actuarial valuation and/or cost determination was prepared and completed by me or under my direct supervision, and I acknowledge responsibility for the results. To the best of my knowledge, the results are complete and accurate. In my opinion, the techniques and assumptions used are reasonable, meet the requirements and intent of Part VII, Chapter 112, Florida Statutes, and are based on generally accepted actuarial principles and practices. 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 which may require a material increase in plan costs or required contribution rates have been taken into account in the valuation. Signature April 2, 2013 Date 11-03355 Enrollment Number TABLE OF CONTENTS SECTION TITLE PAGE A EXECUTIVE SUMMARY A-1 B VAL UATION RESULTS 1. Participant Data B-1 2. Annual Required Contribution B-2 3. Actuarial Value of Benefits and Assets B-3 4. Financial Soundness B-4 5. Actuarial Gains and Losses B-8 6. Recent History of Valuation Results B-12 7. Recent History of Required and Actual Contributions B-14 8. Actuarial Assumptions and Cost Method B-15 C PENSION FUND INFORMA TION 1. Summary of Assets C-1 2. Summary of Fund's Income and Disbursements C-2 3. Reconciliation of DROP Accounts C-3 4. Actuarial Value of Assets C-4 5. Investment Rate of Return C-6 D FINANCIAL ACCOUNTING INFORMATION 1. FASB No. 35 D-1 2. GASB No. 25 D-2 3. GASB No. 27 D-4 E MISCELLANEOUS INFORM ATION 1. Reconciliation of Membership Data E-1 2. Statistical Data E-2 F SUMMARY OF PLAN PROV ISIONS F-1 G COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS G-1 Circular 230 Notice: Pursuant to regulations issued by the IRS, to the extent this communication (or any attachment) concerns tax matters, it is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) marketing or recommending to another party any tax-related matter addressed within. Each taxpayer should seek advice based on the individual’s circumstances from an independent tax advisor. SECTION A EXECUTIVE SUMMARY City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | A-1 EXECUTIVE SUMMARY Comparison of Required Employer Contributions The following is a comparison of required contributions developed in this year's and the last actuarial valuations: Gross Contribution Requirement $1,295,022$1,242,632$52,390 As % of Expected Payroll 32.88%31.34%1.54% Expected Employee Contribution $196,932$198,240$(1,308) As % of Covered Payroll 5.00%5.00%0.00% Required Employer Contribution (If Made in Equal Monthly Installments)$1,098,090$1,044,392$53,698 As % of Covered Payroll 27.88%26.34%1.54% Required Employer Contribution (If Made in Whole at the Beginning of the Year)$1,052,482 1,001,014 51,468 As % of Covered Payroll 26.72%25.25%1.47% IncreaseBased on 9/30/11 For FYE 9/30/2014 For FYE 9/30/2013 Based on 9/30/12 (Decrease)Valuation Valuation Minimum Required Contribution As illustrated in the preceding chart, the City contribution necessary to support the current benefits for the General Employees is $1,098,090 for the fiscal year ending September 30, 2014. Please note that the Required Employer Contribution for that fiscal year is developed assuming it would be deposited in monthly intervals throughout the year. Revisions in Benefits There were no revisions in benefits for the current year. Pending changes being considered would not have an effective date until many months following the October 1, 2012 valuation date. The current financial and actuarial effects of any such amendment, if adopted in the next few months, would be reflected in an Actuarial Impact Statement that will be prepared shortly. Depending on the nature of the amendment, the Minimum Required Contribution for the fiscal year ending September 30, 2014 may change from what is described herein. Revisions in Actuarial Assumptions and Methods There were no revisions in actuarial assumptions or methods for the current year. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | A-2 Actuarial Experience Actuarial gains occur in a year whenever the experience of the plan is better than was assumed. For example, if investment performance were better than the level being assumed in the actuarial valuation and costing process, then an actuarial gain results and would have the effect of lowering the Minimum Required Contribution for the year. Whenever more employees terminate employment than were assumed would terminate, fewer employees are then expected to actually retire from the City, resulting in an actuarial gain for the plan. Actuarial losses occur in a year whenever the experience of the plan is worse than was assumed. In the examples given above, if the reverse were to occur, then actuarial losses would result. As another example, if salaries increased in one year higher than was assumed, or more new employees were hired than terminated, an actuarial loss would occur. The actuarial valuation cost method which determines the Minimum Required Contribution is designed to produce contribution requirements which remain level as a percent of payroll whenever the experience of the plan matches the actuarial assumptions used. Contribution Requirements are also level whenever actuarial losses exactly offset actuarial gains. Analysis of Change in Employer Contribution The components of change in the actuarially required contribution are as follows: Contribution rate last year 26.34% Payment on UAAL 3.07 Experience gain/loss (1.03) Change in administrative expense (0.29) Change in normal cost before expenses (0.21) Revision in benefits 0.00 Revision in assumptions/methods 0.00 Contribution rate this year 27.88% There was a net actuarial gain this year which is due to the lower than expected salary increases (1.2% actual vs. 5.9% assumed). Administrative expenses were less than the previous year by 0.21% of pay. Nevertheless, the Annual Required Contribution increased this year, due to a decrease in the 10-year average payroll growth rate (from 4.26% to 2.98%). This reduction had an increasing effect on the amount of amortization component of the contribution. The covered payroll is assumed to grow at the rate of 4% in the long term and this assumption has been used in the process of developing amortization payments in the past. However, in accordance with the requirements of Ch. 112.64(5)(a), F.S. this assumption needs to be limited by the actual average annual payroll growth based on the last 10 years. Consequently, due to a decrease in the 10-year average, the amortization payment of the UAAL increased this year, offsetting the actuarial gains described previously, which ultimately increased the contribution. The remainder of this Report includes detailed actuarial valuation results, financial information, miscellaneous information and statistics, and a summary of plan provisions. SECTION B VALUATION RESULTS City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-1 ACTIVE MEMBERS Number 84 83 Covered Annual Payroll (non-DROP)$3,713,609$3,738,277 Average Annual Pay $44,210$45,039 Average Age 50.7 50.9 Average Past Service 10.1 9.9 Average Age at Hire 40.7 41.0 RETIREES, BENEFICIARIES, & DROP MEMBERS Number 47 43 Annual Benefits $629,722$552,964 Average Annual Benefit $13,398$12,860 Average Age 68.7 68.8 DISABILITY RETIREES Number 4 4 Annual Benefits $56,377$56,377 Average Annual Benefit $14,094$14,094 Average Age 60.5 59.5 TERMINATED VESTED MEMBERS Number 12 11 Annual Benefits $121,445$126,619 Average Annual Benefit $10,120$11,511 Average Age 52.2 52.3 PARTICIPANT DATA September 30, 2012 September 30, 2011 City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-2 A.Valuation Date B.ARC to Be Paid During Fiscal Year Ending 9/30/2014 9/30/2013 C.Assumed Date(s) of Employer Contrib.Monthly Monthly D.Annual Payment to Amortize Unfunded Actuarial Liability if Paid on the Valuation Date $626,814$559,924 E.Employer Normal Cost (including Administrative Expenses) if Paid on the Valuation Date 347,707 366,941 F.ARC if Paid on the Valuation Date: D+E 974,521 926,865 G.ARC Adjusted for Frequency of Payments and Interest to Required Time of Contribution 1,098,090 1,044,392 H.Payroll Expected for Contribution Year 3,938,639 3,964,802 I.ARC as % of Covered Payroll in Contribution Year: G ÷ H 27.88%26.34% J.Required Employer Contribution (REC) if Paid on the First Day of the Contribution Year 1,052,482 1,001,014 ANNUAL REQUIRED CONTRIBUTION (ARC) September 30, 2012 September 30, 2011 City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-3 A.Valuation Date B.Actuarial Present Value of All Projected Benefits for 1.Active Members a. Service Retirement Benefits $12,222,823$12,213,956 b. Vesting Benefits 339,511 347,811 c. Disability Benefits 300,331 308,879 d. Preretirement Death Benefits 297,034 299,659 e. Return of Member Contributions 107,030 99,017 f. Total 13,266,729 13,269,322 2.Inactive Members a. Service Retirees & Beneficiaries 5,972,648 5,239,771 b. Disability Retirees 513,152 523,906 c. Terminated Vested Members 785,507 860,722 d. Total 7,271,307 6,624,399 3. Total for All Members 20,538,036 19,893,721 C.Actuarial Accrued (Past Service) Liability per GASB No. 25 16,797,167 16,053,066 D.Actuarial Value of Accumulated Plan Benefits per FASB No. 35 14,281,951 13,348,960 E.Plan Assets 1.Market Value 12,693,827 10,448,470 2. Actuarial Value 12,513,031 11,119,463 F.Actuarial Present Value of Projected Covered Payroll 29,036,614 29,390,562 G.Actuarial Present Value of Projected Member Contributions 1,451,831 1,469,528 ACTUARIAL VALUE OF BENEFITS AND ASSETS September 30, 2012 September 30, 2011 City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-4 FINANCIAL SOUNDNESS The purpose of this portion of the Report is to provide certain measures which indicate the financial soundness of the program. These measures relate to short term solvency and long term solvency. The various percentages listed in this Section as of a single valuation date are not that significant. What is significant, however, is the trend of the rates over a period of years. It is also important to keep in mind that each time benefits or assumptions are revised; actuarial liabilities are created or diminished. Any newly created liabilities are financed systematically over a period of future years. All actuarially computed values in this analysis are based on the actuarial assumptions utilized in the respective years' actuarial valuations. Short Term Solvency The ultimate test of financial soundness is the program's ability to pay all promised benefits when due. The program's progress in accumulating assets to pay all promised benefits can be measured by comparing the market value of assets with: 1. The actuarial present value of projected benefits payable to those already receiving benefits and to vested terminations, and 2. The actuarial present value of accrued benefits payable to active participants. This amount is based on benefits earned to date without future credited service or salary increases. The total of the two items should generally be fully covered by assets. That portion of the total of the two items covered by assets should increase over time. Often assets continue to grow beyond the actuarial present value of these two items. Increases in benefits will, of course, adversely affect the trend in the years when such increases are first reflected in the actuarial values. Although different actuarial assumptions would be used in the event of a termination of the program, this test shows how much of the benefits accrued to date might be covered by assets in the event of a plan freeze using the valuation assumptions. 1.Accumulated Contributions of Active Members $1,296,875 $1,211,505$1,120,281 2.APV of Projected Benefits in Pay Status and for Vested Terminations 7,271,3076,624,3995,756,281 3.APV of Accrued Benefits for Active Participants (Employer Portion)5,713,769 5,513,056 5,350,971 4.Total 14,281,95113,348,96012,227,533 5.Market Value of Assets 12,693,82710,448,47010,417,807 6.Assets as % of Total 89%78%85% General Employees 9/30/12 9/30/11 9/30/10 * *Reflects change in benefits, methods or assumptions. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-5 0% 100% 200% $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 2009 2010 2011 2012 Ra t i o Mi l l i o n s Actuarial Valuation Date (September 30) Ratio of Market Value of Assets to Present Value of Accrued Benefits Market Value of Assets PV Accrued Benefits Ratio City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-6 Long Term Solvency Over the longer term, the solvency of an ongoing plan can be measured by comparing the Actuarial Value of Assets to an amount known as the Actuarial Accrued Liability (AAL) under the Entry Age Actuarial Cost Method. This item has often been called the "past service liability". Its derivation differs from the short term solvency value derivation in several ways. The short term solvency liability number is based on the benefits accrued to date by the participants while the long term solvency liability number is based on what the normal costs accrued to date by the employer. In addition, the short term solvency asset number is the market value, while the long term asset number is the actuarial value of assets. As in the case of the short term solvency values, the AAL is affected immediately by any revisions in benefits or assumptions. The accumulation of assets to equal the AAL can be considered a long range funding goal. 9/30/02 5,747 7,479 77 % 9/30/03*5,951 8,186 73 9/30/04 6,273 9,005 70 9/30/05*6,802 9,822 69 9/30/06*7,609 10,505 72 9/30/07 8,594 11,668 74 9/30/08*9,209 12,624 73 9/30/09 9,841 13,682 72 9/30/10*10,618 15,180 70 9/30/11 11,119 16,053 69 9/30/12 12,513 16,797 74 Valuation Date Actuarial Value of Assets (in Thousands) Actuarial Accrued Liability (in Thousands) % of AAL Covered by Assets *Reflects change in benefits, actuarial assumptions and/or asset method. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-7 0% 50% 100% 150% $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 $18.0 2007 2008 2009 2010 2011 2012 Ra t i o Mi l l i o n s Actuarial Valuation Date (September 30) Actuarial Assets Accrued Liability Ratio City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-8 ACTUARIAL GAINS AND LOSSES The assumptions used to anticipate mortality, employment turnover, investment income, expenses, salary increases, and other factors have been based on long range trends and expectations. Actual experience can vary from these expectations. The variance is measured by the gain and loss for the period involved. If significant long term experience reveals consistent deviation from what has been expected and that deviation is expected to continue, the assumptions should be modified. The net actuarial gain (loss) for the past year is computed as follows: 1.Last Year's UAAL $4,933,603 2.Last Year's Employer Normal Cost 381,619 3.Last Year's Actual City Contibution 998,516 4.Interest at the assumed rate on: a. 1 for one year 394,688 b. 2 half a year 15,265 c. 3 from dates paid 39,941 d. a + b - c 370,012 5.This Year's Expected UAAL 1 + 2 - 3 + 4d 4,686,718 6.This Year's Actual UAAL (before any changes in benefits or assumptions)4,284,136 7.Net Actuarial Gain (Loss): (5) - (6)402,582 8.Gain (Loss) due to investments 52,511 9.Gain (Loss) due to other sources 350,071 10.Amortization Payment Due to Gain (Loss)36,664 Derivation of Experience Gain (Loss) City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-9 Net actuarial gains in previous years have been as follows: Year Ended 9/30/1997 252,238 252,238 9/30/1998 58,540 310,778 9/30/1999 108,195 418,973 9/30/2000 (55,470) 363,503 9/30/2001 (18,145) 345,358 9/30/2002 (280,151) 65,207 9/30/2003 (355,383) (290,176) 9/30/2004 (395,109) (685,285) 9/30/2005 (364,305) (1,049,590) 9/30/2006 131,266 (918,324) 9/30/2007 (170,383) (1,088,707) 9/30/2008 (178,856) (1,267,563) 9/30/2009 (482,223) (1,749,785) 9/30/2010 (171,358) (1,921,143) 9/30/2011 (364,563) (2,285,706) 9/30/2012 402,582 (1,883,124) Actuarial Gain (Loss) Cumulative Gain (Loss) ($3) ($2) ($1) $0 $1 $2 $3 ($3) ($2) ($1) $0 $1 $2 $3 M i l l i o n s M i l l i o n s Plan Year End Actuarial Gain (+) or Loss (-) Gain or Loss Cumulative City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-10 The fund earnings and salary increase assumptions have considerable impact on the cost of the Plan so it is important that they are in line with the actual experience. The following table shows the history of actuarial fund earnings and salary increase rates compared to the assumed rates: 9/30/2002 1.5 %8.0 %4.4 %5.9 % 9/30/2003 1.7 8.0 4.5 5.9 9/30/2004 2.3 8.0 7.7 5.8 9/30/2005 4.9 8.0 10.8 5.8 9/30/2006 8.5 8.0 4.1 5.9 9/30/2007 10.0 8.0 9.8 5.9 9/30/2008 4.9 8.0 4.9 5.8 9/30/2009 4.2 8.0 6.1 5.7 9/30/2010 5.0 8.0 (0.4)6.0 9/30/2011 2.1 8.0 0.5 6.0 9/30/2012 8.0 8.0 1.2 5.9 Average 4.8 %---4.8 %--- Assumed Salary Increases Actual Investment Return Year Ending Actuarial Assumed The actual investment return rates shown above are based on the actuarial value of assets. The actual salary increase rates shown above are the increases received by those active members who were included in the actuarial valuations both at the beginning and the end of each year. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-11 -5% 0% 5% 10% 15% -5% 0% 5% 10% 15% Plan Year End History of Investment Return -Actuarial Value of Assets Actual Assumed -5% 0% 5% 10% 15% -5% 0% 5% 10% 15% Plan Year End Compared to Previous Year History of Salary Increases Actual Assumed Ci t y o f A t l a n t i c B e a c h Ge n e r a l E m p l o y e e s ’ Re t i r e m e n t S y s t e m 9/ 3 0 / 2 0 1 2 Ac t u a r i a l V a l u a t i o n | B-12 Active Members Inactive Members 9/30/02 8340 $ 2,768 $ 5,747 $ 1,732 $ 267 9.66 % 9/30/03 *8441 2,856 5,951 2,235 284 9.93 9/30/04 8642 3,051 6,273 2,732 300 9.82 9/30/05 *8245 3,182 6,802 3,020 235 7.37 9/30/06 *8148 3,195 7,609 2,896 233 7.28 9/30/07 8251 3,476 8,594 3,074 252 7.26 9/30/08 *8352 3,727 9,209 3,415 269 7.22 9/30/09 8750 4,019 9,841 3,841 314 7.82 9/30/10 *8451 3,83810,618 4,562 364 9.49 9/30/11 8358 3,73811,119 4,934 367 9.82 9/30/12 84 63 3,71412,513 4,284 348 9.36 Actuarial Value of Assets (in Thousands)% of Payroll Amount (in Thousands) UAAL (in Thousands) RECENT HISTORY OF VALUATION RESULTS Number of Employer Normal Cost Valuation Date Reported Annual Payroll (in Thousands) * Reflects a change in assumptions or benefits. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-13 0 25 50 75 100 125 150 Actuarial Valuation Date Recent History of Number of Members Active Members Inactive Members $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 Mi l l i o n s Actuarial Valuation Date Recent History of Covered Annual Payroll City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-14 9/30/06 *9/30/08 $456,96513.62 %$457,005 9/30/079/30/09 528,42814.03 528,426 9/30/08 *9/30/10 599,29214.84 599,292 9/30/099/30/11 722,76916.60 722,769 9/30/10 *9/30/12 998,51624.53 998,516 9/30/119/30/131,044,39226.34 --- 9/30/129/30/141,098,09027.88 --- RECENT HISTORY OF REQUIRED AND ACTUAL CONTRIBUTIONS Required Contributions Actual Contributions Valuation End of Year To Which Valuation Applies Amount % of Expected Payroll * Reflects a change in assumptions or benefits. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-15 ACTUARIAL ASSUMPTIONS AND COST METHOD Valuation Methods Actuarial Cost Method - The actuarial cost method is a procedure for allocating the actuarial present value of benefits and expenses to time periods. Normal cost and the allocation of benefit values between service rendered before and after the valuation date were determined using the Entry-Age Actuarial Cost Method. The entry-age actuarial cost method allocates the actuarial present value of each member's projected benefits on a level basis over the member's pensionable compensation between the entry age of the member and the estimated active status exit ages. The portion of the actuarial present value allocated to the valuation year is called the normal cost. The portion of the actuarial present value not provided for by the actuarial present value of future normal costs is called the actuarial accrued liability. Deducting accrued assets from the actuarial accrued liability determines the unfunded actuarial accrued liability. Financing of Unfunded Actuarial Accrued Liabilities - The unfunded actuarial accrued liability was financed as a level percent of member payroll. Actuarial Value of Assets - The Actuarial Value of Assets phases in the difference between the expected and actual return on market value of assets at the rate of 25% per year. The Actuarial Value of Assets will be further adjusted to the extent necessary to fall within the corridor whose lower limit is 80% of the Market Value of plan assets and whose upper limit is 120% of the Market Value of plan assets. During periods when investment performance exceeds the assumed rate, Actuarial Value of Assets will tend to be less than Market Value. During periods when investment performance is less than assumed rate, Actuarial Value of Assets will tend to be greater than Market Value. Valuation Assumptions The actuarial assumptions used in the valuation are shown in this Section. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-16 Economic Assumptions The investment return rate assumed in the valuation is 8.0% per year, compounded annually (net of investment expenses). The wage inflation rate assumed in this valuation was 4.0% per year. The Wage Inflation Rate is defined to be the portion of total pay increases for an individual that are due to macroeconomic forces including productivity, price inflation, and labor market conditions. The wage inflation rate does not include pay changes related to individual merit and seniority effects. The price inflation rate assumed in this valuation was 3.00% per year. The plan does not provide for automatic post-retirement cost of living adjustments (COLA) of retiree benefits. Ad-hoc COLA increases have been adopted in the past upon approval by the City. Most recently, such increases have been granted in 1987, 1996 and 2001. No assumptions are made regarding future adjustments. Any such increases will be recognized as they occur. The total rate of return is defined as earnings resulting from interest, dividends, realized gains (losses) and unrealized appreciation (depreciation) less investment-related expenses, all divided by the beginning market value of the fund, adjusted for cash flow during the year. Total rate of return is as the assumed to be 8.0% per year, net of investment-related expenses. The rates of salary increases used in the valuation are illustrated in the following table (rates below include 3% price inflation). Annual Rates for Salary Increase for Sample Ages Age:2030405060 Expected Increase 14.0%8.7%6.5%6.0%5.5% City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-17 Demographic Assumptions The mortality table was the RP-2000 Healthy White Collar tables for males and females, as projected from the year 2000 using Projection Scale AA. Ages Men Women Men Women 45 $142.54 $144.21 36.75 39.03 50 137.46 139.60 32.00 34.22 55 130.46 133.31 27.31 29.50 60 121.38 125.21 22.80 24.94 65 110.29 115.34 18.56 20.66 70 97.44 103.87 14.69 16.73 75 82.54 90.81 11.18 13.18 80 66.51 76.26 8.15 10.01 $1 Monthly for Life Expectancy (Years) RP2000 Table Projected to Valuation Year Value of Future Life This assumption is used to measure the probabilities of each benefit payment being made after retirement. For active members, the probabilities of dying before retirement were based upon the same mortality table as members dying after retirement. All deaths before retirement are assumed to be non-service connected. The rates of retirement used to measure the probability of eligible members retiring under normal and early retirement eligibility during the next year were as follows: Retirement Percent of Eligible Ages Employees Retiring 55 15% 56 10% 57 10% 58 10% 59 10% 60 20% 61 15% 62 15% 63 15% 64 20% 65 30% 66 40% 67 50% 68 50% 69 50% 70 100% Normal or Early Reitrement/DROP City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-18 Rates of separation from active membership were as shown below (rates do not apply to members eligible to retire and do not include separation on account of death or disability). This assumption measures the probabilities of members remaining in employment. SampleYears of AgesServiceAssumptions ALL 0 28.61% 1 20.78% 2 16.94% 3 11.67% 4 7.41% 25 5 & Over3.70% 30 3.50% 35 3.20% 40 3.00% 45 2.70% 50 2.20% 55 2.00% 60 2.00% Rates of Separationg from Active Employment Rates of disability among active members (0% of disabilities are assumed to be service-connected). Sample AgesMenWomen 200.07%0.07% 250.09%0.09% 300.10%0.10% 350.14%0.14% 400.21%0.21% 450.32%0.32% 500.52%0.52% 550.92%0.92% 601.53%1.53% Percent Becoming Disabled Within Next Year The mortality table was set forward ten years from the age at disability for projecting disability costs. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-19 Miscellaneous and Technical Assumptions Administrative & Investment Expenses Annual administrative expenses are assumed to be equal to the actual expenses paid during the preceding fiscal year. Investment expenses are offset against gross investment income. Assumed administrative expenses are added to the Normal Cost. Benefit Service Exact fractional service is used to determine the amount of benefit payable. Decrement Operation Disability and mortality decrements do not operate during the first 5 years of service. Disability and separation do not operate during retirement eligibility. Decrement Timing Decrements of all types are assumed to occur at mid-year. Eligibility Testing Eligibility for benefits is determined based upon the age nearest birthday and service nearest whole year on the date the decrement is assumed to occur. Forfeitures Vested members who terminate with a benefit worth less than 100% of their own accumulated contributions were assumed to forfeit their vested benefit. Incidence of Contributions Employer contributions are assumed to be received in 12 equal monthly installments. Member contributions are assumed to be received continuously throughout the year based upon the computed percent of payroll shown in this report, and the actual payroll payable at the time contributions are made. Marriage Assumption 80% of members are assumed to be married for purposes of death-in- service benefits. Male spouses are assumed to be three years older than female participants and female spouses are assumed to be three years younger than male participants for active member valuation purposes. Normal Form of Benefit The normal form of benefit is a life annuity. Pay Increase Timing Beginning of fiscal year. This is equivalent to assuming that reported pays represent the actual amount paid during the previous fiscal year. Service Credit Accruals It is assumed that members accrue one year of service credit per year. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | B-20 GLOSSARY OF TERMS Actuarial Accrued Liability The difference between (i) the actuarial present value of future plan benefits, and (ii) the actuarial present value of future normal cost. Sometimes referred to as “accrued liability” or “past service liability.” Accrued Service The service credited under the plan which was rendered before the date of the actuarial valuation. Actuarial Assumptions Estimates of future plan experience with respect to rates of mortality, disability, turnover, retirement, rate or rates of investment i ncome and salary increases. Decrement assumptions (rates of mortality, disability, turnover and retirement) are generally based on past experience, often modified for projected changes in conditions. Economic assumptions (salary increases and investment income) consist of an underlying rate in an inflation-free environment plus a provision for a long-term average rate of inflation. Actuarial Cost Method A mathematical budgeting procedure for allocating the dollar amount of the “actuarial present value of future plan benefits” between the actuarial present value of future normal cost and the actuarial accrued liability. Sometimes referred to as the “actuarial funding method.” Actuarial Equivalent A single amount or series of amounts of equal value to another single amount or series of amounts, computed on the basis of the rate(s) of interest and mortality tables used by the plan. Actuarial Present Value The amount of funds presently required to provide a payment or series of payments in the future. It is determined by discounting the future payments at a predetermined rate of interest, taking into account the probability of payment. Amortization Paying off an interest-bearing liability by means of periodic payments of interest and principal, as opposed to paying it off with a lump sum payment. Experience Gain (Loss) A measure of the difference between actual experience and that expected based upon a set of actuarial assumptions during the period between two actuarial valuation dates, in accordance with the actuarial cost method being used. Normal Cost The annual cost assigned, under the actuarial funding method, to current and subsequent plan years. Sometimes referred to as “current service cost.” Any payment toward the unfunded actuarial accrued liability is not part of the normal cost. Reserve Account An account used to indicate that funds have been set aside for a specific purpose and is not generally available for other uses. Unfunded Actuarial Accrued Liability The difference between the actuarial accrued liability and valuation assets. Sometimes referred to as “unfunded accrued liability.” Valuation Assets The value of current plan assets recognized for valuation purposes. Generally based on market value plus a portion of unrealized appreciation or depreciation. SECTION C PENSION FUND INFORMA TION City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | C-1 Cash and Securities - Market Value Cash and Cash Equivalents $59,926 $21,344 Short Term Investments 771,377 509,803 Treasury and Agency Bonds & Notes 2,090,713 2,260,875 Corporate Bonds 0 0 Common & Preferred Stocks 7,632,876 5,702,213 Pooled Equity Funds 0 0 Mutual or Pooled Bond Funds 2,131,912 0 Mutual Equity Funds 0 1,945,666 Other Securities - Participant Directed 129,591 212,114 Total 12,816,395 10,652,015 Receivables and Accruals Member Contribution 0 0 Additional Employer Contribution 0 0 Interest and Dividends 7,241 8,603 Interest Deposit for Late Contribution 0 0 Total 7,241 8,603 Payables Benefits-DROP Reserve 129,809 212,148 Lump Sum Distributions 0 Expenses 0 0 Other 0 0 Total 129,809 212,148 Net Assets - Market Value $12,693,827 $10,448,470 SUMMARY OF ASSETS 9/30/2012 9/30/2011 City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | C-2 Market Value at Beginning of Period $10,448,470$10,417,807 Income Member Contributions 186,326 188,403 State Contributions 0 0 Employer Contribution 998,516 722,769 Interest and Dividends 299,511 290,073 Realized and Unrealized Gain (Loss)1,520,313 (470,932) Total Income 3,004,666 730,313 Disbursements Monthly Benefit Payments 655,424 583,857 DROP Payments Held in Reserve 0 0 Lump Sum Distributions 0 0 Refund of Contributions 7,273 5,661 Investment Related Expenses 64,908 67,877 Other Administrative Expenses 31,704 42,255 Insurance Premiums 0 0 Total Disbursements 759,309 699,650 Net Increase During Period $2,245,357 $30,663 Market Value at End of Period $12,693,827 $10,448,470 PENSION FUND INCOME AND DISBURSEMENTS Year Ending 9/30/2011 Year Ending 9/30/2012 City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | C-3 DEFERRED RETIREMENT OPTION PLAN (DROP) BENEFITS HELD IN RESERVE State Statutes require that the value of assets be offset by the total accumulated balance of DROP payments being held in reserve for those participating in the DROP plan. A reconciliation of the accumulated balance to be recognized is provided in the table below. $212,114 +25,832 +3,821 -112,176 129,591Value at end of year Value at beginning of year RECONCILIATION OF DROP ACCOUNTS Payments credited to accounts Investment Earnings credited Withdrawals from accounts 4 0 (3) 1 Average Monthly Benefit as of September 30, 2012 $1,350 Number exited DROP during the year Number as of September 30, 2012 DROP PARTICIPATION ACTIVITY Number as of September 30, 2011 Number entered DROP during the year City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | C-4 ACTUARIAL VALUE OF ASSETS As of September 30, 2012 Valuation assets are calculated using a smoothed market value over a period of four (4) years, as prescribed under Internal Revenue Procedure 2000-40. The asset value determined under this method will be adjusted to be no greater than 120% and no less than 80% of the fair market value. Under this method, the actuarial value of assets is equal to the market value of assets less a decreasing fraction (1/nth per year, where n equals the number of years in the smoothing period) of the gain or loss for each of the preceding 3 years. Under this method, a gain or loss for a year is determined by calculating the difference between the expected market value of the assets at the valuation date and the actual market value of the assets at the valuation date. The expected value of the assets for the year is the market value of the assets at the valuation date for the prior year brought forward with interest at the valuation interest rate to the valuation date for the current year plus contributions minus disbursements (i.e., benefits paid and expenses), all adjusted with interest at the valuation rate to the valuation date for the current year. If the expected value is less than the market value, the difference is a gain. Conversely, if the expected value is greater than the market value, the difference is a loss. Calculation of Valuation Assets is shown on the following page. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | C-5 2010 2011 2012 2013 A.Preliminary actuarial value from prior year 9,841,314$ 10,618,038$ 11,119,463$ 12,513,031$ B.Market value beginning of prior year 9,213,34810,417,80710,448,47012,693,827 C.Market value end of prior year 10,417,80710,448,47012,693,827 D.Non-investment net cash flow [contributions-(benefits & expenses)]246,078279,399490,441 E.Investment return 1.Actual market value return net of investment expenses: C - B - D 958,380(248,736)1,754,916 2.Expected return of 8.00%746,911 844,600 855,495 3.Excess/(shortfall) to be phased-in: E1 - E2 211,469(1,093,336)899,421 F.Phased-in recognition of investment return (4 Year Recognition) 1.Current year: 25% of E3 52,867(273,334)224,855 2.25% of excess/(shortfall) from first prior year 43,24452,867(273,334)224,855 3.25% of excess/(shortfall) from second prior year (445,351)43,24452,867(273,334) 4.25% of excess/(shortfall) from third prior year 132,975(445,351)43,24452,867 5.Total phased-in recognition of investment return (216,265)(622,574)47,632 4,388 G.Actuarial value end of year 1.Preliminary actuarial value end of year: A + D + E2 + F5 10,618,03811,119,46312,513,031 2.Upper corridor limit: 120% of C 12,501,36812,538,16415,232,592 3.Lower corridor limit: 80% of C 8,334,2458,358,77610,155,062 4.Actuarial value end of year *10,618,03811,119,46312,513,031 H.Difference between market value and actuarial value (200,231)(670,993)180,796 I.Ratio of Funding Value to Market Value 102%106%99% DEVELOPMENT OF FUNDING VALUE OF ASSETS AS OF SEPTEMBER 30 * Offset for DROP Reserve made prior to the calculation of valuation assets. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | C-6 INVESTMENT RATE OF RETURN The investment rate of return has been calculated on the following bases: Basis 1 - Cost Value: Interest, dividends and realized gains (losses) divided by the beginning cost value of the fund, adjusted for cash flow during the year. Basis 2 - Market Value: Interest, dividends, realized gains (losses) and unrealized appreciation (depreciation) divided by the beginning market value of the fund, adjusted for cash flow during the year. This figure is normally called the Total Rate of Return. Basis 3 - Actuarial Value: Investment earnings recognized in the Actuarial Value of Assets divided by the weighted average of the Actuarial Value of Assets during the year. 9/30/02 (6.7) %1.5 % 9/30/03 10.1 1.7 9/30/04 7.2 2.3 9/30/05 9.4 4.9 9/30/06 9.7 8.5 9/30/07 14.7 10.0 9/30/08 (11.9) 4.9 9/30/09 9.7 4.2 9/30/10 9.9 5.0 9/30/11 (2.4) 2.1 9/30/12 16.4 8.0 3.9 %4.8 % 7.0 %5.1 % Actuarial ValueYear Ended Investment Rate of Return Average Compounded Rate of Return for 5 Years 10 Years Market Value SECTION D FINANCIAL ACCOUNTING INFORMATION City of Atlantic Beach General Employees’ Retirement System 9/30/12 Actuarial Valuation | D-1 A.Valuation Date B.Actuarial Present Value of Accumulated Plan Benefits 1.Vested Benefits a.Members Currently Receiving Payments$6,485,800$5,763,677 b.Terminated Vested Members 785,507 860,722 c.Other Members 6,694,979 6,360,869 d.Total 13,966,28612,985,268 2.Non-Vested Benefits 315,665 363,692 3.Total Actuarial Present Value of Accumulated Plan Benefits: 1d + 2 14,281,95113,348,960 4.Accumulated Contributions of Active Members 1,296,875 1,211,505 C.Changes in the Actuarial Present Value of Accumulated Plan Benefits 1.Total Value at Beginning of Year 13,348,96012,227,533 2.Increase (Decrease) During the Period Attributable to: a.Plan Amendment 0 0 b.Change in Actuarial Assumptions 0 0 c.Latest Member Data, Benefits Accumulated and Decrease in the Discount Period 1,595,688 1,710,945 d.Benefits Paid (Including DROP Reserve)(662,697)(589,518) e.Net Increase 932,991 1,121,427 3.Total Value at End of Period 14,281,95113,348,960 D.Market Value of Assets 12,693,82710,448,470 E.Total Actuarial Present Value of Accumulated Plan Benefits using FRS discount rate 14,658,79313,699,795 F.Actuarial Assumptions - See page entitled Actuarial Assumptions and Methods FASB NO. 35 INFORMATION September 30, 2012 September 30, 2011 Ci t y o f At l a n t i c B e a c h Ge n e r a l E m p l o y e e s ’ Re t i r e m e n t S y s t e m 9/ 3 0 / 2 0 1 2 Ac t u a r i a l V a l u a t i o n | D -2 SCHEDULE OF FUNDING PROGRESS (Dollar amounts in thousands) (GASB Statement No. 25) 9/30/2003 *$5,951 $8,186 $2,235 72.7 %$2,856 78.3 % 9/30/2004 6,273 9,005 2,732 69.73,051 89.5 9/30/2005 *6,802 9,822 3,020 69.33,182 94.9 9/30/2006 *7,609 10,505 2,896 72.43,195 90.7 9/30/2007 8,594 11,668 3,074 73.73,476 88.4 9/30/2008 *9,209 12,624 3,415 72.93,727 91.6 9/30/2009 9,841 13,682 3,841 71.94,019 95.6 9/30/2010 10,618 15,180 4,562 69.93,838 118.9 9/30/2011 11,119 16,053 4,934 69.33,738 132.0 9/30/2012 12,51316,797 4,284 74.53,714 115.4 (a) Unfunded AAL (UAAL) (b) - (a) Actuarial Accrued Liability (AAL) - Entry Age (b) Actuarial Valuation Date UAAL As % of Covered Payroll (b - a) / c Covered Payroll ( c ) Funded Ratio (a) / (b) Actuarial Value of Assets * Reflects a change in assumptions or benefits. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | D-3 SCHEDULE OF CONTRIBUTIONS FROM EMPLOYER (GASB Statement No. 25) Fiscal Year Ending 9/30/2003 11.81 %*$315,106$315,106 100 % 9/30/2004 12.72 381,518 381,518 100 9/30/2005 15.02*464,893 464,893 100 9/30/2006 16.09 480,029 480,029 100 9/30/2007 13.99*482,364 482,363 100 9/30/2008 13.62*456,965 457,005 100 9/30/2009 14.03 528,428 528,426 100 9/30/2010 14.84 599,292 599,292 100 9/30/2011 16.60 722,769 722,769 100 9/30/2012 24.53 998,516 998,516 100 Percentage Contributed Annual Required Contribution Contribution ActualContribution Rate As a % of Payroll * Reflects a change in assumptions or benefits. Note: Annual Required Contribution (if any), above, is payable by the City. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | D-4 Employer FYE September 30 A.Annual Required Contribution (ARC)998,516$ 722,769$ 599,292$ B.Interest on Net Pension Obligation (Asset) - - - C.Adjustment to ARC - - - D.Annual Pension Cost (APC): (A + B - C)998,516 722,769 599,292 E.Contributions made 998,516722,769599,292 F.Increase (decrease) in Net Pension Obligation(Asset) rounded to the nearest $100: (D -E) - - - G.Net Pension Obligation(Asset) at beginning of year - - - H.Net Pension Obligation(Asset) at end of year: (F+ G)- - - ANNUAL PENSION COST AND NET PENSION OBLIGATION (GASB STATEMENT NO. 27) 2012 2011 2010 Fiscal Annual PensionActual Year EndingCost (APC)Contribution 9/30/2010$ 599,292$ 599,292100.0%-$ 9/30/2011 722,769 722,769100.0 - 9/30/2012 998,516 998,516100.0 - THREE YEAR TREND INFORMATION Percentage of APC Contributed Net Pension Obligation City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | D-5 REQUIRED SUPPLEMENTARY INFORMATION GASB Statement No. 25 and No. 27 The information presented in the required supplementary schedules was determined as part of the actuarial valuation at the dates indicated. Additional Information as of the latest actuarial valuation: Valuation Date Contribution Rates: Employer Plan Members Actuarial Cost Method Amortization Method Equivalent Single Amortization Period Asset Valuation Method Actuarial Assumptions: Investment rate of return Projected salary increases Includes price inflation Cost-of-living adjustments Payroll Growth Assumption September 30, 2012 27.88% 5.00% Entry Age Closed, Level % of Pay Method 8.03 Years See Section entitled “Actuarial Value of Assets” 8.0% 5.5%-14.0% 3.0% None 2.98% SECTION E MISCELLANEOUS INFORM ATION City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | E-1 A. 1.Number Included in Last Valuation 83 84 2.New Members Included in Current Valuation 8 6 3.Non-Vested Employment Terminations (2)0 4.Vested Employment Terminations (2)(1) 5.Service Retirements (2)(1) 6.Disability Retirements 0 (1) 7.Deaths (1)0 8.DROP Retirement 0 (4) 9.Transfer to Another Division 0 0 10.Number Included in This Valuation 84 83 B. 1.Number Included in Last Valuation 11 12 2.Additions from Active Members 2 1 3.Lump Sum Payments/Withdrawals 0 0 4.Payments Commenced (1)(2) 5.Deaths 0 0 6.Other 0 0 7.Number Included in This Valuation 12 11 C. 1.Number Included in Last Valuation 47 39 2.Additions from Active Members 2 2 3.Additions entering the DROP 0 4 4.Additions from Terminated Vested Members 1 2 5.Deaths Resulting in No Further Payments 0 0 6.Deaths Resulting in New Survivor Benefits 0 (1) 7.End of Certain Period - No Further Payments 0 0 8.Other -- New Survivor Payments for Death 1 1 9.Number Included in This Valuation 51 47 To 9/30/11To 9/30/12 RECONCILIATION OF MEMBERSHIP DATA Active Members Service Retirees, Disability Retirees, Beneficiaries & DROP Terminated Vested Members From9/30/10From9/30/11 City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | E-2 STATISTICAL DATA Active Members as of September 30, 2012 Age Group 0-4 5-9 10-14 15-19 20-24 25-29 30 & Up TotalsAvg. Pay 20-24 NO.1000000128,995 25-29 NO.1000000133,834 30-34 NO.2100000332,508 35-39 NO.2210000527,136 40-44 NO.3400300 10 38,303 45-49 NO.5401210 13 48,470 50-54 NO.2551002 15 45,012 55-59 NO.9723310 25 48,393 60-64 NO.2331100 10 43,874 65&UP NO.0000001180,718 TOT NO.272611 6923 84 44,210 City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | E-3 Active Year Members Ended VestedOther End of September 30AEAEAEAEAAAEYear 20022012 01.710.200.11 1011 9.1 83 20031211 20.800.200.109910.8 84 20041210 21.200.200.117810.0 86 20051014 20.800.200.21 1112 9.4 82 20061011 52.400.100.20668.5 81 2007 8711.810.200.21458.1 82 2008 7603.200.100.21567.8 83 2009 6203.800.100.21126.9 87 2010 4744.400.100.20336.8 84 2011 6755.310.100.31015.7 83 2012 8 7 2 4.3 0 0.2 1 0.2 2 2 4 4.8 84 5-yr. Totals 2008-2012 312911 20.910.711.1 16 32.0 Expected for 2013 4.60.20.2 5.1 A Represents actual number. E Represents expected number. During Normal Disability Died-in Withdrawal Year Retirement Retirement Service Total NUMBER ADDED TO AND REMOVED FROM ACTIVE MEMBERSHIP Number Added Terminations During Year City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | E-4 Year Ended September 30 No. Annual Pensions No. Annual Pensions No. Annual Pensions No. Annual Pensions No. Annual Pensions 2002 323,184126,801 2 (3,617) 29 234,121 0.7 5,355 2003 232,15915,889 1 26,270 30 260,391 0.9 6,159 2004 235,900217,160 18,740 30 279,131 1.0 6,956 2005 347,50515,774 2 41,730 32 320,861 1.0 7,331 2006 682,446329,272 3 53,174 35 374,035 1.0 7,917 2007 351,425 3 51,425 38 425,460 1.1 8,798 2008 19,21719,217 38 425,460 1.3 10,328 2009 217,42425,992 11,432 38 436,892 1.3 11,534 2010 495,156313,790 1 81,366 39 518,258 1.2 11,854 2011 9105,409114,326 8 91,083 47 609,341 1.2 12,414 2012 477,3930- 477,393 51 686,734 1.2 12,623 Expected for 2013 1.3 14,605 *Includes a one-time 5.0% cost-of-living increase. Retired Members and Beneficiary Data Historical Schedule Expected Added Removed Net Increase End of Year Removals SECTION F SUMMARY OF PLAN PROV ISIONS City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | F-1 A. Ordinances: Plan established under the Code of Ordinances for the City of Atlantic Beach, Florida, Part II, Chapter 2, Article VI, Division 3 and was most recently amended and restated under Ordinance No. 58-08-34 passed and adopted on August 11, 2008. The Plan is also governed by certain provisions of Part VII, Chapter 112, Florida Statutes (F.S.) and the Internal Revenue Code. B. Effective Date December 22, 1975 C. Plan Year October 1 through September 30 D. Type of Plan Qualified, governmental defined benefit retirement plan; for GASB purposes it is a sole employer plan. E. Eligibility Requirements All City employees, other than police officers or firefighters, who normally work more than 1,000 hours annually and are not an elected officials, temporary or contractual employees, or executives or departments heads who have elected not to participate, will become members on the date of employment. F. Credited Service Service is measured as the total number of years and fractional parts of years, but credited to the nearest one-twelfth (1/12) of a year. No service will be credited for any periods of employment for which the member received a refund of their employee contributions. G. Compensation Base salary or wages paid for services rendered to the City including longevity pay, overtime pay, cost of living payments, holidays and personal leave taken. Compensation excludes payments of unused personal leave, uniform or equipment allowances, or any reimbursement of expenses. H. Final Average Compensation (FAC) Average monthly rate of Compensation during the highest 60 consecutive months of Credited Service out of the last 120 months preceding the date of termination or retirement. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | F-2 I. Normal Retirement Eligibility: For Employees Hired Before September 1, 2008: A participant may retire on the first day of the month coincident with or next following age 60 with 5 or more years of Credited Service. For Employees Hired On or After September 1, 2008: A participant may retire on the first day of the month coincident with or next following age 60 with 10 or more years of Credited Service. Benefit: For employees hired before April 24, 2005: 2.85% of FAC times Credited Service. Benefit is limited to 100% of FAC. For employees hired on or after April 24, 2005: 2.50% of FAC times Credited Service. Benefit is limited to 100% of FAC. Normal Form of Benefit: Life Annuity; other options are also available. J. Early Retirement Eligibility: For Employees Hired Before September 1, 2008: A member may elect to retire earlier than the Normal Retirement Eligibility upon attainment of age 55 with 5 years of Credited Service. For Employees Hired On or After September 1, 2008: A member may elect to retire earlier than the Normal Retirement Eligibility upon attainment of age 55 with 10 years of Credited Service. Benefit: The Normal Retirement Benefit is actuarially reduced for each year by which the member’s Early Retirement date precedes age 60. Normal Form of Benefit: Life Annuity; other options are also available. K. Delayed Retirement Same as Normal Retirement taking into account compensation earned and service credited until the date of actual employment termination. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | F-3 L. Service Connected Disability Eligibility: For Employees Hired Before September 1, 2008: Any member with 5 or more continuous years of Credited Service who becomes totally and permanently disabled and unable to render useful and efficient service to the City is eligible for a disability benefit. For Employees Hired On or After September 1, 2008: Any member with 10 or more continuous years of Credited Service who becomes totally and permanently disabled and unable to render useful and efficient service to the City is eligible for a disability benefit. Benefit: The benefit is calculated as if the member was eligible for Normal Retirement and is payable retroactively to the later of; the last day on payroll, or the date of application for disability benefits. Normal Form of Benefit: Life Annuity; other options are also available. M. Non-Service Connected Disability Eligibility: For Employees Hired Before September 1, 2008: Any member with 5 or more continuous years of Credited Service who becomes totally and permanently disabled and unable to render useful and efficient service to the City is eligible for a disability benefit. For Employees Hired On or After September 1, 2008: Any member with 10 or more continuous years of Credited Service who becomes totally and permanently disabled and unable to render useful and efficient service to the City is eligible for a disability benefit. Benefit: The benefit is calculated as if the member was eligible for Normal Retirement and is payable retroactively to the later of; the last day on payroll, or the date of application for disability benefits. Normal Form of Benefit: Life Annuity; other options are also available. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | F-4 N. Pre-Retirement Death Eligibility: Any member with 5 or more years of Credited Service is eligible for a death benefit. Benefit: Upon the death of a member, the designated beneficiary shall be paid an actuarially reduced benefit based on one hundred (100) percent survivor pension notwithstanding that the member may not have satisfied the conditions for retirement. If there are no beneficiaries designated by the member, then a benefit shall be paid to the surviving spouse or, if no surviving spouse, a reduced benefit will be paid to the member’s unmarried children. If spouse is receiving benefits described above, no children’s benefits are payable. If spouse is not receiving benefits, children under age 19, or age 23 if a fulltime student, will receive equal shares of 50% of the member’s Normal Retirement Benefit under the Life Annuity option based upon service and FAC as of the date of death. Normal Form of Benefit: Payable for the life of the member’s beneficiary or spouse. Children’s benefits are payable until age 19 or age 23 if a fulltime student. O. Post Retirement Death Benefit determined by the form of benefit elected upon retirement. P. Optional Forms In lieu of electing the Normal Form of benefit, the optional forms of benefits available to all retirees are the 50%, 66 2/3%, 75% or 100% Joint and Survivor options. A Social Security option is also available for members retiring prior to the time they are eligible for Social Security retirement benefits. Q. Vested Termination Eligibility: For Employees Hired Before September 1, 2008: A participant has earned a non-forfeitable right to Plan benefits after the completion of 5 or more years of Credited Service. For Employees Hired On or After September 1, 2008: A participant has earned a non-forfeitable right to Plan benefits after the completion of 10 or more years of Credited Service. Benefit: The benefit is the member’s vested portion of the accrued Normal Retirement Benefit as of the date of termination. Benefit begins on the Normal or Early Retirement date. Normal Form of Benefit: Life Annuity; other options are also available. Member’s terminating employment with less than 5 years of Credited Service, or 10 years for those hired on or after September 1, 2008, will receive a refund of their own accumulated contributions. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | F-5 R. Refunds Eligibility: All non-vested members are eligible. Optionally, vested participants may also withdraw their contributions in lieu of the deferred benefits otherwise due. Benefit: The member who terminates employment receives a lump-sum payment of their employee contributions. S. Member Contributions 5% of Compensation T. Employer Contributions The amount determined by the actuary to pay the normal cost and an amortization of the unfunded actuarial accrued liabilities, along with employee contributions. Following are contribution rates per recent valuations: Plan Year Beginning CityMemberTotal 10/1/200713.62%5.000%18.62% 10/1/200814.03%5.000%19.03% 10/1/200914.84%5.000%19.84% 10/1/201016.60%5.000%21.60% 10/1/201124.53%5.000%29.53% 10/1/201227.88%5.000%32.88% U. Cost of Living Increases The plan does not provide for automatic post-retirement cost of living adjustments (COLA) of retiree benefits. V. Changes from Previous Valuation See the Discussion of Valuation Results Section of this report under the Revisions in Benefits heading. W. Gain-sharing benefits Not applicable. City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | F-6 X. Deferred Retirement Option Plan Eligibility: For Employees Hired Before September 1, 2008: Plan members are eligible for the DROP upon attainment of age 55 with 5 years of Credited Service. For Employees Hired On or After September 1, 2008: Plan members are eligible for the DROP upon attainment of age 55 with 10 years of Credited Service. All members must make a written election to participate in the DROP. Benefit: The member’s Credited Service and FAC are frozen upon entry into the DROP. The monthly retirement benefit as described under Normal Retirement is calculated based upon the frozen Credited Service and FAC. Benefits for members entering the DROP prior to age 60 will be actuarially reduced for Early Retirement. Maximum DROP Period: 60 months Interest Credited: Earnings to the DROP account will be accordance with the self-directed options selected by the participant. Normal Form of Benefit: Lump Sum or roll-over to a qualified retirement account. SECTION G COMPARATIVE SUMMARY O F PRINCIPAL VALUATION RESULTS City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | G-1 A.Participant Data Number Included: Actives 84 83 Service Retirees & Beneficiaries 47 43 Disability Retirees 4 4 Terminated Vested Members 12 11 Total Members and Beneficiaries 147 141 Total Annual Payroll (Excluding DROP Participants)$3,713,609 $3,738,277 Annual Valuation Payroll 3,713,609 3,738,277 Expected Annual Payroll in Contribution Year 3,938,639 3,964,802 Total Annualized Benefits Service Retirees & Beneficiaries 629,722 552,964 Disability Retirees 56,377 56,377 Terminated Vested Members 121,445 126,619 B.Assets (Market Value) Cash and Short Term Investments 831,303 531,147 Treasury and Agency Bonds & Notes 2,090,713 2,260,875 Common and Preferred Stocks 7,632,876 5,702,213 Mutual or Pooled Bond Funds 2,131,912 1,945,666 Mutual Equity Funds 0 0 Other Securities 129,591 212,114 Net Receivables & Payables (122,568)(203,545) Total 12,693,827 10,448,470 Actuarial Value 12,513,031 11,119,463 Assets include: Accumulated active member contributions 1,296,875 1,211,505 (with interest if applicable) C.Actuarial present value of accrued benefits (i)Vested accrued benefits Retired members and benefitciaries (incl DROP)6,485,800 5,763,677 Terminated members 785,507 860,722 Active members (includes non-forfeitable memebrs contributions of 1,296,875 and 1,211,505)6,694,979 6,360,869 Total 13,966,286 12,985,268 (ii)Non-vested accrued benefits 315,665 363,692 (iii)Total actuarial p.v. of accrued benefits 14,281,951 13,348,960 (iv)Actuarial p.v. of accrued benefits at begin. of year 13,348,960 12,227,533 (v)Changes attributable to: Amendments none none Assumption change none none Operation of decrements 1,595,688 1,710,945 Benefit payments (662,697)(589,518) Other none none (vi)Net change (PVAB measurement Method Change)932,991 1,121,427 (vii)Actuarial p.v. of accr. benefits at end of year 14,281,951 13,348,960 COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS September 30, 2012 September 30, 2011 City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | G-2 C.Liabilities- Actuarial Present Value of Future Benefits 1. Active Members Service Retirement Benefits $12,222,823 $12,213,956 Vesting Benefits 339,511 347,811 Disability Benefits 300,331 308,879 Preretirement Death Benefits 297,034 299,659 Return of Member Contributions 107,030 99,017 Total Actives 13,266,729 13,269,322 2. Inactive Members Service Retirees & Beneficiaries 5,972,648 5,239,771 Disability Retirees 513,152 523,906 Terminated Vested Members 785,507 860,722 Total Inactive Members 7,271,307 6,624,399 3. Total Present Value for All Members 20,538,036 19,893,721 Total Present Value of: Future Salaries 29,036,614 29,390,562 Future Employee Contributions 1,451,831 1,469,528 Future Contributions from Other Sources 6,573,174 7,304,730 Derivation of Current Employer Unfunded Actuarial Accrued Liability (UAAL) a.Total UAAL for Prior Valuation Date $4,933,603 $4,561,923 b.Employer Normal Cost for this period 381,619 378,695 c.Interest acccrued on (a) and (b)409,953 380,102 d.Contributions for this period 998,516 722,769 e.Interest accrued on (d)39,941 28,911 f.Changes due to: Plan Amendment 0 0 Assumption Changes 0 0 Asset Method 0 0 Actuarial (Gain) Loss (402,582)364,563 g.Total Current UAAL: a+b+c-d-e+f 4,284,136 4,933,603 COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS September 30, 2012 September 30, 2011 Present Value of Accrued Benefits Vested 324,864 374,694 Non-Vested 14,333,929 13,325,101 Total 14,658,793 13,699,795 Market Value of Assets 12,693,827 10,448,470 Funded Ratio 86.6%76.3% Present Value of Accrued Benefits at FRS Discount Rate September 30, 2012 September 30, 2011 City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | G-3 Date Years Remaining Amortization Payment Original Amount 9/30/1993Original 1$159,550 9/30/1998Experience Gain 1(12,029)(58,540) 9/30/1999Experience Gain 2(20,297)(108,195) 9/30/2000Experience Loss 39,647 55,470 9/30/2001Experience Loss 42,956 18,145 9/30/2002Experience Loss 543,049280,151 9/30/2003Experience Loss 651,702355,383 9/30/2004Experience Loss 754,566395,109 9/30/2005Experience Loss 847,842364,305 9/30/2006Experience Gain 9(16,413)(131,266) 9/30/2007Experience Loss 1020,302170,383 9/30/2008Experience Loss 1120,324178,856 9/30/2009Experience Loss 1251,213482,223 9/30/2010Experience Loss 1317,190171,358 9/30/2011Experience Loss 1434,220364,563 9/30/2012Experience Gain 15(36,664)(402,582) 9/30/1993Benefit Changes 1153,374358,417 9/30/1996Benefit Changes 145,374 41,503 9/30/2001Benefit Changes 1910,430101,350 9/30/2003Benefit Changes 213,429 36,516 9/30/2005Benefit Changes 23(12,788)(149,268) 9/30/1995Assumption/Method Change1362,527461,074 9/30/1997Assumption/Method Change1537,664304,637 9/30/2008Assumption/Method Change268,600115,225 9/30/2009Assumption/Method Change27(4,085)(58,002) 9/30/2010Assumption/Method Change2835,131525,869 TOTAL $626,814$3,872,683 358,157 (402,582) 27,617 11,027 196,156 276,340 (123,043) 46,627 (183,097) (63,589) 556,613 620,745 $4,284,136 413,554 131,384 170,661 468,089 56,244 133,577 332,664 325,963 (12,029) (39,651) Original and Current Unfunded Actuarial Accrued Liabilities Current Unfunded $159,550 Item Description 165,432 178,240 479,487 City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | G-4 D.Pension Cost Entry Age Normal Cost for: Service Retirement Benefits $427,897 $438,341 Vesting Benefits 17,782 17,676 Disability Benefits 18,631 18,615 Preretirement Death Benefits 10,504 10,672 Return of Member Contributions 31,653 31,388 Total Actives 506,466 516,693 Administrative Expenses 30,485 40,630 Expected Member Contributions 189,244 190,382 Total Employer Normal Cost 347,707 366,941 Payment Required to Amortize Unfunded Actuarial Accrued Liability 626,814 559,924 Total Contribution at Valuation Date 974,521 926,865 Total Contribution Adjusted for Frequency of Payments and Interest to Next Following Fiscal Year 1,098,090 1,044,392 % of Expected Payroll 27.88%26.34% Amount Expected to be Contributed by Members Next FY 196,932 198,240 % of Expected Payroll 5.00%5.00% E.Past Contributions- For the Fiscal Years Ended September 30 of 2011 and 2012 Required Contribution Determined in the Valuation as ofSeptember 30, 2010September 30, 2009 by the Plan Sponsor $998,516 $722,769 by Members $203,503 $217,736 Actual Contribution for the Fiscal Year ended September 30, 2011September 30, 2010 by the Plan Sponsor $998,516 722,769 by Members $186,326 188,403 F.Net experience (gain) loss during year:($402,582)$364,563 G.1. Plan to Amortize Unfunded Actuarial Accrued Liability 20 year funding of the Original Unfunded Actuarial Accrued Liability, 15 year funding of any Gains or Losses and 30 year of adjustments due to benefit or assumption changes. 2. Schedule Illustrating the Amortization of the Unfunded Actuarial Accrued Liability (UAAL) Year Projected UAAL 2012 $4,284,136 2013 3,949,911 2014 3,732,827 2015 3,459,228 2022 1,369,040 2027 553,317 2037 210,991 2039 77,685 2041 0 3. Action taken since last actuarial valuation. Contribution sufficient to satisfy the total required contribution. COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS September 30, 2012 September 30, 2011 City of Atlantic Beach General Employees’ Retirement System 9/30/2012 Actuarial Valuation | G-5 H.1. Three-Year Comparison of Actual and Assumed Salary Increases (Annualized) ActualAssumed 1.2%5.9% 0.5 %6.0% (0.4)%6.0% 2. Three-Year Comparison of Investment Return (Actuarial Value) ActualAssumed 8.0%8.0% 2.1%8.0% 5.0%8.0% 3. Average Annual Growth in Payroll, Last Ten Years (if applicable) Total % Increase Last Ten Years 34.17% Annual % Increase 2.98% Thirty-year Forecast 4.00% I.Benefits and Expenses of Plan not Explicitly or Implicitly Provided in Valuation NONE J.Trends not taken into Account but which are likely to Result in Future Cost Increases NONE COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS Year Ended Total PayrollValuation Date 9/30/2012 9/30/2011 9/30/2010 Year Ended 9/30/2012 9/30/2011 9/30/2010 9/30/2010 9/30/2011 3,194,700 9/30/2005 3,726,713 9/30/2006 4,018,667 9/30/2002 $2,767,895 2,856,303 3,051,289 3,182,450 3,837,512 3,738,277 3,713,609 9/30/2008 9/30/2007 9/30/2003 9/30/2004 3,475,757 9/30/2012 9/30/2009