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5B - Actuarial Valuation Report - Police EmployeesGRS AGENDA ITEM# 5B MARCH 10, 2014 Gabriel Roeder Smith & Company Consultants & Actuaries CITY OF ATLANTIC BEACH POLICE OFFICERS' RETIREMENT SYSTEM ACTUARIAL VALUATION REPORT SEPTEMBER 30, 2013 ANNUAL EMPLOYER CONTRIBUTION IS DETERMINED BY THIS VALUATION TO BE PAID IN THE EMPLOYER FISCAL YEAR ENDING SEPTEMBER 30, 2015 GRS January 22,2014 Gabriel Roeder Smith & Company Consllltonts & r\cm~rics The Board of Trustees City of Atlantic Beach Police Officers' Retirement System Atlantic Beach, Florida Dear Board Members: One East Brow.ll'd Blvd. Suite 50S Ft, LuHlerdalc, FL .lHOI-l!l7l lJ$4.527.1616 phone 954.525.0083 fax www.gabridrqed~r.cotn We are pleased to submit herein our September 30, 2013 Actuarial Valuation Repott for the City of Atlantic Beach Police Officers' Retirement System. The contribution results apply to the City's fiscal year ending September 30, 2015. This repott 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 year ending September 30, 2015 and to determine the actuarial information for Governmental Accounting Standards Board (GASB) Statements No. 25 and No. 27. This repott 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, 2013. 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 pmt of the natural operation of the methodology used for these measurements (such as the end of an amottization period or additional cost or contribution requirements based on the plan's funded status); and changes in plan provisions or applicable law. The scope of an actuarial valuation does not include an analysis of the potential range of such future measurements. 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 repott prior to relying on information in the repott. 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. Furthermore, this report was prepared using certain assumptions prescribed by the Board as described in Section B. The Board of Tmstees January 22, 2014 Page 2 The undersigned actuaries are members of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein. The signing actuaries are independent of the plan sponsor. Gabriel, Roeder, Smith & Company will be pleased to answer questions pe1taining to the valuation and to meet with you to review this Repmi. Respectfully submitted, GABRIEL, ROEDER, SMITH AND COMPANY James J. Rizzo, ASA, MAAA Senior Consultant & Actuary Piotr Krekora, ASA, MAAA Consultant & Actuary Gabriel, Roeder, Smith and Company STATEMENT BY ENROLLED ACTUARY This actuarial valuation and/or cost detennination 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 January 22,2013 Date 11-03355 Enrollment Number GRS TABLE OF CONTENTS SECTION TITLE A EXECUTIVE SUMMARY B VALUATION RESULTS 1. Participant Data 2. Annual Required Contribution 3. Actuarial Value of Benefits and Assets 4. State Premium Tax Revenues 5. Financial Soundness 6. Actuarial Gains and Losses 7. Recent History of Valuation Results 8. Recent History of Required and Actual Contributions 9. Actuarial Assumptions and Cost Method C PENSION FUND INFORMATION 1. Summary of Assets 2. Summary of Fund's Income and Disbursements 3. Reconciliation of DROP Accounts 4. Actuarial Value of Assets 5. Investment Rate of Return D FINANCIAL ACCOUNTING INFORMATION 1. F ASB No. 35 2. GASB No. 25 3. GASB No. 27 E MISCELLANEOUS INFORMATION F G 1. Reconciliation of Membership Data 2. Statistical Data SUMMARY OF PLAN PROVISIONS COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS A-1 B-1 B-2 B-3 B-4 B-5 B-9 B-13 B-15 B-16 C-1 C-2 C-3 C-4 C-6 D-1 D-2 D-4 E-1 E-2 F-1 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 >vritten 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. GRS SECTION A EXECUTIVE SUMMARY GRS 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 As % of Expected Payroll Expected Employee Contribution As % of Covered Payroll Required Employer/State Contribution As % of Expected Payroll Estimated State Contribution As % of Covered Payroll Required Employer Contribution (If Made in Equal Monthly Installments) As % of Covered Payroll Required Employer Contribution (IfMade in Whole at the Beginning of the Year) As % of Covered Payroll $ $ $ $ $ $ 781,449 54.16 % 100,987 7.000 % 680,462 47.16 % 91,077 6.31 % 589,385 40.85 % 564,905 39.15 % $ $ $ $ $ $ 769,681 $ 47.04 % 98,175 $ 6.000 % 671,506 $ 41.04 % 91,077 ** $ 5.57 % 580,429 $ 35.47 % 543,748 34.00% 11,768 7.12 % 2,812 1.00 % 8,956 6.12 % 0 0.74 % 8,956 5.38 % 21,157 5.15 % *Results hm'e been updated to include Actuarial Impact Statement for Ordinance Number 58-13-36. **Results hm'e been updated to reflect higher than expected State Contribution. Minimum Required Contribution As illustrated in the preceding chart, the contribution necessmy from the City and State to suppmt the current benefits for the Police Officers is $680,462 for the fiscal year ending September 30, 2015. The City may be able to use State premium tax moneys to satisfy pmt of that requirement (assumed the same as received in 20 13), leaving the City contribution at $589,385. However, the City may need to contribute more, should receipts from the State fall shmt of the expected amount presented in the table above. Please note that the Required Employer Contribution for that fiscal year is assumed to be deposited in monthly intervals throughout the year. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I A-1 Revisions in Benefits The following benefit changes apply to new entrants who enter the plan on or after January I, 2013: • Normal Retirement eligibility has been changed to the earlier of (i) Age 55 with 10 years of Credited Service and (ii) Age 52 with 25 years of Credited Service. • The benefit accrual rate has been lowered from 3.0% to 2.0% per year. • The vesting schedule has been increased from a 5 year cliff to a IO year cliff. • Employee Contribution rate has been increased to 8%. In addition, results for the prior year have been updated to reflect the most recent actuarial impact statement for Ordinance Number 58-13-36. Plan changes resulting from the ordinance include a gradual increase in the employee contribution rate until it reaches 8.0% for years beginning October I, 20I4, an increase in the non- service connected disability eligibility requirement from 5 years to 8.3333 years and a limit of 300 hours of overtime to be included in pensionable compensation. There were no changes in benefits for retirees and vested terminated employees as of the effective date of the ordinance. Revisions in Actuarial Assumptions or Methods There were no revisions in actuarial assumptions or methods for the current year, except for the assumed employee contribution rate which is currently at 7.0% as adopted in Ordinance 58-I3-36 described above and scheduled to increase to 8% after September 30, 20I4. 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, 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. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I A-2 Analysis of Change in Employer Contribution The components of change in the actuarially required contribution are as follows: Contribution rate last year 35.47 % Payment on UAAL 7.57 Experience (gain)/loss (1.89) Change in administrative expense 0.33 Change in normal cost before expenses 0.27 Revision in benefits 0.00 Revision in assumptions/methods 0.00 Change in State Revenue (0.89) Contribution rate this year 40.85 % Although the plan experienced a net actuarial gain, the contribution determined in this valuation increased slightly from last year as discussed below. The gain was primarily due to lower than expected salary increases of 2.3% versus a 7.5% assumption. The gain was pmiially offset by losses from an investment return of 7.5% on the actuarial value of assets when compared to the 8.0% assumption. Administrative expenses were more than the previous year by 0.33% of pay. The dollar amount of the State Revenue is expected to increase slightly and due to a recent payroll reduction it will represent a larger percentage of the projected payroll. There was a decrease in the IO-year average payroll growth rate (from 2.62% to 1.88%). The covered payroll is expected to grow at the rate of 4% in the long term. However, in accordance with the requirements of Ch. II2.64 (5) (a), F.S. this assumed payroll growth used in developing the amortization payments, cannot exceed the actual average mmual payroll growth rate based on the last I 0 years. This limit has been affecting amortization amounts for the last three years. Due to a decrease in the I 0-year average, the ammiization payment of the UAAL increased this year, adding to the actuarial losses described previously, which ultimately increased the contribution. In addition, the decrease in the payroll caused the payment of the UAAL to be a greater percent of payroll. The remainder of this Repmi includes detailed actuarial valuation results, financial information, miscellaneous information and statistics, and a summmy of plan provisions. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I A-3 SECTION B VALUATION RESULTS GRS Number Covered Annual Payroll Average Annual Payroll Average Age Average Past Service Average Age at Hire Number Annual Benefits Average Annual Benefit Average Age Number Annual Benefits Average Annual Benefit Average Age Number Annual Benefits Average Annual Benefit Average Age City of Atlantic Beach Police Officers' Retirement System $ $ $ $ $ $ $ $ 22 1,360,245 61,829 39.3 9.2 30.1 16 592,341 37,021 61.0 4 74,159 18,540 56.1 4 41,865 10,466 49.9 $ $ $ $ $ $ $ $ 26 1,548,109 59,543 37.9 7.9 30.0 15 544,324 36,288 60.7 4 74,159 18,540 55.1 4 41,865 10,466 48.9 9/30/2013 Actuarial Valuation I B-1 GRS A. Valuation Date September 30, 2013 September 30, 2012* B. ARC to Be Paid During Fiscal Year Ending 9/30/2015 9/30/2014 C. Assumed Date(s) of Employer Contrib. Monthly Monthly D. Annual Payment to Am01iize Unfunded Actuarial Liability if Paid on the Valuation Date $ 414,495 $ 372,975 E. Employer Normal Cost (including Administrative Expenses) if Paid on the Valuation 189,394 222,966 F. Annual Required Contribution (ARC) if Paid on the Valuation Date: D+E 603,889 595,941 G. ARC Adjusted for Frequency of Payments and Interest to Required Time of Contribution 680,462 671,506 H. Covered Payroll for Contribution Year 1,442,670 1,636,257 I. ARC as% of Expected Covered Payroll in the Contribution Year G 7 H 47.16 % 41.04 % J. Estimate of State Revenue in Contribution Year** 91,077 91,077 K. Required Employer Contribution (REC) in Contribution Year 589,385 580,429 L. REC as % of Covered Payroll in Contribution Year: K 7 J 40.85 % 35.47 % M. Required Employer Contribution (REC) if Paid on the First Day of the Contribution Year 564,905 556,321 *Results have been updated to include Actuarial Impact Statement for Ordinance Number 58-13-36 and an increase in the State Revenue. **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 szif.licient to meet the total employer contribution requirement. City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I B-2 GRS A. Valuation Date September 30,2013 September 30, 2012* B. Actuarial Present Value of All Projected Benefits for 1. Active Members a. Service Retirement Benefits $5,192,002 $5,625,980 b. Vesting Benefits 411,721 433,728 c. Disability Benefits 199,745 217,796 d. Preretirement Death Benefits 43,825 47,852 e. Return of Member Contributions 75,452 96,932 f. Total 5,922,745 6,422,288 2. Inactive Members a. Service Retirees & Beneficiaries 6,280,862 5,799,923 b. Disability Retirees 746,335 757,569 c. Terminated Vested Members 210,876 194,822 d. Total 7,238,073 6,752,314 3. Total for All Members 13,160,818 13,174,602 c. Actuarial Accrued (Past Service) Liability per GASB No. 25 10,895,233 I 0,559,437 D. Actuarial Value of Accumulated Plan Benefits perF ASB No. 35 9,438,659 9,068,198 E. Plan Assets 1. Market Value 7,331,629 6,934,693 2. Actuarial Value 7,428,849 6,880,124 F. Actuarial Present Value of Projected Covered Payroll 12,024,091 13,816,592 G. Actuarial Present Value of Projected Member Contributions 921,938 1,060,877 *Results have been updated to include Actuarial Impact Statement for Ordinance Number 58-13-36. City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I B-3 STATE PREMIUM TAX REVENUES A. Accumulated Excess Premium Tax Revenues at the Beginning of the Year B. Chapter 185 Receipts During Fiscal Year Ending 9/30/2013 C. Chapter 185 "Frozen" Receipts During Fiscal Year Ending 9/30/1998 D. QualifYing Benefit Improvements Since Chapter 99-1 Effective Date E. Excess 185 Receipts During Fiscal Year Ending 9/30/2013* F. Accumulated Excess Premium Tax Revenues as of9/30/2013 not less than beginning of the year. 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 fmm Year Ending 9/30/2013 Cumulative $ 120,454 $ 91,077 1,417,767 70,289 1,115,363 18,517 185,170 0 120,454 Potential Future Benefits Extra Benefits A. None proposed *Note: During the Fiscal Year ended 9/30/2013, "Chapter 185 receipts" totaled $91,077. This amount is greater than the base amount of State premium tax moneys that was available in the past to be used by the City to satisfY pmt of the Annual Required Contribution. However, per the current interpretation of the law, subject to an actuarial certification, the City has now access to all Chapter 185 revenue to fund contribution requirements and consequently there was no increase in the Accumulated Excess Premium Tax Revenues (item E above). Note: Cumulative amounts presented in the I 0/1/2012 repmt inadvertently omitted 2011 additions. Amounts presented above have been developed by correcting this omission. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I 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. GRS 1. Accumulated Contributions of Active Members $ 2. APV of Projected Benefits in Pay Status and for Vested Terminations 3. APV of Accrued Benefits for Active Participants (Employer Portion) 4. Total 5. Market Value of Assets 6. Assets as % of Total City of Atlantic Beach Police Officers' Retirement System 405,604 $ 381,408 $ 333,818 7,238,073 6,752,314 5,999,606 1,794,982 1,934,476 2,074,844 9,438,659 9,068,198 8,408,268 7,331,629 6,934,693 6,056,405 78% 76% 72% 9/30/2013 Actuarial Valuation I B-5 GRS $12.0 $10.0 $8.0 Ul c § $6.0 :;8 $4.0 $2.0 $0.0 Ratio of Market Value of Assets to Present Value of Accrued Benefits 2010 2011 2012 2013 Actuarial Valuation Date (September 30) llllllilllllll Market Value of Assets •-'PV Accrued Benefits --+--Ratio 150% 100% ?;J Pl ...... 5" 50% 0% City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I 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 shott 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. GRS 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 10,559 65 9/30/13 7,429 10,895 68 *Reflects change in benefits, actuarial assumptions and/or method. City of Atlantic Beach Police Officers' Retirement System 9/30/20 13 Actuarial Valuation I B-7 GRS $14.0 $12.0 $10.0 U'l $8.0 ~ f§ ~ $6.0 $4.0 $2.0 $0.0 Ratio of Acttuuial Value of Assets to Actu~uial Accrued Liability • 2007 2008 2009 2010 2011 2012 2013 Actuarial Valuation Date (September 30) 1111111111111 Actuarial Assets 1-1 Accrued Liability ---+--Ratio 150% 100% 50% 0% City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I 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: GRS 1. Last Year's UAAL 2. Last Year's Employer Normal Cost (mid-year) 3. Last Year's Actual City Contibution 4. Interest at the assumed rate on: a. 1 for one year b. 2 for half a year c. 3 from dates paid d. a+ b-c 5. This Year's Expected UAAL 1 + 2-3 + 4d 6. This Year's Actual UAAL (before any changes in benefits or assumptions) 7. Net Actuarial Gain (Loss): (5)-(6) 8. Gain (Loss) due to investments 9. Gain (Loss) due to other sources City of Atlantic Beach Police Officers' Retirement System $3,679,313 231,884 609,012 294,345 9,275 24,360 279,260 3,581,445 3,466,384 115,061 (39,917) 154,978 9/30/2013 Actuarial Valuation I B-9 GRS Net actuarial gains (losses) in previous years have been as follows: 9/30/1998 95,019 95,019 9/30/1999 117,618 212,637 9/30/2000 (103,871) I 08,766 9/30/2001 1,389 110,155 9/30/2002 (128,212) (18,057) 9/30/2003 (339,563) (357,620) 9/30/2004 (207,808) (565,428) 9/30/2005 (287,225) (852,653) 9/30/2006 411,559 (441,094) 9/30/2007 (137,906) (578,999) 9/30/2008 (308,022) (887,021) 9/30/2009 (323,582) (1,210,603) 9/30/20 I 0 154,731 ( 1 ,055,872) 9/30/20 II (451,201) (1,507,073) 9/30/2012 (32,697) (1,539,770) 9/30/2013 115,061 (1,424,709) Actuarial Gain(+) or Loss ( -) $1 "' § $0 ~ $2 $1 "' = $0 ~ ($1) ~ ($2) ($1) ....____ _________________ _,__ ($3) Plan YearEnd 111111111!11111 Gain or Loss City of Atlantic Beach Police Officers' Retirement System --+-Cumulative 9/3 0/20 13 Actuarial Valuation I B-1 0 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. 9/30/2003 2.2 8.0 8.8 6.5 % 9/30/2004 2.4 8.0 11.2 6.5 9/30/2005 4.4 8.0 15.1 6.3 9/30/2006 7.8 8.0 1.5 6.7 9/30/2007 9.4 8.0 12.8 6.6 9/30/2008 4.6 8.0 2.1 6.6 9/30/2009 3.8 8.0 11.0 6.4 9/30/2010 4.7 8.0 (0.0) 6.4 9/30/2011 2.2 8.0 3.8 7.4 9/30/2012 7.9 8.0 (0.8) 7.6 9/30/2013 7.5 8.0 2.3 7.5 Average 5.1 % 6.0 % 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. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I B-11 GRS History of Investment Return -Actuarial Value of Assets 15% 10% 10% 5% 5% 0% -5% ~------------------------------------------------------~ -5% 0,~'? Plan Year End -Actual -+--Assruned History of Salary Increases 20% 15% 15% 10% 10% 5% 5% -5o/o ~------------------------------------------------------~ -5% 0,~'? Plan Year End Compared to Previous Year -Actual -Assumed City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I B-12 Valuation Date 9/30/03 • 9/30/04 9/30/05 9/30/06 9/30/07 • 9/30/08 9/30/09 9/30/10 9/30/11 9/30/12 • 9/30/13 IJ:J I w Number of Normal Cost** Active Inactive Reported Covered Actuarial Value of Members Members Annual Payroll Assets UAAL Amount %of Covered (in Thousands) 22 15 $ 1,129 $ 4,373 $ 1,613 $ 182 27 16 1,360 4,534 1,871 220 26 18 1,402 4,775 2,222 228 24 19 1,254 5,175 1,859 211 25 19 1,453 5,663 1,957 200 26 19 1,476 5,764 2,348 207 27 20 1,697 5,922 2,767 244 27 21 1,639 6,164 3,285 247 26 22 1,606 6,305 3,760 260 26 23 1,548 6,880 3,679 223 22 24 1,360 7,429 3,466 189 • 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. Payroll 16.12 % 16.21 16.25 16.84 13.74 13.99 14.36 15.08 16.17 14.40 13.92 GRS 50 40 30 20 10 $1.8 $1.5 $1.3 $1.0 $0.8 $0.5 $0.3 $0.0 0 Recent History of Number of Members Actuarial Valuation Date El Active Members llllln~tive Members Recent History of Covered Annual Payroll Actuarial Valuation Date City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I B-14 GRS End of Year To Required Contributions Which Valuation Valuation Applies % of Expected Actual Amount Payroll Contributions 9/30/06 9/30/08 $ 309,841 22.80 % $ 309,842 9/30/07 9/30/09 345,280 21.93 345,280 9/30/08 9/30/10 425,823 26.62 425,823 9/30/09 9/30/11 487,032 26.49 487,032 9130/10 9/30/12 628,909 36.18 628,898 9/30/11 9/30/13 606,741 35.63 609,012 9/30/12 9/30/14 671,506 41.04 9/30/13 9/30/15 680,462 47.16 • Reflects change in benefits, actuarial assumptions and/or method. City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I 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. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I B-16 Economic Assumptions The investment return rate assumed in the valuations is 8.00% per year, compounded annually (net of investment expenses). 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 I 0 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 1.88% 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. GRS Annual Rates for Salary Increase for Sample Ages Age: Expected Increase City of Atlantic Beach Police Officers' Retirement System 20 30 23.0% 9.8% 40 50 60 6.6% 5.7% 5.0% 9/30/2013 Actuarial Valuation I B-17 Demographic Assumptions The mortality rates used were taken from the gender specific RP-2000 Combined Healthy Participant Mortality Tables for males and females, with generational projections from the year 2000 Projection Scale AA. Sample mortality rates and life expectancy factors illustrated below apply to the valuation year and are projected to change in the future years. Sample Probability of Future Life Attained Dying Next Year Expectancy (years) Ages (in 2013) Men Women Men Women 50 0.17% 0.13% 34.17 35.58 55 0.28 0.24 29.05 30.61 60 0.55 0.47 24.13 25.84 65 1.06 0.91 19.53 21.35 70 1.82 1.57 15.35 17.24 75 3.15 2.53 11.58 13.52 80 5.65 4.19 8.38 10.22 This assumption is used to measure the probabilities of each benefit payment being made after retirement. For active members, the probabilities of dying before and after 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 retiremeut used to measure the probability of eligible members retiring under normal and early retirement eligibility during the next year were as follows: GRS Normal Retirement/DROP Retirement Ages 45 46 47 48 49 50 51 52-58 59 60 61-64 65 City of Atlantic Beach Police Officers' Retirement System Percent of Eligible Employees Retiring 40% 10% 10% 10% 40% 50% 50% 50% 50% 50% 50% 100% 9/30/2013 Actuarial Valuation I B-18 Early Retirement/DROP Retirement Percent of Eligible Ages Employees Retiring 50 10% 51 10% 52 10% 53 10% 54 10% 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 is used to model the probabilities of members remaining in employment. Rates of Separation from Active Employment Sample Ages ALL 25 30 35 40 45 50 55 60 Years of Service 0 2 3 4 5 & Over Assumptions 34.00% 23.00% 16.00% 12.00% 9.00% 5.88% 5.32% 4.40% 3.70% 3.20% 2.40% 1.40% 1.00% Rates of Disability among after members Percent Becoming Disabled Within Next Year Sample Ages Men Women 20 0.14% 0.14% 25 0.15% 0.15% 30 0.18% 0.18% 35 0.23% 0.23% 40 0.30% 0.30% 45 0.51% 0.51% 50 1.00% 1.00% 55 1.55% 1.55% 60 0.00% 0.00% The mortality table was set forward ten years for projecting disability costs. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I B-19 Miscellaneous and Technical Assumptions Administrative & Investment Expenses Benefit Service Decrement Operation Decrement Timing Eligibility Testing Fmfeitures Incidence of Contributions Marriage Assumption Normal Form of Benefit Pay Increase Timing Service Credit Accruals 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. Exact fractional service is used to determine the amount of benefit payable. Disability and mortality decrements do not operate during the first 5 years of service. Disability and separation do not operate during retirement eligibility. Decrements of all types are assumed to occur mid year. 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. Vested members who terminate with a benefit worth less than 100% of their own accumulated contributions were assumed to forfeit their vested benefit. 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. 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. The normal form of benefit is a life annuity with I 0 year certain. Beginning of fiscal year. This is equivalent to assuming that reported pays represent the actual amount paid during the previous fiscal year. It is assumed that members accrue one year of service credit per year. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I 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 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 Actuarial Present Value Amortization Experience Gain (Loss) Normal Cost Reserve Account Unfunded Actuarial Accrued Liability Valuation Assets 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. 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. 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. 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. 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. An account used to indicate that funds have been set aside for a specific purpose and is not generally available for other uses. The difference between the actuarial accrued liability and valuation assets. Sometimes referred to as "unfunded accrued liability." The value of current plan assets recognized for valuation purposes. Generally based on market value plus a portion of unrealized appreciation or depreciation. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I B-21 SECTION C PENSION FUND INFORMATION GRS Cash and Securities-Market Value Cash and Cash Equivalents Short Term Investments Treasury and Agency Bonds & Notes Corporate Bonds Common & Preferred Stocks Other Fixed Income Mutual or Pooled Bond Funds Mutual Funds Other Securities -Participant Directed Total Receivables and Accruals Member Contribution Additional Employer Contribution Interest and Dividends Total Payables Benefits-DROP Reserve Lump Sum Distributions Excess Premium Tax Liability Other Total Net Assets-Market Value City of Atlantic Beach Police Officers' Retirement System $ $ 85,328 $ 26,902 277,547 149,346 0 2,119,032 2,754,559 1,209,542 4,306,946 3,507,733 0 24,535 0 0 0 0 199,160 68,961 7,623,540 7,106,051 0 0 0 0 27,703 18,265 27,703 18,265 199,160 69,169 0 0 120,454 120,454 0 0 319,614 189,623 7,331,629 $ 6,934,693 9/30/2013 Actuarial Valuation I C-1 GRS Market Value at Beginning of Period Income Member Contributions State Contributions Employer Contribution Legal Settlement Interest and Dividends Realized and Unrealized Gain (Loss) Total Income Disbursements Monthly Benefit Payments Lump Sum Distributions Refund of Contributions Increase in Excess Premium Tax Liability Investment Related Expenses Other Administrative Expenses Insurance Premiums Total Disbursements Net Increase During Period Market Value at End of Period City of Atlantic Beach Police Officers' Retirement System $ $ $ 6,934,693 $ 6,056,405 77,406 75,667 91,077 88,795 517,935 540,103 26,587 0 146,121 144,410 247,703 698,385 1,106,829 1,547,360 651,941 599,459 0 0 0 5,478 0 0 30,857 38,225 27,095 25,910 0 0 709,893 669,072 396,936 $ 878,288 7,331,629 $ 6,934,693 9/30/2013 Actuarial Valuation I C-2 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 patticipating in the DROP plan. A reconciliation of the accumulated balance to be recognized is provided in the table below. GRS Value at beginning of year Payments credited to accounts Investment Earnings credited Withdrawals from accounts Value at end of year City of Atlantic Beach Police Officers' Retirement System $ 68,961 + 127,403 + 2,796 0 199,160 9/30/2013 Actuarial Valuation I C-3 ACTUARIAL VALUE OF ASSETS As of September 30, 2013 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 fi·action (1/nth per year, where n equals the number of years in the smoothing period) ofthe 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. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I C-4 DEVELOPMENT OF FUNDING VALUE OF ASSETS AS OF SEPTEMBER 30 2011 A. Preliminary actuarial value from prior year $ 6,164,269 B. Market value beginning of prior year 6,010,957 C. Market value end of prior year 6,056,405 D. Non-investment net cash flow [ contributions-(benefits & expenses)] 7,860 E. Investment return I. Actual market value return net of investment expenses: C -B -D 37,588 2. Expected return of 8.00% 481,191 3. Excess/( shortfall) to be phased-in: El -E2 (443,603) F. Phased-in recognition of investment return (4 Year Recognition) I. Current year: 25% ofE3 (1 10,901) 2. 25% of excess/(shmtfall) from first prior year 38,538 3. 25% of excess/( shortfall) from second prior year 6,855 4. 25% of excess/( shortfall) from third prior year (282,636) 5. Total phased-in recognition of investment return (348,144) G. Actuarial value end of year I. Preliminary actuarial value end of year: A+ D + E2 + F5 6,305,176 2. Upper corridor limit: 120% of C 7,267,686 3. Lower corridor limit: 80% ofC 4,845,124 4. Actuarial value end of year * 6,305,176 H. Difference between market value and actuarial value (248,771) I. Ratio of Funding Value to Market Value 104% * Offset for DROP Reserve made prior to the calculation of valuation assets. GRS City of Atlantic Beach Police Officers' Retirement System 2012 2013 2014 $ 6,305,176 $ 6,880,124 $ 7,428,849 6,056,405 6,934,693 7,331,629 6,934,693 7,331,629 73,718 33,969 804,570 362,967 487,461 556,134 317,109 (193,167) 79,277 (48,292) (I 10,901) 79,277 (48,292) 38,538 (110,901) 79,277 6,855 38,538 (I 10,901) 13,769 (41,378) (79,916) 6,880,124 7,428,849 8,321,632 8,797,955 5,547,754 5,865,303 6,880,124 7,428,849 54,569 (97,220) 99% 101% 9/30/2013 Actuarial Valuation I C-5 INVESTMENT RATE OF RETURN The investment rate of return has been calculated on the following bases: Basis 1 -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 n01mally called the Total Rate of Return. Basis 2-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. GRS 9/30/03 9/30/04 9/30/05 9/30/06 9/30/07 9/30/08 9/30/09 9/30/10 9/30/11 9/30/12 9/30/13 Average Compounded Rate of Return for 5 Years 10 Years City of Atlantic Beach Police Officers' Retirement System 9.5 % 2.2 % 6.7 2.4 8.5 4.4 8.8 7.8 14.2 9.4 (11.7) 4.6 8.5 3.8 10.8 4.7 1.2 2.2 13.9 7.9 5.7 7.5 7.9% 5.2% 6.4% 5.4% 9/30/2013 Actuarial Valuation I C-6 SECTION D FINANCIAL ACCOUNTING INFORMATION GRS A. Valuation Date B. Actuarial Present Value of Accumulated Plan Benefits I. Vested Benefits a. Members Currently Receiving Payments b. Terminated Vested Members c. Other Members d. Total 2. Non-Vested Benefits** 3. Total Actuarial Present Value of Accumulated Plan Benefits: I d + 2 4. Accumulated Contributions of Active Members C. Changes in the Actuarial Present Value of Accumulated Plan Benefits I. Total Value at Beginning ofYear 2. Increase (Decrease) During the Period Attributable to: a. Plan Amendment b. Change in Actuarial Assumptions c. Latest Member Data, Benefits Accumulated and Decrease in the Discount Period d. Benefits Paid (Including DROP Reserve) e. Net Increase 3. Total Value at End of Period D. Market Value of Assets E. Actuarial Assumptions -See page entitled Actuarial Assumptions and Methods September 30,2013 September 30, 2012* $ 7,027,197 $ 6,557,492 210,876 194,822 2,129,095 2,188,725 9,367,168 8,941,039 71,491 127,159 9,438,659 9,068,198 405,604 381,408 9,068,198 8,408,268 0 0 0 0 1,022,402 1,264,867 (651,941) (604,937) 370,461 659,930 9,438,659 9,068,198 7,331,629 6,934,693 *Results hm1e been updated to include Actuarial Impact Statement for Ordinance Number 58-13-36. City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I D-1 0 I N 9/30/2004 $ 4,534 $ 9/30/2005 4,775 9/30/2006 5,175 9/30/2007 * 5,663 9/30/2008 5,764 9/30/2009 * 5,922 9/30/2010 * 6,164 9/30/2011 6,305 9/30/2012 * 6,880 9/30/2013 7,429 SCHEDULE OF FUNDING PROGRESS (Dollar amounts in thousands) (GASB Statement No. 25) 6,405 $ 1,871 70.8% $ 6,997 2,222 68.2 7,034 1,859 73.6 7,620 1,957 74.3 8,112 2,348 71.1 8,689 2,767 68.2 9,449 3,285 65.2 10,065 3,760 62.6 10,559 3,679 65.2 10,895 3,466 68.2 • Reflects change in benefits, actuarial assumptions and/or method 1,360 137.6 % 1,402 158.5 1,254 148.2 1,453 134.7 1,476 159.1 1,697 163.1 1,639 200.4 1,606 234.1 1,548 237.7 1,360 254.8 \ GRS 9/30/2004 9/30/2005 9/30/2006 9/30/2007 * 9/30/2008 9/30/2009 * 9/30/2010 * 9/30/2011 9/30/2012 * 9/30/2013 SCHEDULE OF CONTRIBUTIONS FROM EMPLOYER (GASB Statement No. 25) 18.74 % $ 242,637 $ 242,637 24.31 297,361 297,361 23.76 350,161 350,160 25.70 390,494 390,494 22.80 309,841 309,842 21.93 345,280 345,280 26.62 425,823 425,823 26.49 487,032 487,032 36.18 628,909 628,898 35.63 606,741 609,012 *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. 100 % 100 100 100 100 100 100 100 100 100 City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I D-3 er 30 2013 2012 2011 A. Annual Required Contribution (ARC) $ 606,741 $ 628,909 $ 487,032 B. Interest on Net Pension Obligation (Asset) C. Adjustment to ARC D. Annual Pension Cost (APC): (A+ B -C) 606,741 628,909 487,032 E. Contributions made 609,012 628,898 487,032 F. Increase (decrease) in Net Pension Obligation(Asset): (D-E) (2,271) G. Net Pension Obligation( Asset) at beginning of year H. Net Pension Obligation( Asset) at end of year: (F+ G) (2,271) THREE YEAR TREND INFORMATION GRS 9/30/2011 9/30/2012 9/30/2013 $ 487,032 628,909 606,741 City of Atlantic Beach Police Officers' Retirement System $ 487,032 628,898 609,012 100.0% 100.0 100.4 $ (2,271) 9/30/2013 Actuarial Valuation I D-4 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: GRS 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 City of Atlantic Beach Police Officers' Retirement System September 30, 2013 40.86% 7.0% Entry Age Closed, Level % of Pay Method 11.01 Years See Section entitled "Actuarial Value of Assets" 8.0% 5.0%-23.0% 3.0% None 1.88% 9/30/2013 Actuarial Valuation I D-5 SECTION E MISCELLANEOUS INFORMATION GRS 1. Number Included in Last Valuation 2. New Members Included in CutTent Valuation 3. Non-Vested Employment Terminations 4. Vested Employment Terminations 5. Service Retirements 6. Disability Retirements 7. Deaths 8. DROP Retirement 9. Transfer to Another Division 10. Numberlncluded in This Valuation 2. Additions from Active Members 3. Lump Sum Payments/Withdrawals 4. Payments Commenced 5. Deaths 6. Other-Returned to Work 7. Number Included in This Valuation 2. Additions from Active Members ., Additions entering the DROP .), 4. Additions from Terminated Vested Members 5. Deaths Resulting in No Fmiher Payments 6. Deaths Resulting in New Survivor Benefits 7. End of Certain Period -No Fmiher Payments 8. Other --Lump Sum Distributions 9. Number Included in This Valuation City of Atlantic Beach Police Officers' Retirement System 26 26 0 2 (3) (I) 0 0 0 0 0 0 0 0 (I) (I) 0 0 22 26 0 0 0 0 0 (I) 0 0 0 0 4 4 0 I 0 1 0 0 0 0 0 0 0 0 20 19 9/30/2013 Actuarial Valuation I E-1 GRS STATISTICAL DATA Active Members as of September 30, 2013 0 0 0 0 0 2 0 2 5 2 0 0 2 0 0 0 0 0 0 0 0 0 0 0 5 10 4 City of Atlantic Beach Police Officers' Retirement System 0 0 0 0 0 0 0 0 2 0 0 0 0 0 0 0 0 0 2 0 0 0 9 0 0 0 3 0 0 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 22 9/30/2013 Actuarial Valuation I E-2 NUMBER ADDED TO AND REMOVED FROM ACTIVE MEMBERSHIP Year Ended September 30 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 5-yr. Totals 2009-2013 Expected for 2014 Number Added During Year A E 3 6 9 4 3 4 2 4 4 3 5 4 5 4 3 3 3 4 2 2 Q 1 13 17 A Represents actual number. Normal Retirement A E 0 0.1 0 0.3 2 0.6 1 1.0 1 0.2 I 0.1 I 0.1 0 0.4 2 1.0 I 1.0 ! 1.0 5 3.5 0.4 E Represents expected number. Terminations During Year Disability Died-in Withdrawal Retirement Service Vested Other Total A E A E A A A E I 0.1 0 0.0 2 3 5 1.3 0 0.0 0 0.0 2 2 4 1.1 0 0.0 0 0.0 I I 2 1.9 0 0.0 0 0.0 I 2 3 1.8 0 0.0 0 0.0 0 2 2 1.5 0 0.0 0 0.0 0 3 3 1.6 0 0.0 0 0.0 0 3 3 1.6 1* 0.0 0 0.0 1* 1 3 1.4 0 0.0 0 0.0 0 2 2 2.5 0 0.1 0 0.0 0 I I 2.5 Q 0.1 Q 0.0 Q ~ ~ 2.5 I 0.2 0 0.0 12 10.4 0.1 0.0 2.2 *Member retroactively approved for duty disability benefits (previously reported as vested terminated) Active Members End of Year 22 27 26 24 25 26 27 27 26 26 22 GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I E-3 Retired Members and Beneficiary Data Historical Schedule** Added Removed Net Increase September 30 No. Pensions No. Pensions No. Pensions 2003 2 30,148 2 30,148 2004 2005 2 I 06,731 2 106,731 2006 34,521 9,796 0 24,724 2007 43,455 43,455 2008 2 63,781 2 63,781 2009 2010 6,319 * I 14,935 (8,616) 2011 2 84,469 0 2 84,469 2012 2 68,629 * 0 2 68,629 2013 1 48,017 * 0 1 48,017 Expected for 2014 * One-time adjustment correcting past undmpayments ** Includes member retroactively approved for duty disabililty GRS City of Atlantic Beach Police Officers' Retirement System Expected End ofYear Removals No. Pensions No. Pensions 11 235,310 0.1 2,072 11 235,310 0.2 2,683 13 342,041 0.2 2,933 13 366,765 0.2 3,809 14 410,220 0.2 3,922 16 474,001 0.2 4,510 16 474,001 0.2 5,200 15 465,385 0.2 5,200 17 549,854 0.2 5,200 21 618,483 0.3 5,761 22 666,500 0.2 4,950 0.2 5,547 9/30/2013 Actuarial Valuation I E-4 SECTION F SUMMARY OF PLAN PROVISIONS 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. 58-13-36 passed and adopted on June 10, 2013. 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 pmiicipate, 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 not to exceed 300 hours, 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. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I F-1 I. Normal Retirement Eligibility: Benefit: Normal Form of Benefit: For members hired prior to January 1, 2013 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. For members hired on or after January 1, 2013 A participant may retire on the first day of the month coincident with or next following the earlier of: (1) Age 55 with 10 years of Credited Service, or (2) age 52 with 25 years of Credited Service. For members hired prior to January 1, 2013 3.00% ofFAC times Credited Service. Benefit is limited to 100% ofFAC. For members hired on or after January 1, 2013 2.00% ofFAC times Credited Service. Benefit is limited to 100% ofFAC. 10 Years Certain and Life thereafter; other options are also available. J. Early Retirement Eligibility: Benefit: Normal Form of Benefit: A member may elect to retire earlier than the Normal Retirement Eligibility upon attainment of age 50 with 10 years of Credited Service. 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. 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. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I F-2 L. Service Connected Disability Eligibility: Benefit: Normal Form of Benefit: Any member who becomes totally and permanently disabled due to a service related injmy 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. 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% ofF AC. 1 0 year ce1iain and life thereafter. M. Non-Service Connected Disability Eligibility: Benefit: Normal Form of Benefit: Any member with 8 1/3 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. 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 F AC if the member had at least 8 1/3 years of Credited Service. 10 year certain and life thereafter. N. Pre-Retirement Death Eligibility: Benefit: Normal Form of Benefit: Any member with 5 or more years of Credited Service is eligible for a death 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 F AC as of the date of death. 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 full time student. 0. Post Retirement Death GRS Benefit determined by the form of benefit elected upon retirement. City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I F-3 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. Q. Vested Termination Eligibility: Benefit: Normal Form of Benefit: For members hired prior to January 1, 2013 A participant has earned a non-forfeitable right to Plan benefits after the completion of 5 or more years of Credited Service. For members hired on or after January 1, 2013 A pmiicipant has earned a non-forfeitable right to Plan benefits after the completion of 10 or more years of Credited Service The benefit is the member's vested pmiion of the accrued Normal Retirement Benefit as of the date of termination. Benefit begins on the Normal Retirement date. I 0 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: Benefit: All non-vested members 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. The member who terminates employment receives a lump-sum payment of their employee contributions with interest. S. Member Contributions 7% as of October I, 2013 and increasing to 8% as of October 1, 20 14. T. Premium Tax Monies A distribution of casualty insurance premium tax monies collected by the State pursuant to Chapter 185 Florida Statutes. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I F-4 U. Employer Contributions v. 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 City Sec 185 Member Total 10/1/2008 16.44% 5.49% 4.815% 26.75% 10/1/2009 21.07% 5.55% 4.815% 31.44% 10/1/2010 21.66% 4.83% 4.815% 31.31% 10/1/2011 31.07% 5.11% 4.815% 41.00% 10/1/2012 30.13% 5.21% 5.111% 40.45% 10/1/2013 35.47% 5.57% 6.000% 47.04% 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: Benefit: Maximum DROP Period: Interest Credited: Normal Fonn of Benefit: Upon obtaining Normal or Early Retirement eligibility. All members must make a written election to participate in the DROP. 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 F AC. Benefits for members entering the DROP upon Early Retirement eligibility will be actuarially reduced as described for Early Retirement. 60 months Pmticipants' DROP account balances will be credited in accordance with the self-directed options selected by the pmticipant who entered the program prior to July 1, 2013. For all other pmticipants, DROP account balances will be credited qumterly with interest based on Plan's net investment earnings for that quarter. Lump Sum or roll-over to a qualified retirement account. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I F-5 SECTION G COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS GRS Number Included: Actives Service Retirees & Beneficiaries Disability Retirees Terminated Vested Members Total Members and Beneficiaries Total Annual Payroll Expected Annual Payroll in Contribution Year Total Annualized Benefits Service Retirees & Beneficiaries Disability Retirees Terminated Vested Members B. Assets (Market Value) Cash and Short Term Investments Treasury and Agency Bonds & Notes Corporate Bonds Common & Preferred Stocks Mutual Fund Bonds Mutual Fund Stocks Other Securities Net Receivables & Payables Total Actuarial Value Assets include: Accumulated active member contributions (with interest if applicable) C. Actuarial present value of accrued benefits (i) Vested accrued benefits Retired members and benefitciaries (incl DROP) Terminated members Active members (includes non-forfeitable members contributions of 405,604 and 381 ,408) Total (ii) Non-vested accrued benefits (iii) Total actuarial p.v. of accrued benefits (iv) Actuarial p.v. of accrued benefits at begin. of year (v) Changes attributable to: Amendments Assumption change Operation of decrements Benefit payments Other (Method Change) (vi) Net change (vii) Actuarial p.v. of accr. benefits at end of year 22 26 16 15 4 4 4 4 46 49 $1,360,245 $1,548,109 1,442,670 1,636,257 592,341 544,324 74,159 74,159 41,865 41,865 362,875 176,248 0 2,119,032 2,754,559 1,209,542 4,306,946 3,507,733 0 0 0 0 199,160 93,496 (291,911) (171,358) 7,331,629 6,934,693 7,428,849 6,880,124 405,604 381,408 7,027,197 6,557,492 210,876 194,822 9,367,168 8,941,039 71,491 127,159 9,438,659 9,068,198 9,068,198 8,408,268 none none none none 1,022,402 1,264,867 (651,941) (604,937) 0 0 370,461 659,930 9,438,659 9,068,198 *Reflects changes from Actuarial Impact Statement for Ordinance Number58-13-36. City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I G-1 D. Liabilities-Actuarial Present Value of Future Benefits 1. Active Members Service Retirement Benefits $5,192,002 $5,625,980 Vesting Benefits 411,721 433,728 Disability Benefits 199,745 217,796 Preretirement Death Benefits 43,825 47,852 Return of Member Contributions 75,452 96,932 Total Actives 5,922,745 6,422,288 2. Inactive Members Service Retirees & Beneficiaries 6,280,862 5,799,923 Disability Retirees 746,335 757,569 Terminated Vested Members 210,876 194,822 Total Inactive Members 7,238,073 6,752,314 3. Total Present Value for All Members 13,160,818 13,174,602 Total Present Value of: Future Salaries 12,024,091 13,816,592 Future Employee Contributions 921,938 1,060,877 Future Contributions from Other Sources 4,810,031 5,400,476 a. Total UAAL for Prior Valuation Date $3,679,313 $3,759,831 b. Employer Normal Cost for this period 231,884 270,003 c. Interest acccrued on (a) and (b) 303,620 311,586 d. Contributions for this period 609,012 628,898 e. Interest accrued on (d) 24,360 25,156 f. Changes due to: Assumptions 0 0 Plan Amendment 0 (40,750) Cost Method (Asset Method) 0 0 Actuarial (Gain) Loss (115,061) 32,697 Total Current UAAL: a+b+c-d-e+f 3,466 3,679,313 *Reflects changes from Actuarial Impact Statement for Ordinance Number58-13-36. GRS City of Atlantic Beach Police Officers' Retirement System 9/30/20 13 Actuarial Valuation I G-2 GRS 2 3 4 5 6 7 Gain 8 9/30/2007 Experience Loss 9 9/30/2008 Experience Loss 10 9/30/2009 Experience Loss 11 9/30/2010 Experience Gain 12 9/30/2011 13 14 Gain 15 9/30/1993 Changes 10 9/30/1994 Changes 11 9/30/1996 Changes 13 9/30/1997 Changes 14 9/30/2001 Changes 18 9/30/2003 Changes 20 9/30/2007 Benefit Changes 24 9/30/2012 Benefit Changes 29 9/30/1995 Assumption/Method Change 12 9/30/1997 Assumption/Method Change 14 9/30/2009 26 City of Atlantic Beach Police Officers' Retirement System (22,076) 18,349 (232) 20,379 74,845 51,425 339,563 229,589 30,043 207,808 156,572 39,690 287,225 234,816 (54,409) (411,559) (358,067) 17,455 137,906 125,814 37,344 308,022 291,268 35,979 323,582 300,698 (16,440) (154,731) (146,052) 45,377 451,201 425,666 3,260 32,697 3,061 (11,181) (115,061) (115,061) 70,263 442,232 548,025 (1,917) (12,597) (16,025) 5,023 35,914 47,122 1,193 8,892 11,745 9,246 81,627 106,073 14,130 144,006 171,703 ( 4,313) (49,157) (57,343) (2,868) (40,750) (2,552) 9/30/2013 Actuarial Valuation I G-3 GRS E. Pension Cost Entry Age Normal Cost for: Service Retirement Benefits $207,692 Vesting Benefits 19,264 Disability Benefits 11,985 Preretirement Death Benefits 1,963 Return of Member Contributions 17,924 Total Actives 258,829 Administrative Expenses 26,053 Expected Member Contributions 95,488 Total Employer Normal Cost 189,394 Payment Required to Ammiize Unfunded Actuarial Accrued Liability 414,495 Total Contribution at Valuation Date 603,889 Total Contribution Adjusted for Frequency of Payments and Interest to Next Following Fiscal Year 680,462 %of Expected Payroll 47.I6% Amount Expected to be Contributed by Members 100,987 %of Expected Payroll 7.000% F. Past Contributions-For the Fiscal Years Ended September 30 of2012 and 2013: Required Contribution Determined in the Valuation as of by the Plan Sponsor by Members Actual Contribution for the Fiscal Year ended by the Plan Sponsor Members G. Net experience (gain) loss during year: September 30, 20 I I $606,741 $82,005 September 30, 20 I3 609,012 $77 ($I 15,06I) H. I. 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) 2014 $3,296,034 2015 3,079,356 2016 2,856,882 2017 2,607,531 2018 2,352,960 2023 1,169,733 2029 585,485 2031 479,339 2035 297,446 2036 250,812 Contribution sufficient to contribution. $23I,870 2I,9I3 13,456 2,233 20,307 289,779 24,913 91,726 222,966 372,975 595,941 671,506 41.04% 98,175 6.000% September 30,2010 $628,909 $83,708 September 30, 20I2 $628,898 *Reflects changesfi'om Actuarial Impact Statement for Ordinance Number58-13-36. City of Atlantic Beach Police Officers' Retirement System 9/30/2013 Actuarial Valuation I G-4 GRS I. 1. Three-Year Comparison of Actual and Assumed Salary Increases (Annualized) 9/30/2011 9/30/2012 9/30/2013 3.8% (0.8)% 2.3% 7.4% 7.6% 7.5% 2. Three-Year Comparison of Investment Return (Actuarial Value) 9/30/2011 9/30/2012 9/30/2013 2.2% 7.9% 7.5% 8.0% 8.0% 8.0% 3. Average Annual Growth in Covered Payroll, Last Ten Years (if applicable) 9/30/2003 $1,129,034 9/30/2004 I ,360,051 9/30/2005 1,402,444 9/30/2006 1,254,264 9/30/2007 1,452,926 9/30/2008 1,476,074 9/30/2009 1,696,746 9/30/2010 1,639,155 9/30/2011 1,605,814 9/30/2012 1,548,109 9/30/2013 1,360,245 Total % Increase Last Ten Years 20.48% Annual % Increase 1.88% Thitty-year Forecast 4.00% J. Benefits and Expenses ofPlan 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 City of Atlantic Beach Police Officers' Retirement System 9/3 0/20 13 Actuarial Valuation I G-5