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9-30-2016 Atlantic Beach Police Valuation Report CITY OF ATLANTIC BEACH POLICE OFFICERS’ RETIREMENT SYSTEM ANNUAL ACTUARIAL VALUATION AS OF SEPTEMBER 30, 2016 ANNUAL EMPLOYER CONTRIBUTION IS DETERMINED BY THIS VALUATION TO BE PAID IN THE EMPLOYER FISCAL YEAR ENDING SEPTEMBER 30, 2018 May 10, 2017 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, 2016 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, 2018. This report was prepared at the request of the Board of Trustees and is intended for use by the Retirement System and those designated or approved by the Board of Trustees. This report may be provided to parties other than the Retirement System only in its entirety and only with the permission of the Board of Trustees. GRS is not responsible for unauthorized use of this report. 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, 2018 and certain state reporting requirements under F.S. Ch. 112.63. This report should not be relied on for any purpose other than the purpose described above. Determinations of financial results associated with the benefits described in this report, for purposes other than those identified above may be significantly different. The computed contribution rate shown on page A-1 may be considered as a minimum contribution rate that complies with the Board’s funding policy and the State statute. Users of this report should be aware that contributions made at that rate do not guarantee benefit security. Given the importance of benefit security to any retirement system, we suggest that contributions to the Trust in excess of those presented in this report be considered. The contribution rate in this report is determined using the actuarial assumptions and methods disclosed in the section of this report entitled “Actuarial Assumptions and Cost Method”. This report does not include a robust assessment of the risks of future experience not meeting the actuarial assumptions. Additional assessment of risks was outside the scope of this assignment. We encourage a review and assessment of investment and other significant risks that may have a material effect on the plan’s financial condition. The developed findings included in this report consider data or other information through September 30, 2016. 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 scope of an actuarial valuation does not include an analysis of the potential range of such future measurements. The Board of Trustees May 10, 2017 Page 2 This valuation assumed the continuing ability of the plan sponsor to make the contributions necessary to fund this plan. A determination regarding whether or not the plan sponsor is actually able to do so is outside our scope of expertise and was not performed. In addition, this report was prepared using assumptions approved by the Board and prescribed by the Florida Statues as described in the section of this report entitled “Actuarial Assumptions and Cost Method”. The prescribed assumptions are the assumed mortality rates detailed in the Actuarial Assumptions and Cost Method section in accordance with Florida House Bill 1309 of 2015 (codified into Florida Statutes Chapter 112.63). 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 calculations are based upon assumptions regarding future events, which may or may not materialize. They are also based upon plan provisions that are outlined in this 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. Nicolas Lahaye and Piotr Krekora 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. This report has been prepared by actuaries who have substantial experience valuing public employee retirement systems. To the best of our knowledge the information contained in this report is accurate and fairly presents the actuarial position of the Retirement Plan as of the valuation date. All calculations have been made in conformity with generally accepted actuarial principles and practices, with the Actuarial Standards of Practice issued by the Actuarial Standards Board and with applicable statutes. 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 Nicolas Lahaye, FSA, EA, MAAA Consultant & Actuary Piotr Krekora, ASA, EA, 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 May 10, 2017 Date 17-07775 Enrollment Number TABLE OF CONTENTS SECTION TITLE PAGE A EXECUTIVE SUMMARY A-1 B VALUATION RESULTS 1. Participant Data B-1 2. Actuarially Determined 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 INFORMATION 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 MISCELLANEOUS INFORMATION 1. Reconciliation of Membership Data D-1 2. Statistical Data D-2 E SUMMARY OF PLAN PROVISIONS E-1 F COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS F-1 SECTION A EXECUTIVE SUMMARY City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 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 $970,930 $954,072 $16,858 As % of Expected Payroll 60.12 %72.68 %(12.56)% Expected Employee Contribution $129,204 $105,011 $24,193 As % of Covered Payroll 8.00 %8.00 %0.00 % Required Employer/State Contribution $841,726 $849,061 $(7,335) As % of Expected Payroll 52.12 %64.68 %(12.56)% Estimated State Contribution $112,972 $112,972 *$0 As % of Covered Payroll 6.99 %8.61 %(1.62)% Required Employer Contribution (If Made in Equal Monthly Installments)$728,754 $736,089 *$(7,335) As % of Covered Payroll 45.13 %56.08 %(10.95)% Required Employer Contribution (If Made in Whole at the Beginning of the Year)$702,132 $709,198 *(7,066) As % of Covered Payroll 43.48 %54.03 %(10.55)% IncreaseBased on 9/30/2015 For FYE 9/30/2018 For FYE 9/30/2017 Based on 9/30/2016 (Decrease)Valuation Valuation * Results have been updated to reflect higher than expected State Contribution. 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 $841,726 for the fiscal year ending September 30, 2018. The City may be able to use State premium tax moneys to satisfy part of that requirement, leaving the City contribution at $728,754 (assumed receipts are the same as in 2016). However, the City may need to contribute more, should receipts from the State fall short 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. For completeness, we are also presenting an amount required to be contributed if deposited in a single sum at the beginning of the contribution year in lieu of periodic installments. Revisions in Benefits There were no revisions in benefits for the current year. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | A-2 Revisions in Actuarial Assumptions or Methods The mortality tables were changed from the fully generational RP-2000 Combined Healthy Participant Mortality Tables for males and females with mortality improvements projected to all future years from the year 2000 using Scale AA, to the mortality rates used by the Florida Retirement System (FRS) for Special Risk Class members in the July 1, 2016 FRS Actuarial Valuation. The current FRS mortality tables for healthy members are the RP-2000 Combined Healthy Participant Mortality Tables (for pre-retirement mortality) and the RP-2000 Mortality Tables for Annuitants (for postretirement mortality), with mortality improvements projected to all future years after 2000 using Scale BB. For males, the base mortality rates include a 90% blue collar adjustment and a 10% white collar adjustment. For females, the base mortality rates include a 100% white collar adjustment. This change was made in compliance with Ch. 112.63 F.S., which requires all public pension plans in Florida to use the same mortality tables used in either of the last two actuarial valuations reports of FRS no later than October 1, 2016. The assumption change described above decreased the total required contribution by 0.53% of covered payroll. Recommendations We recommend a review of demographic assumptions including salary scale, retirement, and termination rates. The last such study was based on plan experience for the period ending September 30, 2010. An updated study is warranted to ensure actuarial assumptions remain in line with emerging demographic trends and the assumed long term rate of return reflects revisions in the Plan’s investment policy. Actuarial Experience There was a net actuarial loss this year which was partially due to a lower than expected recognized investment return on the actuarial value of assets (4.7% recognized, compared to the 7.0% assumed). The recognized return was low, despite a 9.4% market value return for the year, due to the recognition of deferred investment losses from the past three years. Higher than expected salary increases and lower than expected mortality also added to the experience loss. These losses were partially offset by the withdrawal of a deferred vested member. Analysis of Change in Employer Contribution The components of change in the actuarially required contribution are as follows: Contribution rate last year 56.08 % Payment on UAAL (12.68) Experience (gain)/loss 2.29 Change in administrative expense (0.99) Change in normal cost before expenses (0.66) Revision in benefits 0.00 Revision in assumptions/methods (0.53) Change in State Revenue 1.62 Contribution rate this year 45.13 % The covered payroll increased by more than 23% due to 5 new members hired during the year. This resulted in a significant reduction to the payment on the UAAL (in relation to payroll). The reduction in administrative expenses since the prior year and the drop in the employer normal cost rate (partly due to new employees earning benefits at the lower multiplier) also helped to lower the Employer contribution rate for the year. These reductions in the contribution rate were slightly offset by unfavorable plan experience during the year. Conclusion 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 9/30/2016 Actuarial Valuation | B-1 ACTIVE MEMBERS Number 23 19 Covered Annual Payroll $1,533,818 $1,246,622 Average Annual Payroll $66,688 $65,612 Average Age 36.6 37.4 Average Past Service 9.2 10.2 Average Age at Hire 27.4 27.2 RETIREES, BENEFICIARIES, & DROP MEMBERS Number 17 17 Annual Benefits $612,738 $612,738 Average Annual Benefit $36,043 $36,043 Average Age 63.6 62.6 DISABILITY RETIREES Number 4 4 Annual Benefits $74,159 $74,159 Average Annual Benefit $18,540 $18,540 Average Age 59.1 58.1 TERMINATED VESTED MEMBERS Number 5 6 Annual Benefits $62,469 $71,724 Average Annual Benefit $12,494 $11,954 Average Age 52.2 50.5 PARTICIPANT DATA September 30, 2016 September 30, 2015 City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | B-2 A.Valuation Date B.ADC to Be Paid During Fiscal Year Ending 9/30/2018 9/30/2018 9/30/2017 C.Assumed Date(s) of Employer Contrib.Monthly Monthly Monthly D.Annual Payment to Amortize Unfunded Actuarial Liability if Paid on the Valuation Date $523,936 $525,927 $550,295 E.Employer Normal Cost (including Administrative Expenses) if Paid on the Valuation 233,986 239,676 214,231 F.Actuarially Determined Contribution (ADC) if Paid on the Valuation Date: D+E 757,922 765,603 764,526 G.ADC Adjusted for Frequency of Payments and Interest to Required Time of Contribution 841,726 850,256 849,061 H.Covered Payroll for Contribution Year 1,615,044 1,615,044 1,312,639 I.ADC as % of Expected Covered Payroll in the Contribution Year G ÷ H 52.12 %52.65 %64.68 % J.Estimate of State Revenue in Contribution Year**112,972 112,972 112,972 * K.Actuarially Determined Contribution in Contribution Year 728,754 737,284 736,089 * L.ADEC as % of Covered Payroll in Contribution Year: K ÷ J 45.13 %45.66 %56.08 % M.Actuarially Determined Contribution if Paid on the First Day of the Contribution Year 702,132 710,350 709,198 * ACTUARIALLY DETERMINED CONTRIBUTION (ADC) After Changes Before Changes September 30, 2016 September 30, 2016 September 30, 2015 *Results have been updated for the 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 sufficient to meet the total employer contribution requirement. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | B-3 A.Valuation Date B.Actuarial Present Value of All Projected Benefits for 1.Active Members a. Service Retirement Benefits $7,078,967 $7,211,534 $6,140,916 b. Vesting Benefits 707,704 729,321 651,201 c. Disability Benefits 201,146 217,807 191,223 d. Preretirement Death Benefits 83,976 54,459 47,033 e. Return of Member Contributions 55,081 53,851 28,462 f. Total 8,126,874 8,266,972 7,058,835 2.Inactive Members a. Service Retirees & Beneficiaries 6,816,419 6,801,746 6,910,601 b. Disability Retirees 823,183 771,397 785,713 c. Terminated Vested Members 430,696 444,159 453,362 d. Total 8,070,298 8,017,302 8,149,676 3. DROP Balances*439,764 439,764 488,041 4. Excess Premium Tax Liability*120,454 120,454 120,454 5. Total for All Members 16,757,390 16,844,492 15,817,006 C.Actuarial Accrued (EAN Past Service) Liability (including reserves)*13,998,826 14,031,393 13,399,853 D.Actuarial Value of Accumulated Plan Benefits 12,002,866 12,007,370 11,688,360 E.Plan Assets (including reserves)* 1.Market Value 9,473,354 9,473,354 8,493,122 2. Actuarial Value 9,631,947 9,631,947 9,029,746 F.Actuarial Present Value of Projected Covered Payroll 13,528,737 13,564,000 11,205,487 G.Actuarial Present Value of Projected Member Contributions 1,082,299 1,085,120 896,439 ACTUARIAL VALUE OF BENEFITS AND ASSETS September 30, 2016September 30, 2016 September 30, 2015 Before ChangesAfter Changes * Includes DROP balances and Excess Premium Tax Liability. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | B-4 STATE PREMIUM TAX REVENUES A.Accumulated Excess Premium Tax Revenues at the Beginning of the Year $ 120,454 B.Chapter 185 Receipts During Fiscal Year Ending 9/30/2016 112,972 C.Chapter 185 "Frozen" Receipts During Fiscal Year Ending 9/30/1998 70,289 D.Qualifying Benefit Improvements Since Chapter 99-1 Effective Date 18,517 E.Additional 185 Receipts During Fiscal Year Ending 9/30/2016*24,166 F.Accumulated Excess Premium Tax Revenues as of 9/30/2016 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 Year Ending 9/30/2016 *Note: During the Fiscal Year ended 9/30/2016, “Chapter 185 receipts” totaled $112,972. 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 part of the Actuarially Determined Contribution. However, pursuant to the agreement between the City and the Police Benevolent Association, the City has now access to all Chapter 185 revenue to fund the Unfunded Actuarial Accrued Liability, subject to an actuarial certification, and consequently there was no increase in the Accumulated Excess Premium Tax Revenues (item E above). City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 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. 1.Accumulated Contributions of Active Members $584,757 $471,030 $432,695 2.APV of Projected Benefits in Pay Status and for Vested Terminations1 8,630,516 8,758,171 8,299,283 3.APV of Accrued Benefits for Active Participants (Employer Portion)2,787,593 2,459,159 2,274,229 4.Total 12,002,866 11,688,360 11,006,207 5.Market Value of Assets1 9,473,354 8,493,122 8,128,264 6.Assets as % of Total 79 %73 %74 % Police Officers 9/30/2016 9/30/2015 9/30/2014 1 DROP balances and Excess Premium Tax Liability are included. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | B-6 0% 50% 100% 150% $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 2010 2011 2012 2013 2014 2015 2016 R a t i o M i 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 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. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 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. 9/30/03 *$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 9/30/14 *,**8,270 12,656 65 9/30/15 **9,030 13,400 67 9/30/16 *,**9,632 13,999 69 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. ** DROP balances are being included in Actuarial Accrued Liability and in Plan Assets beginning with the September 30, 2014 Valuation. The Excess Premium Tax Liability is being included in Actuarial Accrued Liability and in Plan Assets beginning with the September 30, 2015 Valuation. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | B-8 0% 50% 100% 150% $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 R a t i o M i l l i o n s Actuarial Valuation Date (September 30) Actuarial Assets Accrued Liability Ratio City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 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 $4,370,107 2.Last Year's Employer Normal Cost 214,231 3.Last Year's Actual City and State Contributions 842,455 4.Interest at the assumed rate on: a. 1 for one year 305,907 b. 2 for one year 14,996 c. 3 from dates paid 29,486 d. a + b - c 291,417 5.This Year's Expected UAAL 1 + 2 - 3 + 4d 4,033,300 6.This Year's Actual UAAL (before any changes in benefits or assumptions)4,399,446 7.Net Actuarial Gain (Loss): (5) - (6)(366,146) 8.Gain (Loss) due to investments (173,785) 9.Gain (Loss) due to other sources (192,361) Derivation of Experience Gain (Loss) City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | B-10 Net actuarial gains (losses) in previous years have been as follows: Year Ended 9/30/1998 95,019 95,019 9/30/1999 117,618 212,637 9/30/2000 (103,871) 108,766 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) 9/30/2010 154,731 (1,055,872) 9/30/2011 (451,201) (1,507,073) 9/30/2012 (32,697) (1,539,770) 9/30/2013 115,061 (1,424,709) 9/30/2014 95,416 (1,329,292) 9/30/2015 (154,573) (1,483,865) 9/30/2016 (366,146) (1,850,011) Actuarial Gain (Loss) Cumulative Gain (Loss) ($2) ($1) $0 $1 $2 ($2) ($1) $0 $1 $2 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 9/30/2016 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. 9/30/2003 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 9/30/2014 6.3 8.0 7.8 7.5 9/30/2015 5.3 7.0 8.6 7.5 9/30/2016 4.7 7.0 10.5 7.3 Average 5.2 %---6.6 %--- Assumed Salary Increases Actual Investment Return (AVA) Year Ending Actual 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 9/30/2016 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 -5% 0% 5% 10% 15% 20% -5% 0% 5% 10% 15% 20% Plan Year End Compared to Previous Year History of Salary Increases Actual Assumed C i 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 ’ R e t i r e m e n t S y s t e m 9 / 3 0 / 2 0 1 6 A c t u a r i a l V a l u a t i o n | B - 1 3 Active Members Inactive Members 9/30/03 *22 15 $ 1,129 $ 4,373 $ 1,613 $ 182 16.12 % 9/30/04 27 16 1,360 4,534 1,871 220 16.21 9/30/05 26 18 1,402 4,775 2,222 228 16.25 9/30/06 24 19 1,254 5,175 1,859 211 16.84 9/30/07 *25 19 1,453 5,663 1,957 200 13.74 9/30/08 26 19 1,476 5,764 2,348 207 13.99 9/30/09 *27 20 1,697 5,922 2,767 244 14.36 9/30/10 *27 21 1,639 6,164 3,285 247 15.08 9/30/11 26 22 1,606 6,305 3,760 260 16.17 9/30/12 *26 23 1,548 6,880 3,679 208 13.44 9/30/13 22 24 1,360 7,429 3,466 176 12.92 9/30/14 *21 25 1,295 8,270 4,387 208 16.08 9/30/15 19 27 1,247 9,030 4,370 214 17.18 9/30/16 *23 26 1,534 9,632 4,367 234 15.26 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 9/30/2016 Actuarial Valuation | B-14 0 5 10 15 20 25 30 35 40 45 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 M i l l i o n s Actuarial Valuation Date Recent History of Covered Annual Payroll City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | B-15 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 9/30/10 *9/30/12 628,909 36.18 628,898 9/30/11 9/30/13 606,741 35.63 609,012 9/30/12 *9/30/14 654,280 39.99 659,420 9/30/13 9/30/15 665,091 46.10 677,542 9/30/14 *9/30/16 825,700 60.14 842,455 9/30/15 9/30/17 849,061 64.68 ---- 9/30/16 *9/30/18 841,726 52.12 ---- RECENT HISTORY OF REQUIRED AND ACTUAL CONTRIBUTIONS Required Employer/State Contributions Actual Employer/State 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 9/30/2016 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. Economic Assumptions The investment return rate assumed in the valuations is 7.00% per year, compounded annually (net of investment expenses). The price inflation rate assumed in this valuation was 2.5% 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 3.5%, 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 2.03% 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 assumed to be 7.00% per year, net of investment-related expenses. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | B-17 The rates of salary increases used in the valuation are illustrated in the following table. These rates include price inflation of 2.5%. Annual Rates for Salary Increase for Sample Ages Age:20 30 40 50 60 Expected Increase 22.5%9.3%6.1%5.2%4.5% Demographic Assumptions The mortality table for healthy lives is the RP-2000 Combined Healthy Participant Mortality Tables (for pre- retirement mortality) and the RP-2000 Mortality Table for Annuitants (for post-retirement mortality), with mortality improvements projected to all future years after 2000 using Scale BB. For males, the base mortality rates include a 90% blue collar adjustment and a 10% white collar adjustment. For females, the base mortality rates include a 100% white collar adjustment. These are the same rates used for Special Risk Class members of the Florida Retirement System (FRS) in the July 1, 2016 FRS Valuation, as mandated by Ch. 112.63 F.S. FRS Healthy Post-Retirement Mortality for Special Risk Class Members Sample Attained Ages (in 2016)Men Women Men Women 50 0.54 %0.23 %33.78 38.21 55 0.67 0.32 29.14 33.19 60 0.91 0.48 24.56 28.29 65 1.32 0.75 20.17 23.56 70 2.04 1.25 16.05 19.10 75 3.31 2.12 12.34 15.04 80 5.45 3.55 9.15 11.43 Probability of Future Life Dying Next Year Expectancy (years) This assumption is used to measure the probabilities of each benefit payment being made after retirement. FRS Healthy Pre-Retirement Mortality for Special Risk Class Members Sample Attained Ages (in 2016)Men Women Men Women 50 0.23 %0.15 %34.77 38.56 55 0.39 0.24 29.65 33.42 60 0.72 0.40 24.77 28.40 65 1.24 0.71 20.21 23.58 70 2.04 1.25 16.05 19.10 75 3.31 2.12 12.34 15.04 80 5.45 3.55 9.15 11.43 Probability of Future Life Dying Next Year Expectancy (years) This assumption is used to measure the probabilities of active members dying prior to retirement. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | B-18 For disabled retirees, the mortality table used was the 60% of the RP-2000 for Disabled Annuitants with ages set back 4 years for males and set forward 2 years for females, and 40% of the RP-2000 Annuitant Mortality Table with a White Collar adjustment with no age setback, both with no provision being made for future mortality improvements. These are the same rates currently used for Special Risk Class members of the Florida Retirement System (FRS) in the July 1, 2016 FRS Valuation, as mandated by Ch. 112.63 F.S. FRS Disabled Mortality for Special Risk Class Members Sample Attained Ages (in 2016)Men Women Men Women 50 1.67 %0.91 %23.74 27.06 55 2.03 1.26 20.77 23.37 60 2.47 1.67 17.91 19.90 65 3.07 2.24 15.15 16.62 70 3.90 3.18 12.52 13.58 75 5.30 4.60 10.02 10.86 80 7.59 6.66 7.80 8.48 Probability of Future Life Dying Next Year Expectancy (years) In the previous valuation, the mortality rates were the RP-2000 Combined Healthy Participant Mortality Tables for males and females with mortality improvements projected to all future years from the year 2000 using Scale AA. For disabled retirees, the regular mortality tables were set forward 10 years in ages to reflect impaired longevity. The rates of retirement used to measure the probability of eligible members retiring under normal and early retirement eligibility were as follows: Year of Percent of Eligible Eligibility Employees Retiring 1 40% 2 10% 3 10% 4 10% 5 40% 6 - 19 50% 20 and over 100% Normal Retirement/DROP Additionally, the rate of retirement is assumed to be 100% upon attainment of age 60 and completion of 5 years of service. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | B-19 Retirement Percent of Eligible Ages Employees Retiring 50 10% 51 10% 52 10% 53 10% 54 10% Early Retirement/DROP 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. Sample Years of Ages Service Assumptions ALL 0 34.00% 1 23.00% 2 16.00% 3 12.00% 4 9.00% 25 5 & Over 5.88% 30 5.32% 35 4.40% 40 3.70% 45 3.20% 50 2.40% 55 1.40% 60 1.00% Rates of Separation from Active Employment Rates of Disability among active members (67% of disability incidences are assumed to be service-connected) 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% Percent Becoming Disabled Within Next Year City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 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 9/30/2016 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 INFORMATION City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | C-1 Cash and Securities - Market Value Cash and Cash Equivalents $197,427 $68,372 Short Term Investments 620,200 2,577,334 Treasury and Agency Bonds & Notes 981,174 0 Corporate Bonds 891,469 434,533 Common & Preferred Stocks 4,570,906 4,921,487 Other Fixed Income 0 0 Mutual or Pooled Bond Funds 0 0 Mutual Funds 1,650,782 0 Other Securities - Participant Directed 439,764 488,041 Total 9,351,722 8,489,767 Receivables and Accruals State Contribution 112,972 0 Member Contribution 0 0 Employer Contribution 0 0 Interest and Dividends 8,660 3,355 Total 121,632 3,355 Payables Benefits-DROP Reserve *0 0 Lump Sum Distributions 0 0 Excess Premium Tax Liability*0 0 Other 0 0 Total 0 0 Net Assets - Market Value $9,473,354 $8,493,122 SUMMARY OF ASSETS 9/30/2016 9/30/2015 Year Ending Year Ending * DROP balances and Excess Premium Tax Liability are included for consistency with GASB Statements 67 and 68. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | C-2 Market Value at Beginning of Period $8,493,122 $8,128,264 Income Member Contributions 117,274 112,354 State Contributions 112,972 103,528 Employer Contribution 729,483 574,014 Interest and Dividends 141,006 51,010 Realized and Unrealized Gain (Loss)677,044 36,774 Total Income 1,777,779 877,680 Disbursements Monthly Benefit Payments 546,640 524,537 Lump Sum Distributions 184,154 0 Refund of Contributions 23,671 28,505 Increase in Excess Premium Tax Liability 0 0 Investment Related Expenses 13,149 44,250 Other Administrative Expenses 29,933 35,984 Insurance Premiums 0 0 Total Disbursements 797,547 633,276 Adjustment for new accounting principle *0 120,454 Net Increase During Period $980,232 $364,858 Market Value at End of Period $9,473,354 $8,493,122 PENSION FUND INCOME AND DISBURSEMENTS * DROP balances and Excess Premium Tax Liability are included for consistency with GASB Statements 67 and 68. Year Ending 9/30/2015 Year Ending 9/30/2016 City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | C-3 DEFERRED RETIREMENT OPTION PLAN (DROP) BENEFITS HELD IN RESERVE A reconciliation of the accumulated DROP account balances 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 488,041 119,859 16,018 184,154 439,764 City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | C-4 ACTUARIAL VALUE OF ASSETS As of September 30, 2016 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 Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | C-5 2014 2015 2016 2017 A.Preliminary actuarial value from prior year 7,428,849$ 8,269,551$ 9,029,746$ 9,631,947$ B.Market value beginning of year 7,331,629 8,128,264 8,493,122 9,473,354 C.Market value end of year 8,128,264 8,493,122 9,473,354 D.Non-investment net cash flow [contributions-(benefits & expenses)]353,317 175,331 E.Investment return 1.Actual market value return net of investment expenses: C - B - D 443,318 43,534 804,901 2.Expected return of 7.00% (8.00% before 2015)608,629 584,441 600,655 3.Excess/(shortfall) to be phased-in: E1 - E2 (165,311)(540,907)204,246 F.Phased-in recognition of investment return (4 Year Recognition) 1.Current year: 25% of E3 (41,328)(135,227)51,062 2.25% of excess/(shortfall) from first prior year (48,292)(41,328)(135,227)51,062 3.25% of excess/(shortfall) from second prior year 79,277 (48,292)(41,328)(135,227) 4.25% of excess/(shortfall) from third prior year (110,901)79,277 (48,292)(41,328) 5.Total phased-in recognition of investment return (121,244)(145,570)(173,785)(125,493) G.Actuarial value end of year 1.Preliminary actuarial value end of year: A + D + E2 + F5 8,269,551 9,029,746 9,631,947 2.Upper corridor limit: 120% of C 9,753,917 10,191,746 11,368,025 3.Lower corridor limit: 80% of C 6,502,611 6,794,498 7,578,683 4.Actuarial value end of year 8,269,551 9,029,746 9,631,947 H.Difference between market value and actuarial value (141,287)(536,624)(158,593) I.Ratio of Funding Value to Market Value 102%106%102% DEVELOPMENT OF FUNDING VALUE OF ASSETS AS OF SEPTEMBER 30 321,324* *Includes adjustment for inclusion of excess premium tax liability. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | C-6 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 normally 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. 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 9/30/13 5.7 7.5 9/30/14 5.8 6.3 9/30/15 0.5 5.3 9/30/16 9.4 4.7 7.0 %6.3 % 5.6 %5.6 % Actuarial ValueYear Ended Investment Rate of Return Average Compounded Rate of Return for 5 Years 10 Years Market Value SECTION D MISCELLANEOUS INFORMATION City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | D-1 A. 1.Number Included in Last Valuation 19 21 2.New Members Included in Current Valuation 5 2 3.Non-Vested Employment Terminations (1)(1) 4.Vested Employment Terminations 0 (1) 5.Service Retirements 0 0 6.Disability Retirements 0 0 7.Deaths 0 0 8.DROP Retirement 0 (1) 9.Vested Employment Terminations-Refunded 0 (1) 10.Number Included in This Valuation 23 19 B. 1.Number Included in Last Valuation 6 5 2.Additions from Active Members 0 1 3.Lump Sum Payments/Withdrawals (1)0 4.Payments Commenced 0 0 5.Deaths 0 0 6.Other-Returned to Work 0 0 7.Number Included in This Valuation 5 6 C. 1.Number Included in Last Valuation 21 20 2.Additions from Active Members 0 0 3.Additions entering the DROP 0 1 4.Additions from Terminated Vested Members 0 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 21 21 RECONCILIATION OF MEMBERSHIP DATA Active Members Service Retirees, Disability Retirees, Beneficiaries & DROP Terminated Vested Members From 9/30/14From 9/30/15 To 9/30/15To 9/30/16 City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | D-2 STATISTICAL DATA Active Members as of September 30, 2016 Age Group 0-4 5-9 10-14 15-19 20-24 25-29 30 & Up Totals Avg. Pay 20-24 NO.2 0 0 0 0 0 0 2 40,251 25-29 NO.4 0 0 0 0 0 0 4 54,084 30-34 NO.3 0 1 0 0 0 0 4 47,934 35-39 NO.0 2 1 0 0 0 0 3 64,503 40-44 NO.0 0 3 3 0 0 0 6 81,943 45-49 NO.0 0 1 1 0 1 0 3 88,959 50-54 NO.0 0 0 1 0 0 0 1 93,197 55-59 NO.0 0 0 0 0 0 0 0 0 60-64 NO.0 0 0 0 0 0 0 0 0 65&UP NO.0 0 0 0 0 0 0 0 0 TOT NO.9 2 6 5 0 1 0 23 66,688 City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | D-3 Active Year Members Ended Vested Other End of September 30 A E A E A E A E A A A E Year 2003 3 6 0 0.1 1 0.1 0 0.0 2 3 5 1.3 22 2004 9 4 0 0.3 0 0.0 0 0.0 2 2 4 1.1 27 2005 3 4 2 0.6 0 0.0 0 0.0 1 1 2 1.9 26 2006 2 4 1 1.0 0 0.0 0 0.0 1 2 3 1.8 24 2007 4 3 1 0.2 0 0.0 0 0.0 0 2 2 1.5 25 2008 5 4 1 0.1 0 0.0 0 0.0 0 3 3 1.6 26 2009 5 4 1 0.1 0 0.0 0 0.0 0 3 3 1.6 27 2010 3 3 0 0.4 1*0.0 0 0.0 1*1 3 1.4 27 2011 3 4 2 1.0 0 0.0 0 0.0 0 2 2 2.5 26 2012 2 2 1 1.0 0 0.1 0 0.0 0 1 1 2.5 26 2013 0 4 1 1.0 0 0.1 0 0.0 0 3 3 2.5 22 2014 2 3 0 0.4 0 0.1 0 0.0 3 0 3 2.2 21 2015 2 4 1 0.5 0 0.1 0 0.0 2 1 3 1.5 19 2016 5 1 0 0.5 0 0.0 0 0.0 0 1 1 1.5 23 5-yr. Totals 2012-2016 11 14 3 3.4 0 0.4 0 0.0 11 10.1 Expected for 2017 0.2 0.1 0.0 2.7 A Represents actual number. E Represents expected number. During Service Disability Died-in Withdrawal Year Retirement Retirement Service Total NUMBER ADDED TO AND REMOVED FROM ACTIVE MEMBERSHIP Number Added Terminations During Year * Member retroactively approved for duty disability benefits (previously reported as vested terminated) City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | D-4 September 30 No. Pensions No. Pensions No. Pensions No. Pensions No. Pensions 2003 2 30,148 2 30,148 11 235,310 0.1 2,072 2004 11 235,310 0.2 2,683 2005 2 106,731 2 106,731 13 342,041 0.2 2,933 2006 1 34,521 1 9,796 0 24,724 13 366,765 0.2 3,809 2007 1 43,455 1 43,455 14 410,220 0.2 3,922 2008 2 63,781 2 63,781 16 474,001 0.2 4,510 2009 16 474,001 0.2 5,200 2010 6,319 *1 14,935 (8,616) 15 465,385 0.2 5,200 2011 2 84,469 0 2 84,469 17 549,854 0.2 5,200 2012 2 68,629 0 2 68,629 19 618,483 0.3 5,761 2013 1 48,017 0 1 48,017 20 666,500 0.2 4,950 2014 0 0 0 0 - 20 666,500 0.2 5,547 2015 1 20,397 0 1 20,397 21 686,897 0.2 6,119 2016 0 0 0 0 - 21 686,897 0.3 6,815 Expected for 2017 0.3 9,139 Retired Members and Beneficiary Data Historical Schedule** Expected Added Removed Net Increase End of Year Removals * **Includes member retroactively approved for duty disabililty One-time adjustment correcting past underpayments SECTION E SUMMARY OF PLAN PROVISIONS City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | E-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. 58-13-36 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 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 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. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | E-2 I. Normal Retirement Eligibility: 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. Benefit: For members hired prior to January 1, 2013 3.00% of FAC times Credited Service. Benefit is limited to 100% of FAC. For members hired on or after January 1, 2013 2.00% 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. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | E-3 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. M. Non-Service Connected Disability Eligibility: 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. 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. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | E-4 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: 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 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 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 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. Benefit: The member who terminates employment receives a lump-sum payment of their employee contributions with interest. S. Member Contributions 8.0% 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 assumed contribution rates per recent valuations: City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | E-5 Contribution Year Beginning City State Sec 185 Member Total 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 34.42%5.57%7.000%46.99% 10/1/2014 39.43%6.67%8.000%54.10% 10/1/2015 52.60%7.54%8.000%68.14% 10/1/2016 56.08%8.61%8.000%72.69% 10/1/2017 45.13%6.99%8.000%60.12% 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: Participants’ DROP account balances will be credited in accordance with the self-directed options selected by the participant who entered the program prior to July 1, 2013. For all other participants, DROP account balances will be credited or debited quarterly with interest based on Plan’s net investment earnings or losses for that quarter. Normal Form of Benefit: Lump Sum or roll-over to a qualified retirement account. SECTION F COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | F-1 A.Participant Data Number Included: Actives 23 23 19 Service Retirees & Beneficiaries 17 17 17 Disability Retirees 4 4 4 Terminated Vested Members 5 5 6 Total Members and Beneficiaries 49 49 46 Total Annual Payroll $1,533,818 $1,533,818 $1,246,622 Expected Annual Payroll in Contribution Year 1,615,044 1,615,044 1,312,639 Total Annualized Benefits Service Retirees & Beneficiaries 612,738 612,738 612,738 Disability Retirees 74,159 74,159 74,159 Terminated Vested Members 62,469 62,469 71,724 B.Assets (Market Value)* Cash and Short Term Investments 817,627 817,627 2,645,706 Treasury and Agency Bonds & Notes 981,174 981,174 0 Corporate Bonds 891,469 891,469 434,533 Common & Preferred Stocks 4,570,906 4,570,906 4,921,487 Mutual Fund Bonds 0 0 0 Mutual Fund Stocks 1,650,782 1,650,782 0 Other Securities 439,764 439,764 488,041 Net Receivables & Payables 121,632 121,632 3,355 Total 9,473,354 9,473,354 8,493,122 Actuarial Value 9,631,947 9,631,947 9,029,746 Assets include: Accumulated active member contributions 584,757 584,757 471,030 (with interest if applicable) C.Actuarial present value of accrued benefits (i)Vested accrued benefits Retired members and benefitciaries 7,639,602 7,573,143 7,696,314 Terminated members 430,696 444,159 453,362 DROP Balances*439,764 439,764 488,041 Excess Premium Tax Liability*120,454 120,454 120,454 Active members (includes non-forfeitable members contributions of 584,757 and 471,030)3,267,111 3,322,853 2,868,753 Total 11,897,627 11,900,373 11,626,924 (ii)Non-vested accrued benefits 105,239 106,997 61,436 (iii)Total actuarial p.v. of accrued benefits 12,002,866 12,007,370 11,688,360 (iv)Actuarial p.v. of accrued benefits at begin. of year 11,688,360 11,688,360 11,006,207 (v)Changes attributable to: Amendments none none none Assumption change (4,504)none 0 Operation of decrements 1,073,475 1,073,475 1,114,741 Benefit payments (754,465)(754,465)(553,042) Other (Method Change)0 0 120,454 (vi)Net change 314,506 319,010 682,153 (vii)Actuarial p.v. of accr. benefits at end of year 12,002,866 12,007,370 11,688,360 COMPARATIVE SUMMARY OF PRINCIPLE VALUATION RESULTS September 30, 2015September 30, 2016 September 30, 2016 Before ChangesAfter Changes * DROP balances and Excess Premium Tax Liability are included. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | F-2 D.Liabilities- Actuarial Present Value of Future Benefits 1. Active Members Service Retirement Benefits $7,078,967 $7,211,534 $6,140,916 Vesting Benefits 707,704 729,321 651,201 Disability Benefits 201,146 217,807 191,223 Preretirement Death Benefits 83,976 54,459 47,033 Return of Member Contributions 55,081 53,851 28,462 Total Actives 8,126,874 8,266,972 7,058,835 2. Inactive Members Service Retirees & Beneficiaries 6,816,419 6,801,746 6,910,601 Disability Retirees 823,183 771,397 785,713 Terminated Vested Members 430,696 444,159 453,362 Total Inactive Members 8,070,298 8,017,302 8,149,676 3. DROP Balances 439,764 439,764 488,041 4. Excess Premium Tax Liability 120,454 120,454 120,454 5. Total Present Value for All Members 16,757,390 16,844,492 15,817,006 Total Present Value of: Future Salaries 13,528,737 13,564,000 11,205,487 Future Employee Contributions 1,082,299 1,085,120 896,439 Future Contributions from Other Sources 6,043,144 6,127,425 5,890,821 Derivation of Current Employer Unfunded Actuarial Accrued Liability (UAAL) a.Total UAAL for Prior Valuation Date $4,370,107 $4,370,107 $4,386,911 b.Employer Normal Cost for this period 214,231 214,231 208,220 c.Interest acccrued on (a) and (b)320,903 320,903 321,659 d.Contributions for this period 842,455 842,455 677,542 e.Interest accrued on (d)29,486 29,486 23,714 f.Changes due to: Assumptions (32,567)0 0 Plan Amendment 0 0 0 Cost Method (Asset Method)0 0 0 Actuarial (Gain) Loss 366,146 366,146 154,573 g.Total Current UAAL: a+b+c-d-e+f 4,366,879 4,399,446 4,370,107 COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS September 30, 2016September 30, 2016 September 30, 2015 Before ChangesAfter Changes City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | F-3 Date Item Description Years Remaining Amortization Payment 9/30/2002 Experience Loss 1 19,885 128,212 9/30/2003 Experience Loss 2 51,583 339,563 9/30/2004 Experience Loss 3 30,216 207,808 9/30/2005 Experience Loss 4 39,841 287,225 9/30/2006 Experience Gain 5 (54,431)(411,559) 9/30/2007 Experience Loss 6 17,392 137,906 9/30/2008 Experience Loss 7 37,053 308,022 9/30/2009 Experience Loss 8 35,544 323,582 9/30/2010 Experience Gain 9 (16,170)(154,731) 9/30/2011 Experience Loss 10 44,438 451,201 9/30/2012 Experience Loss 11 3,179 32,697 9/30/2013 Experience Gain 12 (10,855)(115,061) 9/30/2014 Experience Gain 13 (8,892)(95,416) 9/30/2015 Experience Loss 14 14,032 154,573 9/30/2016 Experience Loss 15 33,344 366,146 9/30/1993 Benefit Changes 7 69,716 442,232 9/30/1994 Benefit Changes 8 (1,894)(12,597) 9/30/1996 Benefit Changes 10 4,919 35,914 9/30/1997 Benefit Changes 11 1,163 8,892 9/30/2001 Benefit Changes 15 8,866 81,627 9/30/2003 Benefit Changes 17 13,441 144,006 9/30/2007 Benefit Changes 21 (4,042)(49,157) 9/30/2012 Benefit Changes 26 (2,643)(40,750) 9/30/1995 Assumption/Method Change 9 46,448 323,633 9/30/1997 Assumption/Method Change 11 30,307 231,795 9/30/2009 Assumption/Method Change 23 2,972 40,694 9/30/2010 Assumption/Method Change 24 43,850 630,507 9/30/2014 Assumption/Method Change 28 76,665 1,234,336 9/30/2016 Assumption/Method Change 30 (1,991)(32,567) TOTAL $523,936 $4,998,732 27,879 (101,638) (40,373) (54,969) 160,458 97,355 (88,280) 146,869 86,503 225,901 (32,567) Original and Current Unfunded Actuarial Accrued Liabilities Original Amount Current Unfunded 1,214,767 265,803 242,180 642,572 42,551 19,885 100,770 10,196 148,601 366,146 425,038 (12,907) 40,087 (248,020) 348,222 $4,366,879 92,960 (121,228) 362,118 City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | F-4 E.Pension Cost Entry Age Normal Cost for: Service Retirement Benefits $248,533 $253,348 $212,124 Vesting Benefits 47,796 49,155 41,516 Disability Benefits 14,013 15,424 12,643 Preretirement Death Benefits 4,266 2,517 2,093 Return of Member Contributions 14,868 14,741 11,487 Total Actives 329,476 335,185 279,863 Administrative Expenses 29,933 29,933 35,984 Expected Member Contributions 125,423 125,442 101,616 (Assuming employee contrib rate applicable to the contrib year) Total Employer Normal Cost 233,986 239,676 214,231 Payment Required to Amortize Unfunded Actuarial Accrued Liability 523,936 525,927 550,295 Total Contribution at Valuation Date 757,922 765,603 764,526 Total Contribution Adjusted for Frequency of Payments and Interest to Next Following Fiscal Year 841,726 850,256 849,061 % of Expected Payroll 52.12%52.65%64.68% Amount Expected to be Contributed by Members 129,204 129,204 105,011 % of Expected Payroll 8.000%8.000%8.000% F.Past Contributions- For the Fiscal Years Ended September 30 of 2015 and 2016: Required Contribution Determined in the Valuation as of September 30, 2014 September 30, 2013 For the Year Ending:September 30, 2016 September 30, 2015 by the Plan Sponsor (Including Expected Premium Tax Revenues)$825,700 $665,091 by the Plan Sponsor (Excluding Expected Premium Tax Revenues)$729,483 $574,014 Expected Premium Tax Revenues $96,217 $91,077 by Members $109,844 $115,414 Actual Contribution for the Fiscal Year ended September 30, 2016 September 30, 2015 by the Plan Sponsor $729,483 $574,014 Premium Tax Revenues $112,972 $103,528 by Members $117,274 $112,354 G.Net experience (gain) loss during year:$366,146 $154,573 COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS September 30, 2015September 30, 2016 September 30, 2016 Before ChangesAfter Changes City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | F-5 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 2016 $4,366,879 2017 $4,111,935 2018 3,849,488 2019 3,614,956 2020 3,388,115 2021 3,181,853 2026 2,029,955 2031 1,446,091 2036 986,549 2041 343,371 2046 0 3. Action taken since last actuarial valuation. Contribution sufficient to satisfy the total required contribution. City of Atlantic Beach Police Officers’ Retirement System 9/30/2016 Actuarial Valuation | F-6 I.1. Three-Year Comparison of Actual and Assumed Salary Increases (Annualized) Actual Assumed 7.8 %7.5% 8.6 %7.5% 10.5 %7.3% 2. Three-Year Comparison of Investment Return (Actuarial Value) Actual Assumed 6.3%8.0% 5.3%7.0% 4.7%7.0% 3. Average Annual Growth in Covered Payroll, Last Ten Years (if applicable) Total % Increase Last Ten Years 22.29 % Annual % Increase 2.03 % Thirty-year Forecast 3.50 % 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 1,254,264 COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS Year Ended Total Covered PayrollValuation Date 9/30/2014 9/30/2015 9/30/2016 Year Ended 9/30/2014 9/30/2015 9/30/2016 9/30/2015 1,246,622 9/30/2016 9/30/2011 9/30/2014 1,294,600 9/30/2012 9/30/2013 1,605,814 1,548,109 1,360,245 1,533,818 1,452,926 9/30/2006 9/30/2007 1,639,155 9/30/2008 9/30/2010 9/30/2009 1,696,746 1,476,074