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Home My WebLink AboutCity of Lansing Employee Retirement System Actuarial Valuation 12.31.2015 Signed f r, 1� lag� City of Lansing Employees' Retirement System Actuarial Valuation For Funding and Contributions as of December 31, 2015 October, 2016 fm� BOOMERSMNE CONSULTING GROUP,u.c. City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation Table of Contents EXECUTIVE SUMMARY....................................................................................................................... 3 SECTION 1: PLAN ASSET INFORMATION ................................................................................................ 5 1.1:Summary of Plan Assets................................................................................................... 6 1.2: Development of Actuarial Value of Assets....................................................................... 7 1.3: Reconciliation of Fund Reserves....................................................................................... 8 SECTION 2: PARTICIPANT SUMMARY.................................................................................................... 9 2.1: Reconciliation of Plan Participants................................................................................. 10 2.2: Distribution of Active Participants.................................................................................. 11 SECTION 3:VALUATION SUMMARY.................................................................................................... 12 3.1:Summary of Actuarial Liability and Funding .................................................................. 13 3.2: Development of Employer Contributions ....................................................................... 14 SECTION 4:ACTUARIAL ASSUMPTIONS AND METHODS.......................................................................... 15 SECTION 5: SUMMARY OF PLAN BENEFITS........................................................................................... 18 GLOSSARY OF TERMS....................................................................................................................... 22 APPENDIX I: 20 YEAR PROJECTION OF FUNDING AND CONTRIBUTIONS...................................................... 23 APPENDIX II: HISTORY OF EMPLOYER CONTRIBUTIONS AND FUNDING PROGRESS........................................ 24 APPENDIX III: BENEFIT COSTS BY UNIT/FORMULA................................................................................. 26 BOOMERSHINI CONSULTING GROUP, s[ty�l n1 s R T14LA11 i PLA Was City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation October 31, 2016 City of Lansing Employees' Retirement System 124 W. Michigan Avenue 8th Floor Lansing, MI 48933 Executive Summary Members of the Board: The following report sets forth the Actuarial Valuation of the City of Lansing Employees' Retirement System (the System) as of December 31, 2015. The report is based on participant data and asset summary as of December 31, 2015 as submitted by the Plan Administrator and City finance department. We relied on this information without auditing it. INVESTMENT PERFORMANCE: The total Market Value of Plan Assets for the plan year ending December 31, 2015 was $197,212,909. Plan assets exclude from this a reserve for healthcare benefits. The total yield of the fund for the plan year ending December 31, 2015 was 2.2%on the market value of assets and 6.5%on an actuarial basis. The Plan uses a smoothing method to determine the City's contributions. Under this method, asset gains or losses are spread over a 5-year period. The gains and losses are determined every year by comparing actual investment returns with expected asset performance. Details of the development of the Actuarial Asset Value are shown on page 8. FUNDING RECOMMENDATIONS: The total recommended City contribution for fiscal year 2017 is $10,246,872. Last year the total recommended contribution was $10,181,620. Actuarial Loss on the Market Value of Assets and Actuarial Value of Assets due to investment returns being lower than the assumed rate of 7.6% and recognition of prior investment losses. This was partly offset by demographic gains, resulting in a slight increase in the City Contribution. FUNDING PROGRESS: The Actuarial Accrued Liability as of December 31, 2015 is $308,794,993 compared to the Actuarial Value of Assets (excluding healthcare reserve) of$176,031,902, resulting in a plan funded ratio of 57.0%. On a market value basis,this ratio is 55.8%. The purposes of this report are to establish the City contribution for the next fiscal year, and to evaluate the funding progress of the System. r BOOMERSH NE CONSULTING GRO UP, a i.�r. uc�j.L7.AUULQJjUM City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation The accounting report for the System, under GASB 67 and 68, is provided under separate cover, and serves a different purpose. All the figures presented in this report are to be used for funding and contribution purposes. This report has been prepared in accordance with generally accepted actuarial principles and practices. In the opinion of the Retirement Board and its actuary, the actuarial assumptions used are reasonable related to Retirement System experience and expectations, and represent the best estimate of Retirement System experience. The undersigned below are members of the American Academy of Actuaries, and are qualified to render the actuarial opinions presented in this report. Respectfully Submitted, BOOMERSHINE CONSULTING GROUP, L.L.C. r Gregory M. Stump, FSA, EA, MAAA, FCA Sunita K. Bhatia,ASA, EA, MAAA,ACA Chief Actuary Senior Consultant r BUOMERSH[h�CUNSUETfNGGRaUP,ur. SL k RL rIRLM"T IJAUULLrI'I[M City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation Section 1: Plan Asset Information BOwr4S H[h� �' CUNSiIE,TfNGGRaUP,u.r. J I AC71Ja.ALALk RLNRLM"T IJAUULLrI'I[M City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation 1.1: Summary of Plan Assets Market Value of Total Fund as of January 1, 2015 $204,492,610 Receipts: Employer Contribution - Pension Fund 10,181,620 Employer Contribution - Healthcare Reserve 200,000 Member Contributions 1,064,494 Adjustments Investment Income Interest 914,713 Dividends 614,188 Market Appreciation 3,423,323 Total Additions $16,398,338 Disbursements: Member Refunds 38,928 Distributions to Participants/ Beneficiaries 22,717,504 Administrative Expenses and Other 226,048 Investment Expenses 695,559 Total Disbursements $23,678,039 Net Increase/(Decrease) in Assets ($7,279,701) Market Value of Total Fund as of December 31,2015 $197,212,909 Allocation of Net Plan Assets Asset Class Market Value %of Total Cash and Short Term Investments 22,592,466 11.5% Equity 93,812,786 47.5% Fixed Income 64,546,894 32.7% Real Estate 18,471,263 9.4% Accounts payable (2,210,502) iLiLl TOTAL ASSETS $197,212,909 100.0% Estimated Rate of Return on Market Value for 2015: 2.16% ��,T B00MERSH[hT �'��' C0N5UE�TfNGGROUP,u.r. AC71Ja.AlAt k RL NRLM"T IJAUULLrI'I[M City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation 1.2: Development of Actuarial Value of Assets Market Value of Total Fund as of December 31,2014 $204,492,610 Plus: Contributions 11,446,114 Less: Benefit Payments, Refunds 22,756,432 Less: Admin Expenses 226,048 Plus: Expected Return during 2015 (@ 7.6%) 14,805,154 Expected Market Value $207,761,398 Actual Market Value of Total Fund as of December 31, 2015 $197,212,909 Asset Gain/(Loss)for 2015 Plan Year (10,548,489) Actuarial Value= Market Value of Total Fund as of December 31, 2015 $197,212,909 Less: 80%of 2015 Gain/(Loss) 80%* (10,548,489) (8,438,791) Less: 60%of 2014 Gain/(Loss) 60%* (2,809,882) (1,685,929) Less: 40%of 2013 Gain/(Loss) 40%* 10,553,104 4,221,242 Less: 20%of 2012 Gain/(Loss) 20%* 7,932,079 1,586,416 Total Deferred Gain/(Loss) (4,317,062) Actuarial Value of Assets,Total Fund - December 31, 2015 $201,529,971 (Market Value, less total deferred) as%of Market Value of Assets 102.2% Healthcare Reserve as of December 31, 2015 $24,951,628 Adjusted Healthcare Reserve' 25,498,069 Actuarial Value of Assets, Pension Plan - December 31, 2015 $176,031,902 Estimated Rate of Return on the Actuarial Value of Assets: 6.53% ' Takes into account asset smoothing 11tT'w= TCoUNROUP,ux. AC71Ja.AlAt k RL rIRLM"T IJAUULLrI'I[M City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation 1.3: Reconciliation of Fund Reserves EMPLOYEE SAVINGS RETIREMENT MEMBER BENEFIT HEALTHCARE FUND RESERVE RESERVE RESERVE TOTAL 1/1/2015 $ 16,838,899 $ 148,417,370 $15,897,412 $22,702,174 $203,855,855 Additions: EE Contributions $1,064,494 $ 1,064,494 ER Contributions $ 10,181,620 $200,000 $ 10,381,620 Interest: 3.00% 7.60% 7.15% 7.15% Annual Credits $505,167 $9,610,848 $ 1,082,421 $1,623,205 $ 12,821,641 Deductions: Refunds/Benefits $(38,928) $(21,958,850) $(758,654) $(22,756,432) Adjustment/Transfer $(3,077,778) $(5,076,980) ($426,249) $426,249 $(8,154,269) 12/31/2015 $15,291,854 $ 141,174,497 $15,794,930 $24,951,628 $197,212,909 Employees Savings Fund Purpose Keep track of employee contribution balances,and interest credited to such Relevance to Plan Funding Does not directly impact plan funding Retirement Reserve Fund Purpose Provides funds to finance regular benefit payments to retirees Relevance to Plan Funding Does not directly impact plan funding Member Benefit Reserve Purpose Provides funds to finance supplemental benefit payments to retirees based on prior early retirement programs (while reserve balance is positive). Relevance to Plan Funding Actuarial liability for supplemental benefit deemed to be equal to the value of the reserve Healthcare Reserve Purpose Funds invested with pension assets, but segregated to be used for retiree healthcare benefits Relevance to Plan Funding Excluded from pension assets to determine contributions towards pension funds r B00MERSH[h�CUNSi]ETfNGGROUP,ur. SL k RL NRLM"T 1JAUQLLrI'I[M City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation Section 2: Participant Summary �tA.CTII&TR BUOMERSH[h� I� � CowsSUE,TfNG GROUP,ux. I ^ I Lk RLNRLM"T IJAUULLrI'I[M City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation 2.1: Reconciliation of Plan Participants Active Vested Participants Terminations Retired Disabled Beneficiary Total Participants as of December 31, 2014 361 74 752 25 124 11336 Corrections 0 1 0 0 1 2 Retired (13) (5) 18 0 0 0 Terminated Vested (2) 2 0 0 0 0 Terminated Non-Vested (Member (3) 0 0 0 0 (3) Contributions refunded) Disabled 0 0 0 0 0 0 Deceased (4) 0 (17) (1) (4) (26) New Beneficiary/EDRO 0 0 0 0 10 10 Rehired 1 0 0 0 0 1 Terminated Non-Vested (Member (5) 0 0 0 0 (5) Contributions to be refunded) Transfers In 0 0 0 0 0 0 Transfers to Police and Fire Plan 0 0 0 0 0 0 New Hires 36 0 0 0 0 36 Data Adjustments 0 0 1 0 0 1 Participants as of December 31, 2015 371 72 754 24 131 1,352 Inactive Participants 12/31/2014 12/31/2015 Number of Retired Participants 752 754 Average Age 66.8 67.4 Average Annual Benefit $27,033 $27,192 Number of Disabled Participants 25 24 Average Age 62.1 62.0 Average Annual Benefit $18,432 $18,933 Number of Beneficiaries/EDROs 124 131 Average Age 73.0 72.7 Average Annual Benefit $12,361 $13,341 Number of Deferred Vested Participants 74 72 Average Age 51.0 51.0 Average Annual Benefit $11,213 $11,518 r BOOMERSH[h�CUNSUETfNGGRaUP,ur. SL k RL rIRLM"T IJAUULLrI'I[M City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation 2.2: Distribution of Active Participants Nearest -----Years of Credited Service----- Age <1 1 2 - 4 5 - 9 10 - 14 15 - 19 20 - 24 25+ Total <20 20-24 1 1 15,499 15,499 25-29 2 8 2 12 28,851 40,755 71,159 43,838 30-34 3 4 3 1 11 26,796 36,993 49,566 44,300 38,305 35-39 8 7 4 4 8 1 32 23,036 42,273 54,434 56,000 54,434 50,064 45,077 40-44 7 7 3 4 17 3 41 28,765 40,724 69,189 47,634 56,203 42,403 47,980 45-49 3 7 6 8 33 18 8 1 84 23,256 40,258 72,391 68,360 61,087 54,502 57,853 88,154 58,103 50-54 4 2 3 6 38 18 12 1 84 25,170 41,435 65,525 62,679 62,738 63,308 60,873 82,470 60,628 55-59 3 3 5 25 17 9 1 63 40,698 36,017 50,779 56,160 56,252 66,109 45,144 55,309 60-64 3 2 1 3 11 4 2 3 29 44,499 31,526 88,983 65,612 57,435 54,692 93,829 67,730 59,440 >64 1 1 7 3 1 13 21,888 110,895 56,749 63,967 71,323 61,019 Total 36 40 22 32 139 64 32 6 371 27,852 40,644 65,283 60,732 59,165 57,263 63,977 69,826 Males Females Total Total Compensation 12,806,584 7,556,384 20,362,968 Average Compensation 56,669 52,113 54,887 Arithmetic Averages: Nearest Age 48.99 49.30 49.11 Completed Years of Service 10.73 10.37 10.59 Salary-Weighted Averages: Nearest Age 49.95 50.23 50.06 Completed Years of Service 11.85 11.08 11.57 Number of Participants 226 145 371 Percent male/female 60.92 39.08 100.00% �tA.CTII&�R BDOMERSH[h� 1 Cl000n E�TfNG GRGUP,ux. L k RL NRLM"T IJAUULLrI'I[M City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation Section 3: Valuation Summary �tA.CTII&�R BoOMERSH[h� I� � CowsSUE,TfNG GROUP,ux. Lk RLNRLM"T IJAUULLrI'I[M City of Lansing Employees' Retirement System December 31,2015 Actuarial Funding Valuation 3.1: Summary of Actuarial Liability and Funding Progress Actuarial Accrued Liability 12/31/2014 12/31/2015 Active Employees $ 53,422,881 $ 52,775,962 Member Benefit Fund 16,534,167 15,801,354 Terminated Vested 5,823,137 5,753,407 Retirees and Beneficiaries 234,144,559 234,470,694 Total Actuarial Accrued Liability $ 309,924,744 $ 308,794,993 Actuarial Value of Assets 177,259,421 176,031,902 Unfunded Actuarial Accrued Liability 132,665,323 132,763,091 L Plan Funding Ratio 57.2% 57.0% llt.CTII&�Pj B00MERSH[h�CUNSUE�TfNG GROUP,ux. 13 I t k RL NRLM"T IJAUULLrI'I[M City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation 3.2: Development of Employer Contributions 12/31/2014 12/31/2015 1) Total Entry Age Normal Cost' $ 2,842,174 $ 2,818,470 2) Estimated Employee Contributions 1,072,734 1,158,291 3) Net City Normal Cost: (1)—(2) $1,769,440 $1,660,179 4) Valuation Payroll $ 22,391,750 $ 23,205,237 5) City Normal Cost Rate (%of pay): (3) - (4) 7.9% 7.2% 6) Amortization of Unfunded Actuarial Accrued Liability $8,106,040 $8,278,591 7) Amortization Rate (%of Pay): (6)- (4) 36.2% 35.7% 8) Total Contribution Rate: (5)+ (7) 44.1% 42.8% 9) Projected Fiscal Payroll $ 23,085,894 $ 23,924,600 L10) Total City Contribution for FY2017:(8)x(9) $ 10,181,620 $ 10,246,872 Estimated Cash Flow for Next Five Years Fiscal Year City Contribution* Member Contributions Benefit Payments 2018 $ 10,500,000 $ 1,200,000 $ 22,700,000 2019 10,900,000 1,200,000 23,000,000 2020 11,300,000 1,300,000 23,200,000 2021 11,800,000 1,300,000 23,500,000 2022 12,100,000 1,400,000 23,900,000 * City contribution will be impacted by actual experience as well as assumption changes in 2017 and later. 'A breakdown of the Normal Cost by bargaining unit is shown in Appendix III. r BoOMERSH[hTCUNSi]ETING GROUP,u r. SL k RL rIRLM"T IJAUULLr1'I[M City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation Section 4: Actuarial Assumptions and Methods �tA.CTII&�R BDOMERSH[h� � CowsSUE,TfNG GROUP,ux. Lk RLNRLM"T IJAUULLrI'I[M City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation Funding Method: Entry Age Normal Actuarial Cost Method. The contribution equals the sum of the normal cost and the amount necessary to amortize the unfunded actuarial liability as a level percent of payroll over a closed period of thirty years, decreasing by 1 year to an ultimate period of 15 years (26 years remaining as of December 31, 2015). Asset Smoothing Method: Investment gains and losses are determined annually and each is spread over a 5- year period. This is done on a total fund basis. The adjusted value of the healthcare reserve is then excluded from the valuation assets. Investment Return: 7.60%compounded annually, net of investment expenses Cost of Living (inflation): The cost of living as measured by the Consumer Price Index (CPI) is assumed to increase at the rate of 3.10% per year. Salary Increases: Increases in salary are assumed to be 3.10% annually, plus an additional amount that varies based on the service of the member as shown below: Years of Service UAW All Others 0-8 2.00% 1.50 9-10 2.00% 0.25 11+ 1.00% 0.25 Mortality: RP2000 Combined Healthy Tables set back one year for females. For Disabled members, the disabled versions of these tables are assumed. Each of these tables is projected to 2008 using Scale BB. Projected improvements in mortality for non-disabled members have been accounted for by projecting the table to 2023 using 50%of Scale BB. Percent Married: 90% of participants are assumed to be married. Male spouses are assumed to be three years older than their female spouse. Disability: Rates of disability vary based on the age of the member as shown below. Half of all disabilities are assumed to be duty related. Sample rates are shown below: Age Rate 20 0.0004 30 0.0004 40 0.0013 50 0.0041 60 0.0090 BOOMERSHINE �'� ' CONSULTING GROUP,u.r. A I&PJa ALSLkRLrIRLM"TIJAUULLUQN City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation Termination: Rates of termination vary based on the service of the member. Sample Rates are shown below: Years of Service UAW Others 0 10.0% 20.0% 1 7.0% 10.0% 2 5.0% 4.0% 3 5.0% 4.0% 4 5.0% 4.0% 5 4.0% 3.0% 10 1.0% 1.0% 15 1.0% 1.0% 20+ 0.5% 0.5% Retirement: Rates of retirement vary based on the age of the member as shown below. Rate is applied only if the member is eligible to retire. Age UAW Others 45-49 0.0% 10.0% 50-54 40.0% 10.0% 55-56 40.0% 15.0% 57 20.0% 15.0% 58 10.0% 25.0% 59 10.0% 10.0% 60 20.0% 15.0% 61 35.0% 15.0% 62-64 20.0% 15.0% 65-69 100.0% 50.0% 70+ 100.0% 100.0% Changes in assumptions since the prior valuation There have been no changes in assumptions since the prior valuation. The assumptions above are based on the most recent experience study, covering 2005 through 2011. An experience study is being conducted in 2016. BOOMERSHINE CONSULTING GRO UP,ux SLk RLNRLM"T IJAUU.LUQN City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation Section 5: Summary of Plan Benefits �tA.CTII&�R BDOMERSH[h� � CowsSUE,TfNG GROUP,ux. Lk RLNRLM"T IJAUULLrI'I[M City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation All benefits are subject to the language in the City Ordinance and relevant collective bargaining agreements. Employee Group Covered: Teamsters, UAW, Exempt, District Court(except Judges), Executive Pay, Newly hired elected officials do not become members of this Plan. Normal Retirement Age (All Members-New Plan): Age 50 with 25 years of service or at age 58 with 8 years of service. Normal Retirement Age(Old Plan): UAW-Age 50 with 25 years of service or at age 58 with 8 years of service.All Others-8 years of service and attainment of the earlier of age 58 or the age at which age plus service equals or exceeds 65. Normal Form of Benefit: Single life annuity Member Contributions: Old Plan New Plan UAW 2.95% 3.00%effective 10/18/2013 Teamsters 214 3.75% 6.5%(5.00%for hires after September 2012) Teamsters 243 3.50% 6.35%(5.00%for hires after (formerly Teamsters 580) 05/09/2014)for T243 CTP and Sup) District Court Teamsters 3.50% 5.50%(5.00%for hires after 04/01/2014 for DCT243) District Court Exempt 4.50% 5.50% Exempt 3.75% 6.50% Executive Pay Plan 3.75% 6.50% Elected Officials 3.25% No Defined Benefit Plan Compensation: Member's Salary, wages, and longevity bonus. In addition, Compensation may include up to 80 hours of compensatory time for members not eligible for overtime pay. Final Average Compensation: The average of the highest annual compensation paid over 2 consecutive years of credited service within the last 10 years of credited service immediately preceding a member's termination of employment. Normal Retirement Benefit Formula (New Plan): UAW 2.75% of Final Average Compensation times years of credited service; 1.70% of Final Average Compensation times years of credited service for new hires after October 18, 2013. Teamsters 214&Teamsters 243 1.80% of Final Average Compensation times years of credited service; (formerly Teamsters 580) 1.25% of Final Average Compensation times years of credited service for new hires after September 2012 in Teamsters 214 and hires after 05/19/2014 in T243 CTP and Sup. All Others 1.60% of Final Average Compensation times years of credited service; 1.25% of Final Average Compensation times years of credited service for new hires after 04/01/2014 in DCT243 BOOMERSHINE CONSULTING GROUP,OiP,ur A�,I&AJTSLkRLrIRLM" IJAUULLjQN . City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation Normal Retirement Benefit Formula (Old Plan): UAW and Elected 2.75% of Final Average Compensation times for the first 35 years of Officials credited service, plus 1.5% of Final Average Compensation for the next 5 years of service, plus 1.0% of Final Average Compensation for service in excess of 40 years, with a maximum of 100% of Final Average Compensation. District Court Teamsters 2.30%of Final Average Compensation times years of credited service. All Others 2.80% of Final Average Compensation times for the first 35 years of credited service, plus 1.5% of Final Average Compensation for the next 5 years of service, plus 1.0% of Final Average Compensation for service in excess of 40 years, with a maximum of 100% of Final Average Compensation. Termination Prior to Retirement Eligibility Vesting is after 8 years of credited service Form of Benefit Benefit is payable as a Life Annuity beginning at age 58 for new Plan Members and at the age at which age plus service equals 65 for Old Plan Members(except UAW). Duty Disability Eligibility Members are eligible for Duty Disability Retirement benefits immediately upon employment. Benefit Amount Benefit is paid at the effective date of disability retirement as a Life Annuity and is equal to the accrued Retirement Benefit, with additional service granted to age 60. During the worker's compensation period, the disability benefit may not exceed the difference between the member's final compensation and the worker's compensation amount. Upon the attainment of age 60, disabled retirees are transferred to service retirement status. Non Duty Disability Eligibility Members are eligible for Non Duty Disability Retirement benefits after completing 10 years of service. Benefit Amount Benefit is paid at the effective date of disability retirement as a Life Annuity and is equal to the accrued Retirement Benefit, with a minimum benefit equal to 25%of final average compensation. Death incurred in the Line of Duty Eligibility Benefit is payable to the survivors of a member who died as a result of an injury or disease arising out of and in the course of duty. Benefit Amount Benefit is paid upon termination of the survivor's workers' compensation period as a Life Annuity and is equal to the survivor's weekly workers' compensation converted to an annual basis. BOOMERSHINE CONSULTING GRO UP,ux SLk RLNRLM"T IJAUU.LUQN City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation Non Duty Pre-Retirement Death Eligibility The non-duty pre-retirement death benefit is payable upon the death of a member after earning 8 years of credited service. Benefit Amount Benefit is paid to the surviving spouse as a Joint and Survivor benefit and is computed in the same manner as the Normal Retirement Benefit. Optional Benefit Forms Prior to retirement, a member may elect to convert the retirement allowance into a benefit of equivalent actuarial value in accordance with one of the optional forms described below. a. Cash Refund Annuity - If a member dies before receiving the total value of accumulated member contributions, the remaining member contributions are payable to designated beneficiary(ies) at the time of death. b. 50%or 100%Joint and Survivor Annuity c. Social Security Level Income ("Equating Pension") -Any member who retires prior to age 65 may elect to have his retirement allowance actuarially equated to provide an increase retirement allowance to age 65, and a reduced retirement allowance payable thereafter. 'The increased retirement allowance shall approximate the sum of the member's reduced retirement allowance 'payable after age 65 and the member's estimated Social Security Primary Insurance Amount. Post-Retirement Benefit Adiustments One-time post-retirement benefit increases were granted in 1984, 1987 and 1998. Effective January 1, 1999, and each January 1 thereafter, certain eligible retirees and beneficiaries receive annual benefit increases,financed by the Members' Benefit Fund reserve while it maintains a positive balance. Retirees/Beneficiaries must meet both of the following conditions: 1) Has been retired at least 6 months as of the January 1 increase date 2)Age 60 as of the January 1 increase date For a retiree/beneficiary who elected a 50%or 100%Joint and Survivor Annuity,the maximum annual increase is equal to $200 ($100 for the beneficiary if 50% option is elected) times a ratio of the original Joint and Survivor benefit to the original straight life annuity benefit. For all other retirees/beneficiaries,the maximum annual increase is$200. Changes in Plan provisions since the prior valuation None. BOOMERSHINE CONSULTING GRO UP,ur A�� I&RTLULkRLrIRLM" IJAUijQN . City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation Glossary of Terms Actuarial Accrued Liability The portion of benefits deemed to be accrued by participants based on (AAL): past service. The AAL serves as the asset funding target, when annual contributions are determined. Actuarial Value of Assets (AVA): The smoothed value of assets, used to compute the Unfunded AAL. The purpose of the AVA is to control volatility in annual cash contributions. Amortization of Unfunded The portion of the annual cash contribution that represents a portion Liability: of the Unfunded AAL. The amortization can be positive or negative. Actuarially Determined The contribution determined by the actuary for funding purposes. Employer Contribution (ADEQ Market Value of Assets (MVA): The total value of Plan assets available to pay benefits. Normal Cost: That portion of the annual contribution that represents one year's accrual of benefits. In funding calculations, this is known as the Service Cost. Unfunded Actuarial Accrued The difference between the Actuarial Value of Assets and the Actuarial Liability: Accrued Liability, used for funding purposes. 'Cown SH[h� �' CONSi]E,TfNGGRaUP,u.r. AC71Ja.ALAL k RL NRLM"T 1JAUQLLrI'I[M City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation Appendix I: 20 Year Projection of Funding and Contributions The graphs below show a projection of expected funding progress and City contributions to the Fund. The actual funding progress and contributions over this time period will differ from what is shown here, due to the actual experience of the Plan. However, we can see that the Plan is on a path to eventually reducing the unfunded liability (top graph, red line) and improving the funding ratio by about 12% over the next 20 years. During this time, the City contribution rate is expected to remain near 40%-45% of pay, before eventually declining. Projection of Funding Progress 160,000,000 140,000,000 120,000,000 F—IFunding Ratio —Unfunded AAL(AVA) 100,000,000 69- 80,000,000 57%57% 57%59%59% 60%61%62%63%64%65%66%67%68% 60,000,000 40,000,000 20,000,000 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 Projection of City Contributions 20,000,000 50% 18,000,000 + + IIIIIIIIIIIIIAmortization =Normal Cost City Contrb(%Pay) 4531 16,000,000 ♦ 40% 14,000,000 ` 35% 12,000,000 30•/ 10,000,000 25% 8,000,000 20% 6,000,000 15% 41000,000 101% 2,000,000 5% 0% 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 �tA.CTII&TR BUOMERSH[h� I� � CoUN5U1✓TfNG GROUP,ux. I ^^ I Lk RLrIRLM"T IJAUULLrI'I[M City of Lansing Employees' Retirement System December 31,2015 Actuarial Funding Valuation Appendix II: History of Employer Contributions and Funding Progress Historical Employer Contributions Fiscal Year Ending Actuarially Actual Employer Determined Employer Contribution Contribution 6/30/2008 I $ 6,021,613 $ 6,021,613 6/30/2009 6,047,520 6,476,000 (1) 6/30/2010 6,472,341 6,043,861 (1) 6/30/2011 I 7,297,083 7,297,083 6/30/2012 7,596,879 7,523,534 (2) 6/30/2013 I 8,586,536 8,586,536 (3) 6/30/2014 9,361,000 9,361,000 6/30/2015 10,548,000 10,548,000 (4) 6/30/2016 10,182,000 10,182,000 6/30/2017 10,247,000 To be determined (1) The City contributed in excess of its FY 2009 Contribution. The City's FY 2010 contribution was reduced by the dollar amount of the FY 2009 overpayment. (2) The FY 2012 City contribution was reduced by $73,345 in recognition of additional contributions by United Auto Workers (UAW) employees, which were negotiated and contributed after the establishment of the June 30, 2012 Contribution from the December 31, 2010 valuation. (3) Fiscal year 2013 Contribution reflects changes made to actuarial assumptions based on an Experience Study. Changes included a decrease in the assumed rate of return from 8.0% to 7.8%. A closed amortization period was also adopted as of 12/31/2011, beginning at 30 years and decreasing each year until 15 years is reached. (4) Fiscal year 2015 Contribution reflects changes made to assumed return and inflation from 7.8%and 3.3%to 7.6%and 3.1%, respectively. �tA.CTII&�Pj BUOMERSH[h� 1 CoUNSUE�TfNG GROUP,ux. t k RL NRLM"T IJAUULLrI'I[M City of Lansing Employees' Retirement System December 31,2015 Actuarial Funding Valuation Historical Funding Progress Actuarial Value Actuarial Accrued Percentage Unfunded Actuarial Valuation Date of Assets(AVA) Liability(AAL) Funded Accrued Liability L J- 12/31/2006 $ 208,765,000 $ 251,427,000 83.0% $42,662,000 12/31/2007 208,572,000 254,356,000 82.0% 45,784,000 12/31/2008 I 200,600,000 258,331,000 77.7% 57,731,000 12/31/2009 I 193,324,000 262,298,000 73.7% 68,974,000 12/31/2010 187,440,590 269,461,935 69.6% 82,021,345 12/31/2011 177,100,863 287,306,707 61.6% 110,205,844 (5) 12/31/2012 167,569,807 293,974,433 57.0% 126,404,626 12/31/2013 172,687,582 313,258,746 55.1% 140,571,164 (6) 12/31/2014 177,259,421 309,924,744 57.2% 132,665,323 12/31/2015 176,031,902 308,794,993 57.0% 132,763,091 (5) Reflects changes made to actuarial assumptions based on an Experience Study, including a reduction in the assumed investment return 8.0%to 7.8%. (6) Reflects changes made to assumed return and inflation from 7.8% and 3.3% to 7.6% and 3.1%, respectively. 11tT'w= TCoUNROUP,ux. AC71Ja.AlAt k RL NRLM"T IJAUULLrI'I[M City of Lansing Employees' Retirement System December 31, 2015 Actuarial Funding Valuation Appendix III: Benefit Costs by Unit/Formula Total Net # Benefit Normal Employer Employee Group(s) _ Employees Multiplier Cost %of Pay Normal Cost %of Pay T214,T243,T243DC (1), 5 2.80% $ 57,997 15.4% $41,655 11.0% Teamsters Exempt, NBU 7 DCT(old) I 4 2.30% 32,260 12.1% 19,652 7.4% T214,T243,T243DC(11), 146 1.80% 1,130,128 11.9% 544,067 5.7% Council Staff T214,T243,T243DC (III) I 39 1.25% 178,557 5.7% 32,348 1.0% UAW 1 121 2.75% 1,000,040 16.7% 821,280 13.7% UAW II 15 1.70% 69,002 11.8% 51,409 8.8% NBU, Exec 41 1.60% 350,486 10.6% 149,768 4.5% All ERS Employees 371 N/A $2,818,47 12.2% $1,660,179 7.2% 0 llT'w= �,��CONROUP,u.r. 26 AC71Ja.AlAt k RL NRLM"T 1JAUQLLrI'I[M