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Home My WebLink AboutPolice and Fire Actuarial Valuation 12.31.2015 Signed �r City of Lansing Police and Fire Retirement System Actuarial Valuation For Funding and Contributions as of December 31, 2015 October, 2016 T BUOMERSH[h� . (: NSULTING GROUP,Ux. dQ,I,J,I1UALi RL fIRLAIJItii I�YI]LLrI'I[17:G City of Lansing Police and Fire 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 Progress ................................................... 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 Police and Fire Retirement System December 31, 2015 Actuarial Funding Valuation Executive Summary October 24, 2016 City of Lansing Police and Fire Retirement System 124 W. Michigan Avenue 8th Floor Lansing, MI 48933 Members of the Board: The following report sets forth the Actuarial Valuation of the City of Lansing Police and Fire 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 $310,270,615. 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 -0.1%% on the market value of assets and 7.2% on an actuarial basis,taking into account asset smoothing. 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 7. FUNDING RECOMMENDATIONS: The total recommended City contribution for fiscal year 2015 is $11,521,768. Last year the total recommended contribution was $10,884,312. There was an actuarial loss on the Actuarial Liability due to salary increases more than the assumed which resulted in an increase in the City Contribution, as well as more retirements than expected. FUNDING PROGRESS: The Actuarial Accrued Liability as of December 31, 2014 is $410,189,555 compared to the Actuarial Value of Assets of $292,531,481, resulting in a plan funded ratio of 71.3%. Using the market value of assets,this ratio is 68.6%. rBOOMERSHE 1 CONSULTING GROUP,a uc-�j.L7.AUULQJjUM City of Lansing Police and Fire Retirement System December 31, 2015 Actuarial Funding Valuation 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. 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 is 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. Gregory M. Stump, FSA, EA, MAAA, FCA Sunita K. Bhatia,ASA, EA, MAAA,ACA Chief Actuary Senior Consultant barBOOMERSHINE CONSULTING GROUP,ux ,,_. QM1 i RLTIRLAlltii I Yi jJ(�yM' City of Lansing Police and Fire 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 Police and Fire Retirement System December 31, 2015 Actuarial Funding Valuation 1.1: Summary of Plan Assets Market Value of Total Fund as of January 1, 2015 $325,637,582 Receipts: Employer Contribution 10,884,312 Employer Contribution - Healthcare Reserve 585,000 Member Contributions 2,826,578 Adjustments Investment Income Interest 1,146,100 Dividends 1,018,265 Market Appreciation (1,647,671) Total Additions $14,812,584 Disbursements: Member Refund 107,871 Distributions to Participants/ Beneficiaries 28,777,990 Administrative Expenses and Other 221,589 Investment Expenses 1,072,100 Total Disbursements $30,179,551 Net Increase/(Decrease) in Assets ($15,366,967) Market Value of Total Fund as of December 31,2015 $310,270,615 Allocation of Net Plan Assets as of December 31, 2015 Asset Class Market Value %of Total Cash and Short Term Investments $ 28,062,259 9.0% Equity 176,314,169 56.8% Fixed Income 86,915,794 28.0% Real Estate 20,594,271 6.7% Accounts payable (1,615,879) -0.5% TOTAL ASSETS $310,270,615 100.0% Estimated Rate of Return on Market Value for 2015 (0.1%) ��,T B00MERSH[hT �'��' C0N5Uf✓TING GROUP,u.r. AC71Ja.ALAL k RL rIRLM"T IJAUULLrI'I[M City of Lansing Police and Fire 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 $ 325,637,582 Plus: Contributions 14,295,890 Less: Benefit Payments, Refunds 28,885,862 Less: Admin Expenses 221,589 Plus: Expected Return during 2015 (@ 7.6%) 23,868,996 Expected Asset Value $334,695,017 Actual Market Value of Total Fund as of December 31, 2015 $310,270,615 Asset Gain/(Loss)for 2015 Plan Year (24,424,402) Actuarial Value= Market Value of Total Fund as of December 31, 2015 $310,270,615 Less: 80%of 2015 Gain/(Loss) 80%* (24,424,402) (19,539,522) Less: 60%of 2014 Gain/(Loss) 60%* (5,226,518) (3,135,911) Less: 40%of 2013 Gain/(Loss) 40%* 25,936,548 10,374,619 Less: 20%of 2012 Gain/(Loss) 20%* 01 0 Total Deferred Gain/(Loss) (12,300,814) Actuarial Value of Assets,Total Fund - December 31, 2015 $322,571,429 (Market Value, less total deferred) as%of Market Value of Assets 104.0% Healthcare Reserve as of December 31, 2015 $28,895,679 Adjusted Healthcare Reserve 30,039,948 Actuarial Value of Assets, Pension Plan - December 31, 2015 $292,531,481 Estimated Rate of Return on the Actuarial Value is 7.2% 1 2010-2012 Investment Experience fully recognized as of 12/31/2013 z Takes into account asset smoothing �� 'Cown SH[hT �'��' C0N5UE�TfNGGRaUP,u.r. AC71Ja.AlAt k RL rIRLM"T IJAUULLrI'I[M City of Lansing Police and Fire Retirement System December 31,2015 Actuarial Funding Valuation 1.3: Reconciliation of Fund Reserves EMPLOYEE RETIREMENT HEALTHCARE SAVINGS FUND RESERVE RESERVE TOTAL 1/1/2015 $27,559,570 $ 271,686,030 $26,391,982 $325,637,582 Additions: EE Contributions $2,826,578 $2,826,578 ER Contributions $ 10,884,312 $585,000 $ 11,469,312 Interest: 3.00% 7.60% 7.27% Annual Credits $826,787 $ 18,461,011 $1,918,697 $21,206,495 Deductions: Refunds/Benefits $ (107,871) $(28,777,990) $(28,885,861) Adjustment $(4,363,090) $(17,620,401) $(21,983,491) 12/31/2015 $26,741,974 $254,632,962 $28,895,679 $310,270,615 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 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 BOOMERSIRNE CONSULTING GROUP,ux. 8 AC I&RLAULkRLrIRLM"TIJAUULLr1'I[M City of Lansing Police and Fire Retirement System December 31, 2015 Actuarial Funding Valuation Section 2: Participant Summary �tA.CTII&�R BDOMERSH[h� � CowsSUE,TfNG GROUP,ux. I ^ I Lk RLNRLM"T IJAUULLrI'I[M City of Lansing Police and Fire Retirement System December 31, 2015 Actuarial Funding Valuation 2.1: Reconciliation of Plan Participants Non-vested Deferred Active Terminations Vested Participants Due Refunds Terminations Retired Disabled Beneficiary Total Participants as of December 31,2014 362 15 24 505 65 141 1,112 Correction 0 (2) (1) (1) 0 0 (4) Retired (22) 0 (2) 24 0 0 0 Terminated Vested (2) 0 2 0 0 0 0 Terminated Non-Vested(Member Contributions refunded) (3) 0 0 0 0 0 (3) Disabled (1) 0 0 0 1 0 0 Deceased (1) 0 0 (13) (1) (12) (27) New Beneficiary/EDRO 0 0 0 0 0 14 14 Rehired 0 0 0 0 0 0 0 Terminated Non-Vested(Member Contributions to be refunded) 0 2 0 0 0 0 2 Transfers In from ERS 0 0 0 0 0 0 0 New Hires 16 0 0 0 0 0 16 Data Adjustments 0 0 0 0 0 0 0 Participants as of December 31,2015 349 15 23 515 65 143 1,110 * Includes distinction made between retiree EDROs and beneficiary EDROs Inactive Participants 12/31/2014 12/31/2015 Fire Police Total Fire Police Total Number of Retired Participants 215 290 505 219 296 515 Average Age 65.4 65.3 65.3 65.2 65.5 65.4 Average Annual Benefit $49,777 $43,742 $46,311 $51,188 $44,838 $47,538 Number of Disabled Participants 40 25 65 40 25 65 Average Age 54.7 53.5 54.2 54.5 54.6 54.5 Average Annual Benefit $41,084 $39,701 $40,552 41,394 39,861 $40,804 Number of Beneficiaries/EDROs 68 73 141 69 74 143 Average Age 76.4 72.4 74.3 76.5 73.1 74.7 Average Annual Benefit $16,455 $16,226 $16,336 16,863 15,914 $16,368 Number of Deferred Vested Participants 5 19 24 5 18 23 Average Age 42.7 47.9 46.8 43.9 48.6 47.6 Average Annual Benefit $34,519 $27,173 $28,703 34,519 31,473 $32,135 �I 'Cown SH[h� �'��' CUNSUE�TfNGGROUP,u.r. AC71Ja.AlAt k RL rIRLM"T IJAUULLrI'I[M City of Lansing Police and Fire Retirement System December 31, 2015 Actuarial Funding Valuation 2.2: Distribution of Active Participants Nearest -----Completed Years of Service from Date of Hire----- Age <1 1 2 - 4 5 - 9 10 - 14 15 - 19 20 24 25+ Total <20 20-24 6 8 1 15 11,641 50,261 52,744 34,979 25-29 5 17 8 1 31 10,914 52,923 58,627 71,612 48,222 30-34 11 6 25 7 49 50,439 68,683 75,417 71.362 68,406 35-39 2 15 25 12 54 75,206 73,971 76,901 79,034 76,499 40-44 2 1 4 17 50 7 81 48,352 65,104 75,016 78,127 77,699 94,995 78,271 45-49 1 3 7 28 38 1 78 10,015 80,269 75,829 80,956 86,738 90,098 82,494 50-54 1 3 10 15 2 31 74,430 78,768 82,923 91,844 101,773 87,780 55-59 3 6 9 75,787 88,741 84,423 60-64 >64 1 1 80,810 80,810 Total 12 38 18 49 59 103 67 3 349 11,203 51,403 63,854 75,141 76,565 79,192 88,835 97,881 Males Females Total Total Compensation 21,988,772 3,849,893 25,838,665 Average Compensation 74,036 74,036 74,036 Arithmetic Averages: Nearest Age 40.1 39.6 40.0 Completed Years of Service 12.7 13.4 12.8 Salary-Weighted Averages: Nearest Age 41.4 40.8 41.4 Completed Years of Service 14.1 14.3 14.1 Number of Participants 297 52 349 Percent male/female 85.1% 14.9% 100.0% 8 11tT'w= TCoUNROUP,ux. AC71Ja.AlAt k RL NRLM"T IJAUULLrI'I[M City of Lansing Police and Fire Retirement System December 31, 2015 Actuarial Funding Valuation Section 3: Valuation Summary BWMERSHih'E CONSULTIING GROUP,ux. ACTIJ&AUL& LrIRLM"TIJAUULLrI'I[M City of Lansing Police and Fire 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 $104,149,553 $106,965,325 Terminated Vested 4,701,287 5,315,759 Retirees and Beneficiaries 286,238,481 297,908,471 Total Actuarial Accrued Liability $395,089,321 $410,189,555 Actuarial Value of Assets 288,785,965 292,531,481 Net Unfunded Actuarial Accrued Liability 106,303,356 117,658,075 Plan Funding Ratio 73.1% 71.3% llt.CTII&�Pj B00MERSH[h�CUNSUE�TfNG GROUP,ux. 13 I t k RL NRLM"T IJAUULLrI'I[M City of Lansing Police and Fire 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' $ 6,548,752 $ 6,463,974 2) Estimated Employee Contributions 2,486,995 2,625,342 3) Net City Normal Cost: (1)—(2) $4,061,757 $3,838,632 4) Valuation Payroll $ 26,264,214 $ 27,038,601 5) City Normal Cost Rate (%of pay): (3)_(4) 15.5% 14.2% 6) Amortization of Unfunded Actuarial Accrued Liability $ 6,495,287 $ 7,336,709 7) Amortization Rate (%of Pay): (6)- (4) 24.7% 27.1% 8) Total Contribution Rate: (5) + (7) 40.2% 41.3% 9) Projected Fiscal Payroll $ 27,078,405 $ 27,876,798 10) Total City Contribution: (8)x(9) $10,884,312 $11,521,768 Estimated Cash Flow for Next Five Years Member Benefit Fiscal Year City Contribution* Contributions Payments ter• �� 2018 11,900,000 2,700,000 29,400,000 2019 12,300,000 2,800,000 30,100,000 2020 13,100,000 2,900,000 30,400,000 2021 13,700,000 3,000,000 30,900,000 2022 14,100,000 3,100,000 31,800,000 * City contribution will be impacted by actual experience as well as assumption changes in 2017 and later. 'A breakdown of normal cost by bargaining unit is shown in Appendix III. BUOMERSH[hT CUNSUE�TING GROUP,u.r. AC71JAlwL k RL fIRLAlltii I�YI]LLrI'I[17:G City of Lansing Police and Fire 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 Police and Fire 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 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 equal to inflation, plus 7.00% for those with less than 5 years of service or 0.75%for all others Mortality: RP2000 with Blue Collar adjustments for males and females. For Disabled members, the disabled version of these tables are assumed with a 5 year age setback for males. Each of these tables is projected to 2008 using Scale BB. Future improvements in mortality for non disabled members are anticipated by projecting these tables an additional 15 years 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. 95%of disabilities are assumed to be duty related. Sample rates are shown below: Age Rate 20 0.0800% 30 0.4000% 40 0.6250% 50 0.7500% 60 0.0000% BOOMERSHINE CONSULTING GRO UP,ux SLk RLNRLM"T IJAUU.LUQN City of Lansing Police and Fire 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 Fire Police 0 4.0% 5.0% 1 3.2% 4.3% 5 1.3% 2.2% 10 0.4% 1.0% 15 0.1% 0.4% 20 0.0% 0.0% Retirement: Rates of retirement vary based on the service of the member as shown below. Years of Service Fire Police 10-24 5.0% 5.0% 25 80.0% 80.0% 26-29 60.0% 25.0% 30+ 100.0% 100.0% Changes in assumptions and methods 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 Police and Fire 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 Police and Fire 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: Police Officers and Fire Fighters Normal Retirement: Age 55 or 25 years of service For FOP-NS hired on or after August 1, 2014,full retirement is at age 50 with 25 years of service Mandatory Retirement: Age 60 for Police and age 70 for Firefighters Normal Form of Benefit: Monthly life annuity with 50% of the benefit payable to the spouse upon the member's death. Contribution Rate Group %of Pa Member Contribution Rates: Fire(IAFF) 9.08% (10.00%as of 05/19/2014) Police,Supervisor(FOP-S) 9.52% Police, Non Supervisor(FOP-NS) 8.50% (9.00%as of 07/01/2015) Hires after 5/19/2014 Fire(IAFF) 7.00% Hires after 08/01/2014 Police, Non Supervisor(FOP-NS) 7.00% Included Compensation: For a police officer member, Included Compensation is defined as annual base salary, overtime pay (including holiday pay), longevity, gun allowance, clothing allowances, sick leave reimbursement (buy-back), shift premium and retroactive pay (prorated by effective date). For a Police Supervisory Division Unit member, the definition also includes compensatory time buy-back (up to a maximum of 160 hours), provided that the compensatory time was earned in the same 24 months on which final average compensation is based. For a firefighter member, Included Compensation is defined as annual base salary, overtime pay, acting pay, ambulance wage differential pay, longevity, holiday pay, field training instructor pay and retroactive pay(prorated by effective date). Final Average Compensation: Final Average Compensation means the monthly average of the member's final compensation that is included in Included Compensation, paid during the period of the member's 24 highest consecutive months of credited service as a police officer, or firefighter. If the member has less than 24 months of credited service, the member's final average compensation shall be the monthly average of the Included Compensation paid for his or her total period of credited service. Normal Retirement Benefit Formula: 3.2%of Final Average Compensation times years of credited service, not to exceed 25 years. Maximum benefit is 80%of Final Average Compensation. Pension benefit is capped at 110%of Base Wage for IAFF and FOP-NS Benefit Multiplier is changed to 2.5% and Pension Benefit is capped at 100% of Base Wage for hires on or after May 19, 2014 for IAFF and August 1,2014 for FOP-NS BOOMERSHENE CONSULTING GROUP, L 17VNS City of Lansing Police and Fire Retirement System December 31, 2015 Actuarial Funding Valuation Termination Prior to Retirement Eligibility Vesting is after 10 years of credited service Benefit Amount Benefit is payable beginning at age 55 and computed in the same manner as the Normal Retirement Benefit, but based on credited service and Final Average Compensation at date of termination. Duty Disability Eligibility Members are eligible for Duty Disability Retirement benefits immediately upon employment. Benefit Amount(Before The Duty Disability Retirement Benefit payable to members is equal to Retirement Eligibility) 2/3 of Final Average Compensation. Benefit Amount(After Benefit is paid at the effective date of disability retirement as a Life Retirement Eligibility) Annuity and is equal to the accrued Retirement Benefit. In computing the benefit amount, credited service is increased to include the period of disability, and Final Average Compensation is calculated using current rates of compensation for those with similar rank. The Disability Benefit will be offset by any workers' compensation payable on account of the disability. 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 maximum benefit equal to 2/3 of the annual rate of compensation of either a full- paid patrolman or a full-paid firefighter as of the date of retirement, whichever is higher. Death incurred in the Line of Duty Eligibility The Death in Line of Duty 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-Fire A benefit, equal to 1/3 of the deceased member's Final Compensation, is payable to the widow or widower. In addition, unmarried children under the age of 21 will receive a benefit equal to 1/4 of the deceased member's Final Compensation, divided equally among children. Benefit Amount-Police A benefit is payable to the widow or widower, equal to the greater of 80% of the deceased member's Final Average Compensation, or 80% of the top paid base salary for the rank the officer held at the time of his or her death. Benefit is paid to surviving children if there is no surviving spouse. Non Duty Pre-Retirement Death Eligibility The non-duty pre-retirement death benefit is payable upon the death of a member after earning 10 years of credited service. Benefit Amount 50%of the accrued retirement benefit,computed in the same manner as the Retirement Benefit payable as a Life Annuity. rBOOMERSHE 1 CONSULTING GROUP,,r &U:_�j_LwLjUunvrs City of Lansing Police and Fire Retirement System December 31, 2015 Actuarial Funding Valuation Optional Benefit Forms Prior to retirement,a member may elect a reduced benefit of either 93%or 86%of the original amount,thereby increasing the spouse benefit to either 75%or 86%, respectively. Ad Hoc Cost-of-Living Adjustments One-time cost of living increases were granted in 1973, 1984 and 1987. Post Retirement Benefit Adjustments Effective January 1, 1995 and each January 1 thereafter,the annual benefit amount will be increased by$525 for each retiree who meets each of the following conditions: 1)25 or more years of credited service at the time of retirement 2)Age 60 as of the January 1 increase date 3) Has been retired at least 6 months as of the January 1 increase date The$525 amount is reduced for retirees who elected the 75%or 86%optional forms of benefit($488.25 and $451.50, respectively). Spouses of deceased members are also eligible for benefit increases each January 1 if: 1)The deceased member had at least 25 years of credited service at the time of retirement 2)The deceased member would have attained at least age 60 as of the January 1 increase date 3)The deceased member had been deceased at least 6 months as of the January 1 increase date. The spouse's annual benefit increase amount is adjusted based on the form of payment elected by the deceased member,according to the following schedule: Spouse Benefit% Annual Benefit Increase 50% $262.50 75% $393.75 86% $451.50 The benefit increases accumulate from year to year, but cumulative benefit increases shall not exceed cumulative increases in the Consumer Price Index. Changes in Plan provisions since the prior valuation There have been no changes in Plan provisions since the prior valuation. BOOMERSHINE CONSULTING GRO UP,ux SLk RLrIRLM"T IJAUU.LUQN City of Lansing Police and Fire 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 Police and Fire 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 pension 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 as well as changes in assumptions. However, we can see that the Plan is on a path to decreasing the unfunded liability (top graph, red line) and improving the funding ratio to 80% over 20 years. During this time, the City contribution rate is expected to remain relatively level for 10 years, before gradually decreasing. Projection of Funding Progress 140,000,000 120,000,000 O Funding Ratio —Unfunded AAL(AVA) 100,000,000 7. 71%71%71%70%70%70%71%71%72%73% 73%74%75%76%77%78%79%79% 80,000,000 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% iiiiiiiiiiiiiiiiAmortlzation oNormal Cost City Contrb(%Pay) 18,000,000 45% 16,000,000 40% 14,000,000 35% 12,000,000 30% 10,000,000 25% 810001000 20% 6,000,000 15% 4,000,000 10% 2,000,000 5% 0% 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 llt.CTII&TR BUOMERSH[h�CoWsSUE�TfNG GROUP,ux. LkRLfIRLM"TIJAUQLLrI'I[M City of Lansing Police and Fire Retirement System December 31,2015 Actuarial Funding Valuation Appendix II: History of Employer Contributions and Funding Progress Historical Employer Contributions Actuarially Determined Actual Employer Fiscal Year Ending Employer Contribution Contribution 6/30/2008 $ 6,520,974 $ 6,520,974 6/30/2009 6,094,397 6,483,000 (1) 6/30/2010 7,179,360 6,790,757 (1) 6/30/2011 8,240,688 8,240,688 6/30/2012 9,242,173 9,057,080 (2) 6/30/2013 10,133,599 10,133,599 (3) 6/30/2014 11,248,857 11,248,857 6/30/2015 11,050,091 11,050,091 (4) 6/30/2016 10,884,312 10,884,312 6/30/2017 11,521,768 To Be determined (1) The City contributed in excess of its FY 2009 ADEC. 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 $185,093 in recognition of additional contributions by International Association of Firefighters (IAFF) employees, which were negotiated and contributed after the establishment of the June 30, 2012 ADEC from the December 31, 2010 valuation. (3) Fiscal year 2013 ADEC 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 ADEC reflects changes made to assumed return and inflation from 7.8% and 3.3% to 7.6% and 3.1%, respectively. ADEC also reflects change in asset smoothing to immediately recognize all investment gains and losses prior to 12/31/2012. BCUNSUE�TING GOWr4S H[h� RaUP,u.r. AC71J�AlwL k RL fIRLAlltii I�YI]LLrI'I[17:G City of Lansing Police and Fire 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 12/31/2006 $ 278,839,000 $ 308,193,000 90.5% $ 29,354,000 12/31/2007 293,571,000 315,635,000 93.0% 22,064,000 12/31/2008 287,394,000 326,673,000 88.0% 39,279,000 12/31/2009 280,342,000 337,315,000 83.1% 56,973,000 12/31/2010 276,377,041 359,293,016 76.9% 82,915,975 12/31/2011 264,492,738 372,547,509 71.0% 108,054,771 (5) 12/31/2012 257,898,061 373,083,911 69.1% 115,185,850 12/31/2013 277,267,947 383,879,280 72.2% 106,611,333 (6) 12/31/2014 288,785,965 395,089,321 73.1% 106,303,356 12/31/2015 292,531,481 410,189,555 71.3% 117,658,075 (5) Reflects changes made to actuarial assumptions, based on Experience Study, including a reduction in the assumed 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. AVA also reflects change in asset smoothing to immediately recognize all investment gains and losses prior to 12/31/2012. CONSULTING G CUN3ULTING GROUP,u.r. AC71Ja.AlwLkRL fIRLAlltii I Yi JQN City of Lansing Police and Fire Retirement System December 31, 2015 Actuarial Funding Valuation Appendix III: Benefit Costs by Unit/Formula Benefit Total Net City Employee Group(s) # Employees Multiplier Normal Cost %of Pay Normal Cost %of Pay Police 1 169 3.20% $ 3,460,831 25.4% $ 2,119,015 15.6% Police 11 18 2.50% 68,727 14.4% 35,360 7.4% Fire 1 137 3.20% 2,670,021 23.3% 1,524,111 13.3% Fire 11 25 2.50% 264,395 17.8% 160,146 10.8% All Police and Fire 349 N/A $6,463,974 23.9% $ 3,838,632 14.2% Employees BOwr4S H[hT I� �' CUNSUE�TING GRaUP,u.r. .�� I AC7IJ�AULk RLNRLM"T 1JAUQLLrI'I[M