Loading...
HomeMy WebLinkAboutPolice and Fire Retirement System Actual Valuation for Funding and Contributions v2 IF � I �I r � l City of Lansing Police and Fire Retirement System � 1 Actuarial Valuation For Funding and Contributions as of December 31,2014 � 1 f September, 2015 [ 1 St 3L_'�(tI.'4bhat,A}3J.�3:,.'v,(ki.A4 ivil'.f 4:d.45 City of Lansing Police and Fire Retirement System December 31, 2014 Actuarial Funding Valuation r1 Table of Contents EXECUTIVESUMMARY......................................................................................„ 3 r � PLAN ASSET INFORMATION................................................................................................................. 5 TrustFund Statement.............................—.............................................................................. & ' i Allocation of Net Plan Assets as of December 31, 2014.......................................................... b ' 1 Development of Actuarial Value of Assets.............................................................................. 7 PARTICIPANT SUMMARY.................................................................................................................... 8 Reconciliation of Plan Participants from Prior Year................................................................ 9 Distribution of Active Participants and Average Compensation 10 VALUATION SUMMARY.................................................................................................................... 11 Development of Funding Ratio and City Contribution........................................................... 12 l ACTUARIAL ASSUMPTIONS AND METHODS.......................................................................................... 13 SUMMARY OF PLAN BENEFITS........................................................................................................... 16 GLOSSARY OF TERMS........................................................................................ 20 APPENDIX I: 2O YEAR PROJECTION OF FUNDING AND CONTRIBUTIONS................ APPENDIX II: HISTORY OF EMPLOYER CONTRIBUTIONS AND FUNDING PROGRESS........................................ 22 Il CONSULTI C (}-P Lac. t 13U'R'-&.'.0 i.v11:51;'�7_�'6.M1!�1121i,11!Ihr i i City of Lansing Police and Fire Retirement System December 31,2014 Actuarial Funding Valuation September 10,2015 City of Lansing Police and Fire 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 Police and Fire Retirement System (the System) as of December 31, 2014. The report is based on participant data and asset summary as of December 31, 2014 as submitted by the Plan Administrator and City finance department. We relied on this information without auditing it. INVESTMENT PERFORMANCE: , I The total Market Value of Plan Assets for the plan year ending December 31, 2014 was $325,637,582, ' Plan assets exclude from this a reserve for healthcare benefits. The total yield of the fund for the plan year ending December 31, 2014 was 6.2%on the market value of assets and 9.6% 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 8. FUNDING RECOMMENDATIONS: The total recommended City contribution for fiscal year 2015 is $10,884,312. Last year the total recommended contribution was $11,050,091. Changes in the Employee Contributions and the change in Plan provisions for the new hires in Fire and Police - Non Supervisor groups, resulted in a slight decrease in the City Contribution. FUNDING PROGRESS: The Actuarial Accrued Liability as of December 31, 2014 is $395,089,321 compared to the Actuarial Value of Assets of $288,785,965, resulting in a plan funded ratio of 73.1%. Using the market value of assets,this ratio is 75.7%. i i ; �l?97 F1:T;3 k1pORiPy u.C. City of Lansing Police and Fire Retirement System December 31,2014 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. ri 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. gory M.4Stum�p, A, MAAA, FCA Sunita K. Bhatia,ASA, EA, MAAA Chief Actuary Senior Consultant '. I ' I ii Ctl1tiSL'2.TtNC GROL`P,�.�.c. �..�..,,....�.1 4i._._......-.-._..-'---..»-_..,._.-..--,-...„.w.«.f...«....._.e_m..,.:_ ....,_,_.._"__.__.v...._.,..,. ._..-......,..««« w....._.m._...._._.,_._..__.... ....-.-......_-.,_.-......«....«.«.....:.«......._..,_........411� 'J.hR1:7fFL'IL\@.I'LM1.ti-fll City of Lansing Police and Fire Retirement System December 31,2014 Actuarial Funding Valuation i I i Plan Asset Information , I CONSULTM GROUP „ l i ; l , l - Y City of Lansing Police and Fire Retirement System December 31, 2014 Actuarial Funding Valuation Trust Fund Statement I Market Value of Total Fund as of January 1, 2014 $319,630,880 Receipts: Employer Contribution, 11,298,948 Employer Contribution- Healthcare Reserve 940,000 Member Contributions 1,858,941 Adjustments Investment Income Interest 1,203,476. Dividends 1,146,480 i Market`Appreciation 17,082,.577 Total Additions $34,530,422 Disbursements: Member Refund 18,093 Distributions to Participants/Beneficiaries 27,278,253 1 Administrative•Expenses and.Othe-r 119z035 Investment Expenses 1,108,339 Total Disbursements $28,523,720 Net Increase/(Decrease) in Assets $6,006,702 � I Market Value of Total Fund as of December 31,2014 $325,637,582 Allocation of Net:Plan Assets as of December 31,2014 Asset Class Market Value %of Total I i Cash:andiShortTerm Investments $30,665;518 9:4% Equity 184,651,534 56.7% Fixed,lncom :e 93,431180 28.7% Real Estate 18,042,030 5.6% Accounts payable 5 ,68 ::Q.4% ` f TOTAL ASSETS $325,637,582 100.0% i Estimated Rate of Return on Market Value for 2014 6.2% ', flYeg. ibl �lll i, ...---•..6 ..--......,.' :.--......»-.....»......w.»..«.....»..::...,..,.....«..._.M.:............ ,..,......., ,..,........, ,-».».,_ E1'XL Vil3Aa.&f.Y11lE.hlF4f YF.1.=aG.Yff.;} ` ' I j City of Lansing Police and Fire Retirement System December 31,2014 Actuarial Funding Valuation ' I Development of Actuarial Value of Assets i I Market Value of Total Fund as of December 31, 2013 $ 319,630,880 Plus. Contributions 15,097,889 Less: Benefit Payments, Refunds 27,296,346 v Less:Admin Expenses 119,035 Plus:'Expected Return during 20.144 7.6%) 23,550,712 ' Expected Asset Value $330,864,1.00 , i Actual Market'Value of Total,Fund as of December 31,"20 4 $325,637,582 I Asset Gain/(Loss}for 214 Plan Year (5,226,518) Actuarial Value' Market Value of Total Fund as of December 31, 2014 $325,637,582 Less; 80%%of 20.14'G all nAL05s)i 80%* (5,226,518) (4,191,214) Less: 60%of 2013 Gain/(Lass) 60%* 25,936,548 15,561,929 Less":40%of"201:2,Q]MLoss) 40%* -0 0 i Less: 20%of 2011 Gain/(Loss) 20%* 01 0 Total"Deferred Gain/(Loss) 11,380,71:5 Actuarial Value of, ets,Total Fund -December 31,2014 $314,256,967 (Market'Valu:&, less�td al deferred) as%of Market Value of Assets 96.5% J Healthcare Reserve.as of'becem:ber 31, 2014 $2.6,391,982 Adjusted Healthcare Reserve .25;470,902 Actuarial Value of Assets,Pension Plan-December 31 2014 $288,785,965 l r Estimated Rate:of Return on the Actuarial Value:is 9..6% 1 20107 2012 Investment Experience fully recognized as of 12/31/2013 iz Takes into account asset smoothing B(MERSHENE i CflSt�T,T9"+r�t�ltOliP,�,�x. City of Lansing Police and Fire Retirement System December 31,2014 Actuarial Funding Valuation i II ' 1 ' I f Participant Summary � 1 l i , i i , CONSULTING GROUT, i...v,.........q_,»..»..�._.._.....�I 4 f!'li4[i City of Lansing Police and Fire Retirement System December 31,2014 Actuarial Funding Valuation Reconciliation of Plan Participants from Prior Year r I Active Ter, ifitfid% esel " x z &, Participants, Due efunds Tefiti5riatifyi s etl Disabl.eti. Beneflc ar., Tatai Participants as of December 31,2013 352 15 23 495 64 140 1,089 Correctlarr 0 0 0 0 0 0 0. Retired (21) 0 (1) 22 0 0 0 i Terminated Vested (2) 0 2 ..0 0 0 0 Terminated Non-Vested(Member (2) 0 0 0 0 0 (2) Contributions refunded) Disabled {1) 0 0 0 1 0 Deceased 0 0 0 (12) 0 (7) (19) New'Beneficiary/EDRO 0 0 0 0 0 8 8 Rehired 0 0 0 0 0 0 0 Terminated-:Nan-Tested(Mem.be.r 0 0 0 =0 .0; ; 0 0 Cohtributloris to-be refunded) Transfers In from ERS 0 0 0 0 0 0 0 New Wires 36 0 0 0 0 0 36 Data Adjustments 0 0 0 0 0 D 0 Participants as of December$1,2014 362. .15 24 505 65 141. 1,112 *Includes distinction made between retiree EDROs and beneficiary EDROs I Inactive Participants 12/31/2013 12/31/2014 Fire Police Total Fire Police Total. Number of Retired Participants 212 283 495 215 290 505 Average Age 65.3. 65:4 65.4 65..4 65'a 653. Average Annual Benefit $47,634 $43,121 $45,054 $49,777 $43,742 $46,311 Number of Disabled Participants 39 25 64 40 25 65 j Average Age 54,0 52,5 53A 54.7 53.5 54,.2 Average Annual Benefit $41,463 $37,342 $39,853 $41,084 $39,701 $40,552 Number of Beneficiaries/EDROs 57 83 140 68 73 141 Average Age 76,8 72.1 74:0 76.4 72A 74.3 Average Annual Benefit $15,016 $16,606 $15,959 $16,455 $16,226 $16,336 Number of Deferred Vested 4 19 23 5 19 24 Participants Average Age 4:2.7 47A 47.3 42.7 47.9 46.8 Average Annual Benefit $34,032 $26,246 $27,600 $34,519 $27,173 $28,703 i lst }�q�u��SlNS i. LTI GROUP,ut r. 9 City of Lansing Police and Fire Retirement System December 31,2014 Actuarial Funding Valuation Distribution of Active Participants and Average Compensation r 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 r � 20-24 9 4 13 15,125 44,725 24,233 ri 25-29 17 6 4 4 31 13,355 47,280 63,823 76,048 34,523 1 30-34 9 1 7 25 13 55 J 17,981 57,130 67,457 71,820 65,622 60,723 35-39 1 4 10 30 18 63 10,372 66,643 70,491 72,812 69,815 70,205 40-44 2 2 18 53 8 83 61,059 76,181 73,097 74,018 79,024 74,041 45-49 1 2 3 26 33 2 67 66,968 80,444 71,800 75,021 80,175 88,731 77,867 50-54 1 5 15 23 2 46 68,606 78,233 73,998 80,807 80,430 78,025 55-59 2 1 3 76,963 77,418 77,114 t 60-64 1 1 76,884 76,884 >64 Total 36 11 18 44 69 114 66 4 362 14,871 47,247 65,731 72,420 71,881 73,633 80,164 84,580 Males Females Total Total Compensation 20,736,997 3,592,922 24,407,740 Average Compensation 67,547 60,536 67,425 Arithmetic Averages: Nearest Age 40.1 40.0 40.0 Completed Years of Service 12.9 13.5 12.9 Salary-Weighted Averages: Nearest Age 41.8 41.0 41.6 Completed Years of Service 14.5 14.5 14.5 Number of Participants 307 54 362 Percent male/female 84.8% 14.9% 100.0% : I ....._._.......... i 101�..., _._______._. ,.-____... _. .���... ._... ....._._.. ..-.._.-,-_..,-�.-._.�.�.��.�.,._.«....,............._..�..._.._...,...._..._�.__.�.3�4 ax€Sa.s@'8.f,�a olta^Y..1+s.��i.€f.,_.W...____-__..._.,�,� i 1 City of Lansing Police and Fire Retirement System December 31,2014 Actuarial Funding Valuation l , Valuation Summary I � i 11100MIRMNE COMELTINGOUP,rt�: ...,._._.._..__.,__, J-� � .....�_..o..�,e�..___.,___.._............._.........._...f___._..____.�.._�..-».»..�.......�,....,..,�..........�......._�....__�....____....,....._.._��......--._..-..�,.......�...»..,,..«.�....,,........L�€Y_Rffii'��4tk.i�.Bf[.111.i�["C.3k.�gl.'FIEr_��.........,,...«..,..-.._.._,....�. City of Lansing Police and Fire Retirement System December 31,2014 Actuarial Funding Valuation ®evelopiment of Funding Ratio and City Contribution 12/31/2013 12/31/2014 i 1) Total Entry Age Normal:Cost $6,577,961 $A,548,75'2 2) Estimated Employee Contributions 2,240,606 2,486,995 i 3) Net-,City Normal Cost: (1)--(2) $4.,337,355 $4,0611757' i 4) Valuation Payroll $25,636,626 $26,264,214 i 5) City Normal Cost Rate (%of pay);(3) (4) 1.6.9% 15..5% Actuarial Accrued Liability Active Employees $ 104,601,312 $104,149,553 TermInated Vested' 4,2.28,451 4,701,287 Retirees and Beneficiaries 275,049,517 286,238,481 6) Total ActuwIalAccrueftiability:(sum of above) $383,879,280 $395,089,321 I 7) Actuarial'Value.of Assets 277.1267,947 288,785,965 8) Net Unfunded Actuarial Accrued Liability: (6)—(7) 106,611,332 106,303,356 9) PI"an Funding Ratio:.(7)+ (6) 72,2% 711% 10) Amortization of Unfunded Actuarial.Accrued'Liabi'lity $.6,390,889 $6,495,2:87 11) Amortization Rate (%of Pay): (10):(4) 24.9% 24.7% 12) Total Contribution Rate: (5)+(11) 41.8% 40.2% 13) Projected Fiscal Payroll $26,405,725 $27,078,405 I 14) Total City Contribution:(12)x(13) $ 11,050,091 $10,884,312 : l 1 Estimated Cash Flow for Next Five Years J Member Benefit Fiscal Year City Contributions Contributions Payments .2017 10,90{,oc)o Z600000 28,400,000 1 2018 10,800,000 2,600,000 29,000,000 2019 10,800,000 2,700,000 2%60.0,000 2020 11,200,000 2,800,000 30,000,000 1 2021 11,500,000 2,900,000 30,500;000 OWNIEWBE °BSI ITi'k C titf,12 �u. .ia clesl.d!_IZK,91Aw_a t1.40._x_!_,h: I City of Lansing Police and Fire Retirement System December 31,2014 Actuarial Funding Valuation ri f ! li Actuarial Assumptions and Methods ` I CONSULT[%CROUP, ; I ' I . I 11 �i 13 City of Lansing Police and Fire Retirement System December 31,2014 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 (27 years remaining as of December 31, 2014). 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 ; i 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 i 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 -..J to be three years olderthan their female spouse. Disability: Rates of disability vary based on the age of the member. 95%of disabilities i 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% ; i I i y e jbcg CONSULTING CROUP, �..� 14 City of Lansing Police and Fire Retirement System December 31, 2014 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% . I Retirement: Rates of retirement vary based on the service of the member as shown below. ; I Years of Service Fire Police I I 10-24 5.0% 5.0% 25 80.0% 80.0% 26-29 60.0% 25.0% 30+ 100.0% 100.0% :l The demographic assumptions above are based on the most recent experience study, covering 2005 through 2011. The next study is scheduled for 2016, Changes in assumptions and methods There have been no changes in assumptions since the prior valuation. � 1 11I I it ; 1 I , i i I i � I I 7I. IONS __._,.....—. � �..a 1 ..W.�..7 R.'ll3:5d5N}.Fi�'InfE 47.f9..4.v t.S1,l!lr.•.y City of Lansing Police and Fire Retirement System December 31,2014 Actuarial Funding Valuation ' � l i Summary®f flan Benefits DWMERSMNE i I ' ' l I f lacg CONSULTING GROUP, � +J;.l1..Aa',i�.i1�d16'[d4�A41z'4F F'3..i't xM_LS1F+i . ._1 I City of Lansing Police and Fire Retirement System December 31,2014 r 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 l Normal Retirement: Age 55 or 25 years of service; For FOP-NS,full retirement is at age 50 i 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 ` 1 the member's death. Contribution Rate Gr' oua ON of Pa i 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), 1 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 L J 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 I 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 MUMMA {I . C0NSULTF 41s'P L I City of Lansing Police and Fire Retirement System December 31,2014 Actuarial Funding Valuation l r � I Termination Prior to Retirement Eligibility Vesting is after 10 years of credited service i Benefit Amount Benefit is payable beginn'ng 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. I Duty Disability Eligibility Members are eligible for Duty Disability Retirement benefits immediately i upon employment. I Benefit Amount(Before The Duty Disability Retirement Benefit payable to members is equal to Retirement Eligibility) 2/3 of Final Average Compensation. r � 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 1 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. j 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 jher 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. Ij ��LTIT[ �ff:lNG G �gQhT.r.�. , l City of Lansing Police and Fire Retirement System December 31,2014 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 Adlustments One-time cost of living increases were granted in 1973, 1984 and 1987. Post Retirement Benefit Adlustments 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 If' 2)Age 60 as of the January 1 increase date ' I 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 t 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. I Changes in Plan provisions since the prior valuation This Valuation takes into effect the change in Employee Contribution rate for the Fire and Police - Non Supervisor groups and the new Plan provisions for new hires in the Fire and Police - Non Supervisor groups. , j i ��CONSL M CROUP, City of Lansing Police and Fire Retirement System December 31,2014 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 (ADEC): 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. j I 1 II 1 i« WOMERSKNE 20 City of Lansing Police and Fire Retirement system December 31,2014 Actuarial Funding Valuation Appendix is 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. 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 by about 13% over 20 years. During this time, the City contribution rate is expected to decrease from its current level ` to less than 30%of pay. All recent benefit changes have been taken into account far these projections. Protection of Funding Progress 120,000,000 .....__. ___,_._ -_ ------ Funding RatioUnfunded AAL(AVA) 8� `6"� .g a as R6 85%86% 80 000 000 - 76%J.Z4�Z796 78%7935 78%79%79%80%81%8- r; 121 Or fit3,000,000 - �, 40,000,000 j 20,000,000 I x ?` 2014 2017 2020 2023 2026 2029 2032 Projection of City Contributions 20,000,000 45 i T6MAmortization t...�:.:.INormalCost �city contrb(%Pay) j 118,000,000 . 1 I 16,000,000 _ =--x'�'.—�.-..r-.ram---� ----- � 35% 14,000,000 i 30% i ) !12,000,000 .,.. ...._ .� ..__ .._. 25% i I10,000,000 .. ._ I 20% -- � 15%� 6,000,000 - - i 4,000,000 _. ___ .._. ° .. _._ __ .._.. 2,000,000 , 5% 2015 2%F 2021 2024 2027 2030 2033 i I CUMMING GROLP,gAx ._.._._____....��,.. 21 ..a..__.__.. ..._».-- I l _1 I City of Lansing Police and Fire Retirement System December 31,2014 Actuarial Funding Valuation Appendix li: History of Employer Contributions and Funding Progress Historical Employer Contributions i Actuarially Determined Actual Employer Fiscal Year Ending Employer Contribution Contribution I i 6/30/2007 5,385,960 5,385,960 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) i 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 To Be determined ` i (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 dosed 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. Jj I � I II � . i i 500MERSIDNE CONSULTING GROUP, i .1,IR,IAtne&rt r ;:Jl4R.in-.5.ccn:n, I III City of Lansing Police and Fire Retirement System December 31, 2014 Actuarial Funding Valuation Historical Funding Progress l Actuarial Value Actuarial Accrued Percentage Unfunded Actuarial Valuation Date of Assets(AVA) Liability(AAL) Funded Accrued Liability 12/31/2005 275,216,000 290,299,000 94.8% 15,083,000 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 297,394,000 326,673,000 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 (5)Reflects changes made to actuarial assumptions, based on Experience Study, including a reduction in the i assumed return 8.0%to 7.8%. 1 (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. l DOOMERSMNE NSUriCROU3 iAL 23 i