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Home My WebLink AboutCity of lansing Employee Retirement System, Actuarial valuation For Funding and Contributions Dec 31, 2016 RECE I VV -,'--'D � 5� � r -4 F'► S* 32 O N y't I �1 1 1� r City of Lansing Employees' Retirement System Actuarial Valuation For Funding and Contributions as of December 31,2016 November, 2017 lMe BOOMERSHENE CONSULTING GROIN,LAC. City of Lansing Employees' Retirement System December 31,2016 Actuarial Funding Valuation Executive Summary November 28, 2017 City of Lansing Employees' 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 Employees' Retirement System (the System) as of December 31, 2016. The report is based on participant data and asset summary 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, 2016 was $196,865,514. Plan assets exclude from this a reserve for healthcare benefits. The total yield of the fund for the plan year ending December 31, 2016 was 5.9%on the market value of assets and 7.4% 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 City contribution for fiscal year 2018, based on the 7.4% assumption, is $10,185,060. Because this is lower than last year's contribution of$10,246,872, it would be prudent for the City to contribute a higher amount. Changes in actuarial assumptions were made for this valuation, which resulted in an increase in the City Contribution. However, this was offset by favorable demographic experience during 2016. FUNDING PROGRESS The Actuarial Accrued Liability as of December 31, 2016 is $305,886,505 compared to the Actuarial Value of Assets (excluding healthcare reserve) of$176,160,086, resulting in a plan funded ratio of 57.6%. On a market value basis,this ratio is 55.4%. These figures are based on the 7.40% return assumption. B00,WR,WN*E C01SUi,TI\G GROUP, City of Lansing Employees' Retirement System December 31,2016 Actuarial Funding Valuation Section 1: Plan Asset Informal ien I100MERSHENE �/ COWIMG GROUP,LLc. City of Lansing Employees' Retirement System December 31,2016 Actuarial Funding Valuation 1.2: Development of Actuai-ial Value of Assets Market Value of Total Fund as of January 1,2016 $197,212,909 Plus: Contributions 11,667,266 Less: Benefit Payments, Refunds 22,861,856 Less:Admin Expenses 39,101 Plus: Expected Return during 2016(@ 7.6%) 14,250,880 Expected Market Value as of December 31, 2016 200,230,099 Actual Market Value of Total Fund as of December 31,2016 196,865,514 Asset Gain/(Loss)for 2016 Plan Year (3,3644,585) Actuarial Value= Market Value Less: 80%of 2015 Gain/(Loss) 80%* (3,364,585) (2,691,668) Less: 60%of 2014 Gain/(Loss) 60%* (10,548,489) (6,329,093) Less:40%of 2013 Gain/(Loss) 40%* (2,809,882) (1,123,953) Less: 20%of 2012 GainALoss) 20%* 10,553,104 2,110,621 Total Deferred Gain/(Loss) (8,034,093) Actuarial Value of Assets,Total Fund-December 31, 2016 $204,899,607 as%of Market Value of Assets 104.1% Healthcare Reserve as of December 31, 2016 27,612,914 Adjusted Healthcare Reserve' 28,739,521 Actuarial Value of Assets, Pension Plan -December 31,2016 $176,160,086 Estimated Rate of Return on the Actuarial Value of Assets: 7.36% ' Takes into account asset smoothing CONSULTING GROUP, City of Lansing Employees' Retirement System December 31,2016 Actuarial Funding Valuation Section 2: Participant Sum.mar CONSULTING G f 1 � CONSULTING GROUP,LLC, ii41f11LS 1II''.'.IIJ:Ki':1-._w1.lI! . 9 City of Lansing Employees' Retirement System December 31,2016 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 20-24 2 2 4 25-29 7 2 8 17 30-34 4 2 7 13 35-39 3 4 6 7 5 2 27 40-44 6 8 7 2 14 1 38 45-49 4 2 10 6 28 19 8 77 50-54 3 5 3 5 32 23 10 2 83 55-59 2 2 4 5 24 17 12 1 67 60-64 2 4 3 3 10 7 2 3 34 >64 1 1 10 4 1 17 Total 34 32 48 28 123 73 32 7 377 Males Females Total Total Compensation $12,760,999 $7,721,550 $20,482,549 Average Compensation 55,483 52,528 54,330 Arithmetic Averages: Nearest Age 49.2 49.5 49.3 Completed Years of Service 10.8 10.3 10.6 Salary-Weighted Averages: Nearest Age 50.5 50.7 50.6 Completed Years of Service 12.0 11.2 11.7 Number of Participants 230 147 377 Percent male/female 61.0% 39.0% 100.0% BOOMERSIME CO\SULTENG GROUP, City of Lansing Employees' Retirement System December 31,2016 Actuarial Funding Valuation 3.1: Summary of Actuarial Liability and Funding Progress Actuarial Accrued Liability 12/31/2016 12/31/2015 Old Assumptions New Assumptions 7.60% 7.40% Active Employees $ 52,775,962 $51,868,676 $54,452,341 Member Benefit Fund 15,794,930 15,738,432 15,738,432 Terminated Vested 5,753,407 6,147,193 6,435,440 Retirees and Beneficiaries 234,470,694 220,974,285 229,260,292 Total Actuarial Accrued Liability $308,794,993 $294,728,586 $305,886,505 Actuarial Value of Assets 176,031,902 176,160,086 176,160,086 Unfunded Actuarial Accrued Liability 132,763,091 118,568,500 129,726,419 Plan Funding Ratio 57.0% 59.8% 57.6% BOOiIERSHIIE CO\SGLTI\.N G GROUP, J 13 City of Lansing Employees' Retirement System December 31,2016 Actuarial Funding Valuation Section 4: Actuarial Assumptions and Meti3®ds l BOOMERSHCiE CON'SU[JIN?G GROUP,i-w City of Lansing Employees' Retirement System December 31,2016 Actuarial Funding Valuation Termination*: Rates of termination vary based on the service of the member. Sample Rates are shown below: No Change in Old Assumption Assumption 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% New Assumption UAW UAW Years of Service Males Females 0 22.0% 33.0% 1 18.7% 28.1% 2 15.9% 23.8% 3 13.5% 20.3% 5 9.8% 14.6% 10 4.3% 6.5% 15+ 0.0% 0.0% 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% BOOMERSHINT / COMULTI\G GROUP, 17 City of Lansing Employees' Retirement System December 31,2016 Actuarial Funding Valuation Section S: Summary of Plan Benefits 1�BOOMERStll;if, CONSULTING CROUP,LLC. City of Lansing Employees' Retirement System December 31,2016 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. 80OIIF.RSHINT / COSSULTI\G GROUP, 21 City of Lansing Employees' Retirement System December 31,2016 Actuarial Funding Valuation Glossary of Teruns 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. �—. 6001IERSHI\E CO\SUIJI\G CROUP,i_i_c. �— 23 _ City of Lansing Employees' Retirement System December 31,2016 Actuarial Funding Valuation Appendix II: History of Employer Contributions and Funding Progress Historical Employer Contributions Actuarially Determined Employer Actual Employer Fiscal Year Ending Contribution Contribution _ - -- - - - - - - -- . - - 6/30/2009 $ 6,047,520 $6,476,000 (1) 6/30/2010 6,472,341 6,043,861 (1) 6/30/2011 7,297,083 7,297,083 6/30/2012 7,596,879 7,523,534 (2) 6/30/2013 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 10,247,000 6/30/2018 To be determined (5) (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. (5) Reflects changes made to actuarial assumptions based on an Experience Study completed in 2016, including assumed return of 7.40%, with 2.925% underlying inflation. l�BO(?MERSHI\6 CONSULTING GROUP, ....k1113L111iC1.1:5!LLII!" 25 City of Lansing Employees' Retirement System December 31,2016 Actuarial Funding Valuation Appendix III: Benefit Costs by Unit/Formula # Benefit Total %of Pay Net Employer %of Pay Employee Group(s) Employees Multiplier Normal Cost Normal Cost T214,T243,T243DC(1), 3 2.80% $36,269 14.6% $25,826 10.8% Teamsters Exempt, NBU DCT(old) 4 2.30% 36,322 12.8% 25,778 9.4% T214,T243,T243DC(II), 138 1.80% 1,020,217 10.7% 495,507 5.4% Council Staff T214,T243,T243DC(III) 51 1.25% 148,559 7.3% 56,168 2.9% UAW 1 116 2.75% 985,088 16.7% 829,042 14.6% UAW II 19 1.70% 92,806 9.4% 66,196 6.9% NBU, Exec 46 1.60% 345,150 9.4% 147,280 4.1% All ERS Employees 377 N/A $2,664,411 11.8% $1,645,797 7.5% UAW I: hired before 10/21/2013 UAW H: hired on or after 10/21/2013 T214 I: hired before 12/8/2008 T214 II: hired after 12/8/2008 and beforel/1/2015 T214 III: hired on or after 1/1/2015 T243 I: all except District Court T243 II: hired on or after 5/19/2014 T243DC I: District Court hired before 4/1/2014 T243DC II: District Court hired on or after 4/1/2014 and before 7/1/2016 T243DC III: District Court hired on or after 7/1/2016 J,k BOOMERSHI\E CONSULTING GROUP,u-c :5�r' llr roc