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HomeMy WebLinkAboutHandouts_Regular_Tab 2_10/11/2018 f � 1 � � � �etireme�tt P:�54.527.1bt6 ; F:9�4.525.Ofl83 ( www.grsconsulting.com Consulting April 27,2018 Ms. Kerry Dutton Resource Centers, LLC 4360 Northiake Boulevard, Suite 206 Palm Beach Gardens, Florida 33410 Re: Village of Tequesta Public Safety Officers Pension Trust Fund Supplemental Actuarial Valuation Report Dear Kerry: As requested,we have prepared the enclosed Supplemental Actuarial Valuation Report which shows the first year financial impact of reopening the Village of Tequesta Public Safety Officers Pension Trust Fund to police officers. Under Ordinance No. 18-12,the Plan was closed to police officers hired on or after February 1,2013. The enclosed study shows the first year financial impact of allowing 12 active police officers who currently participate in the 401(a) Plan to join the Pension Plan under the following four scenarios. ■ Scenario 1—The 12 police officers would not receive credit for service earned prior to entering the Pension Plan and the benefit multiplier would be equal to 2%for the first three years of service, 2.35%for the next three years of service, and 2.75%for each year of service thereafter. The member contribution rate for these members would be 6%of pensionable earnings. ■ Scenario 2—Same as Scenario 1 except the benefit multiplier would be equal to 2.75%for each year of service. ■ Scenario 3—The 12 police officers would receive credit for both future service and service earned prior to entering the Pension Plan and the benefit multiplier woufd be equal to 2.75%for each year of service. The member contribution rate for these members would be 6%of pensionable earnings. The 401(a)Plan balances for these 12 police officers would be transferred to the Pension Plan. This transfer amount would be equal to the Village contributions to the 401(a) Plan for these 12 members plus the contributions these members would have paid to the Pension Plan, including interest. We have estimated the transfer amount to be$269,284. Under this scenario, we have assumed the Plan would be eligible to receive future annual Chapter 185 revenue. We have assumed that the full amount of annual Chapter 185 revenue($157,450 was allocated for FYE 2017)would be used as an offset to the Village required contribution, but this wou{d be subject to negotiations between the Union and the Village. ■ Scenario 4—Same as Scenario 3 except we assume the Plan would also receive the annual Chapter 185 revenue that was allocated, but not received,for FYE 2014—2017. The unreceived Chapter Ip—1(— 1 St 185 revenue for these years totaled$471,094. We have assumed that this full amount of �L�N��h previously unreceived Chapter 185 revenue would be used as an offset to the Village required T�u IG� contributions. '� 2 • - : , . . :. . . � . .- .. - . .. � ;�� . Ms. Kerry Dutton April 27, 2018 Page 2 Under all scenarios,the remaining benefits for these police officers are assumed to be the same as the current Pension Plan provisions for police officers. Under each of these scenarios,we have assumed that all 12 police officers would transfer to the Pension Plan. If there are any police officers that do not transfer to the Pension Plan,the Division of Retirement would need to determine if the Chapter 185 revenue would still be available to the Plan. We recommend that this be confirmed in writing before any final decision is made. Additionally, under all scenarios,the calculations do not include an allocation of the accumulated unused balance of Chapter 185 money of$333,315. The use of this reserve is subject to negotiations between the Union and the Village. The funds can be used for share accounts,to offset the Village's contribution,or other uses defined by the parties. It is important to note that potential effects on other benefit pians were not considered in this study. This study does not reflect the Village's savings in the 401(a) Plan for police officers who would join the Pension Plan. Also,our study shows the first year financial impact to the Pension Plan. Please let us know if you would like us to prepare projections which would show the financial impact over a 30-year period. Summary of Findings ■ Scenario 1—The first year required Village contribution increases by approximately$142,000 if the 12 new police officers join the Pension Plan. This is roughly 18.2%of their payroll and does not reffect any savings the Vilfage would realize from no longer contributing to the 401(a) Plan for these members. ■ Scenario 2—The first year required Village contribution increases by approximately$151,000 if the 12 new police officers join the Pension Plan. This is roughly 19.3%of their payroll and does not reflect any savings the Village would realize from no longer contributing to the 401(a)Plan for these members. ■ Scenario 3—The first year required Village contribution would decrease by approximately$9,000. The decrease is based on the Plan receiving future Chapter 185 revenue. The Village required contribution for FYE 2018 would also be reduced by the Chapter 185 revenue received in August 2018. This does not include any savings the Village would realize from no longer contributing to the 401(a) Plan for these members. ■ Scenario 4—The first year required Village contribution would decrease by approximatefy $103,000 to$0. The decrease is based on the Plan receiving future Chapter 185 revenue as well as the previously unreceived Chapter 185 revenue for FYE 2014-2017. Approximately,$93,000 of the previously unreceived Chapter 185 revenue is assumed to be applied as an offset in FYE 2019, leaving a balance of roughly$378,000 which could be used as an offset to future required Village G R� Conlsu t ng Ms. Kerry Dutton April 27, 2018 Page 3 contributions. The Village required contribution for FYE 2018 would also be reduced by the Chapter 185 revenue received in August 2018. ■ It is important to note that under Scenarios 3 and 4, provided the Plan remains in a surplus position,the required Village/State contribution rate would be approximately 19%of covered payroll for new police officers. This cost would be offset by the Chapter 185 revenue used as a credit toward the required contribution and the savings the Village would realize from no longer contributing to the 401(a) Plan for these members. Additional Disclosures This report was prepared at the request of the Board of Trustees and is intended for use by the Pension Plan and those designated or approved by them. This report may be provided to parties other than the Plan only in its entirety and only with the permission of the Board. GRS is not responsible for unauthorized use of this report. This report is intended to describe the financial effect of the proposed plan changes. No statement in this report is intended to be interpreted as a recommendation in favor of the changes,or in opposition to them. Except as otherwise noted, potential effects on other benefit plans were not considered. The calculations in this report are based upon data provided by the Village covering the 12 police officers currently in the 401(a) Plan as well as information furnished by the Plan Administrator for the October 1, 2017 Actuarial Valuation concerning Plan benefits,financial transactions,plan provisions and active members,terminated members, retirees and beneficiaries. We reviewed this information for internal and year-to-year consistency, but did not audit the data. We are not responsible for the accuracy or completeness of the information provided by the Plan Administrator. The calculations are based upon assumptions regarding future events,which may or may not materialize. They are also based on the assumptions, methods,and plan provisions outlined in this report. Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions;changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements(such as the end of an amortization period or additional cost or contribution requirements based on the plan's funded status);and changes in plan provisions or applicable law. If you have reason to believe that the assumptions that were used are unreasonabie,that the plan provisions are incorrectly described,that important plan provisions relevant to this proposal are not described,or that conditions have changed since the calculations were made,you should contact the author of the report prior to relying on information in the report. G R S �0�,�5�:ngY Ms. Kerry Dutton April 27,2018 Page 4 Jeffrey Amrose and Trisha Amrose are members of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein. The undersigned actuary is independent of the plan sponsor. This report has been prepared by actuaries who have substantial experience valuing public employee retirement systems.To the best of our knowledge the information contained in this report is accurate and fairly presents the actuarial position of the Plan as of the valuation date. All calculations have been made in conformity with genera{{y accepted actuarial principles and practices,and with the Actuarial Standards of Practice issued by the Actuarial Standards Board and with applicable statutes. We welcome your questions and comments. Sincerely yours, ���"'- �.,G� 1e re mrose,EA, MAAA Trisha Amrose, EA, MAAA S nio onsultant&Actuary Consultant&Actuary Enclosures This communication shall not be construed to provide tax advice, legal advice or investment advice. cc: Bonni Jensen �' �� Con�su t ng SUPPLEMENTAL ACTUARIAL VALUATION REPORT Plan Village of Tequesta Public Safety Officers Pension Trust Fund Valuation Date October 1, 2017 Date of Report April 27, 2018 Report Requested by Board of Trustees Prepared by Jeffrey Amrose Group Valued All active and inactive members of the Plan as of October 1, 2017. Plan Changes Being Considered for Change Allow 12 active police officers who currently participate in the 401(a) Plan to join the Pension Plan. The benefits for these officers would be determined using the current plan provisions with the following exceptions: ■ Scenario 1—The 12 police officers would not receive credit for service earned prior to entering the Pension Plan and the benefit multiplier would be equal to 2%for the first three years of service, 2.35%for the next three years of service,and 2.75°I for each year of service thereafter. The member contribution rate for these members would be 6%of pensionable earnings. ■ Scenario 2—Same as Scenario 1 except the benefit multiplier would be equal to 2.75%for each year of service. ■ Scenario 3—The 12 police officers would receive credit for both future service and service earned prior to entering the Pension Plan and the benefit multiplier would be equal to 2.75% for each year of service. The member contribution rate for these members would be 6%of pensionable earnings. The 401(a) Plan balances for these 12 police officers would be transferred to the Pension Plan. This transfer amount would be equal to the Village contributions to the 401(a)Plan for these 12 members plus the contributions these members would have paid to the Pension Plan, including interest. We have estimated the transfer amount to be$269,284. Under this scenario,we have assumed the Plan would be eligible to receive future annual Chapter 185 revenue. We have assumed that the full amount of annual Chapter 185 revenue($157,450 was allocated for FYE 2017)would be used as an offset to the Village required contribution, but this would be subject to negotiations between the Union and the Village. ■ Scenario 4—Same as Scenario 3 except we assume the Plan would also receive the annual Chapter 185 revenue that was allocated, but not received,for FYE 2014—2017. The unreceived Chapter 185 revenue for these years totaled$471,094. We have assumed that this full amount of previously unreceived Chapter 185 revenue would be used as an offset to the Village required contributions. 5 Participants Affected The 12 current active police officers who are not already members of the Pension Plan. Future police officers would also become members of the Pension Plan. Actuarial Assumptions and Methods Same as October 1, 2017 Actuarial Valuation Report with no exceptions. Some of the key assumptions/methods are: � Investment Return 7.25% Salary increase 6.0% per year Cost Method Entry Age Normal Amortization Period for Any Change in Actuarial Accrued Liability 20 years Summary of Data Used in Report Same as data used in the October 1, 2017 Actuarial Valuation Report and data provided by the Village regarding the 12 police officers who would join the Pension Plan. Actuarial Impact of Proposal(s) See attached page(s) 6 � ACTUARIALLY DETERMINED CONTRIBUTION(ADC) POLICE OFFICERS A. Valuation Date October 1,2017 October 1,2017 October 1,2017 October 1,2017 October 1,Z017 Baseline Scenario 1 Scenario 2 Scenario 3 Scenario 4 B. ADC to Be Paid During FiscalYearEnding 9/30/2019 9/30/2019 9/30/2019 9/30/2019 9/30/2019 C. Assumed Date of Employer ContribuYion Monthly Monthly Monthly Monthly Monthly D. Annual Payment to Amortize UnfundedActuarialliability(UAL) $ 0 $ 0 $ 0 $ 0 $ 0 E. Employer Normal Cost 98,77o 226,352 234,760 232,352 232,352 F. ADC if Paid on the Valuation Date: D+E 98,770 226,352 234,760 23Z,352 232,352 G. ADC Adjusted for Frequency of Payments 102,524 234,955 243,683 241,183 241,183 H. ADC as%of Covered Payroll 27.50 % 20.91 % 21.69 % 21.46 % 21.46 % I. Assumed Rate of Increase in Covered Payroll to Contribution Year 0.00 % 4.00 % 4.00 % 4.00 % 4.00 % J. Covered Payroll for Contribution Year 372,781 1,168,605 1,168,605 1,168,605 1,168,605 K. ADC for Contribution Year:H x 1 102,524 244,355 253,470 250,783 250,783 L. Estimated Credit for State Revenue in Contribution Year 0 0 0 157,450 250,783 M. Required Employer Contribution(REC) in Contribution Year:K-L 102,524 244,355 253,470 93,333 1 0 ''Z N. REC as%of Covered Payroll in Contribution Year:M/J 27.50 % 20.91 % 21.69 % 7.99 % 0.00 % 0. Change in Required Employer Contribution(REC) NfA 141,831 150,946 (9,191) (102,524) P. Change in REC as%of Covered Payroll in Contribution Year N/A % (6.59) % (5.81) % (19.51) % (27.50) % 1 Village required contribution for FYE 2018 would also be offset by Chapter 185 revenue received by the Plan in August 2018. The Village contribution for fYE 2018 is not shown on these exhibits. Z Chapter 185 revenue allocated to the Defined Benefit Plan on behalf of Police Officers,but not received,for FYE 2014-2017 totaled$471,094. After using this amount to offset the required Village contribution for FYE 2019 there would still be$377,761 remaining which may be used as an offset to future Village required contributions. Note: Under all scenarios,the calculations do not include an allocation of the$333,315 Accumulated Unused Chapter 185 Money Reserve which is subject to negotiations between the Union and the Village. 7 ♦ ACTUARIAL VALUE OF BENEFITS AND ASSETS POLICE OfFICERS A. Valuation Date October 1,2017 October 1,2017 October 1,2017 October 1,2017 October 1,2017 Baseline Scenario 1 Scenario 2 Scenario 3 Scenario 4 B. Actuarial Present Value of All Projected Benefits for 1. Active Members a.Service Retirement Benefits $ 1,899,651 $ 3,636,542 $ 3,713,692 $ 3,958,235 $ 3,958,235 b.Vesting Benefits 138,237 236,493 241,217 308,744 308,744 c.Disability Benefits 111,989 325,318 327,447 328,096 328,096 d.Preretirement Death Benefits 27,810 81,026 81,501 82,157 82,157 e.Return of Member Contributions 0 14,194 14,194 5,468 5,468 f.Total 2,177,687 4,293,573 4,378,051 4,682,700 4,682,700 2. Inactive Members a.Service Retirees&Beneficiaries 362,999 362,999 362,999 362,999 362,999 b.Disability Retirees - - - - - c.Terminated Vested Members 510,358 510,358 510,358 510,358 510,358 d.Total 873,357 873,357 873,357 873,357 873,357 3. Total for All Members 3,051,044 5,166,930 5,251,408 5,556,057 5,556,057 C. Actuarial Accrued(Past Service) Liability under Entry Age Normal 2,288,611 2,288,611 2,288,611 2,692,001 2,692,001 D.Actuarial Value of Accumulated Plan Benefits per FA56 No.35 N/A N/A N/A N/A N/A E. Plan Assets 1. Market Value 3,421,640 3,421,640 3,421,640 3,690,924 3,690,924 2. Actuarial Value 3,372,321 3,372,321 3,372,321 3,641,605 3,641,605 F. Unfunded Actuarial Accrued Liability (1,083,710) (1,083,710) (1,083,710) (949,604) (949,604) G.Actuarial Present Value of Projected Covered Payroll 3,181,429 12,526,224 12,526,224 12,341,695 12,341,695 H.Actuarial Present Value of Projected Member Contributions 159,071 719,759 719,759 708,687 708,687 I. Funded Ratio:E2/C 147.4 % 147.4 % 147.4 % 135.3 % 135.3 % 8 CALCULATION OF EMPLOYER NORMAL COST POLICE OFFICERS A. Valuation Date October 1,2017 October 1,2017 October 1,2017 October 1,2017 October 1,2017 Baseline Scenario 1 Scenario 2 Scenario 3 Scenario 4 B. Normal Cost for 1. Service Retirement Benefits $ 80,530 $ 222,431 $ 230,320 $ 226,854 $ 226,854 2. Vesting Benefits 7,124 14,040 14,373 16,961 16,961 3. Disability Benefits 8,374 26,732 26,879 25,565 25,565 4. Preretirement Death Benefits 2,033 6,425 6,464 6,114 6,114 5. Return of Member Contributions 560 1,628 1,628 1,762 1,762 6. Total for Future Benefits 98,621 271,256 279,664 277,256 277,256 7. Assumed Amount for Administrative Expenses 18,788 18,788 18,788 18,788 18,788 8. Total Normal Cost 117,409 290,044 298,452 296,044 296,044 As%of Covered Payroll 31.50 % 25.81 % 26.56 % 26.35 % 26.35 % C. Expected Member Contribution 18,639 63,692 63,692 63,692 63,692 As%of Covered Payroll 5.00 °/a 5.67 % 5.67 % 5.67 % 5.67 % D. Net Employer Normal Cost:BS-C 98,770 226,352 234,760 232,352 232,352 As%of Covered Payroll 26.50 % 20.14 % 20.89 % 20.68 % 20.68 % 9 PARTICIPANT DATA POLICE OFFICERS October 1,2017 October 1,2017 October 1,2017 Baseline Scenarios 1 &2 Scenarios 3&4 ACTIVE MEMBERS Number 5 17 17 Covered Annual Payroll $ 372,781 $ 1,123,658 $ 1,123,658 Average Annual Payroll $ 74,556 $ 66,098 $ 66,098 Average Age 43.2 38.0 38.0 Average Past Service 11.5 3.4 5.0 Average Age at Hire 31.7 34.6 33.0 RETIREES, BENEFICIARIES& DROP Number 2 2 2 Annual Benefits $ 27,708 $ 27,708 $ 27,708 Average Annual Benefit $ 13,854 $ 13,854 $ 13,854 DISABILITY RETIREES Number 0 0 0 Annual Benefits $ 0 $ 0 $ 0 Average Annual Benefit $ 0 $ 0 $ 0 TERMINATED VESTED MEMBERS Number 2 2 2 Annual Benefits $ 37,272 $ 37,272 $ 37,272 Average Annual Benefit $ 18,636 $ 18,636 $ 18,636 10