HomeMy WebLinkAboutHandouts_Special Meeting_Tab 01_06/29/2015 Gabriel Roeder Smith & Cor�ipany One East 8roward Blvd. 954.527.1616 phone
R r
Consultants & Actuaries Suite 505 954.525.0083 fax
Ft. Lauderdale, FL 33301-1804 www.gabrielroeder.com
June 28, 2015
Ms. Kerry Dutton
The Resource Centers, LLC
4360 Northlake Boulevard, Suite 206
Palm Beach Gardens, Florida 33410
Re: Village of Tequesta Public Safety Officers Pension Trust Fund
Dear Kerry:
As requested, we are providing an Actuarial Impact Statement for the proposed ordinance which would
amend the Plan for Firefighters as summarized below:
■ The benefit multiplier for current active members would be changed to a flat 3% prospectively.
■ The benefit multiplier for future new members would be changed to 2% for the first ten years of
service and 2.5% thereafter.
■ The vesting period would be changed to ten years for future new members.
• The employee contribution rate would be increased from 5% to 5.5% for the �scal year ending
September 30, 2017 and to 6% thereafter. The employee contribution rate would revert back to 5%
if the V i) lage opts out of participation in Chapter 175.
■ The optional sell back of vacation and sick leave would be allowed upon entering the DROP. For
sick leave, 25% of the available balance could be sold back for members with less than ten years of
service and 50% of the available balance could be sold back for members with at feast ten years of
service. The maximum accrual of sick leave is 1,600 hours. For vacation leave, 100% of the
available balance could be sold back, with a maximum accruai of 320 hours.
■ The Village would be permitted to use all annual Chapter 175 revenue as a credit toward the
Required Employer Contribution.
� The Village would be permitted to apply the Chapter 175 reserve of $426,587 to reduce the Required
Employer Contributions for the fiscal years ending September 30, 2015 through September 30, 2018,
as determined by the Viltage.
■ The interest rate credited to DROP accounts would continue to be the same as the net Pension Plan
rate of return; however, the rate credited would not be less than 0% nor greater than 7.5%.
We have also prepared projections which illustrate the expected Village contributions for Firefighters over
the next 30 years under the current Plan provisions and under the proposed Plan provisions described above.
The baseline results under the current Pian provisions incorporate the changes previously reflected in the
Actuarial lmpact Statement dated February 12, 2015.
It is important to note that this Actuarial Impact Statement was prepared based on the summary of proposed
pension changes provided by the Village. We have not been provided with a drafl of the proposed ordinance.
If the changes included in the proposed ordinance do not match the changes in provisions described above,
this Actuarial [mpact Statement wili need to be revised. Additionally, we recommend that these proposed
Plan provisions are reviewed by the Plan attorney for compliance with the recent changes to Chapter 175
under Chapter 2015-39 effective July l, 2015.
Ms. Kerry Dutton
June 28, 2015
Page 2
The Statement must be filed with the Division of Retirement before the final public hearing on the ordinance.
Please have a member of the Board of Trustees sign the Statement. Then send the Statement along with a copy
of the proposed ordinance to Tal(ahassee.
Assumptions, Methods, and Data Used
The actuarial assumptions and methods, financial data, and member census data used for the purposes of this
Actuarial Study are the same as those used for the October l, 2014 Actuarial Valuation with the following
exceptions:
• In our opinion, the change in the DROP interest crediting rate would have no immediate actuarial
impact for advance funding (or actuarial valnation) purposes, since the DR�P interest crediting rate is
not expticitly reflected. However, actuarial gains and losses would be recognized over time. Under the
proposed DROP interest provisions, actuariai gains would be reatized in years when the investment
ceturn on plan assets is greater than 7.5%, and actuarial losses would be reatizeci in years when the
investment return is less than 0%. Since these gains or losses are not recognized in advance, there
woutd not be an initial actuarial impact for this change.
■ To allow for the inclusion of the lump sum payment of unused sick and vacation leave in average
fina! compensation, projected benefits for current active members are increased by the calculated
percentage based on each member's accrued unused leave hours, as provided by the Village, divided
by 10,400 hours (equal to 2,080 hours for each year in 5-year averaging period).
■ We have reflected the use of the Chapter 175 reserve of $426,587 to reduce the Required Village
contribution by assuming that one-third, or $142,196, would be applied in each of the fiscai years
ending September 30, 2016, 2017 and 2018.
■ The current tota! of annual Chapter 175 revenue is $134,587 (received in August and October of 2014}.
We have assumed that this amount remains the same through the fiscal year ending September 30,
2016 and then increases by 1% per year thereafter. [n the proposed Plan changes scenario, we have
assumed that the full amount of Chapter 175 revenue is used as a credit toward the Required Viliage
Contribution. The actual amount used would be subject to a minimum benefits test which compaces
the amount of additional Chapter 175 premium tax revenue to the cost ofthe Plan reflecting the
Chapter 175 minimum benefits. We do not expect the result of this test to limit the amount of Chapter
175 revenue that can be used to fund the Pension Plan.
• Administrative expenses are assumed to increase by 3% per year.
■ Throughout the forecast period new members are assumed ta be hired each year at a rate sufficisnt to
maintain a constant active headcount, or stationary population. New employees are assumed to have
the same average demographic characteristics (age, gender, satary — adjusted each year for inflation)
at their dates of employment as those of current members.
■ Prajections are deterministic and throughout the projection period Plan experience is expected to
� m�tch the assumptions, including the assumed investment return on market value of assets.
Additional Disclosures
This report was prepared at the request of the Viltage, with the Board's aathori7ation, and is intended for use
by the Village and the Board and those designated or approved by the Viilage and the Board. This report
may be provided to parties other than the Board only in its entirety and only with the perrnission of the
Village and the Board.
Gabriel Roeder Smith & Company
Ms. Kerry Dutton
June 28, 20i 5
Page 3
The purpose of this report is to describe the financial effect of the proposed plan changes. This report shouid
not be relied on for any purpose other than the purpose described above.
The calculations in this report are based upon information furnished by the Ptan Administrator and the
Village for the October l, 2014 Actuarial Valuation concerning Plan benefits, financial transactions, plan
provisions and active members, terminated members, retirees and beneficiaries. This study also reflects
accumulated unused leave hours provided by the Village for firefighters. We reviewed this information for
internal and year-to-year consistency, but did not otherwise audit the data. We are not responsible for the
accuracy or completeness of the information provided by the Plan Administrator and Village.
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 unreasonable, 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.
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 actuaries are independent of the plan sponsor.
This report has been prepared by actuaries who have substantial experience va(uing 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 catculations have been made in
conformity with generally accepted actuarial principles and practices, and with the Actuarial Standards of
Practice issued by the Actuarial Standards Board and with applicable statutes.
Respectfully submitted,
1 �"
�f
1 � • (� � ; .,. �. —
..�. -� <, .
ff Amrose, MAAA Trisha Amrose, MAAA
��nro led Actuary No. 14-6599 Enrolled Actuary No. 14-8010
Enclosures
cc: Jody Forsythe
t�al:s�iet :Zoecie.� �rxa�i�i c� Z;c��,��,<;siy
Village of Tequesta Public Safety Officers' Pension Trust Fund
Impact Statement — June 28, 2015
Description of Amendments
The proposed ordinance would amend the Plan for Firefighters as summarized below:
■ The benefit multiplier for current active members would be changed to a flat 3% prospectively.
■ The benefit multiplier for future new members would be changed to 2% for the first ten years of
service and 2.5% thereafter.
■ The vesting period would be changed to ten years for future new members.
■ The employee contribution rate would be increased from 5% to 5.5% for the fiscal year ending
September 30, 2017 and to 6% thereafter. The employee contribution rate would revert back to 5%
if the Village opts out of participation in Chapter 175.
■ The optional sell back of vacation and sick leave would be allowed upon entering the DROP. For
sick leave, 25% of the available balance eould be sold back for members with less than ten years of
service and 50% of the available balance could be sold back for members with at least ten years of
service. The maximum accrual of sick leave is 1,600 hours. For vacation leave, 100% of the
available balance could be sold back, with a ma�mum accrual of 320 hours.
■ The Village would be permitted to use all annual Chapter 175 revenue as a credit toward the
Required Employer Contribution.
■ The Village would be permitted to apply the Chapter 175 reserve of $426,587 to reduce the Required
Employer Contributions for the fiscal years ending September 30, 2015 through September 30, 2018,
as determined by the Village.
■ The interest rate credited to DROP accounts would continue to be the same as the net Pension Plan
rate of return; however, the rate credited would not be less than 0% nor greater than 7.5%.
Funding Implications of Amendment
An actuarial cost estimate is attached.
Certification of Administrator
I believe the amendment to be in compliance with Part VII, Chapter 112, Florida Statutes and Section 14,
Article X of the Constitution of the State of Florida.
For the Board of Trustees
as Plan Administrator
4
SUPPLEMENTAL ACTUARIAL VALUATION REPORT
Plan
Village of Tequesta Public Safety Officers' Pension Trust Fund
Valuation Date
October 1, 2014
Date of Report
June 28, 2015
Report Requested by
Village of Tequesta
Prepared by
Jeffrey Amrose
Group Valued
All active and inactive Plan members
Plan Changes Being Considered for Change
The proposed ordinance would amend the Plan for Firefighters as summarized below:
■ The benefit multiplier for current active members would be changed to a flat 3% prospectively.
■ The benefit multiplier for future new members would be changed to 2% for the first ten years of
service and 2.5% thereafter.
■ The vesting period would be changed to ten years for future new members.
■ The employee contribution rate would be increased from 5% to 5.5% for the fiscal year ending
September 30, 2017 and to 6% thereafter. The employee contribution rate would revert back to
5% if the Village opts out of participation in Chapter 175.
■ The optional sell back of vacation and sick leave would be allowed upon entering the DROP.
For sick leave, 25% of the available balance could be sold back for members with less than ten
years of service and 50% of the available balance could be sold back for members with at least
ten years of service. The maximum accrual of sick lea�e is 1,600 hours. For vacation leave,
100% of the available balance could be sold back, with a maximum accrual of 320 hours.
■ The Village would be permitted to use all annual Chapter 175 revenue as a credit toward the
Required Employer Contribution.
■ The Village would be pernutted to apply the Chapter 1'75 reserve of $426,587 to reduce the
Required Employer Contributions for the fiscal years ending September 30, 2015 through
September 30, 2018, as deternuned by the Village.
■ The interest rate credited to DR�P accounts would continue to be the same as the net Pension
Plan rate of return; however, the rate credited would not be less than 0% nor greater than 7.5%.
Participants Affected
Current and future active firefighter members of the Plan.
Actuarial Assumptions and Methods
Same as October l, 2014 Actuarial Valuation Report. Some of the key assumptions/methods are:
Investment Return 7.5%
Salary increase 6.0% per year
Cost Method Entry Age Normal
Please also refer to the additional items noted on page 2.
5
Amortization Period for Any Change in Actuarial Accrued Liability
20 Years
Summary of Data Used in Report
See attached page. Same as data used for the October 1, 2014 Actuarial Valuation Report along with
accumulated unused sick and vacation leave hours provided by the Village for current active
firefighter members.
Actuarial Impact of Proposal(s)
See attached pages.
Special Risks Involved with the Proposal That the Plan Has Not Been Ezposed to Previously
None
Other Cost Considerations
None
Possible Conflicts with IRS Qualitication Rules
None
6
Village of Tequesta Public Safety Officers Pension Trust Fund
30-Year Projection of Required Village Contributions for Firefighters
Current Plan Proposed Plan Changes
Required Viilage Required Village
Fscal Year Pensiona6le Contribution Ftinded Contribution* Funded Savings/(Cost)*
Ending Payroll $ Amount % of Pay Ratio $ Amount % of Pay Ratio $ Amount
2016 1,450,827 361,456 24.91% 85.5% 201,555 13.89% 82.0% 159,901
2017 1,460,332 353,918 24.24% 87.9% 183,336 12.55% 84.3% 170,582
2018 1,523,369 349,081 22.92% 90.b% 169,296 11.11°/u 87.4°/u 179,785
2019 1,589,278 354,359 22.30% 92.5% 314,756 19.80% 89.6% 39,603
2020 1,525,938 329,036 21.56% 93.8% 285,074 18.68% 91.2% 43,962
2021 1,596,085 338,462 21.21% 94.7% 291,565 18.27% 92.3% 46,897
2022 1,591,861 33Q216 20.74% 95.6% 279,930 17.59% 93.4% 50,286
2023 1,617,838 332,387 20.55% 96.3% 277,959 17.18% 94.3% 54,428
2024 1,696,818 341,023 2010% 97.0% 284,912 16.79% 95.1% 56,111
2025 1,773,296 352,653 19.89% 97.7% 294,176 16.59% 96.0% 58,477
2026 1,788,888 349,934 19.56% 98.3% 288,177 16.11% 96.8% 61,757
2027 1,730,389 330,476 19.10% 98.9% 263,926 15.25% 97.5% 66,550
2028 1,776,733 334,463 18.82% 99.5% 262,854 14.79% 98.2% 71,609
2029 1,861,791 344,911 18.53% 100.0% 269,638 14.48% 98.9% 75,273
2030 1,950,329 358,032 18.36% 100.6% 279,826 14.35% 99.6% 78,206
2031 2,034,814 319,212 15.69% 101.2% 238,093 11.70% 100.3% 81,119
2032 1,987,946 306,062 15.40% 101.�% 221,483 ll.14% 100.9% 84,579
2033 2,006,449 244,959 12.21% 102.1% 133,145 6.64% 101.4% 111,814
2034 1,898,437 223,233 11.76% 102.4% 103,273 5.44% 101.9% 119,960
2035 1,996,407 223,416 11.19% 102.5% 103,522 5.19% 102.0% 119,894
2036 2,098,692 237,843 11.33% 102.7% 108,815 5.18% 102.1% 129,028
2037 2,202,591 252,445 11.46% 102.9% 120,029 5.45% 102.3% 132,416
2038 2,311,167 267,669 11.58% 103.0% 131,539 5.69% 102.4% 136,130
2039 2,354,505 273,067 11.60% 103.1% 134,766 5.72% 102.5% 138,301
2040 2,470,967 288,082 11.66% 103.3% 145,391 5.88% 102.6% 142,691
2041 2,591,946 304,859 11.76% 103.4% 158,389 611% 102.7% 146,470
2042 2,698,127 319,424 11.84% 103.6% 169,413 6.28% 102.9% I50,011
2043 2,779,808 330,393 11.89% 103.8% 177,243 6.38% 103.0% 153,150
2044 2,892,947 345,840 11.95% 103.9% 188,994 6.53% 103.1% 156,846
2045 3,009,623 361,426 12.01% 1041% 201,107 6.68% 103.3% 160,319
Total 9,458,337 6,282,182 3,176,155
Total Present Value 4,170,729 2,926,711 1,244,018
* Tl�ese amounts reflect the use of t6e Chapter 175 reserve of $426,587 to reduce the Required Village Contribution.
'Il�e Required Village Contributions for the fiscal yeais ending 9/30/2016, 9/30/2017, and 9/30/2018 were assumed to be reduced
by $142,196 in each of these three years.
Descriation of Plan Provision Changes for F'irefie6te�s
- Currenf active members: change the benefrt muhiplier to 3% per year of service pmspectively.
- Future new members: change the benefrt muhiplier to 2% for the first 10 years of service and 2.5% thereafter.
- Future new members: change the vesting period to 10 years.
- Increase the employee contnbution rate to 5.5% for FYE 9/30/2017 and to 6% thereafter.
- Allow optional vacation/sick leave sell back to Village upon entering the DROP.
- Use all annual Chapter 175 revenue as a credit toward the Required Employer Contdbution.
- Apply the Chapter 175 reserve of $426,587 to reduce Required Village Contrbutions for the fiscal years ending 9/30/2015
through 9/30/2018 as determined by the Village.
Assumations and Methods
Investment Return Assumption 7.50%
Funding Method Enhy Age Normal
Salary Scale 6.00% per year
Mortalicy Assumption RP-2000 fully generational using Sca1e AA
Paymll Growth Assumption 3.00% per yeaz
Increase in Chapter 175 Revenue 1.00% per year
Increase in Adminisirative Eapenses 3.00% per yeaz
No future non-investment gains or losses
7
ANNUAL REQUIltED CONTRIBUTION (ARC)
FIItEFIGHTERS
A. ValuationDate October 1, 2014 October 1, 2014
Actuarial Impact �'oposed Plan Change
Statement Dated Changes
2/12/201 S
B. ARC to Be Paid During
Fiscal Year Ending 9/30/2016 9/30/2016
C. Assumed Date of Employer Contribution Monthly Monthly
D. Annual Payment to Amortize
Unfunded Actuarial Liability (UAL) $ 118,591 $ 149,967 $ 31,376
E. Employer Normal Cost 281,078 292,643 11,565
F. ARC if Paid on the Valuation
Date: D+E 399,669 442,610 42,941
G. ARC Adjusted for Frequency of
Payments 415,364 459,991 44,627
H. ARC as % of Covered Payroll 29.77 % 32.97 % 3.20 %
I. Assumed Rate of Increase in Co�red
Payroll to Contribution Year 4.00 % 4.00 % 0.00 %
J. Co�eredPayroll for CoirtributionYear 1,450,827 1,450,827 0
K. ARC for Contribution Year: H x J 431,911 478,338 46,427
L. Allowable Credit for State Re�enue in
Contribution Year 70,455 134,587 64,132
M. Use of One-"Ihird of Chapter 175 Reserve 0 142,196 142,196
N. Required Employer Coirtribution (REC)
in Contribution Year: K- L- M 361,456 201,555 (159,901)
O. REC as % of Covered Payroll in
Corrtribution Year: N! J 24.91 % 13.89 % (11.02) %
8
ACTUARIAL VALUE OF BENEFITS AND ASSETS
FIl2EFIGHTERS
A. ValuationDate October 1, 2014 October 1, 2014
Actuarial Impact Proposed Plan Change
Statement Dated Changes
2/12/201 S
B. Actuarial Present Value of All Projected
Benefits for
1. Active Members
a. Service Retirement Benefits $ 7,785,882 $ 8,232,150 $ 446,268
b. VestingBenefits 507,634 489,062 (18,572)
c. Disability Benefits 509,132 501,318 (7,814)
d. Preretiremerrt Death Benefits 70,718 70,265 (453)
e. Return of Member Contributions 0 0 0
f. Tota1 8,873,366 9,292,795 419,429
2. Inacti� Members
a. Service Retirees & Beneficiaries 1,870,149 1,870,149 0
b. Disability Retirees 0 0 0
a Terminated Vested Members 134,249 134,249 0
d Tota1 2,004,398 2,004,398 0
3. Total far All Members 10,877,764 11,297,193 419,429
C. Actuarial Accrued (Past Service)
Liability per GASB No. 25 8,026,531 8,370,379 343,848
D. Actuarial Value of Accumulated Plan
Benefits per FASB No. 35 N/A N/A N/A
E. Plan Assets
1. Market Va1ue 7,051,410 7,051,410 0
2. Actuarial Value 6,861,939 6,861,939 0
F. Unfunded Actuarial Accrued Liability: 1,164,592 1,508,440 343,848
G. Actuarial Present Va1ue of Projected
Co�ered Payroll 12,371,716 12,371,716 0
H. Actuarial Present Value of Projected
Member Contributions 618,586 709,357 90,771
I. Funded Ratio: E2/C 85.5 % 82.0 % (3.5) %
9
CALCULATION OF EMPLOYER NORMAL COST
FIltEFIGHTERS
A. Valuation Date October 1, 2014 October l, 2014
Actuarial Impact Proposed Plan Change
Statement Dated Changes
2/12/201 S
B. Normal Cost for
1. Service Retirement Benefits $ 262,226 $ 274,960 $ 12,734
2. Vesting Benefits 32,281 31,518 (763)
3. Disability Benefits 30,813 30,429 (384)
4. PreretirementDeathBenefits 4,193 4,171 (22)
5. Return of Member Contributions 2,395 2,395 0
6. Total for Future Benefits 331,908 343,473 11,565
7. Assumed Amount for Administrative
Expenses 18,921 18,921 0
8. Total Normal Cost 350,829 362,394 11,565
As % of Covered Payroll 25.15 % 25.98 % 0.83 %
C. Expected Member Contribution 69,751 69,751 0
As % of Covered Payroll 5.00 % 5.00 % 0.00 %
D. Net Employer Normal Cost: B8-C 281,078 292,643 11,565
As % of Covered Payroll 20.15 % 20.98 % 0.83 %
10
PARTICIPANT DATA
FIREFIGHTERS
October 1, 2014 October 1, 2014
Actuarial Impact Proposed Plan Change
Statement Dated Changes
2/12/201 S
ACTIVE MEMBERS
Number 16 16 0
Covered Annual Payroll 1,395,026 1,395,026 0
Average Annual P ayroll $ 87,189 $ 87,189 $ 0
Average Age 41.0 41.0 0.0
Average Past Service 13.2 13.2 0.0
Average Age at Hire 27.8 27.8 0.0
RETIREES, BENEFICIARIES & DROP
Number 3 3 0
Annual Benefits $ 156,287 $ 156,287 $ 0
Average Annual Benefit $ 52,096 $ 52,096 $ 0
DISABILITY RETIREES �
Number 0 0 0
Annual Benefits $ 0 $ 0 $ 0
Average Annual Benefit $ 0 $ 0 $ 0
TERMINATED VESTED MEMBERS
Number 1 1 0
Annual Benefits $ 17,524 $ 17,524 $ 0
Average Annual Benefit $ 17,524 $ 17,524 $ 0
11