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OCTOBER 1, 2003
ACTUARIAL VALUATION REPORT
FOR THE
VILLAGE OF TEQUESTA
PUBLIC SAFETY OFFICERS PENSION TRUST FUND
ANNUAL EMPLOYER CONTRIBUTION
IS DETERMINED BY THIS VALUATION
FOR THE PLAN YEAR ENDING
SEPTEMBER 30, 2004
TO BE PAID IN THE EMPLOYER FISCAL YEARS ENDING
SEPTEMBER 30, 2004 and 2005
!~~ GABRIEL, ROEDER, SMITH 8 COMPANY
GABRIEL, ROEDER, SMITH & COMPANY
Consultants & Actuaries
301 East Las Olas Blvd. • Suite 200 • Ft. Lauderdale, FL 33301-2254.954-527-1616 • FAX 954-525-0083
July 22, 2004
Board of Trustees
Village of Tequesta Public Safety Officers
Pension Trust Fund
Tequesta, Florida
Dear Board Members:
We are pleased to present our October 1, 2003 Actuarial Valuation Report for the Plan. The
purpose of the Report is to set forth required contribution levels, to disclose plan assets and
actuarial liabilities, to comment on funding progress and to provide supporting information
regarding the operation of the Plan. This Report is also designed to comply with requirements of
the State.
The valuation was performed on the basis of employee, retiree and financial information supplied
by the City. Although we did not audit this information, it was reviewed for reasonableness and
comparability to prior years.
The benefits valued are outlined at the end of the Report. Actuarial assumptions and the actuarial
cost method are also described herein. Any changes in benefits, assumptions or methods are
described in the first section.
We will be pleased to answer any questions pertaining to the valuation and to meet with you to
review this Report.
Respectfully submitted,
GABRIEL, ROEDER, SMITH AND COMPANY
J. tephe Palmquist, ASA, M , FCA
Enrolled Actuary No. 02-1560
Statement by Enrolled Actuary
This actuaria! valuation and!or cost determination .vas prepared and completed by me or
under my direct supervision, and I acknowledge responsibility for the results. To the best of my
knowledge, the results are complete and accurate. In my opinion, the techniques and
assumptions used are reasonable, meet the requirements and intent of Part VII, Chapter 112,
Florida Statutes, and are based on generally accepted actuarial principles and practices. There is
no benefit or expense to be provided by the plan and/or paid from the plan's assets for which
liabilities or current costs have not been established or otherwise taken into account in the
valuation. All known events or trends which may require a material increase in plan costs or
required contribution rates have been taken into account in the valuation.
Signature
,7/~ lv~
Date
02-1560
Enrollment Number
e ~ GABRIEL. RDEDER_ SMITH ~ CnMPQNY
TABLE OF CONTENTS
Section Title
Page
A Discussion of Valuation Results 1
B Valuation Results
1. Summary of Valuation Results 3
2. Derivation of Employer Normal Cost 4
3. Actuarial Gains and Losses 5
4. Actuarial Assumptions and Cost Method 6
5. Glossary of Terms 7
C Pension Fund Information
1. Summary of Assets 8
2. Summary of Fund's Income and Disbursements 9
D Financial Accounting Information
1. FASB No. 35 10
2. GASB No. 25 11
3. GASB No. 27 13
E Miscellaneous Information
1. Reconciliation of Membership Data 15
2. Statistical Data 16
3. Age and Service Distributions 18
F Summary of Plan Provisions 19
l~~~ GABRIEL, ROEDER, SMITH 8~ COMPANY
SECTION A
DISCUSSION OF VALUATION RESULTS
~~~ GABRIEL, ROEDER, SMITH S~ COMPANY
1
DISCUSSION OF VALUATION RESULTS
Comparison of Required Employer Contributions
The following is a schedule of required contributions developed in this year's and the
previous actuarial valuations:
For FYE
9/30/04 For FYE
9/30/03 Increase
(Decrease)
Required Contribution $ 193,043 $ 152,976 $ 40,067
of Payroll 14.41 % 12.08% 2.33%
Credit for State Revenue 73,756 61,475 12,281
of Payroll 5.51 % 4.86% 0.65%
Net Employer Contribution 119,287 91,501 27,786
of Payroll 8.90% 7.22% 1.68%
The required employer contribution has been computed under the assumption that the
amount to be received from the State on behalf of police officers and firefighters this year will be
equal to the base year revenue of $61,475 plus the $12,281 annual cost of benefits described
below. If this year's payment from the State falls below the expected payment, then the City must
raise its contribution by the difference. The required employer contribution was calculated under
the assumption that payment would be made in equal installments at the end of each month.
Required Contribution for Next Fiscal Year
In order to notify the Village of the amount to budget for the next fiscal year, this year's
contribution rate (14.41%) has been applied to next year's expected payroll ($1,393,254). The
result of $200,768 less allowable State revenue of $73,756 equals $127,012 which is the required
Village contribution for the fiscal year ending September 30, 2005.
Changes in Benefits
These changes have been made pursuant to Ordinance No. 585 adopted December 11,
2003:
1. The single plan that covered general employees, police officers and firefighters was
e~~ GABRIEL, ROEDER, SMITH 8~ COMPANY
separated into one plan for general employees and one plan for public safety officers.
2
2. Normal retirement date was changed from age 55 with ten years of service to age 55
with six years of service.
3. Early retirement date was changed from age 50 with ten years of service to age 50 with
sir, years of service.
4. The multiplier was changed from 3% per year to:
3.0% for each of the first six years
3.5% for each of the next four years
4.0% for each of the next five years
2.5% for each of the next six years
2.0% for each year after 21 years
5. Eligibility for non-service incurred death benefit was changed from ten years of service
to six years.
6. A supplemental pension was added in the amount of $5 per year of service with a cap
of $150.
7. Attainment of vested status was changed from ten years of service to six years.
8. A deferred retirement option plan (DROP) was added.
As indicated in Section B, these changes have raised the required contribution by
$12,281, an amount covered by the current level of Chapter revenue. In addition, the $118,597
reserve of additional Chapter 175/185 revenue was used to fund these changes. Chapter
revenue and reserves are enough to prevent an increase in cost to the Village this year due to the
benefit changes.
Change in Actuarial Assumptions and Methods
There have been no such changes since the last valuation.
Actuarial Experience
Overall experience since the last valuation has been unfavorable resulting in an actuarial
loss of $92,874. The loss is due to lower investment return and a higher rate of salary increases
than expected. The actuarial loss has caused the required contribution to increase by 0.63% of
payroll.
The remainder of this Report includes detailed actuarial valuation results, information
relating to the pension fund, miscellaneous information and statistics, and a summary of plan
j
provisions.
{`~~ GABRIEL, ROEDER, SMITH Sc COMPANY
SECTION B
VALUATION RESULTS
P~~ GABRIEL, ROEDER, SMITH S COMPANY
3
SUMMARY OF VALUATION RESULTS
As of October 1
2003 After 2003 Before 2002
COVERED GROUP
A. Number Included in the Valuation
1. Active Members 25 25 26
2. Inactive Members 0 0 0
B. Covered Annual Pa roll $1,339,667 $1,339,667 $ 1,265,970
LONG RANGE COST
C. Actuarial Present Value of Projected Benefits 4,579,962 4,351,144 3,969,178
D. Actuarial Value of Assets 1,966,148 1,847,551 1,626,932
E. Actuarial Present Value of Future Contrib.
1. Total: C - D 2,613,814 2,503,593 2,342,246
2. Portion Assigned to Unfunded Frozen
Actuarial Accrued Liability (UFAAL) 0 0 0
3. Portion Assi ned to Future Normal Costs 2,613,814 2,503,593 2,342,246
CURRENT ANNUAL COST
F. Annual Payment Needed to Amortize UFAAL 0 0 0
AS % Of B --- --- ---
G. Annual Employer Normal Cost 185,298 173,509 146,838
As % of B 13.83% 12.95% 11.60%
H. Interest on F + G from Valuation Date to
Contribution Date(s) 7,745 7,253 6,138
As % of B 0.58% 0.54% 0.48%
I. Required Employer/State Contribs: F + G + H 193,043 180,762 152,976
As % of B 14.41 % 13.49% 12.08%
J. Estimated State Premium Tax Refund 73,756 61,475 61,475
As % of B 5.51 % 4.59% 4.86%
K. Balance Required from Employer 119,287 119,287 91,501
As % of B 8.90% 8.90% 7.22%
L. Year to Which Contributions Apply
1. Plan Year Ending 9/30/04 9/30/04 9/30/03
2. Employer Fiscal Year Ending 9/30/04 9/30/04 9/30/03
3. Assumed Date(s) of Employer Contribs. Monthly Monthly Monthly
M. Required Employer Contribution for Fiscal
Year Ending 9/30/05 127,012 NA NA
As % of '04-`05 Pa roll 9.12% --- ---
~~~ GABRIEL, ROEDER, SMITH S~ COMPANY
DERIVATION OF EMPLOYER NORMAL COST
As of October 1
2003 After 2003 Before 2002
A. Actuarial Present Value of Projected
Benefits for
1. Active Members
a. Service Retirement Benefits $3,736,800 $3,587,383 $3,261,203
b. Vesting Benefits 318,385 241,147 211,385
c. Disability Benefits 385,263 357,870 339,214
d. Preretirement Death Benefits 124,493 123,149 114,691
e. Return of Member Contributions 15,021 41,595 42,685
Other
f 0 0 0
.
g. Total 4,579,962 4,351,144 3,969,178
2. Inactive Members
a. Service Retirees & Benefits 0 0 0
b. Disability Retirees 0 0 0
c. Terminated Vested Members 0 0 0
d. Total 0 0 0
3. Total for All Members 4,579,962 4,351,144 3,969,178
B. Actuarial Value of Assets 1,966,148 1,847,551 1,626,932
C. Unfunded Frozen Actuarial Accrued
Liability (UFAAL) 0 0 0
D. Actuarial Present Value of Projected
Member Contributions 766,658 773,950 752,037
E. Actuarial Present Value of Projected
Employer Normal Costs: A3- B - C - D 1,847,156 1,729,643 1,590,209
F. Actuarial Present Value of Projected
Covered Payroll 15,333,153 15,478,989 15,040,728
G. Employer Normal Cost Rate: 100 x E/F 12.05% 11.17% 10.57%
H. Annual Payroll of Active Members 1,339,667 1,339,667 1,265,970
I. Assumed Amount of Administrative
Expenses 23,868 23,868 12,884
J. Employer Normal Cost: (G x H) + I 185,298 173,509 146,838
~ ~~ GABRIEL, ROEDER, SMITH 8~ COMPANY
5
ACTUARIAL GAINS AND LOSSES
When the actual plan experience differs from the actuarial assumptions, an actuarial gain
or loss is the result. The net actuarial gain (loss) since the last valuation is computed as follows:
A. Normal Cost Rate
1. Last Year 10.57%
2. This Year 11.17
3. Change (0.60)
B. Present Value of Projected Payroll $15,478,989
C. Actuarial Gain (Loss) : A3 x B (92,874)
The fund earnings and salary increase assumptions have considerable impact on the cost
of the Plan so it is important that they are in line with the actual experience. The following table
shows the actual fund earnings and salary increase rates compared to the assumed rates for the
last few years:
Salary Increases
Investment Return Actual
Y
ear
Ending Police 8 Fire
9/30 Actual Assumed Police Fire Combined Assumed
1994 (0.1)% 8.0% NA 13.3% NA 6.0%
1995 21.6 8.0 NA 14.1 NA 6.0
1996 12.9 8.0 NA 8.1 NA 6.0
1997 22.2 8.0 NA 4.8 NA 6.0
1998 12.2 8.0 NA 15.8 NA 6.0
1999 13.2 8.0 3.4 8.7 NA 6.0
2000 18.7 8.0 15.4 10.3 NA 6.0
2001 (10.7) 8.0 19.6 18.6 NA 6.0
2002 (3.7) 8.0 13.9 7.9 NA 6.0
2003# 6.0 8.0 NA NA 8.4 6.0
Avera es 8.7% --- 12.9% 11.2% 8.4% ---
* Starting Public Safety (Police & Fire Only)
The actual investment return rates shown above are based on the actuarial value of
assets. The actual salary increase rates shown above are the increases received by those active
members who were included in the actuarial valuation both at the beginning and the end of each
period.
~~~ GABRIEL, ROEDER, SMITH 8c COMPANY
6
ACTUARIAL ASSUMPTIONS AND COST METHOD
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
~,
~:
Cost Method Aggregate Actuarial Cost Method
Investment Earnings* 8% per year, compounded annually; net rate after
investment related expenses.
Salary Increases'` 6% each year up to the assumed retirement age.
Inflation 4% per year.
Retirement Age Normal retirement date or, if later, one year after
valuation date. Probability of early retirement is 5%
for each year eligible.
Turnover Rates See Table below.
Mortality Rates 1983 Group Annuity Mortality Tables for males and
females.
Disability
1. Rates
2. Percent Service Connected
Asset Value
Administrative Expenses
Increase in Covered Payroll
Post Retirement Benefit Increase
Including inflation
See Table below.
75%.
Market Value on the valuation date.
Actual expenses incurred in most recent year.
NA
NA
Employment
GLOSSARY OF TERM
7
Actuarial Present Value is the value of an amount or series of amounts payable at various times,
determined as of the valuation date by the application of the set of actuarial assumptions.
Actuarial Assumptions are assumptions as to the occurrence of future events affecting pension
costs. The previous page outlines the Actuarial Assumptions utilized in this valuation.
Actuarial Cost Method is a procedure for determining the Actuarial Present Value of pension
plan benefits and for developing an actuarially equivalent allocation of such value to time periods,
usually in the form of a Normal Cost and Actuarial Accrued Liability.
AggreAate Actuarial Cost Method is a method under which the excess of the Actuarial Present
Value of Projected Benefits of the group included in the valuation, over the sum of the Actuarial
Value of Assets, and the Actuarial Present Value of Future Member Contribution (if any) is
allocated as a level percentage of earnings of the group between the valuation date and the
assumed retirement age. This allocation is performed for the group as a whole, not as a sum of
individual allocations. The portion of this Actuarial Present Value allocated to a specific year is
called the Employer Normal Cost. Under this method, actuarial gains (losses) reduce (increase)
future Normal Costs.
S'-~~ GABRIEL, ROEDER, SMITH 8c COMPANY
SECTION C
PENSION FUND INFORMATION
P~~ GABRIEL, ROEDER, SMITH 8~ COMPANY
~.
~r
r
SUMMARY OF ASSETS
9130/03 9/30/02
Cash and Securities -Market Value
Cash and Savings Accounts $ --- $ (9,078)
Money Market Funds 180,462 250,804
Treasury and Agency Bonds & Notes 490,386 416,158
Corporate Bonds 221,655 242,708
Common & Preferred Stocks 1,069,042 726,479
Pooled Equity Funds --- ---
Pooled Bond Funds --- ---
Other Securities --- ---
Total 1,961,545 1,627,071
Receivables
Accounts Receivable --- 2,100
State Contribution 3,129 2,061
PENSION FUND INCOME AND DISBURSEMENTS
Year Ending Year Ending
9!30/03 9/30102
clue at Beginning of Period $ 1,564,513 $ 1,398,731
:ome
Member Contributions 65,769 61,030
State Contributions 112,762 163,772
Employer Contributions 92,863 66,261
Other Contributions 0 0
Investment Earnings 115,151 (68,984)
Other Income 0 0
Total Income 386,545 222,079
)isbursements
II Increase In Reserve for Excess
SECTION D
FINANCIAL ACCOUNTING INFORMATION
~~ GABRIEL, ROEDER, SMITH $ COMPANY
10
FASB NO. 35 INFORMATION
10/ 1 /03 10/ 1 /02
A. Actuarial Present Value of Accumulated Plan Benefits
1. Vested Benefits
a. Members Currently Receiving Payments $ 0 $ 0
b. Terminated Vested Members 0 0
c. Other Members 721,556 204,047
d. Total 721,556 204,047
2. Non-Vested Benefits 211,725 507,554
3. Total Actuarial Present Value of Accumulated Plan
Benefit: 1 d+2 933,281 711,601
4. Accumulated Contributions of Active Members 261,238 204,047
B. Changes in the Actuarial Present Value of Accumulated
Plan Benefits
1. Total Value at Beginning of Period 711,601 414,498
2. Increase (Decrease) During the Period Attributed to:
a. Plan Amendrnent 60,537 NA
b. Change in Actuarial Assumption NA NA
c. Latest Member Data, Benefits Accumulated and
Decrease in the Discount Period. 174,448 325,758
d. Benefits Paid (13,305) (28,655)
e. Net Increase 221,680 297,103
3. Total Value at End of Period 933,281 711,601
C. Market Value of Assets 1,847,551 1,626,932
~~ GABRIEL, ROEDER, SMITH 8c COMPANY
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~~~~ GABRIEL, ROEDER, SMITH & COMPANY
12
SCHEDULE OF EMPLOYER AND STATE OF FLORIDA CONTRIBUTIONS
(GASB Statement No. 25)
Fiscal Year Ended
September 30 Annual Required
Contribution Actual
Contributions Percentage
Contributed
1994 $ 55,503 $ 55,751 100.5%
1995 71,957 91,120 126.6
1996 92, 343 100,118 108.4
1997 104,853 134,048 127.8
1 ggg 123,417 172,072 139.4
1999 89,265 188,433* 211.1
2000 89,265 106,355` 119.1
2001 78,035 78,035* 100.0
2002 99,223 127,736* 128.7
2003 152,976 154,338* 100.9
~' Excludes State revenue in excess of baseline amount plus adjustments.
~~` GABRIEL, ROEDER, SMITH $ COMPANY
13
ANNUAL PENSION COST AND NET PENSION OBLIGATION
(GASB Statement No. 27)
A.
B.
C.
D.
E.
F.
G
H
Employer Fiscal Year End September 30:
Annual Required Contribution (ARC)
Interest on Net Pension Obligation (NPO)
Adjustment to ARC
Annual Pension Cost (A+B-C)
Actual Contributions
NPO at beginning of year
Increase (decrease) in NPO (D-E)
NPO at end of year (F+G)
To be determined
2004 2003 2002
$ 193,043 $152,976 $ 99,223
(18,708) (18,677) (16,770)
(20,432) (19,651) (21,441)
194 , 767 153, 950 103 , 894
154,338 127,736
(233,852) (233,464) (209,622)
(388) (23,842)
(233,852) (233,464)
THREE-YEAR TREND INFORMATION
Fiscal Annual Pension Actual Percentage of Net Pension
Year Ending Cost (APC) Contribution APC Contributed Obligation
9/30/01 $ 82,813 $ 78,035 94.2% $ (209,622)
9/30/02 103,894 127,736 122.9 (233,464)
9/30/03 153,950 154,338 100.3 (233,852)
GABRIEL, ROEDER, SMITH 8c COMPANY
14
REQUIRED SUPPLEMENTARY INFORMATION
GASB Statement No. 25 and No. 27
The information presented in the required supplementary schedules was determined as
part of the actuarial valuations at the dates indicated. Additional information as of the
latest actuarial valuation:
Valuation date October 1, 2003
Contribution Rates 41
14
Employer (and State) .
Plan members 5%
Actuarial Cost Method Aggregate
Amortization Method NA
Remaining amortization period NA
Asset Valuation Method Market Value
Actuarial Assumptions
Investment rate of return 8 0%
Projected salary increases 6.0%
Includes inflation and other general increases at 4.0%
Cost of Living adjustments Not Applicable
GABRIEL, ROEDER, SMITH 8c COMPANY
SECTION E
MISCELLANEOUS INFORMATION
GABRIEL, ROEDER, SMITH 8c COMPANY
15
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GABRIEL, ROEDER, SMITH Sc COMPANY
16
STATISTICAL DATA
POLICE OFFICERS
1011198
Active Members
Number 2
Total Annual Payroll $ 68,007
Average Annual Salary 34,004
Other Averages
Current Age 29.0
Age at Employment 27.9
S 1.1
Past ervice
Service Retirees and Beneficiaries
Number
Total Annual Benefit
Average Monthly Benefit
Disability Retirees
Number
Total Annual Benefit
Average Monthly Benefit
0
$ ---
10/1100
10/1 /02
10/1103
5
$ 193,566
38,713
30.1
27.8
2.3
0
$ ---
8
$ 344,328
43,041
31.6
30.2
1.4
0
$ ---
0 0 0
9
$ 424,795
47,199
33.7
31.6
2.1
0
$ ---
0
$ ---
Terminated Members With Vested Benefits
Number 0 0 0 0
Total Annual Benefit $ ---
---
$
$ ---
$
Average Monthly Benefit ---
17
STATISTICAL DATA
1=IREFIOFiTI`RS
10/1 /98 10/1 /00 10/1 /02 10/1 /03
Active Members
Number 16 17 18 16
Total Annual Payroll $ 669,711 $ 757,174 $ 921,642 $ 914,872
Average Annual Salary 41,857 44,540 51,202 57,180
Other Averages
Current Age 35.4 35.6 36.0 36.8
Age at Employment 31.5 31.0 31.5 30.8
Past Service 3.9 4.6 4.5 6.0
Service Retirees and Beneficiaries
Number 0 0 0 0
Total Annual Benefit $ --- $ --- $ --- $ ---
Average Monthly Benefit --- --- --- ---
Disability Retirees
Number 0 0 0 0
Total Annual Benefit $ --- $ --- $ --- $ ___
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Total Annual Benefit $ --- $ ___ $ ___ $ ___
Average Monthly Benefit --- ___ ___ ___
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~ ~~ GABRtEL, ROEDER, SMITH S~ COMPANY
SECTION F
SUMMARY OF PLAN PROVISIONS
~~ GABRIEL, ROEDER, SMITH 8c COMPANY
19
SUMMARY OF PLAN PROVISIONS
All full-time firefighters and police officers hired after December 31, 1995 are eligible for
membership on date of employment.
Total cash remuneration.
Average of Compensation over the five best years within the last ten years of service;
does not include lump sum payments of unused leave.
Number of years and fractional parts of years of service.
Eligibility - Earlier of age 55 with six years of service, or age 52 with 25 years of
service.
Benefit - 3.0% of AFC for each of the first six years
3.5% for each of the next four years
4.0% for each of the next five years
2.5% for each of the next six years
2.0% for each year after 21 years
Form of Benefit -Ten year certain and life annuity, with other options available.
Eligibility - Age 50 with six years of Credited Service.
Benefit - Accrued pension benefit reduced by 3% for each year early.
ipplemental Benefit
Monthly amount of $5 per year of service, with a maximum of $150.
Members who continue in employment past normal retirement date may either accrue
larger pensions or freeze their accrued benefit and enter the DROP. Each participant in
the DROP has an account credited with benefits not received and investment earnings.
GABRIEL, ROEDER, SMITH 8 COMPANY
20
ility - Death in the line of duty
it - 50% of AFC payable to spouse (or children) for life.
~e Incurred Death
ility - Six years of Credited Service
•it - Spouse receives actuarial equivalent of the accrued pension.
D
igibility - Continuous and permanent incapacity for rendering useful and efficient
service.
~nefit - Greater of the accrued pension benefit or 42% of AFC.
ervice Incurred Disability
ligibility - Continuous and permanent incapacity for rendering useful and efficient
service.
enefit - Greater of the accrued pension benefit or 25% of AFC.
For a member who is not vested when he terminates, a refund of his accumulated
contributions is payable. For a member who is vested when he terminates, his vested
accrued benefit is payable at his Normal Retirement Date. The vesting schedule is as
follows:
Years of Vested
Credited Service °l°
Under 6 0%
6 or more 100
Members -
the State
the Employer -
5% of Compensation.
Premium tax refunds received pursuant to Chapters 175 and 185,
Florida Statutes.
The remaining amount necessary to fund the Plan properly
according to the Plan's actuary.
ROEDER, SMITH 8c COMPANY
21
These changes have been made pursuant to Ordinance No. 585 adopted December 11,
The single plan that covered general employees, police officers and firefighters was
separated into one plan for general employees and one plan for public safety officers.
Normal retirement date was changed from age 55 with ten years of service to age 55
with six years of service.
Early retirement date was changed from age 50 with ten years of service to age 50 with
six years of service.
~:4. The multiplier was changed from 3% per year to:
3.0% for each of the first six years
3.5% for each of the next four years
4.0% for each of the next five years
2.5% for each of the next six years
2.0% for each year after 21 years
Eligibility for non-service incurred death benefit was changed from ten years of service
to six years.
6. A supplemental pension was added in the amount of $5 per year of service.
7. Attainment of vested status was changed from ten years of service to six years.
8. A deferred retirement option plan (DROP) was added.
ROEDER, SMITH 8~ COMPANY