City of Hallandale Beach Retirement Plan Actuarial Review April 15, 2013.

City of Hallandale Beach Retirement Plan

Actuarial ReviewApril 15, 2013

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October 1, 2012 Valuation Review

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Basic Funding Equation

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The Annual Required Contribution (ARC) for the 2012 and 2013 fiscal year is $3,512,685 and $3,940,595.

• The 2012 ARC is equal to 47.10% of estimated participant compensation.

• The 2013 ARC is equal to 53.46% of estimated participant compensation.

• Expected employee contributions for the 2012 fiscal year are $223,757.

• Expected employee contributions for the 2013 fiscal year are $221,137.

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Analysis of Actuarial Experience• Total Normal Cost increased from $ 3,491,371 for the 2012 fiscal

year to $3,895,351 for the 2013 fiscal year. As a percentage of estimated payroll, the increase was from 46.81% to 52.85%.

• Participant salaries were higher than expected. The expected increase for active participants was 5.53%; the actual increase was 7.45%.

• The actuarial value of plan assets increased approximately 6.67% due to investment earnings assuming mid-year cash flow. We anticipated an increase of 7.5%. The market value of assets increased approximately 17.8%.

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Analysis of Actuarial Experience Cont.• With the 2012 valuation report, the following changes were made

this year:

• The valuation interest rate was lowered to reflect current expectations of your plan's long term investment performance. The new rate was decreased to 7.25%.

• The mortality table was updated to the IRS Prescribed Mortality – Generational Annuitant and Non-annuitant, male and female.

• The salary scale was decreased 50 basis points to reflect past experience and the expected level of future salary increases. The inflation assumption was decreased to 2.5%.

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• Smooth unexpected investment return over 4 years

• Reduces volatility of ARC

Development of Actuarial Value of Assets

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Development of Actuarial Value of Assets continued….

a) Market Value of Assets as of 10/01/2011 $31,026,638

b) Contributions/Transfers 2,798,610

c) Benefit payments (2,368,133)

d) Expenses (49,895)

e) Expected Interest on (a, b, c, and d) 2,341,413

f) Expected Value of Assets as of 10/01/2012 (a+b+c+d+e)

33,748,633

g) Market Value of Assets as of 10/01/2012 36,956,563

h) Current year excess appreciation/(shortfall) (g-f) 3,207,930

i) Adjustments to market value (sum of deferred amounts) 1,611,773

j) Actuarial value of assets (g-i) 35,344,790

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Deferred Asset Gains/(Losses)

Plan Year

Allocation Year 2009 2010 2011 2012

2009 $(655,811)

2010 $(655,811) $213,464

2011 $(655,811) $213,464 $(503,819)

2012 $(655,810) $213,463 $(503,819) $801,983

2013 $213,463 $(503,819) $801,983

2014 $(503,818) $801,982

2015 $801,982

Total $(2,623,243) $853,854 $(2,015,275) $3,207,930

Deferred $0 $213,463 $(1,007,637) $2,405,947

Adjustment to market value (sum of deferred amounts) $1,611,773

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Valuation History

Deposit calculations are based on the plan’s actuarial funding method and the City’s funding policy. The City’s funding policy has been to calculate the Annual Required Contribution equal to the City’s Normal Cost.

Plan Year Beginning 10/1/2012 10/1/2011 10/1/2010 10/1/2009

Total Normal Cost

(% of Estimated Payroll)

$3,895,351

(52.85%)

$3,491,371

(46.81%)

$3,379,069

(42.17%)

$3,295,353

(42.25%)

Employee Normal Cost $221,137 $223,757 $224,223 $234,001

Employer Normal Cost $3,674,214 $3,267,614 $3,154,846 $3,061,352

Annual Required Contribution

(% of Estimated Payroll)

$3,940,595

(53.5%)

$3,512,685

(47.1%)

$3,391,459

(45.3%)

$3,290,953

(42.2%)

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Funded Status

• Present Value of Accrued Benefits: The comparison uses the asset values divided by the present value of all benefits accrued to date. The liability measure does not include a provision for future service accruals or salary increases.

• Present Value of Future Benefits: Ultimately, the plan will need to fund the Present Value of Future Benefits. This present value assumes future salary increases and service credits. It is the present value of the projected benefit payable at retirement for each current plan participant.

The funded status is a measurement of the plan’s assets compared to the benefit liabilities. The value of these benefit liabilities on either an “accrued” or “projected” basis.

Another measure that we have not shown includes the plan termination liabilities. The actual cost to terminate the plan would be based on annuity purchase rates at the time of termination.

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Plan Year Beginning 10/1/2012 10/1/2011 10/1/2010 10/1/2009

Plan Assets

• Market Value

• Actuarial Value *

$37,804,428

$36,192,655

$31,026,638

$32,766,978

$29,592,676

$32,088,033

$25,537,551

$30,645,061

Present Value of Accrued Bens

• Funded % (Market Value)

• Funded % (Actuarial Value)

$46,052,116

82%

79%

$41,548,860

75%

79%

$39,943,354

74%

80%

$37,092,178

69%

83%

Present Value of Proj. Bens

• Funded % (Market Value)

• Funded % (Actuarial Value)

* Limited to 120% MVA

$61,025,913

62%

59%

$55,583,324

56%

59%

$54,511,310

54%

59%

$52,574,884

49%

58%

Funded Status

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Actuarial HistoryPlan Year Beginning 10/1/2012 10/1/2011 10/1/2010 10/1/2009

Lives Covered

• Active

• Vested Terminated/DROP

• Retired

• Total

151

72

128

351

158

70

126

354

165

71

123

359

170

72

121

363

Salary Increases

• Actual

• Expected

7.5%

5.5%

3.1%

5.6%

1.2%

5.6%

2.4%

5.6%

Investment Return

• Market

• Actuarial

17.78%

6.67%

0.70%

0.53%

10.63%

0.54%

(2.72)%

(1.88)%

Defined Benefit Plan Sponsors are in a Challenging Environment

Plan Sponsor

Law changes

Accounting Changes

Market Conditions

Administrative Complexity

Forecasting & Projections

Plan Design Review

Asset Liability Modeling

Frozen Plan Solutions

Bundled Services

Principal Financial

Group