City of Hallandale Beach
Retirement Plan
Actuarial Review
April 15, 2013
October 1, 2012 Valuation Review
2
Basic Funding Equation
3
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.
4
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%.
5
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%.
6
Development of Actuarial Value of Assets
• Smooth unexpected investment
return over 4 years
• Reduces volatility of ARC
7
Development of Actuarial Value of Assets
continued….
a) Market Value of Assets as of 10/01/2011
b) Contributions/Transfers
c)
2,798,610
Benefit payments
(2,368,133)
d) Expenses
(49,895)
e) Expected Interest on (a, b, c, and d)
f)
$31,026,638
2,341,413
Expected Value of Assets as of 10/01/2012
(a+b+c+d+e)
g) Market Value of Assets as of 10/01/2012
33,748,633
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
8
Deferred Asset Gains/(Losses)
Plan Year
Allocation Year
2009
2009
$(655,811)
2010
$(655,811)
$213,464
2011
$(655,811)
$213,464
$(503,819)
2012
$(655,810)
$213,463
$(503,819)
$801,983
$213,463
$(503,819)
$801,983
$(503,818)
$801,982
2013
2010
2014
2011
2015
2012
$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)
9
$1,611,773
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
$3,895,351
$3,491,371
$3,379,069
$3,295,353
(% of Estimated Payroll)
(52.85%)
(46.81%)
(42.17%)
(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
$3,940,595
$3,512,685
$3,391,459
$3,290,953
(53.5%)
(47.1%)
(45.3%)
(42.2%)
Total Normal Cost
(% of Estimated Payroll)
10
10/1/2009
Funded Status
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.
• 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.
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.
11
Funded Status
Plan Year Beginning
10/1/2012
10/1/2011
10/1/2010
10/1/2009
Plan Assets
• Market Value
$37,804,428
$31,026,638
$29,592,676
$25,537,551
• Actuarial Value *
$36,192,655
$32,766,978
$32,088,033
$30,645,061
Present Value of Accrued Bens
$46,052,116
$41,548,860
$39,943,354
$37,092,178
• Funded % (Market Value)
82%
75%
74%
69%
• Funded % (Actuarial Value)
79%
79%
80%
83%
Present Value of Proj. Bens
$61,025,913
$55,583,324
$54,511,310
$52,574,884
• Funded % (Market Value)
62%
56%
54%
49%
• Funded % (Actuarial Value)
59%
59%
59%
58%
* Limited to 120% MVA
12
Actuarial History
Plan Year Beginning
10/1/2012
10/1/2011
10/1/2010
10/1/2009
Lives Covered
• Active
151
158
165
170
72
70
71
72
• Retired
128
126
123
121
• Total
351
354
359
363
• Actual
7.5%
3.1%
1.2%
2.4%
• Expected
5.5%
5.6%
5.6%
5.6%
17.78%
0.70%
10.63%
(2.72)%
6.67%
0.53%
0.54%
(1.88)%
• Vested Terminated/DROP
Salary Increases
Investment Return
• Market
• Actuarial
13
Defined Benefit Plan Sponsors are in
a Challenging Environment
Forecasting &
Projections
Law changes
Accounting
Changes
Market
Conditions
Administrative
Complexity
Plan
Sponsor
Plan Design Review
Asset Liability Modeling
Frozen Plan Solutions
Bundled Services
Principal
Financial
Group