City of Hallandale Beach Professional/Management

Retirement PlanActuarial Review

April 15, 2013

2

October 1, 2012 Valuation Review

3

Basic Funding Equation

4

The Annual Required Contribution (ARC) for the 2012 and 2013 fiscal year is $762,010 and $912,745.

• The 2012 ARC is equal to 57.53% of estimated participant compensation.

• The 2013 ARC is equal to 87.38% of estimated participant compensation.

• Expected employee contributions for the 2012 plan year are $100,221.

• Expected employee contributions for the 2013 plan year are $80,622.

5

Analysis of Actuarial Experience• Total Normal Cost increased from $452,071 for the 2012 fiscal

year to $480,722 for the 2013 fiscal year. As a percentage of estimated payroll, the increase was from 34.13% to 46.02%.

• Participant salaries were lower than expected. The expected increase for active participants was 7.40%; the actual increase was 4.39%.

• The actuarial value of plan assets increased approximately 6.8% due to investment earnings assuming mid-year cash flow. We anticipated an increase of 7.75%. The market value of assets increased approximately 19.3%.

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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 7.50%.

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

• The salary scale was decreased 80 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 $10,102,657

b) Contributions/Transfers 823,015

c) Benefit payments (326,813)

d) Expenses (26,730)

e) Expected Interest on (a, b, c, and d) 801,573

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

11,373,702

g) Market Value of Assets as of 10/01/2012 12,571,796

h) Current year excess appreciation/(shortfall) (g-f) 1,198,094

i) Adjustments to market value (sum of deferred amounts) 561,842

j) Actuarial value of assets (g-i) 12,009,954

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Deferred Asset Gains/(Losses)

Plan Year

Allocation Year 2009 2010 2011 2012

2009 $(210,757)

2010 $(210,757) $59,097

2011 $(210,757) $59,097 $(197,913)

2012 $(210,756) $59,097 $(197,912) $ 299,524

2013 $59,096 $(197,912) $299,524

2014 $(197,912) $299,523

2015 $299,523

Total $(843,027) $236,387 $(791,649) $1,198,094

Deferred $0 $59,096 $(395,824) $898,570

Adjustment to market value (sum of deferred amounts) $561,842

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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 plus an amount to fund the unfunded Frozen Initial Liability over 30 years.

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

Total Normal Cost

(% of Estimated Payroll)

$480,722

(46.02%)

$452,071

(34.13%)

$673,627

(39.58%)

$772,490

(44.24%)

Employee Normal Cost $80,622 $100,221 $129,320 $136,795

Employer Normal Cost $400,100 $351,850 $544,307 $635,695

Annual Required Contribution

(% of Estimated Payroll)

$912,745

(87.3%)

$762,010

(57.5)

$953,218

(56.0%)

$1,051,450

(60.2%)

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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 *

$12,810,101

$12,248,259

$10,102,657

$10,788,956

$9,370,501

$10,186,540

$7,921,579

$9,505,895

Present Value of Accrued Bens

• Funded % (Market Value)

• Funded % (Actuarial Value)

$15,251,081

84%

80%

$12,443,511

81%

87%

$11,519,812

81%

88%

$10,269,646

77%

93%

Present Value of Proj. Bens

• Funded % (Market Value)

• Funded % (Actuarial Value)

* Limited to 120% of MVA

$19,144,638

67%

64%

$16,608,976

61%

65%

$17,853,094

52%

57%

$18,628,881

42%

51%

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

17

14

13

44

18

13

12

43

23

10

10

43

25

12

9

46

Salary Increases

• Actual

• Expected

4.4%

7.4%

3.2%

7.4%

3.0%

7.5%

6.8%

5.6%

Investment Return

• Market

• Actuarial

19.34%

6.81%

(0.44)%

(1.65)%

10.53%

0.98%

(3.09)%

(1.65)%

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