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05-12-2003
AGENDA PENSION TRUSTEES AGENDA Board of Trustees of the Employees' Pension Fund May 12, 2003 - 1:00 P.M. 1 - Call to Order 2 - Approval of Minutes: 04/14/03 3 - Request for acceptance into membership: Timothy Murch, Micah Maxwell, Sergo Alexandre, Michael Dellavolpe, Mark Eggers, Mark Henry, Gregory Record, John Savage, Christian Schuele, Adam Siegel, Steve Wilensky, Michele Williams, Floyd Thurman, Christopher Jenkins, Clifford Fisher, Bryan Berry, Michael Reynolds, and Ronald Gideon. 4 - Regular Pension(s) to be granted: Fred Aust, Howard Wister, Joseph Colbert, Kenneth Fairchild and Samuel Garrett. 5 - Approve a legal services agreement between Klausner & Kaufman and the Board of Trustees of the City of Clearwater Employees' Pension Plan for legal services to be provided to the Board and to the Pension Advisory Committee, and authorize payments to Klausner & Kaufman in an amount not to exceed $60,000 for the period 5/12/03 through 9/30/04. 6 - Accept the Actuary's Report for the Employees' Pension Plan for the plan year beginning 1/1/2003. 7 - Investment Performance Presentation 8 - Other Business 9- Adjourn 3 r Meeting Date: Approved by Trustees: CITY OF CLEARWATER EMPLOYEES' PENSION PLAN/ PENSION ADVISORY COMMITTEE TO: Pension Trustees FROM: Pension Advisory Committee SUBJECT: Recommendation for Acceptance into Pension Plan DATE: April 10, 2003 As Trustees of the City of Clearwater Employees' Pension Fund, you are hereby notified that the employee(s) listed below have been duly examined by a local physician and each has been designated as a "first class risk". The employment of these individuals brings the number of FTE's as of this date to 1744.01 of 1844.9 budgeted positions (including the City Commission). These employees are eligible for pension membership as noted in the Pension Eligibility Date column below, and it is the recommendation of the Pension Advisory Committee that they be accepted into membership. Pension Elig. Name, Job. Class, & Deot./Div. Hire Date Date Timothy Murch, Senior Marine Lifeguard/Marine & Aviation 2/22/03 2/22/03 Micah Maxwell, Management Intern/City Manager 3/10/03 3/10/03 Sergo Alexandre, Firefighter/Fire 3/10/03 3/10/03 Michael Dellavolpe, Firefighter/Fire 3/10/03 3/10/03 Mark Eggers, Firefighter/Fire 3/10/03 3/10/03 Mark Herny, Firefighter/Fire 3/10/03 3/10/03 Gregory Record, Firefighter/Fire 3/10/03 3/10/03 John Savage, Firefighter/Fire 3/10/03 3/10/03 Christian Schuele, Firefighter/Fire 3/10/03 3/10/03 Adam Siegel, Firefighter/Fire 3/10/03 3/10/03 Steve Wilensky, Firefighter/Fire 3/10/03 3/10/03 Michele Williams, Firefighter/Fire 3/10/03 3/10/03 Floyd Thurman, Mechanic II/Solid Waste/General Services 3/25/03 3/25/03 Christopher Jenkins, Recreation Leader/Parks & Recreation 3/24/03 3/24/03 Clifford Fisher, Police Recruit/Police 3/24/03 3/24/03 Bryan Berry, Planner/Planning 3/17/03 3/17/03 Michael Reynolds, Senior Planner/Planning 3/24/03 3/24/03 Ronald Gideon, Risk Management Specialist/Finance 3/24/03 3/24/03 r ._ Q 99??Ir Trustees of the Employees' Pension Plan Agenda Cover Memorandum Final Agenda Item # i Meeting Date: 5/12/03 SUBJECT/RECOMMENDATION: Fred Aust, Solid Waste/General Services; Howard Wister, Engineering Department; Joseph Colbert, Fire Department; Kenneth Fairchild, Police Department; and Samuel Garrett, Fire Department, be granted regular pensions under Section(s) 2.393 and 2.397 of the Employees' Pension Plan as approved by the Pension Advisory Committee. ? and that the appropriate officials be authorized to execute some. SUMMARY: Fred Aust, Solid Waste Supervisor II, Solid Waste/General Services Department, was employed by the City on April 6, 1981, and his pension service credit is effective on that date. His pension will be effective June 1, 2003. Based on an average salary of approximately $47,444 per year over the past five years, the formula for computing regular pensions, and Mr. Aust's selection of the 100% Joint & Survivor Annuity, this pension will approximate $27,655 annually. Howard E. Wister, Traffic Operations Supervisor, Engineering Department, was employed by the City on February 25, 1991, and his pension service credit is effective on that date. His pension will be effective May 1, 2003. Based on an average salary of approximately $38,806 per year over the past five years, the formula for computing regular pensions, and Mr, Wister's selection of the Joint & Survivor Annuity, this pension will approximate $13,088 annually. Joseph S. Colbert Department, was employed by the City on March 4, 1985, and his pension service credit is effective on November 17, 1989. His pension will be effective May 1, 2003. Based on an average salary of approximately $43,530 per year over the past five years, the formula for computing regular pensions, and Mr. Colbert's selection of the 75% Joint & Survivor Annuity, this pension will approximate $15,453 annually. Reviewed by: . Originating Dept: Costs Legal NA Info Tech NA Debbie Ford/Hu n . Total om Resources , Budget NA Public NA User Dep Funding Source: Works Purchasing NA DCM/ Cootral Current Fiscal Year ACM Improvement Risk Mgmt NA Other NA Attachments Cphioting ct?r Appropriation Code: Submitted by: ? None City Manager PrIntad nn racvnind nnna? Dov 2/98 Regular Pensions Page 2 May 12, 2003 Kenneth R. Fairchild, Police Sergeant, Police Department, was employed by the City on June 19, 1978, and his pension service credit is effective on that date. His pension will be effective June 1, 2003. Based on an average salary of approximately $64,926 per year over the past five years, the formula for computing regular pensions, and Mr. Fairchild's selection of the 100% Joint & Survivor Annuity, this pension will approximate $43,983 annually. Samuel R. Garrett, Police Sergeant Department, was employed by the City on July 23, 1973, and his pension service credit is effective on that date. His pension will be effective May 1, 2003. Based on an average salary of approximately $63,737 per year over the past five years, the formula for computing regular pensions, and Mr. Garrett's selection of the 100% Joint & Survivor Annuity, this pension will approximate $51,307 annually. These pensions were approved by the Pension Advisory Committee on April 10, 2003. Section 2.393 (p) provides for normal retirement eligibility when a participant has reached age 55 and completed twenty years of credited service, has completed thirty years of credited service, or has reached age 65 and completed ten years of credited service. Section 2.393 also (p) provides for normal retirement eligibility when a participant has completed twenty years of credited service in a type of employment described as "hazardous duty" and further specifically defines service as a Police Sergeant as meeting the hazardous duty criteria. Mr. Aust qualifies under the 20 years of service and age 55 criteria. Mr. Wister and Mr. Colbert qualify under the 10 years of service and age 65 criteria. Mr. Fairchild and Mr. Garrett qualify under the hazardous duty criteria. f 0 ??'??ITENF Employee Pension Plan Trustee Agenda Cover Nlemorandum `.Norksession Item #: Final Agenda Item # Meeting Date: 5/12103 SUBJECT/RECOMMENDATION: Approve a legal services agreement between Klausner & Kaufman and the Board of Trustees of the City of Clearwater Employees' Pension Plan for legal services to be provided to the Board and to the Pension Advisory Committee, and authorize payments to Klausner & Kaufman in an amount not to exceed $60,000 for the period 5/12/03 through 9/30/04, 9 and that the appropriate officials be authorized to execute same. SUMMARY: • On January 6, 2003, RFP 15-03 was issued for legal services for the Board of Trustees of the City of Clearwater Employees' Pension Plan with a deadline for receipt of proposals of February 14, 2003. • Three responses were received for the RFP. • On March 13, 2003, after presentations from the three responsive firms, at a joint meeting of the Board of Trustees and the Pension Advisory Committee, the law firm of Klausner and Kaufman was chosen to provide such legal services. • During the past 4 years, the average cost for pension attorney services has been approximately $3,400 per month. This amount was multiplied by 17 months to arrive at an estimated amount that will be spent between 5/12/03 and 9/30/04. Reviewed by- l Q?/f Info Srvc L Originating Dept: Costs ega NIA ? - Legal" Total 60,000 Budget Public Works NIA NIA User Dept.. -' Funding Source: Purchasing DCM/ACM Human Res r s Current FY 20,000 CI Risk Mgmt N/A Other LIT?? Attachments OP Other X Submitted by: City Manager Appropriation Code: 646-07410.530100.585-000 Rev. 2198 PROFESSIONAL SERVICES AGREEMENT THIS AGREEMENT is made this day of , 2003, by and between THE BOARD OF TRUSTEES OF THE CITY OF CLEARWATER EMPLOYEES' PENSION PLAN (hereinafter referred to as the "Board") and KLAUSNER & KAUFMAN, P.A., a professional legal corporation (hereinafter referred to as the "Counsel"). WITNESSETH: WHEREAS, the Board wishes to retain Counsel to serve as Legal Counsel; NOW, THEREFORE, in consideration of the promises and mutual covenants contained in this Agreement, the parties hereby agree as follows: SECTION 1. AUTHORIZATION TO PROCEED AS COUNSEL. Counsel is hereby authorized to provide services as described in this Agreement and for the professional fees described in this agreement. SECTION 2. SCOPE OF SERVICES. Counsel hereby agrees to provide its services to the Board as follows: a. review all contracts and other documents relating to the affairs of the Board for legal sufficiency, legal form and correctness, and approve same on signature page of document; b. provide verbal and legal written opinions as requested by the Board and by individual Trustees for matters relating to their duties on the Board; C. provide reasonable availability for telephone consultation on matters relating to the affairs of the Board; d. draft legislation, rules and regulations, contracts and other legal documents as requested by the Board; e. review and supervise the services of any other Attorneys who may be retained by the Board; f. provide continuing educational updates to the Trustees on changes in the law relating to the duties of the Trustees and the management of the Pension Fund; 9. attend meetings of the Board, Pension Advisory Committee (PAC), and other meetings as requested by the Board; h. provide advice to the PAC in determining eligibility of applicants for disability and other pension benefits; provide advice on Sunshine Law and Public Records Act issues; Advise the Board and PAC regarding provisions of state and federal pension and tax law and, as directed by the Board, recommend changes to the pension ordinance and procedures necessary to comply with the law; k. represent the Board, PAC, or other body as directed by the Board in litigation arising out of administration of the pension plan; 1. provide such other legal services as the Board shall deem appropriate. SECTION 2. PROFESSIONAL FEES AND COSTS. The Board and Counsel agree to a rate of $250 per hour. There shall be no charge for faxes, long distance telephone calls, or regular postage. Copying charges will be billed at $0.25 per page. Overnight mail shall be billed at cost. Travel for meeting attendance shall be a flat fee of $250 for travel time plus airfare and car rental. The maximum fees and compensable expenses paid pursuant to this Agreement shall be $40,000.00 per year. Any additional fees and expenses must be approved by the Board. The parties shall review this Agreement in six (6) months for the purposes of setting a retainer agreement. -2- SECTION 2. INDEMNIFICATION AND INSURANCE. Counsel represents that it has expertise in the area of public employee retirement systems and is competent to perform the duties required by this Agreement. Counsel agrees to protect, defend, indemnify and hold the City and its officers, employees and agents free and harmless from and against any and all losses, penalties, damages, settlements, costs, charges, professional fees or other expenses or liabilities of every kind and character arising out of or due to any negligent act or omission of Counsel, its employees, agents and subcontractors in connection with or arising directly or indirectly out of this Agreement and/or the performance hereof. Without limiting its liability under this Agreement, Counsel shall procure and maintain during the life of this Agreement professional liability insurance in an amount of $1,000,000. This provision shall survive the termination of this Agreement. SECTION 3. CONFLICT OF INTEREST. It is understood by the Board and Counsel that Counsel is not aware of any clients of the firm that currently present any conflict between the interests of the Board and other clients of Counsel. If any potential conflict of interest arises during the time Counsel is representing the Board, Counsel will promptly inform the Board. The Board is under no obligation to agree to permit such conflict representation. The parties recognize that the role of Counsel in representing the Board is that of a fiduciary and Counsel shall act in accordance with generally accepted principles of fiduciary responsibility. SECTION 4. CONSTRUCTION AND AMENDMENTS. This Agreement shall be governed by the laws of the State of Florida and any dispute involving the enforcement or interpretation of this Agreement shall have its venue in Pinellas County, Florida. This Agreement may be amended only by a writing duly entered into by the Board and Counsel. -3- SECTION 5. CANCELLATION OF AGREEMENT. This Agreement may be terminated with or without cause upon thirty (30) days written notice. The terms of the Agreement shall remain in effect as is unless modified in writing. This Agreement shall supersede all other professional services agreements between the parties. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above. BOARD OF TRUSTEES OF THE EMPLOYEES' PENSION PLAN OF THE CITY OF CLEARWATER, FLORIDA By: Brian J. Aungst Chairperson Approved as to form: Id-1- Pamela K. Akin City Attorney Attest: Cynthia E. Goudeau City Clerk Klausner & f au jman, P Attest: By: Its -4- z1 7?--- sue, Employee's Pension Plan Worksession Item #: Trustee's Agenda Cover Final Agenda Item # w?rE0.E Memorandum Meeting Date: 5/12/03 SUBJECT/RECOMMENDATION: Accept the Actuary's Report for the Employees' Pension Plan for the plan year beginning 1/ 1 /2003, 21 and that the appropriate officials be authorized to execute some. SUMMARY: • The 1 / 1 /2003 actuarial report for the Employees' Pension Plan indicates that a City contribution of $7,153,190, equivalent to 11 % of covered payroll, is required, This is an increase from the 2002 valuation, which required a contribution of $1,766,058. This actuarially-required contribution per Florida Statutes exceeds the minimum City contribution per the ordinance governing the plan of 7% of the compensation of all employees participating in the plan (estimated at $4,560,557). • The minimum City contribution was affected by the following factors: • Actuarial investment return of (1.85%) in comparison to an assumed rate of 7.5% for plan year 2002 (2001 actuarial investment return was 7.4%); • Actual salary increases of 5.8% in comparison to an assumed rate of 6% for plan year 2002 (2001 actual salary increases were 5.9%); • Amortization of the plans initial unfunded liability was reduced to zero due to the final payment towards this liability during 2002; and • Actual expenses for the plan year were $232,620 less than expected. • The difference between the actuarially determined contribution of $7,153,190 and the ordinance-required contribution of $4,560,557 can be funded from the existing credit balance, which is currently $25,832,535. The remaining credit balance can be used to pay additional actuarially-required City contributions above the ordinance-required 7% until it is exhausted, • The Plan uses a phase-in approach of prior asset gains (losses) through a rolling five-year average used to "smooth" investment performance. The market value basis performance for the last five years (1998, 1999, 2000, 2001, and 2002, respectively) has been 16.74%, 18.61%, (3.43)%, (5.16)% and (8.83)%. As a result of the last three years of Reviewed by: Originating Dept: " 3 P Costs Legal N/A Info Srvc N/A Finance k/r7jj J. Ravins ' Total 0 Budget yv Public Works N/A User Dept. Funding Source: Purchasing DCM/ACM N/A Human Resources Current FY 0 CI Risk Mgmt N/A Other Attachments OP Other Submitted by: © None City Manager Appropriation Code: relatively poor investment market performance, the actuarial value of the plan assets exceeds the market value by almost $80 million. This deficit will be included in the actuarial value and will gradually increase the funding requirements, unless the market value of the assets earns $80 million above the expected 7.5% annual return over the next four years. It is currently anticipated that this deficit could consume the remaining credit balance in the next three to five years, requiring the City to budget for annual increases in excess of the current 7% at that point. • The funded status of the plan (ratio of assets at market value to the actuarial present value of accumulated plan benefits) has decreased significantly, from 162% at 1 / 1 /00 to 148% at 1/1/01 to 137% at 1 /1 /02, to 112% at 1 /1 /03, primarily due to the poor plan investment performance for calendar years 2000, 2001, and 2002. As Indicated above, the plan has experienced negative investment returns for the last three plan years due to the downturn in the stock market. • A copy of the draft Actuary's Report is available for review In the Official Records and Legislative Services Department. 2 l The City of Clearwater Employees' Pension Plan Actuary's Report As of January 1, 2003 to determine annual contribution for the Plan Year: 01/01/2003 - 12/31/2003 to be paid in the Fiscal year: 10/01/2003 - 09/30/2004 F? OAP Prepared by PricewaterhouseCoopers, LLP April 2003 PI e1CEV ?(ATERHOUS?PERS April 17, 2003 Private & Confidential City ofClearvater 100 S. Myrtle Avenue Clearwater, FL 33758-4748 Ladies and Gentlemen; This report presents the results of the January 1, 2003 actuarial valuation of the City of Clearwater Employees' Pension Plan. It has been prepared primarily to present to management the contribution requirements for 2003 and also the current status of funding of accumulated plan benefits. Section IV of this report includes a presentation of the information required by the Govemmeql;Accounting Standards Board (GASB) Statements No. 25 and 27. ?i? I rnished by the City of Clearwater. Our calculations were based on financial data and ee e data fu The valuation was based upon generally acceptej!e ial methods, and we performed such tests as we considered necessary to assure the accuracy of the results. To our knowledge there are no benefits or expenses to be provided by the plan for which a liability or current cost was not established. We certify that the amounts presented in the accompanying report have been appropriately determined according to the actuarial assumptions stated herein. Statement by Enrolled Actuary This actuarial valuation and/or cost determination was 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, and in my opinion, the techniques and assumptions used are reasonable and meet the requirements and intent of Part VII, Chapter 112, Florida Statutes. There is no benefit or expense to these provided by the plan 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. Respectfully submitted, Stephen M. Metz Associate of the Society of Actuaries Enrolled Actuary Number 02-4342 Mark E. Knecht Associate of the Society of Actuaries Enrolled Actuary Number 02-5471 CONTENTS Pages SECTION I SUMMARY 1-6 SECTION II FUNDING 7-11 SECTION III ASSETS SECTION IV ACCOUNTING 5? SECTION VI ASSUMPTIONS 7?ND METHODS SECTION VII SUMMARY OF PLAN PROVISIONS SECTION V CENSUS DATA 12- 15 16 - 17 18-22 23 - 25 26-28 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION I - SUMMARY A. Actuary's Comments This report presents the highlights of the January 1, 2003 actuarial valuation prepared to determine the contribution requirements for the 2003-2004 fiscal year. Since the last actuarial valuation of the plan on January 1, 2002, there have been no changes in the actuarial assumptions, the plan provisions or the actuarial cost method. For a detailed description of the plan provisions, please see Section VII and for a detailed description of the actuarial assumptions and methods, please see Section VI of this report. The minimum required City Contribution pursuant to Florida Statutes for the 2003 plan year is $7,153,190 (excluding the credit balance of $25,832,535) compared to $1,766,058 for 2002. Although State law does not require any contributions for th' fiscal year, the City ordinance establishing the Plan requires the City to contribute at least 7%oll. The minimum required contribution was affected by the following factors: ftz • The actuarial investment return w 5%, compared to an assumed rate of 7.5%; • The actual average salary increase was 5.8%, compared to an assumed rate of 6%; Amortization of the plan's initial unfunded liability was reduced to zero, due to the final payment towards this liability in 2002; and • Actual expenses for the year were $232,620 less than expected. The plan's credit balance is currently equal to $25,832,535, providing a cushion against future contributions. On the negative side, however, the actuarial value of assets of the plan exceeds the market value by almost $80 million. Over the next four years this deficit will be included in the actuarial value and will gradually increase the funding requirements unless the market value of assets earns $80 million above the expected 7.5% annual return. The funded status of the plan decreased compared to the prior year, primarily due to poorer-than-expected returns on the market value of assets. The ratio of assets at market value to the actuarial present value of accumulated plan benefits decreased from 137% at January 1, 2002 to 112% at January 1, 2003. CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION I - SUMMARY (continued) B. Contribution Requirements for the Plan Year Ending December 31, 2003 Minimum Required Employer Contribution Florida Statutes 7% of Payroll $7,153,190* $4,560,557 The employer contribution is assumed to be mak uniformly during the first two quarters of the fiscal year beginning on October 1, 2003. Differen the investment return due to contributions actually being made at any other time will be recogn s an actuarial gain or loss in the following valuation. The minimum required contribution repr a funding level which will satisfy the minimum funding requirements under Part VII, Chapter A 1 orida Statutes. Please refer to Section VI and VII of the report for a summary of the actuarial ass?lfnptions and plan provisions, respectively. * Excluding the credit balance (currently $25,832,535) 2 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION I - SUMMARY (continucd) C. Comparative Summary of Principal Valuation Results Actuarial Valuation Prepared as of: Jail. 1, 2003 Jan. 1, 2002 Jan.l, 2002 After Before Assumption Assumption Changes Changes (a) Participant Data Number Included Active Members 1,619 1,592 1,592 Retirees and Beneficiaries 590 566 566 Terminated Vested Participants 53 47 47 Annual Payroll of Actives $65,150,820 $58,929,582 $58,918,790 Annualized Benefits Retirees and Beneficiaries $12,751,479 $11,813,227 $11,813,227 Terminated Vested Participants 1 92,349 $882,207 $882,207 (b) Actuarial Reserves g t^ S Market Value $397,951,216 $442,042,923 $442,042,923 Actuarial Value $477,541,459 $491,859,015 $491,859,015 (c) Liabilities Present Value of Expected Benefits: Active Participants: Retirement Benefits $321,602,739 $306,539,097 $331,150,655 Termination Benefits $29,196,714 $26,668,857 $16,757,605 Disability Benefits $15,744,154 $15,394,022 $14,407,970 Death Benefits $3,639,787 $3,543,058 $4,103,602 Refund of Employee Contributions $2,212,656 $2,064,718 $1,983,947 Total Active $372,396,050 $354,209,752 $368,403,779 Terminated Vested Participants $9,481,373 $8,264,408 $8,644,737 Retirees and Beneficiaries $165,984,116 $150,289,355 $155,468,752 Total Present Value of Expected Benefits $547,861,539 $512,763,515 $532,517,268 Liabilities Due and Unpaid $380,686 $456,150 $456,150 3 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION I - SUMMARY (continued) C. Comparative Summary of Principal Valuation Results (continued) Actuarial Valuation Prepared as of: Jail. 1, 2003 Jail. 1, 2002 Jan. 1, 2002 After Before Assumption Assumption Chanties Chances (c) Liabilities (continued) Unfunded Actuarial Accrued Liability Frozen Initial Liab. (FIL) - 1/1/79 $0 $258,509 $258,509 Supplemental FII_ - 1/1/79 922,920 1,041,436 1,041,436 Supplemental FIL - 1/1/81 174,863 190,434 190,434 Supplemental FIL - 1/1/82 (2,247,906) (2,418,887) (2,418,887) Supplemental FIL - 1/1/87 1,072,324 1,115,015 1,115,015 Supplemental FIL - 1/1/88 1,230,343 1,274,163 1,274,163 Supplemental FIL - 1/1/89 1,660,310 1,713,426 1,713,426 Asset Valuation Method - 1/1/94 3,256,08 3,319,783 3,319,783 Change ?? Plan Amendment - 1/1/96 rl3, b9 9,624 13,923,090 13,923,090 Plan Amendment - 1/1/00 51,171,649 51,762,005 51,762,005 Assumption Changes - 1/1/02 (30,548,178) (30,846,502) 0 Total $40,392,036 $41,332,472 $72,178,974 (d) Funding Account Credit Balance Prior Year Amount $21,360,525 $15,156,006 $15,156,006 Prior Year: Required Employer Contributions (1,766,058) 0 0 Employer Contributions Made 4,636,029 5,143,599 5,143,599 Interest on Credit Balance 1,602,039 1,060,920 1,060,920 Total $25,832,535 $21,360,525 $21,360,525 (e) Actuarial Present Value of Accrued Benefits $354,603,387 $322,794,259 $345,418,170 Changes During Prior Year: Value from Prior Year $322,794,259 $317,663,113 $317,663,113 Benefits Paid $(13,003,161) $(11,816,392) $(11,816,392) Interest, Aging and Benefits Accrued 44,812,289 39,571,449 39,571,449 Change in Assumptions 0 (22,623,911) 0 Change in Plan Provisions 0 0 0 Net Change $31,809,128 $5,131,146 $27,755,057 Value at Current Year $354,603,387 $322,794,259 $345,418,170 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION I - SUMMARY (continued) C. Comparative Summary of Principal Valuation Results (continued) Actuarial Valuation Prepared as of. Jan. 1, 2003 Jan.l, 2002 Jan. 1, 2002 After Before Assumption Assumption Chances Chances (0 Pension Cost for Year Normal Cost $6,469,476 $100,180 $(1,272,646) Amortization of Unfunded Frozen Initial Liability 3,499,977 3,758,486 5,956,564 Administrative Expenses 2,038,348 2,270,968 2,270,968 Shortfall for Expenses in Prior Year (232,620) 239,578 239,578 Interest Adjustment 602,075 123,213 172,827 Total Required Contribution $12,377,256 $6,492,425 $7,367,291 As a Percentage of Payroll 19.00% 11.0% 12.5% Anticipated Employee Contributions $5,212, 6*'% $4,714,367 $4,713,503 As a Percentage of Payroll 8 p 8.0% 8.0% Anticipated State Contributions $12,000 $12,000 $12,000 As a Percentage of Payroll 0.02% 0.0% 0.0% City Required Contribution $7,153,190 $1,766,058 $2,641,788 As a Percentage of Payroll 10.98% 3.0% 4.5% Prior Year Actual Contributions made by state $12,000 $12,279 $12,279 Employees 4,636,029 4,905,521 4,905,521 City 5,118,850 5,143,599 5,143,599 Total $9,766,879 $10,061,399 $10,061,399 (h) Gains and Losses N/A N/A N/A (i) Other Present Values Present Value of Future Salaries At attained age $561,764,999 $552,303,111 $470,763,126 Present Value of Future Employee Contributions At attained age $44,941,200 $44,184,249 $37,661,050 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION I - SUMMARY (continued) C. Comparative Summary of Principal Valuation Results (continued) Actuarial Valuation Prepared as of: Jan. 1, 2003 Jail. 1, 2002 Jail. 1, 2002 After Before Assumption Assumption Changes Changes (i) Other Present Values (continued) Present Value of Future Normal Costs $55,760,579 S(4,567,447) $(15,660,196) (j) Comparison of Actual and Assumed 114 Salaiylncreases Investment Return Year Ended Actual Assumed F ;)4*v Actual Assumed Market Value Actuarial Value 12/31/86 7.4% 5.0% 13.21% N/A 7.0% 12/31/87 5.9% 5.0% 10.78% N/A 7.0% 12/31/88 9.1% 5.0% 9.12% N/A 7.0% 12/31/89 8.7% 5.0% 20.84% NIA 7.0% 12/31/90 5.3% 5.0% 6.21% N/A 7.0% 12/31/91 6.1% 5.0% 28.52% N/A 7.0% 12/31/92 6.8% 5.0% 6.49% N/A 7.0% 12/31/93 1.2% 5.0% 9.29% 7.42% 7.0% 12/31/94 4.4% 5.0% 0.89% 6.28% 7.0% 12/31/95 6.4% 5.0% 23.36% 9.14% 7.0% 12/31/96 6.7% 5.0% 14.80% 11.54% 7.0% 12/31/97 5.6% 5.0% 17.49% 13.74% 7.0% 12/31/98 7.4% 5.0% 16.74% 15.28% 7.0% 12/31/99 4.2% 5.0% 18.61% 17.96% 7.0% 12/31/00 5.8% 5.0% (3.43%) 12.42% 7.0% 12/31/01 5.9% 5.0% (5.16%) 7.40% 7.0% 12/31/02 5.8% 6.0% (8.83%) (1.85%) 7.5% 6 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION II - FUNDING A. Development of the Unfunded Frozen Actuarial Accrued Liability 1. Unfunded Frozen Actuarial Accrued Liability as of January 1, 2002 $41,332,472 Interest to December 31, 2002 $3,099,935 $44,432,407 2. Employer Normal Cost* for Year with interest $(2,274,313) to December 31, 2002 3. Required Employer Contributions for Period $1,766,058 4. Unfunded Frozen Actuarial Accrued Liability $40,392,036 as of December 31, 2002 P O * Includes Expenses and Adjustments 7 J CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION II - FUNDING (continued) B. Development of Normal Cost The Normal Cost is the portion of the cost of projected benefits which is allocated to the current year by the actuarial cost method. The Normal Cost for the plan years beginning January 1, 2003 and January 1, 2002 are determined as follows: Total Projected Actuarial Liability: Jan. 1, 2003 Jan. 1, 2002 Jan. 1, 2002 After Before Assumption Assumption Changes Changes The present value as of the beginning of the plan year of all benefits expected to be paid in the future to current participants. f a • Active participants $372,396,050 $354,209,752 $368,403,779 • Terminated vested participants 9,481,373 8,264,408 8,644,737 • Retired and disable participants 165,984,116 150,289,355 155,468,752 • Total Participants $547,861,539 $512,763,515 $532,517,268 Credit Balance: Employer contributions from prior years reserved for future use. $25,832,535 $21,360,525 $21,360,525 Fund: The actuarial value of fund assets as of the beginning of the plan year. $477,541,459 $491,859,015 $491,859,015 Excess of Total Projected Actuarial Liability Over the Fund Minus the Credit Balance: The portion of the projected total actuarial liability to be funded in the future. $96,152,615 $42,265,025 $62,018,778 This portion is divided into two components: a. Unfunded frozen actuarial accrued liability $40,392,036 $41,332,472 $72,178,974 b. Present value of future service liability (funded over the expected future service years of current participants) $55,760,579 $932,553 $(10,160,196) Present Value of Future Covered Payroll $561,764,999 $552,303,111 $470,763,126 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION II - FUNDING (continued) B. Develolment of Normal Cost (continued) Jan. 1, 2003 Jan. 1, 2002 Jan. 1, 2002 After Before Assumption Assumption Changes Changes Normal Cost Rate: The ratio of the present value of future service liability to the present value of future covered payroll. G?93% 0.17% (2.16%) Annual Covered Payroll: The reported payrovil P` for plan participants who have not attained the assumed retirement age. $65,150,820 $58,929,582 $58,918,790 Normal Cost: The annual cost as of the beginning of the plan year to fund the future service liability over the expected future years of service of the current participants. $6,469,476 $100,180 $(1,272,646) CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION II - FUNDING (continued) C. Schedule of Amortization Pavments Initial Jan. 1, 2003 Annual Date Initial Amortization Unamortized Amortization Established Reason Amount Period (Years) Amount Payment 1/1/79 * Frozen Initial Liability (FIL) $9,726,419 24.5 $0 $0 1/1/79 Supplemental FIL 2,707,962 30.0 922,920 182,906 1/1/81 Supplemental FIL 390,421 30.0 174,863 27,771 1/1/82 Supplemental FIL (4,521,985) (2,247,906) (327,812) `? 1/1/87 Supplemental c? ..° FIL 1,519,142 30.0 1,072,324 117,504 1/1/88 Supplemental FIL 1,673,738 30.0 1,230,343 129,658 1 / 1 /89 Supplemental FIL 2,177,772 30.0 1,660,310 168,952 1 / 1 /94 Asset Valuation Method Change 3,724,296 30.0 3,256,087 290,865 1/1/96 Plan Amendment 15,063,842 30.0 13,699,624 1,179,254 1/l/00 Plan Amendment 52,921,724 30.0 51,171,649 4,160,471 1/1/02 Assumption (30,846,502) 30.0 .(30,548,178) (2,429,592) Changes Total Charges $73,188,120 $6,257,381 Total Credits (32,796,084) (2,757,404) Total $40,392.036 53,499, * Established July 1, 1963 and being amortized over a forty year period beginning on that date. 10 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION II - FUNDING (continued) D. Anticipated Amortization Schedule Shown below is the anticipated amortization schedule for the Unfunded Frozen Actuarial Accrued Liability taking into account the plan's funding policy. Anticipated Amortization Schedule Unfunded Frozen Date Actuarial Accrued Liability 2003 $40,392,036 2004 $39,658,963 2005 $38,870,910 2006 $38,023,753 2031 $0 On July 1, 1963, the Unfunded Frozen Actuarial Accrued Liability was established equal to the difference between the retirement plan's accrued liability, determined under the Entry Age Normal Funding Method and the actuarial value of plan assets. According to the plan's funding policy, the initial liability is to be amortized by a series of level payments over a forty-year period. Subsequent changes in the level of the Frozen Actuarial Accrued Liability due to plan amendments or changes in actuarial assumptions are to be amortized on a straight-line basis over a period of thirty years. By contributing more than the stated funding policy, the amortization of the Unfunded Frozen Actuarial Accrued Liability can be accelerated. CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION III -ASSETS Comparative Balance Sheet As of December 31, 2002 Market Value Market Value ASSETS 12/31/2002 12/31/2001 Cash $0 $2,844,922 Money Market Accounts 16,668,205 23,109,838 International Equity Securities 31,637,360 36,401,038 Domestic Corporate Equity Securities 171,233,103 218,945,242 Domestic Bonds 176,253,952 158,759,426 Total Investments $395,792,620 $440,060,466 Receivables: Interest - pooled cash 24,921 34,449 Employer Contributions 2,514,361 2,404,158 P Total Assets $398,331,902 $442,499,073 LIABILITIES AND ACTUARIAL RESERVES Liabilities: Accounts Payable $380,686 $456,150 Total Liabilities $380,686 $456,150 Actuarial Reserves: Accumulated Member Contributions 42,237,450 38,390,720 Balance of Actuarial Reserves 355,713,766 403,652,203 Total Actuarial Reserves 5397,951,216 $442,042,923 TOTAL LIABILITIES AND ACTUARIAL RESERVES S398,331,M $442,499,073 12 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION III - ASSETS (continued) Schedule of Changes in Actuarial Reserves For the Plan Year Ended December 31, 2002 Market Value Revenues: Employee Contributions Employer Contributions State Contributions $5,118,850 4,636,029 12,000 $9,766,879 Earnings on Investments: Interest Dividends Realized Net Gains on Securities Transactions Unrealized Appreciation (Depreciation) on Investments Expenses: Benefits Paid Refunds of Contributions Professional Fees Other Expenses 0 $9,361,674 1,627,932 (37,151,511) $12,283,739 719,422 2,038,348 0 $(26,161,905) $(12,655,172) $15,041,509 Net Change in Actuarial Reserves Actuarial Reserves at Beginning of Plan Year $(44,091,707) $442,042,923 Actuarial Reserves at End of Plan Year $397,951,216 13 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION III - ASSETS (continued) Development of Actuarial Value of Assets 1. Actuarial Reserves at Beginning of Plan Year $442,042,923 2. Time Weighted Employee Contributions 2,559,425 (.5 x $5,118,850) 3. Time Weighted Employer Contributions 289,752 (.5 x .125 x $4,636,029) 4. Time Weighted State Contributions 6,000 . (.5 x $12,000) 5. Time Weighted Benefit Payments 5,959,782 (11/24) x ($13,003,161) 6. Time Weighted Expenses 1,019,174 (.5 x $2,038,348) 7. Time Weighted Value of Actuarial Reserves $437,919,144 (Items 1 +2+3 +4-5-6) 8. Expected Asset Return $32,843,936 (Item 7 x 0.075) 9. Actual Asset Return (38,817,077) 10. Difference of Expected Return over Actual Return $71,661,013 11. Actuarial Reserves. at End of Plan Year 397,951,216 12. Expected Actuarial Reserves at End of Plan Year $469,612,229 (Items 10 + 11) 13. Difference Between Actual and Expected Asset Return $(71,661,013) (Items 11- 12) 14 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION III - ASSETS (continued) Development of Actuarial Value of Assets (continued) Date Established Initial Amount Annual Amount Recognized Amount Excluded Prior Valuation Amount Excluded Current Valuation 01/01/1999 $34,935,904 56,987,181 $(6,987,181) $0 01/01/2000 $48,325,707 $9,665,141 $(19,330,283) 01/01/2001 $(50,971,924) $(10,194,385) $30,583,154 01/01/2002 $(56,938,003) $(11,387,601) $45,550,402 01/01/2003 $(71,661,013) $(14jfV03) $0 Total ? Actuarial Reserves Actuarial Value of Assets, Before Applying Limits 80% of Actuarial Reserves 120% of Actuarial Reserves $(9,665,142) $20,388,769 $34,162,801 $57,328,810 $102,215,238 $397,951,216 $500,166,454 $318,360,973 $477,541,459 Actuarial Value of Assets, After Applying Limits $477,541,459 15 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION IV - ACCOUNTING A. Plan Description and Contribution Information Membership of the plan consisted of the following at January 1, 2002, the date of the latest actuarial valuation: Retirees and beneficiaries receiving benefits 566 Terminated plan members entitled to but not yet receiving benefits 47 Active plan members 1,592 Total -2205 Number of participating employers 1 A 16 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION IV - ACCOUNTING (continued) B. Required Supplementary Information Scheduling of Funding Propqess Actuarial Actuarial UAAL as a Actuarial Value of Accrued Unfunded Percentage Valuation Assets Liability (AAL) AAL Funded Covered of Covered Date (a) Frozen Entry (UAAL) Ratio Payroll Payroll Age (b) (b-a) (a/b) (c) ( (b-a) / c) 01/01/1991 $141,865,764 $152,118,075 $10,252,311 93% $34,532,753 30% 01/01/1992 $184,746,269 $194,550,126 $9,803,857 95% $36,626,332 27% 01/01/1993 $198,315,690 $207,639,701 $9,324,011 96% $38,731,039 24% 01/01/1994 $213,014,474 $225,549,346 $12,534,872 94% $38,710,974 32% 01/01/1995 $225,482,726 $237,428,796 $11,946,070 95% $41,371,332 29% 01/01/1996 $244,744,488 $271,124,381 $26 A 693 90% $44,208,964 60% 01/01/1997 $272,346,200 $297,892,502 $ ,302 91% $44,955,348 57% 01/01/1998 $308,596,133 $333,250,492 ,654,359 93% $47,281,198 52% 01/01/1999 $354,088,751 $377,788,73 3,699,980 94% $49,666,523 48% 01/01/2000 $414,826,422 $490,426,940 $75,600,518 85% $50,937,403 148% 01/01/2001 $461,724,610 $535,672,208 $73,947,598 86% $54,864,584 135% 01/01/2002 $491,859,015 $533,191,487 $41,332,472 92% $58,929,582 70% 01/01/2003 $477,541,459 $517,933,495 $40,392,036 92% $65,150,820 62% 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 follows: Valuation date 01/01/2002 Actuarial cost method Frozen Entry Age Amortization method Level Dollar Closed Remaining amortization periods Various Asset valuation method Five Year Average * Actuarial assumptions: Investment rate of return 7.5% Projected salary increases 6.0% Include merit increases 3.0% Cost-of-living adjustments 3.0% Effective January 1, 1994, the asset valuation method was changed from market value to a five year average method. 17 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION V - CENSUS DATA A. Reconciliation of Emp loyee Data A summary of changes in the employee data from January 1, 2002 through January 1, 2003 fol lows. Employees who do not participate in the plan are not included. Retired Terminated Participants Active Vested And Employees Employees Beneficiaries Total Participants included in the January 1, 2002 valuation 1,592 47 566 2,205 Nonvested terminations (9) (9) Data Revisions (1) (1) Vested terminations (13) ? 0 Deaths without eligible beneficiary (6) (6) Retirements (26) (5) 31 0 Cash settlements (69) (2) (71) Rehires 0 New participants 144 144 Participants included in the January 1, 2003 valuation 1,619 53 590 2,262 _ Active Participants: Fully vested 784 Partially vested 0 .Non-vested 835 Total 1,619 18 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION V - CENSUS DATA (continued) B. Age - Service Distribution of Active Participants as of January 1, 2003 Years of Service Attained 0-4 5-9 10 - 14 15- 19 20 - 24 25+ Total Age No. No. No. No. No. No. No. Under 25 43 2 0 0 0 0 45 25 to 29 107 30 1 0 0 0 138 30 to 34 105 66 34 1 0 0 206 35 to 39 87 76 62 27 2 0 254 40 to 44 63 53 85 24 1 278 45 to 49 49 44 53 64 63 29 302 50 to 54 35 28 34 39 48 46 230 55 to 59 10 17 17 29 8 16 97 60 to 64 8 8 9 10 5 8 48 65+ 1 3 7 3 3 4 21 Total 508 327 269 258 153 104 1,619 Active Participant Statistics Average Age 42.79 years Average Service 10.91 years 19 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION V - CENSUS DATA (continued) C. Age - Service Distribution of Active Hazardous Duty Partici pants as of January 1, 2003 Years of Service Attained 0-4 5-9 10 - 14 15- 19 20 - 24 25+ Total Age No. No. No. No. No. No. No. Under 25 4 2 0 0 0 0 6 25 to 29 42 13 0 0 0 0 55 30 to 34 42 32 19 0 0 0 93 ? 35 to 39 14 29 37 t 0 0 91 40 to 44 3 3 19 e37 10 0 72 45 to 49 3 1 9 9 24 10 56 50 to 54 0 1 6 2 16 13 38 55 to 59 0 0 0 5 0 7 12 60 to 64 0 0 0 0 0 4 4 65+ 0 0 0 0 0 0 0 Total 108 81 90 64 50 34 427 Active Participant Statistics Average Age 39.18 years Average Service 12.07 years 20 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION V - CENSUS DATA (continued) D. Age - Service Distribution of Active Non-Hazardous Duty Participants as of January 1, 2003 Years of Service Attained 0-4 5-9 10- 14 15 - 19 20 - 24 25+ Total Age No. No. No. No. No. No. No. Under 25 39 0 0 0 0 0 39 25 to 29 65 17 1 0 0 0 83 30 to 34 63 34 15 0 0 113 35 to 39 73 47 25 2-N 6 2 0 163 40 to 44 60 50 33 48 14 1 206 45 to 49 46 43 44 55 39 19 246 50 to 54 35 27 28 37 32 33 192 55 to 59 10 17 17 24 8 9 85 60 to 64 8 8 9 10 5 4 44 65+ 1 3 7 3 3 4 21 Total 400 246 179 194 103 70 1,192 Active Participant Statistics Average Age 44.09 years Average Service 10.49,years 21 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION V - CENSUS DATA (continued) E. Inactive Participant Count and Benefits as of January1, 2003 Number of Annual Participants Benefit Terminated Vested Participants 53 $992,349 Retired Participants and Beneficiaries 590 $12,751,479 F? o?P 22 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION VI - ASSUMPTIONS AND METHODS A. Actuarial Methods Investment Yield The investment rate of earnings is assumed to be 7.5% per annum. Mortality Mortality is based on the 1994 Group Annuity Reserving Table. Withdrawal Pre-retirement withdrawals are assumed to occur in accordance with the following table: Rate of Withdrawal General General Hazardous Age Male Female Duty 25 15% 15% 5% 30 10% 15% 3% 35 5% 10% 3% 40 554 10% 2% 45 ;s 5% 2% 50 q 1 % 10 5% 0% 55 0% 0% 0% Disability Pre-retirement incidence of disability is assumed to occur in accordance with a standard scale of moderate disability rates (Class 1, 1952 Inter-Company). Rates for females are assumed to be double that for males. Sample rates for males are shown below: Aye Incidence of Disability 20 .17% 25 .17% 30 .17% 35 .18% 40 .20% 45 .23% 50 .29% 55 .39% 60 .59% 65 1.04% 70 1.74% Service vs. Non-service All pre-retirement deaths are assumed to be non-service related. All incidence of disability is assumed to be service related. Salary Scale Future salaries are assumed to increase at the rate of 6% per year - 3% due to cost-of-living, and 3% due to merit increases. 23 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION VI - ASSUMPTIONS AND METHODS (continued) B. Actuarial Assumptions Valuation Salary Compensation during the plan year is assumed to be the greater of (1) and (2). (1) Compensation earned during the prior plan year, increased by salary scale; (2) Pay rate for the current plan year. Retirement Rates Retirement is assumed to occur in accordance with the following table: General Hazardous Age Employees Duty <45 0% 20% 45 0% 20% 46 0% 20% 47 0°/ 20% 48 20% 49 Oho 20% 50 20% 50% 51 20% 50% 52 25% 75% 53 25% 75% 54 25% 75% 55 50% 100% 56 50% 100% 57 50% 100% 58 50% 100% 59 50% 100% 60+ 100% 100% Timing of Contribution The employer contribution is assumed to be made uniformly during the first two quarters of the fiscal year beginning on the October 1 following the valuation date. Employees Covered All participants as of the actuarial valuation date. Spouses Eighty-five percent (85%) of the active participants are assumed to be married (or have dependents eligible for Survivor's Benefits). Female spouses are assumed to be five years younger than male spouses. State Contributions Expenses The state contributions are assumed to equal $12,000 per year. Expenses are assumed to equal last year's actual expenses. 24 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION VI - ASSUMPTIONS AND METHODS (continued) B. Actuarial Assumptions (continued) Completeness of All benefits and expenses to be provided by the Plan are recognized in the valuation. Assumptions All known events are taken into account; no current trends are assumed to discontinue in the future. C. Asset Valuation Method The Actuarial Value of Assets is based on a five year moving average of assets valued at statement value. The statement value reflects an amortized value for bonds and market value for equity investments. From the statement value, actual and expected return on investments ik?erived. Any difference between the actual return on investments for a given year and the expected re ids%pread over five years. After five years the entire amount is fully recognized. However, the ActuartaValue of Assets will never exceed 120% nor fall below 80% of the market value of assets. The use gft.?,dprived value of plan assets rather than current market value will produce a more stable funding pattern fdr -'the plan by partially eliminating the effect of unusual market fluctuations. D. Actuarial Cost Method The actuarial cost method is the Frozen Entry Age Actuarial Cost Method. Under this method the excess of the actuarial present value of projected benefits over the suin of the actuarial value of assets plus the Unfunded Frozen Actuarial Accrued Liability is funded on a level basis over the future compensation of active employees. The portion of this excess allocated to the current year is called the Normal Cost. The Frozen Actuarial Accrued Liability is determined using the Entry Age Actuarial Cost Method. This Frozen Actuarial Accrued Liability is adjusted from time to time to reflect changes in the Plan or in the actuarial assumptions. The Unfunded Frozen Actuarial Accrued Liability is separately amortized over a fixed number of years. 25 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION VII - SUMMARY OF PLAN PROVISIONS This summary is intended as an outline of plan provisions and does not alter the intent or meaning of the provisions contained in the contract and / or plan document. Plan Year January 1 to December 31. Eligibility Any permanent employee shall participate in the plan immediately. Current Employee 8.0% of wages and salaries actually paid to a participant. Contributions Average Monthly The total Compensation received during the highest five years of service of the last ten years Compensation divided by sixty. Accrued Benefit A monthly benefit equal to 2.75% of Average Monthly Compensation multiplied by the number of years of service to date. Retirement Benefit `far A. Eligibility (Normal Retirement Date • Non-Hazardous Duty: Completion of 30 years of service, completion of at least 20 years of service and the attainment of age 55, or completion of at least ten years of service and the attainment of age 65. B C. • Hazardous Duty: Completion of 20 years of service or completion of at least ten years of service and the attainment of age 55. Normal Retirement Benefit The participant's Accrued Benefit payable as of his actual retirement date on or after his Normal Retirement Date. No adjustment applies for deferred retirement beyond his Normal Retirement Date. Normal Form of Benefit A monthly annuity for the life of the participant. After the participant's death, 100% of the Normal Retirement Benefit shall be paid as a Survivor Annuity to the spouse for five years. After five years, such Survivor Annuity is reduced to 50% of the original amount. The Survivor Annuity ceases upon death or remarriage of the spouse. 120 monthly payments are guaranteed in any case for police and fire fighters. 26 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION VII - SUMMARY OF PLAN PROVISIONS (continued) D. Early Retirement Benefit For police and fire fighters, an early retirement benefit is payable to those participants who have completed ten years of service and the attainment of age 50. The benefit is equal to the retirement benefit calculated as of the date of early retirement, reduced by 3% per year for each year below age 55. E. Cost of Living Increase All participants commencing annuity benefit payments shall be entitled to a 1.5% increase in their benefit amount each year. Disability Benefit A. Eligibility Total and permanent disability. If the disability is non-servi'?onnected, there is an additional requirement of the completion of ten years of service. ??•• B. Disability Benefit The participant's Accrued Benefit, payable immediately. If the disability is service connected, the Disability Benefit must be at least 66.67% of Average Monthly Compensation. C. Normal Form of Benefit A monthly annuity for the life of the participant. After the participant's death, a Survivor Annuity is provided as described under the Normal Form of Benefit for retirement benefits. 120 monthly payments are guaranteed in any case for police and fire fighters. D. Cost of Living Increase All participants commencing annuity benefit payments shall be entitled to a 1.5% increase in their benefit amount each year. Death Benefit A. Eligibility Any actively employed participant. B. Death Benefit The participant's Accrued Benefit, payable immediately. If death is service connected, the Death Benefit must be at least 66.67% of Average Monthly Compensation. 27 CITY OF CLEARWATER EMPLOYEES' PENSION PLAN SECTION VII - SUMMARY OF PLAN PROVISIONS (continued) C. Form of Benefit A monthly Survivor Annuity as described under the Normal Form of Benefit. D. Cost of Living Increase All participants commencing annuity benefit payments shall be entitled to a 1.5% increase in their benefit amount each year. Vested Termination Benefit A. Eligibility Completion of ten years of service B. Termination Benefits The participant's Accrued Benefit payable as of his Normal Retirement Date, provided Employee Contributions are not refunded. C. Form of Payment A monthly annuity for the life of the participant. After the participant's death, a Survivor Annuity is provided as described under the Normal Form of Benefit, beginning at the latter of the participant's Normal Retirement Date or date of death. D. Cost of Living Increase All participants commencing annuity benefit payments shall be entitled to a 1.5% increase in their benefit amount each year. Non-Vested Termination Benefit A. Eligibility Any actively employed participant. B. Benefit Refund of Employee Contributions with 5% simple interest. C. Form of Benefit Lump sum. O:\T{SVds' RETCkuw¦in1Di11VaiQ003\03•V•1Repon.doc 28 ? - Employee's Pension Plan Work Session Item #: Trustee's Final Agenda Item # Agenda Cover Memorandum Meeting Date: SUBJECT/RECOMMENDATION: Authorize the termination of Sirach Capital Management,fixed income money manager, transferring $40 million of the assets to the "Daily Aggregate Bond Index Fund" upon approval of a contract for this fund with Northern Trust by the pension plan's attorneys and transfer the remaining approximately $19 million equally to the various domestic equity managers, o and that the appropriate officials be authorized to execute same. SUMMARY: • For the last two years Sirach Capital Management had a return placing them in the 99th and 98th percentile. The Investment Committee has been monitoring their performance and the changes they have been making to improve their performance. To date, no real improvement in the performance has been observed. • Earlier this year the Trustee's authorized a search to add an additional fixed income manager because of this less than acceptable performance. • Sirach Capital Management has not met performance expectations; therefore, the PAC and the Pension Investment Committee are recommending the termination of Sirach at this time. • Pending the completion of the fixed income manager search, the PAC, the Pension Investment Committee and both of the plan's advisors are recommending that a majority of the plan's assets be put into a "Lehman Brothers Aggregate Index" type fund. This is a fund that duplicates the performance of the Lehman Brothers Aggregate, which is the benchmark for our fixed income managers. Northern Trust, the plan's custodian, has this type of fund ("Daily Aggregate Bond Index Fund") available at a cost of 6 basis points. This is a standard fee for a passive index fund. • As of Friday May 9th Sirach Capital Management had some $59,022,196 under management. The Pension Investment Committee is recommending that $40 million be placed in the "Lehman Brothers Aggregate Index" type fund and the balance be divided equally among the plan's domestic equity managers. Currently, the plan is over funded in the domestic fixed income area and this transfer will rebalance the portfolio to our current guidelines which are Domestic Equity 51 %, International Equity 9% and Domestic Fixed Income 40%. Reviewed by: Originating Dept: Costs Legal Info Srvc N/A S. Moskun Finance Total WA 42 .Budget N/A Public Works N/A Use7t- . Funding Source: Purchasing N/A DCM/ACM N/A Finance Current FY CI Risk Mgmt N/A Other N/A Attachments OP Ordinance Other Submitted by: City Manager ? None Appropriation Code: • Because the plan's attorneys have not reviewed the contract with Northern Trust, the transfer to the index fund will be contingent upon their approval of the contract. • The search of a new fixed income manager is being expedited. (2)