05/30/20064 PENSION TRUSTEES AGENDA
Date: 5/30/2006- 1:30 PM
Location:Council Chambers - City Hall
1. Call to Order
2. Approval of Minutes
2.1 May 15, 2006
Attachments
3. Pension Trustee Items
3.1 Accept the Actuary's Report for the Employees' Pension Plan for the plan year beginning January 1, 2006.
Attachments
3.2 Investment Update of Employee's Pension Plan for Year Ending December 31, 2005.
Attachments
4. Other Business
5. Adjourn
;fY4,st4r
` Pension Trustees Agenda
Council Chambers - City Hall
SUBJECT / RECOMMENDATION:
May 15, 2006
SUMMARY:
May 15, 2006
Meeting Date:5/30/2006
Review Approval: 1) Clerk
;fY4,st4r
` Pension Trustees Agenda
Council Chambers - City Hall
SUBJECT / RECOMMENDATION:
Accept the Actuary's Report for the Employees' Pension Plan for the plan year beginning January 1, 2006.
SUMMARY:
Meeting Date:5/30/2006
The 1/1/2006 actuary report for the Employees' Pension Plan indicates a City employer contribution of $15,438,360, equivalent to 20.31%
of covered payroll, is required for fiscal 2007. This is an increase from the fiscal 2006 required contribution of $14.5 million. The current
required contribution of $15.4 million, in accordance with Florida statutes, exceeds the minimum required contribution per the plan
ordinance of 7% of payroll, or $5.2 million. The required City employer contribution was affected by the following factors: (1) The actuarial
investment return (5-year weighted average) was 4.58% versus an assumed rate of 7.5%. This was due to three years of poor performance,
(5.16%), (8.83%) and 6.67% for calendar years 2001, 2002, and 2005, respectively; partially offset by two years of good performance,
20.08% and 9.73% for calendar years 2003 and 2004. The actuarial investment return five-year average of 4.58% was an improvement from
the 1/1/2005 return of 2.18% due to the dropping off of a negative return of (3.43%) for calendar 2000, replaced by 6.67% for calendar
2005. (2) Actual salary increases were 5.49% versus an assumed rate of 6.0%. The plan has a current "credit balance" of $18,817,573, which
can be used to subsidize future City employer contributions. The employer contribution for fiscal 2006 was budgeted at 10%, with the
balance of the required 19.6% required contribution funded from the credit balance. This reduced the credit balance from $24.1 million to
the current $18.8 million level. Staff is recommending that the fiscal 2007 City employer contribution be funded (budgeted) at 13%, with the
fiscal 2008 and 2009 funding increasing to 16% and 20%, respectively. Any difference between the budgeted funding and the required
employer contribution would continue to be funded from the credit balance.
Review 1) Financial Services 2) Office of Management and Budget 3) Financial Services 4) Office of Management and
Approval: Budget 5) Clerk 6) City Manager 7) Clerk 8) City Manager 9) Clerk
The City of Clearwater Employees' Pension Plan
Actuary's Report
As of January 1, 2006 to determine annual contribution
for the Plan Year: 01 /01 /2006 - 12/31/2006 to be paid in the
Fiscal Year: 10/01/2006 - 09/30/2007
Prepared by PricewaterhouseCoopers, LLP
May 2006
ftXUATERHOUSECCOPERS 0
May 4, 2006
City of Clearwater
100 S. Myrtle Avenue
Clearwater, FL 33756-5520
This document was not intended or written to be used, and it cannot be used,
for the purpose of avoiding U.S. federal, state or local tax penalties.
Ladies and Gentlemen:
This report presents the results of the January 1, 2006 actuarial valuation of the City of Clearwater
Employees' Pension Plan. It has been prepared primarily to present to management the contribution
requirements for 2006 and also the current status of funding of accumulated plan benefits. Section
IV of this report includes a presentation of the information required by Government Accounting
Standards Board (GASB) Statement No. 25.
Our calculations were based on financial data and employee data furnished by the City of Clearwater.
The valuation was based upon generally accepted actuarial 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 05-04342
Derek Tse
Fellow of the Society of Actuaries
Enrolled Actuary Number 05-06080
James D. Burke
Fellow of the Society of Actuaries
Enrolled Actuary Number 05-06899
CONTENTS
Pages
SECTION I SUMMARY 1- 6
SECTION 11 FUNDING 7- 11
SECTION III ASSETS 12 - 15
SECTION IV ACCOUNTING 16 - 17
SECTION V CENSUS DATA 18 - 22
SECTION VI ASSUMPTIONS AND METHODS 23 - 25
SECTION VII SUMMARY OF PLAN PROVISIONS 26 - 28
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION I - SUMMARY
A. Actuary's Comments
This report presents the highlights of the January 1, 2006 actuarial valuation prepared to determine the
contribution requirements for the 2006-2007 fiscal year. Since the last actuarial valuation of the plan
on January 1, 2005, 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 2006 plan year is
$15,438,360 or 20.31% of pay (excluding the credit balance of $18,817,573), compared to
$14,471,960 for 2005. Although State law allows the City to use the credit balance to entirely fund the
actuarially required City contribution, the City ordinance establishing the Plan requires the City to
contribute at least 7% of payroll. The minimum required contribution was affected by the following
factors:
• While the investment return on the market value of assets was 6.67%, the return on the
actuarial value of assets was only 4.58% due to prior years' losses, compared to an assumed
rate of 7.5%;
• The actual average salary increase was 5.49%, compared to an assumed rate of 6.0%;
The plan enjoys a couple of advantages that will mitigate future cost increases somewhat:
• The credit balance is currently equal to $18,817,573, which can be used to offset future City
contributions.
• The market value of assets now exceeds the actuarial value by approximately $9 million. This
difference will flow through the plan's asset valuation method over the next four years,
decreasing costs slightly.
While the plan remains well funded compared to the majority of public and private pension plans,
there are several issues that should be kept in mind:
• If the City contributes 10% of payroll for the 2006 plan year (as it did for 2005), it will reduce
the credit balance by roughly $6.5 million.
• If the City wishes to continue its recent practice of contributing 10% of payroll and using the
credit balance to cover the difference, it will be able to do so for two to three more years.
After that point, if the Plan's experience matches the actuarial assumptions, the City will have
to increase its contributions to a level close to 20% of payroll.
• Due to the Plan's large asset pool and the impact of the employee contributions, the City's cost
is highly leveraged, which means that changes in the assets and liabilities can change the
City's funding requirements dramatically.
The funded status of the accumulated benefits is very close to the prior year. The ratio of assets at
market value to the actuarial present value of accumulated plan benefits is 121% at January 1, 2006,
compared to 122% at January 1, 2005.
I
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION I - SUMMARY
(continued)
B. Contribution Requirements for the Plan Year Endinjz December 31, 2006
Minimum Required Employer Contribution
Florida Statutes
7% of Payroll
$15,438,360*
$5,327,019
The employer contribution is assumed to be made uniformly during the first two quarters of the fiscal
year beginning on October 1, 2006. Differences in the investment return due to contributions actually
being made at any other time will be recognized as an actuarial gain or loss in the following valuation.
The minimum required contribution represents a funding level which will satisfy the minimum funding
requirements under Part VII, Chapter 112, Florida Statutes. Please refer to Section VI and VII of the
report for a summary of the actuarial assumptions and plan provisions, respectively.
* Excluding the credit balance (currently $18,817,573)
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION I - SUMMARY
(continued)
C. Comparative Summary of Principal Valuation Results
Actuarial Valuation Prepared as of: Jan. 1, 2006 Jan. 1, 2005 Jan. 1, 2004
(a) Participant Data
Number Included
Active Members 1,671 1,661 1,633
Retirees and Beneficiaries 721 686 646
Terminated Vested Participants 58 54 48
Annual Payroll of Actives $76,010,269 $73,836,304 $69,907,473
Annualized Benefits
Retirees and Beneficiaries $18,243,971 $16,486,474 $14,772,610
Terminated Vested Participants $1,016,166 $1,047,860 $961,774
(b) Actuarial Reserves
Market Value $534,252,349 $508,490,924 $471,110,205
Actuarial Value $525,573,824 $510,265,274 $507,256,663
(c) Liabilities
Present Value of Expected Benefits:
Active Participants:
Retirement Benefits $358,857,273 $346,148,058 $327,392,044
Termination Benefits $30,101,976 $30,700,351 $29,943,370
Disability Benefits $18,309,704 $17,822,108 $17,019,266
Death Benefits $4,274,602 $4,185,182 $3,970,903
Refund of Employee Contributions $2,871,864 $2,659,178 $2,556,148
Total Active $414,415,419 $401,514,877 $380,881,731
Terminated Vested Participants $9,890,291 $10,916,726 $9,890,625
Retirees and Beneficiaries $235,058,990 $219,617,026 $197,199,518
Total Present Value of Expected Benefits $659,364,700 $632,048,629 $587,971,874
Liabilities Due and Unpaid $662,183 $611,252 $524,524
3
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, 2006 Jan. 1, 2005 Jan. 1, 2004
(c) Liabilities (continued)
Unfunded Actuarial Accrued Liability
Supplemental FIL - 1/1/1979 $511,323 $658,555 $795,515
Supplemental FIL - 1/1/1981 120,785 140,129 158,124
Supplemental FIL - 1/1/1982 (1,654,101) (1,866,511) (2,064,101)
Supplemental FIL - 1/1/1987 924,064 977,098 1,026,432
Supplemental FIL - 1/1/1988 1,078,158 1,132,596 1,183,236
Supplemental FIL - 1/1/1989 1,475,841 1,541,827 1,603,210
Asset Valuation Method - 1/1/1994 3,034,876 3,114,005 3,187,614
Change
Plan Amendment - 1/1/1996 12,923,544 13,201,155 13,459,398
Plan Amendment - 1/1/2000 49,121,389 49,854,786 50,537,016
Assumption Changes - 1/1/2002 (29,512,123) (29,882,730) (30,227,480)
Total $38,023,756 $38,870,910 $39,658,964
(d) Funding Account Credit Balance
Prior Year Amount $24,083,096 $25,459,838 $25,832,535
Prior Year:
Required Employer Contributions (14,471,960) (8,414,878) (7,153,190)
Employer Contributions Made 7,400,205 5,128,648 4,843,053
Interest on Credit Balance 1,806,232 1,909,488 1,937,440
Total $18,817,573 $24,083,096 $25,459,838
(e) Actuarial Present Value of Accrued
Benefits $440,674,422 $417,252,415 $385,298,167
Changes During Prior Year:
Value from Prior Year $417,252,415 $385,298,167 $354,603,387
Benefits Paid $(18,314,544) $(16,518,471) $(14,325,691)
Interest, Aging and Benefits Accrued 41,736,551 48,472,719 45,020,471
Change in Assumptions 0 0 0
Change in Plan Provisions 0 0 0
Net Change $23,422,007 $31,954,248 $30,694,780
Value at Current Year $440,674,422 $417,252,415 $385,298,167
4
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, 2006 Jan. 1, 2005 Jan. 1, 2004
(f) Pension Cost for Year
Normal Cost $13,742,657 $12,685,077 $7,843,618
Amortization of Unfunded Frozen
Initial Liability 3,499,977 3,499,977 3,499,977
Administrative Expenses 2,808,804 2,530,425 2,001,370
Shortfall for Expenses in Prior Year 278,379 529,055 (36,978)
Interest Adjustment 1,201,365 1,146,330 711,489
Total Required Contribution $21,531,182 $20,390,864 $14,019,476
As a Percentage of Payroll 28.33% 27.62% 20.05%
Anticipated Employee Contributions $6,080,822 $5,906,904 $5,592,598
As a Percentage of Payroll 8.00% 8.00% 8.00%
Anticipated State Contributions $12,000 $12,000 $12,000
As a Percentage of Payroll 0.02% 0.02% 0.02%
City Required Contribution 15,438,360 14,471,960 $8,414,878
As a Percentage of Payroll 20.31% 19.60% 12.04%
(g) Prior Year Actual Contributions made by
State $12,000 $12,000 $12,000
Employees 5,827,931 5,858,176 5,353,573
City 7,400,205 5,128,648 4,843,053
Total $13,240,136 $10,998,824 $10,208,626
5
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, 2006 Jan. 1, 2005 Jan. 1, 2004
(i) Other Present Values (continued)
Present Value of Future Normal
$114,584,693 $106,995,541 $66,516,085
0) Comparison of Actual and Assumed
Salary Increases Investment Return
Actual
Year Ended Actual Assumed Market Value Actuarial Value Assumed
12/31/1986 7.40% 5.00% 13.21% N/A 7.00%
12/31/1987 5.90% 5.00% 10.78% N/A 7.00%
12/31/1988 9.10% 5.00% 9.12% N/A 7.00%
12/31/1989 8.70% 5.00% 20.84% N/A 7.00%
12/31/1990 5.30% 5.00% 6.21% N/A 7.00%
12/31/1991 6.10% 5.00% 28.52% N/A 7.00%
12/31/1992 6.80% 5.00% 6.49% N/A 7.00%
12/31/1993 1.20% 5.00% 9.29% 7.42% 7.00%
12/31/1994 4.40% 5.00% 0.89% 6.28% 7.00%
12/31/1995 6.40% 5.00% 23.36% 9.14% 7.00%
12/31/1996 6.70% 5.00% 14.80% 11.54% 7.00%
12/31/1997 5.60% 5.00% 17.49% 13.74% 7.00%
12/31/1998 7.40% 5.00% 16.74% 15.28% 7.00%
12/31/1999 4.20% 5.00% 18.61% 17.96% 7.00%
12/31/2000 5.80% 5.00% (3.43%) 12.42% 7.00%
12/31/2001 5.90% 5.00% (5.16%) 7.40% 7.00%
12/31/2002 5.80% 6.00% (8.83%) (1.85%) 7.50%
12/31/2003 6.40% 6.00% 20.08% 7.45% 7.50%
12/31/2004 6.38% 6.00% 9.73% 2.18% 7.50%
12/31/2005 5.49% 6.00% 6.67% 4.58% 7.50%
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION II - FUNDING
A
Development of the Unfunded Frozen Actuarial Accrued Liability
Unfunded Frozen Actuarial Accrued Liability
as of January 1, 2005
Interest to December 31, 2005
$38,870,910
$2,915,318
$41,786,228
2.
Employer Normal Cost* for Year with interest
to December 31, 2005
Required Employer Contributions for Period
4. Unfunded Frozen Actuarial Accrued Liability at
December 31, 2005
* Includes Expenses and Adjustments
$10,709,488
$14,471,960
$38,023,756
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, 2006, January 1, 2005, and
January 1, 2004 are determined as follows:
Total Projected Actuarial Liability:
Jan. 1, 2006 Jan. 1, 2005 Jan. 1, 2004
The present value as of the beginning of the plan
year of all benefits expected to be paid in the
future to current participants.
• Active participants
• Terminated vested participants
• Retired and disabled participants
• Total Participants
$414,415,419 $401,514,877 $380,881,731
9,890,291 10,916,726 9,890,625
235,058,990 219,617,026 197,199,518
$659,364,700 $632,048,629 $587,971,874
Credit Balance: Employer contributions from
prior years reserved for future use.
Fund: The actuarial value of fund assets as of
the beginning of the plan year.
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.
$18,817,573 $24,083,096 $25,459,838
$525,573,824 $510,265,274 $507,256,663
$152,608,449 $145,866,451 $106,175,049
This portion is divided into two components:
a. Unfunded frozen actuarial accrued liability
$38,023,756 $38,870,910
$39,658,964
b. Present value of future service liability
(funded over the expected future service
years of current participants)
$114,584,693 $106,995,541
$66,516,085
Present Value of Future Covered Payroll $633,768,660 $622,761,495 $592,588,035
8
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION II - FUNDING
(continued)
B. Development of Normal Cost (continued)
Jan. 1, 2006 Jan. 1, 2005 Jan. 1, 2004
Normal Cost Rate: The ratio of the present
value of future service liability to the present
value of future covered payroll. 18.08% 17.18% 11.22%
Annual Covered Payroll: The reported payroll
for plan participants who have not attained the
assumed retirement age. $76,010,269 $73,836,304 $69,907,473
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. $13,742,657 $12,685,077 $7,843,618
9
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION II - FUNDING
(continued)
C. Schedule of Amortization Pam
Initial Jan. 1, 2006 Annual
Date Initial Amortization Unamortized Amortization
Established Reason Amount Period (Years) Amount Payment
1/1/1979 Supplemental
FIL 2,707,962 30 $511,323 $182,906
1/1/1981 Supplemental
FIL 390,421 30 120,785 27,771
1/1/1982 Supplemental
FIL (4,521,985) 30 (1,654,101) (327,812)
1/1/1987 Supplemental
FIL 1,519,142 30 924,064 117,504
1/1/1988 Supplemental
FIL 1,673,738 30 1,078,158 129,658
1/1/1989 Supplemental
FIL 2,177,772 30 1,475,841 168,952
1/1/1994 Asset Valuation
Method Change 3,724,296 30 3,034,876 290,865
1/1/1996 Plan Amendment 15,063,842 30 12,923,544 1,179,254
1/1/2000 Plan Amendment 52,921,724 30 49,121,389 4,160,471
1/1/2002 Assumption
Changes (30,846,502) 30 (29,512,123) (2,429,592)
Total Charges $69,189,980 $6,257,381
Total Credits (31,166,224) (2,757,404)
Total 38.023.756 499 977
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
2006 $38,023,756
2007 $37,113,059
2008 $36,134,063
2009 $35,081,646
2034 $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.
11
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION III - ASSETS
Comparative Balance Sheet
As of December 31, 2005
Market Value Market Value
ASSETS Dec. 31, 2005 Dec. 31, 2004
Cash $0 $0
Money Market Accounts (1,621,349) 12,189,576
International Equity Securities 54,427,233 48,106,829
Domestic Corporate Equity Securities 293,796,569 248,236,344
Preferred Stock 1,094,165 0
Domestic Bonds 183.690.140 198.051.211
Total Investments $531,386,758 $506,583,960
Receivables:
Interest - Pooled Cash 0 14,438
Commission Recapture 36,083 107,046
Employer Contributions 3,491,691 2,396,732
Total Assets $534,914,532 $509,102,176
LIABILITIES AND ACTUARIAL RESERVES
Liabilities:
Accounts Payable $662,183 $611,252
Total Liabilities $662,183 $611,252
12
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION III - ASSETS
(continued)
Schedule of Changes in Actuarial Reserves
For the Plan Year Ended December 31, 2005
Market Value
Revenues:
Employee Contributions $5,827,931
Employer Contributions 7,400,205
State Contributions 12,000
$13,240,136
Earnings on Investments:
Interest $6,991,999
Dividends 2,700,540
Realized Net Gains on Securities Transactions 24,253,970
$33,946,509
Unrealized Appreciation (Depreciation)
on Investments ($301,872)
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 $508,490,924
2. Time Weighted Employee Contributions 2,913,966
(.5 x $5,827,931)
3. Time Weighted Employer Contributions 462,513
(.5 x .125 x $7,400,205)
4. Time Weighted State Contributions 6,000
(.5 x $12,000)
5. Time Weighted Benefit Payments 8,394,166
( (11/24) x $18,314,544)
6. Time Weighted Expenses 1,404,402
(.5 x $2,808,804)
7. Time Weighted Value of Actuarial Reserves $502,074,835
(Items 1+2+3+4-5-6)
8. Expected Asset Return 37,655,613
(Item 7 x 7.50%)
9. Actual Asset Return 33,644,637
10. Difference of Expected Return over Actual Return $4,010,976
11. Actuarial Reserves at End of Plan Year 534,252,349
12. Expected Actuarial Reserves at End of Plan Year $538,263,325
(Items 10 + 11)
13. Difference Between Actual and Expected Asset Return $(4,010,976)
(Items 11 - 12)
14
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION III - ASSETS
(continued)
Development of Actuarial Value of Assets (continued)
Date Initial Annual Amount Amount Excluded Amount Excluded
Established Amount Recognized Prior Valuation Current Valuation
01/01/2002 $(56,938,003) $(11,387,601) $11,387,601 $0
01/01/2003 $(71,661,013) $(14,332,203) $28,664,405 $14,332,202
01/01/2004 $49,774,669 $9,954,934 $(29,864,801) $(19,909,867)
01/01/2005 $10,516,067 $2,103,213 $(8,412,854) $(6,309,641)
01/01/2006 $(4,010,976) $(802,195) $0 3,208,781
Total $(8,678,525)
Actuarial Reserves $534,252,349
Actuarial Value of Assets, Before Applying Limits $525,573,824
80% of Actuarial Reserves $427,401,879
120% of Actuarial Reserves $641,102,819
Actuarial Value of Assets, After Applying Limits $525,573,824
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, 2005, the date of the latest actuarial valuation:
Retirees and beneficiaries receiving benefits 686
Terminated plan members entitled to but not yet receiving benefits 54
Active plan members 1,661
Total 2.401
Number of participating employers 1
16
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION IV - ACCOUNTING
(continued)
B. Required Supplementary Information Scheduling of Funding Progress
Actuarial UAAL as a
Actuarial Accrued Unfunded Percentage
Actuarial Value of Liability (AAL) AAL Funded Covered of Covered
Valuation Assets Frozen Entry (UAAL) Ratio Payroll Payroll
Date (a) 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 $26,379,893 90% $44,208,964 60%
01/01/1997 $272,346,200 $297,892,502 $25,546,302 91% $44,955,348 57%
01/01/1998 $308,596,133 $333,250,492 $24,654,359 93% $47,281,198 52%
01/01/1999 $354,088,751 $377,788,731 $23,699,980 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%
01/01/2004 $507,256,663 $546,915,627 $39,658,964 93% $69,907,473 57%
01/01/2005 $510,265,274 $549,136,184 $38,870,910 93% $73,836,304 53%
01/01/2006 $525,573,824 $563,597,580 $38,023,756 93% $76,010,269 50%
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 01/01/2005
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 Employee Data
A summary of changes in the employee data from January 1, 2005 through January 1, 2006 follows.
Employees who do not participate in the plan are not included.
Retired
Terminated Participants
Active Vested And
Employ Employ Beneficiaries Total
Participants included in the
January 1, 2005 valuation 1,661 54 686 2,401
Nonvested terminations (14) (14)
Data revisions 0
Vested terminations (14) 14 0
Deaths without eligible (10) (10)
beneficiary
Retirements (35) (10) 45 0
Cash settlements (99) (99)
Rehires 4 (1) 3
New participants 168 1 169
18
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION V - CENSUS DATA
(continued)
B. Aye - Service Distribution of Active Participants as of January 1, 2006
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 72 0 0 0 0 0 72
25 to 29 100 19 0 0 0 0 119
30 to 34 98 81 15 0 0 0 194
35 to 39 89 75 52 22 1 0 239
40 to 44 74 58 53 74 19 0 278
45 to 49 71 47 41 68 48 19 294
50 to 54 41 41 39 38 36 48 243
55 to 59 33 18 27 39 23 21 161
60 to 64 8 6 15 9 5 3 46
65+ 4 3 10 5 1 2 25
Total 590 348 252 255 133 93 1,671
Active Participant Statistics
Average Age 43.38 years
Average Service 10.18 years
19
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION V - CENSUS DATA
(continued)
C. Aye - Service Distribution of Active Hazardous Duty Participants as of January 1, 2006
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 16 0 0 0 0 0 16
25 to 29 27 8 0 0 0 0 35
30 to 34 35 46 10 0 0 0 91
35 to 39 26 36 29 10 0 0 101
40 to 44 6 9 23 36 7 0 81
45 to 49 1 1 3 19 12 3 39
50 to 54 3 1 2 6 5 18 35
55 to 59 2 0 1 2 4 4 13
60 to 64 0 0 0 0 0 0 0
65+ 0 0 0 0 0 0 0
Total 116 101 68 73 28 25 411
Active Participant Statistics
Average Age 38.70 years
Average Service 10.82 years
20
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION V - CENSUS DATA
(continued)
D. Aye - Service Distribution of Active Non-Hazardous Duty Participants as of January 1, 2006
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 56 0 0 0 0 0 56
25 to 29 73 11 0 0 0 0 84
30 to 34 63 35 5 0 0 0 103
35 to 39 63 39 23 12 1 0 138
40 to 44 68 49 30 38 12 0 197
45 to 49 70 46 38 49 36 16 255
50 to 54 38 40 37 32 31 30 208
55 to 59 31 18 26 37 19 17 148
60 to 64 8 6 15 9 5 3 46
65+ 4 3 10 5 1 2 25
Total 474 247 184 182 105 68 1,260
Active Participant Statistics
Average Age 44.91 years
Average Service 9.97 years
21
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION V - CENSUS DATA
(continued)
E. Inactive Participant Count and Benefits as of January 1, 2006
Number of Annual
Participants Benefit
Terminated Vested Participants 58 $1,016,166
Retired Participants and Beneficiaries 721 $18,243,971
22
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION VI - ASSUMPTIONS AND METHODS
A. Actuarial Assumptions
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 5% 10% 2%
45 5% 5% 2%
50 2% 5% 0%
55 0% 0% 0%
Age 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 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)
A. Actuarial Assumptions (continued)
Valuation Salary Compensation during the plan year is assumed to be the greater of (1) and (2):
Retirement Rates
(1) Compensation earned during the prior plan year, increased by salary scale;
(2) Pay rate for the current plan year.
Retirement is assumed to occur in accordance with the following table:
General Hazardous
Age Employ Duty
<45 0% 20%
45 0% 20%
46 0% 20%
47 0% 20%
48 0% 20%
49 0% 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%
Timinjz of Contribution The employer contribution is assumed to be made uniformly during the first two
quarters of the fiscal year beginning on 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 The state contributions are assumed to equal $12,000 per year.
Expenses Expenses are assumed to equal last year's actual expenses.
24
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION VI - ASSUMPTIONS AND METHODS
(continued)
A. 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.
B. 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 is derived. Any difference between the actual
return on investments for a given year and the expected return is spread over five years. After five years the
entire amount is fully recognized. However, the Actuarial Value of Assets will never exceed 120% nor fall
below 80% of the market value of assets. The use of a derived value of plan assets rather than current market
value will produce a more stable funding pattern for the plan by partially eliminating the effect of unusual
market fluctuations.
C. 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 sum 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
Eligibility
Current Employee
Contributions
Average Monthly
Compensation
Accrued Benefit
Retirement Benefit
January 1 to December 31.
Any permanent employee shall participate in the plan immediately.
8.0% of wages and salaries actually paid to a participant.
The total Compensation received during the highest five years of service of the last ten years
divided by sixty.
A monthly benefit equal to 2.75% of Average Monthly Compensation multiplied by the
number of years of service to date.
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.
Hazardous Duty: Completion of 20 years of service or completion of at least ten years of service and the
attainment of age 55.
B. 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.
C. 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. Earlv 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-service connected, 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 Livinjz 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 Livinjz 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.
G:ATLS\Hrs\RETVCea-aterADBVVa1A2000Va1Report Draft.doc
28
;fY4,st4r
` Pension Trustees Agenda
Council Chambers - City Hall
SUBJECT / RECOMMENDATION:
Investment Update of Employee's Pension Plan for Year Ending December 31, 2005.
SUMMARY:
Presentation of Employee's Pension Plan dated 5/30/06.
Type: Other
Current Year Budget?: None Budget Adjustment:
Budget Adjustment Comments:
Current Year Cost: Annual Operating Cost:
Not to Exceed: Total Cost:
For Fiscal Year: to
None
Meeting Date:5/30/2006
Review Approval: 1) Financial Services 2) Office of Management and Budget 3) Clerk
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