06/02/2005Pension Trustees Aqenda
r Clearwat Date: 0610212005
Location: Council Chambers - City Hall
Call to Order
Pension Trustee Items
Accept the Actuary's Report for the Employees' Pension Plan for the plan year
beginning January 1, 2005.
Other Business
Adjourn
Pension Trustees Agenda 6/2/2005 Page 1 of 1
Cleanv ter Pension Trustee Cover Memorandum
Tracking Number: 1,351 Actual Date: 06/02/2005
Subject / Recommendation:
Accept the Actuary's Report for the Employees' Pension Plan for the plan year beginning January
1, 2005.
Summary:
The 1/1/2005 actuarial report for the Employees' Pension Plan indicates that a required City
contribution of $14,471,960, equivalent to 19.6% of covered payroll, is required for fiscal year
2005/2006. This is an increase from the 2004 valuation, which required a contribution of
$8,414,878. This actuarially-required contribution required by Florida Statutes exceeds the
minimum City contribution per the plan ordinance of 7% of covered payroll, currently estimated
at $5,168,541.
The required City contribution was affected by the following factors:
(1) Actuarial investment return (5-year weighted average) of 2.18% versus an assumed rate of
7.5%. This is due to three years of poor investment performance (calendar years 2000 thru
2002 at (3.43)%, (5.16)%, and (8.83)%, respectively), partially offset by returns of 20.08%
and 9.73% for calendar years 2003 and 2004. The actuarial investment return of 2.18%
decreased from 7.45% for the previous year due to an 18.61% year (1999) falling off the 5-year
average, replaced by a 9.73% return for 2004.
(2) Actual salary increases of 6.38% versus an assumed rate of 6.00%. This was primarily a
result of hurricane-related overtime of $900,000.
(3) Actual expenses for the plan year were $529,055 more than expected, primarily due to
increased money manager fees. Please see the attached WORD document for additional
information regarding the increase in money manager fees.
Please see the attached WORD document for additional information on this agenda item. A copy
of the draft actuary's report is also attached.
Originating: Finance
Review Approval
Jav Ravins 05-13-2005 11:17:14
Tina Wilson 05-13-2005 13:23:02
Garry Brumback 05-20-2005 13:12:55
Maraie Simmons 05-13-2005 13:18:47
Cvndie Goudeau 05-20-2005 13:55:22
Bill Horne 05-20-2005 15:26:57
Agenda Item for 1-1-05 Actuary's Report, Clearwater Employees' Pension Plan, continued:
The increase in money manager fees was due to: replacement of underperforming money managers;
diversification of the plan to additional asset categories with higher management fees; and increased
money manager commissions as a result of growth in the portfolio due to investment returns of 20.08%
and 9.73% for calendar years 2004 and 2005, respectively.
The plan has a current "credit balance" of $24,083,096, reflecting excess prior employer contributions to
the plan, which can be used to subsidize future required employer contributions. If the City continues its
recent practice of contributing 7% of payroll to the plan, the credit balance will decrease by
approximately $7.5 million for fiscal 2006. With future employer contributions expected to remain at or
near the 19.6% level (assuming plan assumptions are met), the plan's credit balance will be exhausted in
3 to 4 years (fiscal 2008 or 2009). After that point, if the plan's experience matches the actuarial
assumptions, the City will have to prudently increase its contributions to a level close to 19.6% of
payroll. Staff will be discussing these results with the City Council and possibly increasing the City's
annual contribution as part of the fiscal year 2006 budget process.
04/28/2005 09:54 FAX GHRS 0 001
D R A F T
The City of Clearwater Employees' Pension Plan
Actuary's Report
As of January 1, 2005 to determine annual contribution
for the Plan Year: 01/01/2005 -1213112005 to be paid in the
Fiscal Year: 10101/2005 - 09/30/2006
Prepared by PricewaterhouseCoopers, LLP
April 2005
[bCWATERHOUSECOOPERS 0
04/28/2005 09:55 FAX GHRS I M002
April 22, 2005
City of Clearwater
100 S. Myrtle Avenue
Clearwater, FL 33756-5520
Ladies and Gentlemen:
This report presents the results of the January 1, 2005 actuarial valuation of the City of Clearwater
Employees' Pension Plan. It has been prepared primarily to present to management the contribution
requirements for 2005 and also the current status of funding of accumulated plan benefits. Section
1V of this report includes a presentation of the information required by the 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 V11, 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
Associate of the Society of Actuaries
04/28/2005 09:55 FAX GHRS I M003
CONTENTS
Pages
SECTION I SUMMARY 1- 6
SECTION IT 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 VIl SUMMARY OF PLAN PROVISIONS 2b - 28
04/28/2005 09:56 FAX GHRS I M004
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION I - SUMMARY
A. Actuary's Comments
This report presents the highlights of the January 1, 2005 actuarial valuation prepared to determine the
contribution requirements for the 2005-2006 fiscal year. Since the last actuarial valuation of the plan
on January 1, 2004, 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 V11, and for
a detailed description of the actuarial assumptions and methods, please see Section V1 of this report.
The minimum required City Contribution pursuant to Florida Statutes for the 2005 plan year is
$14,471,960 or 19.60% of pay (excluding the credit balance of $24,083,096), compared to $8,414,878
for 2004. 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 nearly 10%, the return on the
actuarial value of assets was only 2.18% due to prior years' losses, compared to an assumed
rate of 7.5%;
• The actual average salary increase was 6.38%, compared to an assumed rate of 6.0%;
• Actual expenses for the year were $529,055 more than expected.
The plan's credit balance is currently equal to $24,083,096, providing a cushion against future
contribution increases.
While the plan remains well funded compared to the majority of other public and private pension
plans, there are several issues that should be kept in mind:
• The actuarial value of assets exceeds the market value by roughly $2 million - this difference
will flow through the plan's experience over the next four years, increasing costs slightly.
• if the City contributes 7% of payroll for the 2005 plan year it will reduce the credit balance by
roughly $7.5 million.
• 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 change the City's
funding requirements significantly.
• if the City wishes to continue its recent practice of contributing 7.0% of payroll and using the
credit balance to cover the difference, it will be able to do so for perhaps 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 19.60% of payroll.
The funded status of the plan is consistent with the prior year. The ratio of assets at market value to
the actuarial present value of accumulated plan benefits is 122% at January 1, 2005, the same ratio as
of January 1, 2004.
04/28/2005 09:57 FAX GHRS I M005
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION I - SUMMARY
(continued)
B. Contribution Re uirements for the Plan Year Ending December 31, 2005
Minimum Required Employer Contribution
Florida Statutes $14,471,960*
7% of Payroll $5,168,541
The employer contribution is assumed to be made uniformly during the first two quarters of the fiscal
year beginning on October 1, 2005. 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 V11, 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 $24,083,096)
04/28/2005 09:57 FAX GHRS I M006
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION I - SUMMARY
(continued)
C. Comparative Summary of Principal Valuation Results
Actuarial Valuation Prepared as of. Jan. 1, 2005 Jan. 1, 2004 Jan. 1, 2003
(a) Participant Data
Number Included
Active Members 1,661 1,633 1,619
Retirees and Beneficiaries 686 646 590
Terminated Vested Participants 54 48 53
Annual Payroll of Actives $73,836,304 $69,907,473 $65,150,820
Annualized Benefits
Retirees and Beneficiaries $16,486,474 $14,772,610 $12,751,479
Terminated Vested Participants $1,047,860 $961,774 $992,349
(b) Actuarial Reserves
Market Value $508,490,924 $471,110,205 $397,951,216
Actuarial Value $510,265,274 $507,256,663 $477,541,459
(c) Liabilities
Present Value of Expected Benefits:
Active Participants:
Retirement Benefits $346,148,058 $327,392,044 $321,602,739
Termination Benefits $30,700,351 $29,943,370 $29,196,714
Disability Benefits $17,822,108 $17,019,266 $15,744,154
Death Benefits $4,185,182 $3,970,903 $3,639,787
ee Contributions
lo
d
f E
R
f 178
$2
659 $2,556,148 $2,212,656
y
un
o
mp
e ,
,
Total Active $401,514,877 $380,881,731 $372,396,050
Terminated Vested Participants $10,916,726 $9,890,625 $9,481,373
i
fi
i
d B
i 61
7
026
$219 $197,199,518 $165.984,116
ar
es
ene
c
rees an
Ret .
,
,
Total Present Value of Expected Benefits $632,048,629 $587,971,874 $547,861,539
Liabilities Due and Unpaid $611,252 $524,524 $380,686
3
04/28/2005 09:58 FAX GHRS I M007
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, 2005 Jan. 1, 2004 Jan. 1, 2003
(c) Liabilities (continued)
Unfunded Actuarial Accrued Liability
Supplemental FIL - 1/1/1979 658,555 795,515 922,920
Supplemental FIL - 1/1/1981 140,129 158,124 174,863
Supplemental FIL - 1/1/1982 (1,866,511) (2,064,101) (2,247,906)
Supplemental FIL - 1/1/1987 977,098 1,026,432 1,072,324
Supplemental FIL - 1/1/1988 1,132,596 1,183,236 1,230,343
Supplemental FIL - 1/1/1989 1,541,827 1,603,210 1,660,310
Asset Valuation Method - 1/1/1994 3,114,005 3,187,614 3,256,087
Change
Plan Amendment - 1/1/1996 13,201.,155 13,459,398 13,699,624
Plan Amendment - 1/1/2000 49,854,786 50,537,016 51,171,649
Assumption Changes - 1/1/2002 (29,882,73 0 (30,227,4 (30,548,178)
Total $38,870,910 $39,658,964 $40,392,036
(d) Funding Account. Credit Balance
Prior Year Amount $25,459,838 $25,832,535 $21,360,525
Prior Year:
Required Employer Contributions (8,414,878) (7,153,190) (1,766,058)
Employer Contributions Made 5,128,648 4,843,053 4,636,029
Interest on Credit Balance 1,909,488 1,937,440 1,602,039
Total $24,083,096 $25,459,838 $25,832,535
(e) Actuarial Present Value of Accrued
Benefits $417,252,415 $385,298,167 $354,603,387
Changes During Prior Year:
Value from Prior Year $385,298,167 $354,603,387 $322,794,259
Benefits Paid $(16,518,471) $(14,325,691) $(13,003,161)
Interest, Aging and Benefits Accrued 48,472,719 45,020,471 44,812,289
Change in Assumptions 0 0 0
Change in Plan Provisions 0 0 0
Net Change $31,954,248 $30,694,780 $31,809,128
Value at Current Year $417,252,415 $385,298,167 $354,603,387
4
04/28/2005 09:58 FAX GHRS I M008
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION I - SUMMARY
(continued)
C. Comparative Summarv of Principal Valuation Results (continued)
Actuarial Valuation Prepared as of Jan. 1, 2005 Jan. 1, 2004 Jan. 1, 2003
(f) Pension Cost for Year
Normal Cost $12,685,077 $7,843,618 $6,469,476
Amortization of Unfunded Frozen
Initial Liability 3,499,977 3,499,977 3,499,977
Administrative Expenses 2,530,425 2,001,370 2,038,348
Shortfall for Expenses in Prior Year 529,055 (36,978) (232,620)
Interest Adjustment 1,146,330 711,489 602,075
Total Required Contribution $20,390,864 $14,019,476 $12,377,256
As a Percentage of Payroll 27.62% 20.05% 19.00%
Anticipated Employee Contributions
As a Percentage of Payroll
Anticipated State Contributions
As a Percentage of Payroll
City Required Contribution
As a Percentage of Payroll
(g) Prior Year Actual Contributions made by
State
Employees
City
Total
(h) Gains and Losses
(i) Other Present Values
Present Value of Future Salaries
$5,906,904
8.00%
$12,000
0.02%
14,471,960
19.60%
$12,000
5,858,176
5,128,648
$10,998,824
NIA
$5,592,598
8.00%
$12,000
0.02%
$8,414,878
12.04%
$12,000
5,353,573
4,843,053
$10,208,626
NIA
$5,212,066
8.00%
$12,000
0.02%
$7,153,190
10.98%
$12,000
5,118,850
4.636,029
$9,766,879
NIA
At attained age $622,761,495 $592,588,035 $561,764,999
Present Value of Future Employee
Contributions
At attained me $49,820,920 $47,407,043 $44,941,200
5
04/28/2005 09:59 FAX
GHRS IM 009
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, 2005 Jan. 1, 2004 Jan. 1, 2003
(i) Other Present Values (continued)
Present Value of Future Normal Costs
$106,995,541 $66,516,085 $55,760,579
0) Comparison of Actual and Assumed
Sala Increases Investment Return
Year Ended Actual Assumed Actual Assumed
Market Value Actuarial Value
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% NIA 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%
1213111.996 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%
6
04/28/2005 09:59 FAX GHRS I M010
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION II - FUNDING
A.
Unfunded Frozen Actuarial Accrued Liability
as of January 1, 2004
Interest to December 31, 2004
$42,633,386
2
Employer Normal Cost* for Year with interest
to December 31, 2004
$4,652,402
3
4.
Required Employer Contributions for Period
Unfunded Frozen Actuarial Accrued Liability at
December 31, 2004
* Includes Expenses and Adjustments
$8,414,878
$38,870,910
7
04/28/2005 10:00 FAX GHRS
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION 11 - FUNDING
(continued)
B. Development of Normal Cost
[Moil
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, 2005, January 1, 2004, and
January 1, 2003 are determined as follows:
Total Projected Actuarial Liability:
Jan. 1, 2005 Jan. 1, 2004 Jan. 1, 2003
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
$401,514,877 $380,881,731 $372,396,050
10,916,726 9,890,625 9,481,373
219,617.026 197,199,51 8 165,984,116
$632,048,629 $587,971,874 $547,861,539
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.
This portion is divided into two components:
a. Unfunded frozen actuarial accrued liability
b. Present value of future service liability
(funded over the expected future service
years of current participants)
$24,083,096 $25,459,838 $25,832,535
$510,265,274 $507,256,663 $477,541,459
$145,866,451 $106,175,049
$38,870,910
$39,658,964
$106,995,541
$66,516,085
$96,152,615
$40,392,036
$55,760,579
Present Value of Future Covered Payroll $622,761,495 $592,588,035 $561,764,999
8
04/28/2005 10:00 FAX
GHRS IM 012
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION I1- FUNDING
(continued)
B. Development of Normal Cost (continued)
Jan. 1, 2005 Jan. 1, 2004 Jan. 1, 2003
Normal Cost Rate: The ratio of the present
value of future service liability to the present
value of future covered payroll. 17.18% 11.22% 9.93%
Annual Covered Payroll: The reported payroll
for plan participants who have not attained the
assumed retirement age. $73,836,304 $69,907,473 $65,150,820
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. $12,685,077 $7,843,618 $6,469,476
04/28/2005 10:01 FAX GHRS I M013
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION II - FUNDING
(continued)
C. Schedule of Amortization Pgyments
Initial Jan. 1, 2005 Annual
Date Initial Amortization Unamortized Amortization
Established Reason Amount Period Years Amount Payment
1/1/1979 Supplemental
FIL 2,707,962 30 658,555 182,906
1/1/1981 Supplemental
FIL 390,421 30 140,129 27,771
1/1/1982 Supplemental
FIL (4,521,985) 30 (1,866,511) (327,812)
1/1/1987 Supplemental
FIL 1,519,142 30 977,098 117,504
1/1/1988 Supplemental
FIL 1,673,738 30 1,132,596 129,658
1/1/1989 Supplemental
FIL 2,177,772 30 1,541,827 168,952
1/1/1994 Asset Valuation
Method Change 3,724,296 30 3,114,005 290,865
1/1/1996 Plan Amendment 15,063,842 30 13,201,155 1,179,254
1/1/2000 Plan Amendment 52,921,724 30 49,854,786 4,160,471
1/1/2002 Assumption
Changes 502)
(30
846 30 (29,8-82 730 (2,429,59?
,
,
Total Charges $70,620,151 $6,257,381
Total Credits (31,749,241) (2,757,404)
Total '7 P7
min
10
04/28/2005 10:01 FAX GHRS I M014
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
2005 $38,870,910
2006 $38,023,753
2007 $37,113,059
2008 $36,134,063
2033 $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.
04/28/2005 10:02 FAX GHRS I M015
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION III -- ASSETS
Comparative Balance Sheet
As of December 31, 2004
Market Value Market Value
ASSETS Dec. 31, 2004 Dec. 3l, 2003
Cash $0 $0
Money Market Accounts 12,189,576 8,855,432
International Equity Securities 48,106,829 41,438,718
Domestic Corporate Equity Securities 248,236,344 229,024,857
Domestic Bonds 198,051,211 189,545,757
Total Investments $506,583,960 $468,864,764
Receivables:
Interest - Pooled Cash 14,438 28,049
Commission Recapture 107,046 109,248
Employer Contributions 2,396,732 2,632,668
Total Assets $509,102,176 $471,634,729
LIABILITIES AND ACTUARIAL RESERVES
Liabilities:
Accounts Payable $61.1,252 $524,524
Total Liabilities $611,252 $524,524
Actuarial Reserves:
Accumulated Member Contributions 46,285,020 43,846,975
Balance of Actuarial Reserves 462,205,904 427,263,230
Total Actuarial Reserves $508,490,924 $471,110,205
_
TOTAL LIABILITIES AND ACTUARIAL RESERVES $502, $471,634,M
12
04/28/2005 10:02 FAX
GHRS IM 016
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION III - ASSETS
(continued)
Schedule of Changes in Actuarial Reserves
For the Plan Year Ended December 31, 2004
Market Value
Revenues:
Employee Contributions $5,858,176
Employer Contributions 5,128,648
State Contributions 12,000
$10,998,824
Earnings on Investments:
Interest $5,473,724
Dividends 2,662,648
Realized Net Gains on Securities Transactions 24 77447,852
$32,884,224
Unrealized Appreciation (Depreciation)
on Investments $12,546,567
Expenses:
Benefits Paid $(15,722,255)
Refunds of Contributions (796,216)
Professional Fees (2,530,425)
Other Expenses 0
$(19,048,896)
Net Change in Actuarial Reserves $37,380,719
Actuarial Reserves at Beginning of Plan Year $471,110,205
Actuarial Reserves at End of Plan Year $508,490,924
13
04/28/2005 10:03 FAX GHRS I M017
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION III -- ASSETS
(continued)
Development of Actuarial Value of Assets
1. Actuarial Reserves at Beginning of Plan Year $471,110,205
2. Time Weighted Employee Contributions 2,929,088
(.5 x $5,353,573)
3. Time Weighted Employer Contributions 320,541
(.5 x.125 x $4,843,053)
4. Time Weighted State Contributions 6,000
(.5 x $12,000)
5. Time Weighted. Benefit Payments 7,570,966
( (11/24) x $14,325,691)
6. Time Weighted Expenses 1,265.213
(.5 x $2,001,370)
7. Time Weighted Value of Actuarial Reserves $465,529,655
(Items 1 +2+3+4-5-6)
8. Expected Asset Return 34,914,724
(Item 7 x 7.50%)
9. Actual Asset Return 45,430,791
10. Difference of Expected Return over Actual Return $(10,516,067)
11.. Actuarial Reserves at End of Plan Year 508,490,924
12. Expected Actuarial Reserves at End of Plan Year $497,974,857
(Items 10 + 11)
13. Difference Between Actual and Expected Asset Return $10,516,067
(Items 11 - 12
14
04/28/2005 10:03 FAX GHRS I M018
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
01/01/2001 $(50,971,924) $(10,194,385) $10,194,385 $0
01/01/2002 $(56,938,003) $(11,387,601) $22,775,201 $11,387,600
01/01/2003 $(71,661,013) $(14,332,203) $42,996,608 $28,664,405
01/01/2004 $49,774,669 $9,954,934 $(39,819,735) $(29,864,801)
01/01/2005 $10,516,067 $2,103,213 $0 (8,412,85
Total $1,774,350
Actuarial Reserves $508,490,924
Actuarial Value of Assets, Before Applying Limits $510,265,274
80% of Actuarial Reserves $406,792,739
120% of Actuarial Reserves $610,189,109
Actuarial Value of Assets, After Applying Limits $510,265,274
15
04/28/2005 10:04 FAX GHRS I M019
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, 2004, the date of the latest actuarial valuation:
Retirees and beneficiaries receiving benefits 646
Terminated plan members entitled to but not yet receiving benefits 48
Active plan members 1,633
Total 2,327
Number of artici atin employers I
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04/28/2005 10:04 FAX GHRS I M020
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 (alb) 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 $1.98,315,690 $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%
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 01/01/2004
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
04/28/2005 10:05 FAX GHRS I M021
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, 2004 through January 1, 2005 follows.
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, 2004 valuation 1,633 48 646 2,327
Nonvested terminations (4) (4)
Data revisions 4 7 11
Vested terminations (8) 8 0
Deaths without eligible (9) (9)
beneficiary
Retirements (37) (6) 43 0
Cash settlements (73) (73)
Rehires 4 (1) 3
New participants 146 146
Participants included in the
January 1, 2005 valuation 1,661 54 686 2,401
Active Participants:
Fully vested 725
Non-vested 936
Total 1,661
18
04/28/2005 10:05 FAX GHRS I M022
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION V - CENSUS DATA
(continued)
B. Age - Service Distribution of Active Participants as of Janua 1 2005
Years of Service
Attained 0-4 5-9 10 - 14 l 5 - 19 20 - 24 25+ Total
Age No. No. No. No. No. No. No.
Under 25 59 0 0 0 0 0 59
25 to 29 103 25 0 0 0 0 128
30 to 34 105 77 14 0 0 0 196
35 to 39 93 80 62 16 0 0 251
40 to 44 75 60 49 74 23 0 281
45 to 49 62 59 48 72 48 15 304
50 to 54 47 32 32 44 38 42 235
55 to 59 18 19 29 37 1.3 19 135
60 to 64 9 5 16 9 7 4 50
65+ 4 4 6 5 1 2 22
Total 575 361 256 257 130 82 1,661
Active Participant Statistics
Average Age 43.15 years
Average Service 10.1.7 years
19
04/28/2005 10:05 FAX GHRS I M023
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION V - CENSUS DATA
(continued)
C. Age - Service Distribution of Active Hazardous Duly 1'y articipants as of January 1, 2005
Years of Service
Attained 0-4 5-9 10 - 14 15 -19 20 - 24 25+ Total
A e No. No. No. No. No. No. No.
Under 25 13 0 0 0 0 0 13
25 to 29 32 13 0 0 0 0 45
30 to 34 42 42 7 0 0 0 91
35 to 39 24 33 38 7 0 0 102
40 to 44 8 5 23 37 8 0 81
45 to 49 0 2 5 18 11 6 42
50 to 54 1 1 2 7 10 11 32
55 to 59 0 0 1 1 2 4 8
60 to 64 0 0 0 0 0 1 1
65+ 0 0 0 0 0 0 0
Total 120 96 76 70 31 22 415
Active Participant Statistics
Average Age 38.52 years
Average Service 10.90 years
20
04/28/2005 10:06 FAX GHRS I M024
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION V -- CENSUS DATA
(continued)
D. Age - Service Distribution of Active Non-Hazardous Duty Participants as of Janua 1 2005
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 46 0 0 0 0 0 46
25 to 29 71 12 0 0 0 0 83
30 to 34 63 35 7 0 0 0 105
35 to 39 69 47 24 9 0 0 149
40 to 44 67 55 26 37 15 0 200
45 to 49 62 57 43 54 37 9 262
50 to 54 46 31 30 37 28 31 203
55 to 59 18 19 28 36 11 15 127
60 to 64 9 5 16 9 7 3 49
65+ 4 4 6 5 1 2 22
Total 455 265 180 187 99 60 1,246
Active Participant Statistics
Average Age 44.69 years
Average Service 9.93 years
21
04/28/2005 10:06 FAX GHRS I M025
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION V - CENSUS DATA
(continued)
E. Inactive Participant Count and Benefits as of Janua 1 2005
Number of Annual
Partici ants Benefit
Terminated Vested Participants 54 $1,047,860
Retired Participants and Beneficiaries 686 $16,486,474
22
04/28/2005 10:07 FAX GHRS I M026
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
Male Female -M
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%
Disabili 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:
Age Incidence of Disability
20 .17%
25 .17%
30 .l7%
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.
Salar_k_r 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
04/28/2005 10:07 FAX GHRS I M027
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:
T General Hazardous
Ag_e Employees 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%
Timing of Contribution The employer contribution is assumed to be made uniformly during the first two
quarters of the fiscal year beginning on October I 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
04/28/2005 10:08 FAX GHRS I M028
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 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.
D. Actuarial Cost Method
The actuarial cost method is the Frozen Entry AM 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
04/28/2005 10:08 FAX GHRS I M029
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
Eli ibili
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. Eli ibili ormal 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
04/28/2005 10:09 FAX GHRS I M030
CITY OF CLEARWATER EMPLOYEES' PENSION PLAN
SECTION VII - SUMMARY OF PLAN PROVISIONS
(continued)
D. Earl 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 Norm 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. Eli ibili
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
04/28/2005 10:09 FAX GHRS I M031
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 Liviniz 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. Eli ibili
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 Pgyment
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. Eli ig bilitx
Any actively employed participant.
B. Benef it
Refund of Employee Contributions with 5% simple interest.
C. Form of Benefit
Lump sum.
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