PB 11/15/2011 Minutes - Laserfiche WebLink

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Police/Fire Pension Board Meeting November 11, 2011 Page 2 6. Presentations Mr. Patrick Donlan, Foster & Foster actuarial services presented the 2011 Police/Fire Pension Plan Actuarial Report to the board and also reviewed it. The City's contribution to the plan is increasing to 30.4% from 29.9%. The amount due from the City for FY12 is 24.3% & is expected to be 24.8%. The four year average return is - .021% as exhibited on page 15 of the Actuarial Evaluation Report. Projected actuarial investment returns for the plan were 8%. The actual returns for the past year came in at -3.4%. This resulted in a $690,000 loss to the plan relative to what was expected, causing costs to increase by approximately 2% of payroll. The offset to the investment loss is the difference in projected salary increases as compared to actual salary increases. The plan presumption is that police and fire plan members receive 6% raises each year. Actual increases were 1.9%. A three year comparison of salary increases is shown on page 7. The three year average is well below the 6% assumption. If the assumptions for terminations and salary increases being used are correct, the City will have to increase their plan contribution by about 1.3% over the next three years. Because the plan is relatively young, the investment losses do not have such a significant impact. There were fewer terminations in 2011 than expected, which resulted in a actuarial gain for the plan because the benefit portion of contributions stays in the plan. When there are fewer terminations to the plan than expected, this results in an actuarial loss, when there are more terminations, this results in an actuarial gain. There were two vested terminations and one non - vested termination (page 21). There were 75 active participants. The number of participants each i is .•._ „ , ,• year should increase over time as a« new ��rres enter the Police/Fire Pension plan. Younger individuals have higher turnover and are less likely to reach retirement, which leads to a decreased a cost to the plan. The average entry age of plan members is 29.2 years old for 2011 (page 19). The relatively young average age of plan members reduces the amount expected to pay out at retirement. The state froze the amount of reserves in 1999 at $183,000. Anything over the frozen amount of $183,000 per year goes into the excess state reserve. As of 10/1/11, the plan has $1,287,674 in excess state reserves to be used for future plan benefits (page 4). Premium tax refund amounts are based on the insurance amounts homeowners pay for their insurance. The amount of the premium tax refund in 2011 was $267,679 (page 11). The present value of accrued benefits demonstrates that if the plan was terminated as of today, the total payout would be $4,464,000 (page 4). The plan assets are almost $9,000,000 which means the City is more than 100% funded on what everyone has accrued as of 10/1/11. MOTION: Mr. Stewart moved to accept the actuary report for 2011. Motion was seconded by Mr. Glancy. Motion carried unanimously by voice vote 4-0. A copy of the signed addendum for Foster & Foster's fees was given to Mr. Christiansen, pension board attorney. A discussion of actuary fees ensued. The 2008/9/10 billing was overstated because Foster &, Foster had their rate increase incorrect. This will result in a $1,000 credit due to the plan. The pension plan should expect an increase next year because there has been no increase since 2007. The evaluation increase will then be 5% each year thereafter. Mr. Mike Welker of The Bogdahn Group presented a review of the pension plan performance for the third quarter of calendar year 2011/ fourth quarter of fiscal year 2011 as contained in the plan performance booklet provided to the board members by The Bogdahn Group. The information contained in the booklet was as of September 30, 2011.