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HomeMy WebLinkAboutFinal Agenda Packet AGENDA Firefighters' Pension Board Meeting 2:00 PM - Thursday, May 18, 2017 Mayor's Conference Room, 7th Floor, City Hall – 1055 S. Grady Way 1. CALL TO ORDER 2. APPROVAL OF MINUTES a) April 6, 2017 3. CORRESPONDENCE 4. MONTHLY STATEMENTS a) March 2017 Statement b) April 2017 Statement 5. MONTHLY BILLS AND PENSION PAYMENTS a) April 2017 b) May 2017 6. UNFINISHED BUSINESS 7. NEW BUSINESS a) Actuarial Valuation of January 1, 2017 (Firefighters Pension Fund) 8. ADJOURNMENT MINUTES FIREFIGHTERS' PENSION BOARD CITY OF RENTON April 6, 2017 Denis Law, Mayor Don Persson, Finance Committee Chair Jason Seth,City Clerk Ray Barilleaux, Fire Department Representative Bruce Phillips, Fire Department Representative Chuck Christenson,Alternate Fire Department Representative Jill Masunaga, Finance Department Representative The regular meeting of the Firefighters' Pension Board was called to order by Mayor Denis Law at 2:04 p.m. in the Mayor's office, 7th floor of Renton City Hall. In attendance were Board members Mayor Denis Law, Finance Committee Representative Don Persson, City Clerk Jason Seth, Fire Department Representative Ray Barilleaux, Fire Department Representative Bruce Phillips, and Finance Department Representative Jill Masunaga. MINUTES APPROVAL MOVED BY PHILLIPS, SECONDED BY BARILLEAUX,THE PENSION BOARD APPROVE THE MINUTES OF THE JANUARY 19, 2017 MEETING.CARRIED. MONTHLY STATEMENT The final December 31, 2016,1anuary 31, 2017, and February 28, 2017 financial reports were reviewed.Total cash/investment balance was, as of February 28, 2017,$5,540,072.08. MONTHLY BILLS AND PENSION PAYMENTS MOVED BY BARILLEAUX, SECONDED BY PHILLIPS,THE BOARD APPROVE THE PENSION/MEDICAL PAYMENTS OF$20,669.28 FOR FEBRUARY 2017 AND$20,669.28 FOR MARCH 2O17,TO BE PAID BY THE FIREFIGHTERS' PENSION FUND. CARRIED. UNFINISHED BUSINESS Ray Barilleaux asked how a new bill pending at the State level regarding LEOFF II would affect the Firefighters' Pension Fund. Mayor Law remarked that he would look into it and provide the information at a later date. NEW BUSINESS N/A ADJOURNMENT MOVED BY BARILLEAUX, SECONDED BY PHILLIPS,THE FIREFIGHTERS' PENSION BOARD ADJOURN. CARRIED.TIME: 2:10 P.M. Jason Seth,City Clerk Secretary, Firefighters' Pension Board AGENDA ITEM #2. a) CITY OF RENTON - FIREFIGHTER'S PENSION FUND CASH & INVESTMENT ACTIVITY REPORT AS OF MARCH 31, 2017 Firefighter's Pension Fund Comparison of Cash and Investment Activity CURRENT 2017 2017 LAST YEAR 2016 2016 ACTIVITY: MONTH YTD BUDGET CURR MO ACTUAL BUDGET BEGINNING CASH/INV BALANCE $5,540,072.08 $5,578,044.41 $5,202,835 $5,267,787.87 $5,299,034.47 $4,935,310 RECEIPTS: Fire Insurance Premium Tax 0.00 0.00 143,000 0.00 148,033.76 143,000 Investment Interest 3,938.54 7,304.77 325,000 3,174.05 339,631.82 325,000 DISBURSEMENTS: Fire Pension 20,669.28 62,007.84 200,000 16,581.61 208,229.65 200,000 Fire Pension Medical 0.00 0.00 0 0.00 0.00 0 Office/Operating Supplies 0.00 0.00 475 0.00 425.99 475 Actuarial/Firemen's Pens 0.00 0.00 0 0.00 0.00 0 ENDING CASH/INV BALANCE $5,523,341.34 $5,523,341.34 $5,470,360 $5,254,380.31 $5,578,044.41 $5,202,835 CURRENT PREVIOUS LAST YEAR LAST YEAR ACTIVITY: MONTH MONTH CURR MO PREV MO CASH/State Investment Pool $3,097,023.05 $3,114,697.23 $2,683,262.23 $2,696,664.22 INVESTMENTS: Federal National Mortgage Assn 852,855.63 852,855.63 852,855.63 852,855.63 Treasury Strips & Zero Coupon Bonds 1,561,038.48 1,561,038.48 1,709,638.98 1,709,638.98 Interest Receivable 12,424.18 11,480.74 8,623.47 8,629.04 TOTAL CASH AND INVESTMENTS $5,523,341.34 $5,540,072.08 $5,254,380.31 $5,267,787.87 The State Investment Pool interest 0.7007% 0.6303% 0.4488% 0.4201% 1 2 3 4 5 6 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mi l l i o n s o f D o l l a r s 2017 2016 H:\FINANCE\FINPLAN\FIREPEN\1_Fire_Pension Stmt.xls\Mar17 Page 1 4/19/2017 AGENDA ITEM #4. a) CITY OF RENTON - FIREFIGHTER'S PENSION FUND CASH & INVESTMENT ACTIVITY REPORT AS OF APRIL 30, 2017 Firefighter's Pension Fund Comparison of Cash and Investment Activity CURRENT 2017 2017 LAST YEAR 2016 2016 ACTIVITY: MONTH YTD BUDGET CURR MO ACTUAL BUDGET BEGINNING CASH/INV BALANCE 5,523,341.34 5,578,044.41 5,202,834.91 5,254,380.31 5,299,034.47 4,935,309.91 RECEIPTS: Fire Insurance Premium Tax 0.00 0.00 143,000.00 0.00 148,033.76 143,000.00 Investment Interest 1,860.41 9,165.18 325,000.00 973.78 339,631.82 325,000.00 DISBURSEMENTS: Fire Pension 18,523.86 80,531.70 200,000.00 15,965.53 208,229.65 200,000.00 Fire Pension Medical 0.00 0.00 0.00 0.00 0.00 0.00 Office/Operating Supplies 0.00 0.00 475.00 0.00 425.99 475.00 Actuarial/Firemen's Pens 0.00 0.00 0.00 0.00 0.00 0.00 ENDING CASH/INV BALANCE $5,506,677.89 $5,506,677.89 $5,470,360 $5,239,388.56 $5,578,044.41 $5,202,835 CURRENT PREVIOUS LAST YEAR LAST YEAR ACTIVITY: MONTH MONTH CURR MO PREV MO CASH/State Investment Pool $3,079,419.93 $3,097,023.05 $2,667,363.11 $2,683,262.23 INVESTMENTS: Federal National Mortgage Assn 852,855.63 852,855.63 852,855.63 852,855.63 Treasury Strips & Zero Coupon Bonds 1,561,038.48 1,561,038.48 1,709,638.98 1,709,638.98 Interest Receivable 13,363.85 12,424.18 9,530.84 8,623.47 TOTAL CASH AND INVESTMENTS $5,506,677.89 $5,523,341.34 $5,239,388.56 $5,254,380.31 The State Investment Pool interest 0.8283% 0.7007% 0.4288% 0.4488% 5.00 5.25 5.50 5.75 6.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mi l l i o n s o f D o l l a r s 2017 2016 H:\FINANCE\FINPLAN\FIREPEN\1_Fire_Pension Stmt\Apr17 Page 1 7/17/2017 AGENDA ITEM #4. b) FIREFIGHTERS' PENSION BOARD PENSION/MEDICAL PAYMENTS FOR APRIL, 2017 Recipient Pension Amt Medical Total *ANKENY, Charlie (Captain) $153.63 153.63            * BARILLEAUX, Ray (Battalion Chief)‐‐                  *BERGMAN, Claudette (Widow) $174.42 174.42            *CHRISTENSON, Chuck (Firefighter) $294.28 294.28            * GEISSLER, Dick (Fire Chief)‐‐                  * GOODWIN, Kathryn Lorayne (Widow) $1,159.41 1,159.41         HAWORTH, Constance (Widow) $3,382.27 3,382.27         *JONES, Evelyn M. (Widow) $284.03 284.03            *LARSON, William (Firefighter)‐‐                  * LAVALLEY, Theodele (Captain) $410.45 410.45            * MATTHEW, James (Deputy Chief)‐‐                  *MC LAUGHLIN, Barbara M. (Widow) $1,143.87 1,143.87         *NEWTON, Gary (Lieutenant) $310.61 310.61            *NICHOLS, Gerald (Battalion Chief) $611.47 611.47            *PARKS‐ANDREASON, Arlene (Widow) $381.11 381.11            * PHILLIPS, Bruce H. (Deputy Chief) $293.41 293.41            *PRINGLE, Arthur (Captain) $547.69 547.69            PRINGLE, S. Joan (Widow) $2,905.75 2,905.75         * RIGGLE, Arduth S. (Widow) $93.13 93.13              * RUPPRECHT, Jim (Firefighter D Step) $132.97 132.97            *SMITH, Shirley (Widow) $466.07 466.07            STROM, Doris (Widow) $3,709.29 3,709.29         * TODD, Tess R. (Widow) $534.31 534.31            *TONDA, Lila Jean (Widow) $8.26 8.26                * VACCA, Nick (Lieutenant) $354.69 354.69            * WALLS, Camille (Widow) $164.32 164.32            * WALLS, Mercedes (Widow) $132.20 132.20            * WEISS, Cheryl (Widow) $876.22 876.22              Total Expenses:  Pension/Medical $18,523.86 $0.00 $18,523.86 * Adjusted to reflect a 2.28% LEOFF cost of living increase effective April 1. Total Pension Payments for April 2016 15,965.53 Total Medical Bills Reimbursed in April, 2016 0.00 Total Expenses:  Medical/Pension 15,965.53 Prior Year Pension/Medical Payments: 4_SUMMARY 2017.xls 4/10/2017 AGENDA ITEM #5. a) FIREFIGHTERS' PENSION BOARD PENSION/MEDICAL PAYMENTS FOR MAY 2017 Recipient Pension Amt Medical Total ANKENY, Charlie (Captain) $153.63 153.63            BARILLEAUX, Ray (Battalion Chief)‐‐                  BERGMAN, Claudette (Widow) $174.42 174.42            CHRISTENSON, Chuck (Firefighter) $294.28 294.28            GEISSLER, Dick (Fire Chief)‐‐                  GOODWIN, Kathryn Lorayne (Widow) $1,159.41 1,159.41         HAWORTH, Constance (Widow) $3,382.27 3,382.27         JONES, Evelyn M. (Widow) $284.03 284.03            LARSON, William (Firefighter)‐‐                  LAVALLEY, Theodele (Captain) $410.45 410.45            MATTHEW, James (Deputy Chief)‐‐                  MC LAUGHLIN, Barbara M. (Widow) $1,143.87 1,143.87         NEWTON, Gary (Lieutenant) $310.61 310.61            NICHOLS, Gerald (Battalion Chief) $611.47 611.47            PARKS‐ANDREASON, Arlene (Widow) $381.11 381.11            PHILLIPS, Bruce H. (Deputy Chief) $293.41 293.41            PRINGLE, Arthur (Captain) $547.69 547.69            PRINGLE, S. Joan (Widow) $2,905.75 2,905.75         RIGGLE, Arduth S. (Widow) $93.13 93.13              RUPPRECHT, Jim (Firefighter D Step) $132.97 132.97            SMITH, Shirley (Widow) $466.07 466.07            STROM, Doris (Widow) $3,709.29 3,709.29         TODD, Tess R. (Widow) $534.31 534.31            TONDA, Lila Jean (Widow) $8.26 8.26                VACCA, Nick (Lieutenant) $354.69 354.69            WALLS, Camille (Widow) $164.32 164.32            WALLS, Mercedes (Widow) $132.20 132.20            WEISS, Cheryl (Widow) $876.22 876.22              Total Expenses:  Pension/Medical $18,523.86 $0.00 $18,523.86 Total Pension Payments for May 2016 15,965.53 Total Medical Bills Reimbursed in May, 2016 0.00 Total Expenses:  Medical/Pension 15,965.53 Prior Year Pension/Medical Payments: 4_SUMMARY 2017.xls 4/19/2017 AGENDA ITEM #5. b) ACTUARIAL VALUATION of Firefighters' Pension Fund City of Renton January 1, 2017 Prepared by Daniel R. Wade, FSA, EA, MAAA Fellow, Society of Actuaries Member, American Academy of Actuaries and Robert F. Busey, FSA, EA, MAAA Fellow, Society of Actuaries Member, American Academy of Actuaries AGENDA ITEM #7. a) Offices in Principal Cities Worldwide This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. Fqh0013.docx - 1 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo 1301 Fifth Avenue Suite 3800 Seattle, WA 98101-2605 USA Tel +1 206 624 7940 Fax +1 206 623 3485 milliman.com March 31, 2017 Firefighters' Pension Board City of Renton 1055 S. Grady Way Renton, WA 98055 Re: 2017 Actuarial Valuation As requested, we performed an Actuarial Valuation of the City of Renton Firefighters' Pension Fund as of January 1, 2017. The major findings of the valuation are contained in this report. This report reflects the benefit provisions in effect as of the valuation date. In preparing this report, we relied, without audit, on information (some oral and some in writing) supplied by the City. This information includes, but is not limited to, statutory provisions, employee data and financial information. We found this information to be reasonably consistent and comparable with information used for other purposes. The valuation results depend on the integrity of this information. If any of this information is inaccurate or incomplete, our results may be different and our calculations may need to be revised. All costs, liabilities, rates of interest, and other factors for the Fund have been determined on the basis of actuarial assumptions and methods which are individually reasonable (taking into account the experience of the Fund and reasonable expectations); and which, in combination, offer our best estimate of anticipated experience affecting the Fund. Nevertheless, the emerging costs will vary from those presented in this report to the extent that actual experience differs from that projected by the actuarial assumptions. This valuation report is only an estimate of the Fund’s financial condition as of a single date. It can neither predict the Fund’s future condition nor guarantee future financial soundness. Actuarial valuations do not affect the ultimate cost of Fund benefits, only the timing of Fund contributions. While the valuation is based on an array of individually reasonable assumptions, other assumption sets may also be reasonable and valuation results based on those assumptions would be different. No one set of assumptions is uniquely correct. Determining results using alternative assumptions is outside the scope of our engagement. Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan's funded status); and changes in plan provisions or applicable law. Due to the limited scope of our assignment, we did not AGENDA ITEM #7. a) City of Renton March 31, 2017 Page 2 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. Fqh0013.docx - 2 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo perform an analysis of the potential range of future measurements. The Board has the final decision regarding the appropriateness of the assumptions. Actuarial computations presented in this report are for purposes of determining the recommended funding amounts for the Fund. Actuarial computations presented in this report under GASB Statements No. 67 and 68 are for purposes of fulfilling financial accounting requirements. The computations prepared for these two purposes may differ as disclosed in our report. The calculations in the enclosed report have been made on a basis consistent with our understanding of the Fund’s funding requirements and goals and of GASB Statements No. 67 and 68. Determinations for purposes other than meeting these requirements may be significantly different from the results contained in this report. Accordingly, additional determinations may be needed for other purposes. Milliman’s work is prepared solely for the internal business use of the City of Renton (“City”). To the extent that Milliman's work is not subject to disclosure under applicable public records laws, Milliman’s work may not be provided to third parties without Milliman's prior written consent. Milliman does not intend to benefit or create a legal duty to any third party recipient of its work product. Milliman’s consent to release its work product to any third party may be conditioned on the third party signing a Release, subject to the following exceptions: (a) The City may provide a copy of Milliman’s work, in its entirety, to the Fund's professional service advisors who are subject to a duty of confidentiality and who agree to not use Milliman’s work for any purpose other than to benefit the Fund. (b) The City may provide a copy of Milliman’s work, in its entirety, to other governmental entities, as required by law. No third party recipient of Milliman's work product should rely upon Milliman's work product. Such recipients should engage qualified professionals for advice appropriate to their own specific needs. The consultants who worked on this assignment are pension actuaries. Milliman’s advice is not intended to be a substitute for qualified legal or accounting counsel. The signing actuaries are independent of the plan sponsor. We are not aware of any relationship that would impair the objectivity of our work. On the basis of the foregoing, we hereby certify that, to the best of our knowledge and belief, this report is complete and accurate and has been prepared in accordance with generally recognized and accepted actuarial principles and practices. We are members of the American Academy of Actuaries and meet the Qualification Standards to render the actuarial opinion contained herein. We would like to express our appreciation to staff members of the City of Renton, who gave substantial assistance in supplying the data on which this report is based. AGENDA ITEM #7. a) City of Renton March 31, 2017 Page 3 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. Fqh0013.docx - 3 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo We respectfully submit the following report and look forward to discussing it with you. Sincerely, Daniel R. Wade, FSA, EA, MAAA Robert F. Busey, FSA, EA, MAAA Consulting Actuary Actuary Enrolled Actuary Number 14-06417 Enrolled Actuary Number 14-07875 DRW/RFB/nlo AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. i Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo Table of Contents Page SUMMARY: Scope of the Report ....................................................................................... 1 SECTION 1 Conclusions and Recommendations ............................................................. 7 SECTION 2 Valuation of Pension Benefits ........................................................................ 9 TABLE 1 Actuarial Present Value of All Future Pension Benefits Not Provided by LEOFF System ..................................................................... 13 TABLE 2 Derivation of Contributions Required for Pension Benefits .............................. 14 SECTION 3 Actuarial Information for Accounting Purposes ......................................... 15 TABLE 3 GASB Statement No. 67 Schedule of Employer Contributions ........................ 17 TABLE 4 GASB Statement No. 67 Money-Weighted Rate of Return .............................. 18 TABLE 5 GASB Statement No. 67 Long-Term Expected Rate of Return ....................... 19 TABLE 6 GASB Statement No. 67 Calculation of the Discount Rate .............................. 20 TABLE 7 GASB Statement No. 67 Net Pension Liability ................................................ 21 TABLE 8 GASB Statement No. 67 Changes in Net Pension Liability.............................. 22 TABLE 9 GASB Statement No. 67 Schedule of Changes in Net Pension Liability and Related Ratios ......................................................................................... 23 TABLE 10 GASB Statement No. 68 Pension Expense ..................................................... 24 TABLE 11 GASB Statement No. 68 Schedule of Deferred Inflows and Outflows of Resources ............................................................................. 25 SECTION 4 Supplemental Information ............................................................................ 27 TABLE 12 Projection of Future Excess Pension Benefits ................................................. 28 APPENDIX A Actuarial Procedures and Assumptions ..................................................... 29 TABLE A-1 Summary of Valuation Assumptions ................................................................ 31 APPENDIX B Provisions of Governing Law ....................................................................... 33 APPENDIX C Valuation Data ............................................................................................... 39 TABLE C-1 Firefighters Retired for Service ........................................................................ 40 TABLE C-2 Firefighters Disabled in Line of Duty ................................................................ 40 TABLE C-3 Survivors of Firefighters .................................................................................. 40 APPENDIX D Glossary ........................................................................................................ 41 AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 1 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo SUMMARY Scope of the Report This report presents the results of an actuarial valuation of the City's Firefighters' Pension Fund (FPF). When valuing the pension fund liabilities, particular attention is given to the cost of providing the “excess benefit,” a benefit under FPF available to active members as of March 1, 1970. On that date, the Washington Law Enforcement Officers' and Firefighters' System (LEOFF) was established. Under the terms of governing law, active members of the City's FPF on that date are entitled to payment from the FPF of the excess of benefits calculated under the FPF law over those calculated under the LEOFF law. The City's FPF also pays the entire pensions of those members retired prior to March 1, 1970 and their survivors. The employer costs given in the report are those that are the responsibility of the City. They exclude pension costs payable under the LEOFF system. In addition to the summary information presented in this section, you will find the next section of the report gives the conclusions and recommendations resulting from the valuation. Section 2 gives a brief description of the implications of the method employed in carrying out the valuation. It also contains a presentation of the computations discussed in Section 1. Section 3 gives the disclosure required by the Governmental Accounting Standards Board (GASB). Section 4 shows the projected cash payments the City will be required to pay under the pension obligations of the FPF. There are four appendices attached to the report. The actuarial assumptions used in the valuation are summarized in Appendix A. Appendix B gives a summary of the benefit provisions of both FPF and LEOFF, as interpreted for the purposes of this study. Appendix C contains tables showing the distribution of the retirees with their monthly pension benefits by age. Appendix D contains a glossary of terms. Changes in Accounting Standards The Governmental Accounting Standards Board (GASB) released new accounting standards for public pension plans and participating employers in 2012. These standards, GASB Statements No. 67 and 68, have substantially revised the accounting requirements previously mandated under GASB Statements No. 25 and 27. The most notable change is the distinct separation of funding from financial reporting. The Annual Required Contribution (ARC) has been eliminated under GASB 67 and 68 and is no longer relevant for financial reporting purposes. As a result, Plan Sponsors have been encouraged to establish a formal funding policy that is separate from financial reporting calculations. AGENDA ITEM #7. a) This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 2 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo GASB 67 applies to financial reporting for public pension plans and is required to be implemented for plan fiscal years beginning after June 15, 2013. For the City’s FPF plan, reporting was first done for GASB 67 as of December 31, 2014. Note that a plan's fiscal year might not be the same as the employer's fiscal year. Even if the Plan does not issue standalone financial statements, but rather is considered a pension trust fund of a government, it is our understanding that it is subject to GASB 67. Under GASB 67, enhancements to the financial statement disclosures are required, along with certain required supplementary information. Please note that we are actuaries and that Milliman’s advice is not intended to be a substitute for qualified accounting counsel. GASB 68 governs the specifics of accounting for public pension plan obligations for participating employers and is required to be implemented for employer fiscal years beginning after June 15, 2014. For the City’s FPF plan, reporting was first done for GASB 68 as of December 31, 2015. GASB 68 requires a liability for pension obligations, known as the Net Pension Liability, to be recognized on the balance sheets of participating employers. Changes in the Net Pension Liability will be immediately recognized as Pension Expense on the income statement or reported as deferred inflows/outflows of resources depending on the nature of the change. AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 3 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo Findings The following table presents an analysis of the actuarial present value of future pension benefits to be paid by the City's FPF. The entire pension benefit of members retiring before the establishment of the LEOFF System is paid by the City. The City's actuarial accrued liability for members retiring after establishment of LEOFF is only for excess pension benefits, which can be substantial. Active Members Hired Prior to March 1, 1970:0$ Retirees and survivors: Retirements prior to March 1, 1970 334,141$ Retirements since March 1, 1970 2,534,201 2,868,342$ Total Present Value of Future Benefits 2,868,342$ AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 4 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo Projection of Future Excess Pension The following table illustrates the projected excess annual pension payments for retired members eligible for retirement benefits under FPF. The table is based on the actuarial assumptions stated in Appendix A. The graph on the following page illustrates the projected cash flow payments. Year Ending December 31 Total Estimated Payouts 2017 238,000$ 2018 235,000 2019 236,000 2020 235,000 2021 234,000 2022 231,000 2023 226,000 2024 219,000 2025 211,000 2026 202,000 2027 192,000 2028 181,000 2029 168,000 2030 155,000 2031 142,000 2032 128,000 2033 115,000 2034 102,000 2035 90,000 2036 78,000 2037 68,000 2038 58,000 2039 48,000 2040 40,000 2041 33,000 2042 27,000 2043 21,000 2044 17,000 2045 13,000 2046 10,000 AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 5 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 2017 2027 2037 2047 Expected Future Benefit Payments Pension AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 6 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo Summary of Changes in Plan Net Assets for the Years Ended December 31, 2015 and December 31, 2016 Below is a summary of changes in assets for the past two years. 2015 2016 RECEIPTS Tax revenue from fire insurance premium $146,358 $148,034 Total receipts $146,358 $148,034 INVESTMENT EARNINGS Investment income $336,787 $334,923 Net increase/(decrease) in the fair value of investments (202,796) (198,852) Total investment earnings $133,991 $136,071 DISBURSEMENTS Pension benefit payments $205,147 $208,231 Administrative expenses 11,775 426 Total disbursements $216,922 $208,657 CHANGE IN NET ASSETS $63,427 $75,448 Market Value of Net Assets BOY $9,467,775 $9,531,202 Market Value of Net Assets EOY $9,531,202 $9,606,650 AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 7 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo SECTION 1 Conclusions and Recommendations The City's obligations under the FPF are limited to the benefits provided to firefighters who retired prior to March 1, 1970, plus payments of excess retirement benefits to active members as of that date. To meet these obligations, the City may contribute annually to the Fund the amount raised by levying all or part of a tax of up to $0.45 (only $0.225 of which can be in excess of the property tax limit pursuant to Revised Code of Washington (RCW) 84.52.043) per $1,000 of true and fair market value, the maximum provided by law for maintaining the Fund. Contributions also include donations and income from the state fire insurance premium collection. On the basis of the actuarial assumptions used in this valuation, we estimate that the current assets of the Fund, along with investment earnings, will be sufficient to pay all future FPF pension benefits. Accordingly, we recommend that the City make no contributions to the Fund until the next actuarial valuation is performed. As of January 1, 2017, the actuarial present value of future excess pension benefits to be provided by the City is $2,868,342. As of January 1, 2015 (the date of our last valuation), the present value of excess pension benefits was determined to be $3.221 million. The expected value as of January 1, 2017 based upon our 2015 valuation was $2.989 million. The actual present value of $2.868 million was 4% lower than expected for reasons summarized in the following chart: The fund experienced a liability decrease since our last valuation. The decrease is mainly attributable to the changes in the economic assumptions. For this valuation we are assuming a 2.50% increase for FPF benefits tied to salary increases in 2018. By comparison, in the prior valuation there was a 3.25% salary increase assumption for 2016 onward. This assumption change resulted in lower overall projected FPF benefits, and as a result, lower projected city paid excess benefits. The assumptions were changed in order to better reflect current expectations. In addition, the discount rate was raised from 3.50% to 3.75%. A higher discount rate results in a lower present value of measured liabilities. Reason Liability Increase (Decrease) as a Percentage Changes in demographics (1%) Changes in benefit amounts compared to expectations 1% Changes in the economic assumptions (4%) Total (4%) AGENDA ITEM #7. a) This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 8 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo The Plan’s demographic experience resulted in a small decrease in liabilities. Partially offsetting these decreases, was the fact that excess benefits increased more than anticipated over the past two years. The Plan remains sensitive to demographic experience that deviates from expectations due to the small size of the Plan membership. The Plan also remains sensitive to deviations in the excess benefit amounts from expectations. AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 9 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo SECTION 2 Valuation of Pension Benefits Income from the FPF comes from the following sources, as described in RCW.41.16.050: 1. Bequests, fees, gifts, emoluments or donations. 2. Forty-five percent of all monies received by the State from taxes on fire insurance premiums, prior to January 1, 2000. Twenty-five percent after January 1, 2000. 3. Taxes paid pursuant to the provisions of R.C.W.41.16.060 (see below). 4. Interest on the investments of the Fund. 5. Contributions by firefighters as provided herein. The provisions referred to in item (3) require that each municipality levy up to $0.45 (only $0.225 of which can be in excess of the property tax limit pursuant to RCW 84.52.043) per $1,000 of assessed valuation, based on reports by a qualified actuary, to maintain the Fund. At the time that the LEOFF System was installed, the state assumed the major portion of the obligation to provide future retirement benefits for members still in active service at the date of the inception of LEOFF, March 1, 1970. Each of the cities maintaining an FPF retained the responsibility for all benefits payable to members (or to their survivors) who retired prior to that date. In addition, each city retained the responsibility for a portion of the benefits payable to members who were active on that date. These members are entitled to benefits under either the FPF formula or the LEOFF formula, whichever is greater. If the FPF benefit is greater, the City's FPF must meet the cost of the excess of the FPF benefit over the LEOFF benefit. Upon the establishment of LEOFF, the total pension liability of each FPF was expected to decrease rapidly from year to year because of the closed, diminishing nature of the group of retirees and survivors. However, the excess pension benefits paid by each city's FPF have generally been much larger than anticipated. This is largely due to the way postretirement adjustments to benefits are calculated. For those retired after 1970, the City must pay the excess of the FPF benefit over the LEOFF benefit. The LEOFF benefits increase with the Consumer Price Index (CPI) for Seattle, while most of the FPF benefits increase with wages of the current active firefighters in the rank the members held at retirement. For this reason, the benefits are highly sensitive to the spread between wage increases and CPI increases. Wages have typically grown at a faster rate than CPI and are expected to continue to do so in the future. AGENDA ITEM #7. a) This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 10 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo Small changes in the assumptions for wage increases or CPI have a magnified impact on the liabilities calculated. To see why this magnification occurs, consider the following example. Suppose that a person has an FPF benefit of $4,000 per month and a LEOFF benefit of $3,500 per month. The city-paid benefit is $500 per month. If wages increase at 3.25%, while CPI increases at 2.25%, the benefit increases will look like the following: Current Year Increase Following Year FPF $ 4,000.00 3.25% $ 4,130.00 LEOFF 3,500.00 2.25% 3,578.75 City-Paid Benefit $ 500.00 10.25% $ 551.25 As you can see, the city-paid benefit increased 10.25% despite the fact that the total benefit paid to the member increased by only 3.25%. Consider the same example, but with a 3.50% increase to wages. Current Year Increase Following Year FPF $ 4,000.00 3.50% $ 4,140.00 LEOFF 3,500.00 2.25% 3,578.75 City-Paid Benefit $ 500.00 12.25% $ 561.25 In the second example, the wages and total benefit increased by 0.25% more (3.50% - 3.25%) than in the first example. However, the city-paid portion of the benefit increased by 2.00% more (12.25% - 10.25%) than in the first example. AGENDA ITEM #7. a) This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 11 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo Under LEOFF, the benefit is adjusted after retirement in proportion to the change in the CPI. Under FPF, most adjustments are based on the change in salary for the active firefighters in the rank the members held at retirement. Wages have nearly always increased more rapidly than prices. The pattern is illustrated by the following table: The wage information is based on statistics from the Social Security System back to 1951 and the Total Private Nonagricultural Wages prior to 1951. The CPI figures are based on the national Consumer Price Index, U.S. City Average and All Urban Consumers. Over all years considered, wages have increased 1.3% faster than CPI. For the past 20 years, wages have grown at a rate of 1.0% higher than CPI. Period Ending 10 years 20 years 50 years 90 years 2016 1.9%2.2%4.1%3.0% 2006 2.4%3.1%4.1% 1996 3.7%5.1%4.1% 1986 6.6%6.2%4.2% 1976 5.9%3.8% 1966 1.8%2.2% 1956 2.5%3.5% Period Ending 10 years 20 years 50 years 90 years 2016 2.4%3.2%4.7%4.3% 2006 4.1%4.1%4.9% 1996 4.1%5.3%5.3% 1986 6.5%6.5%6.0% 1976 6.4%4.9%4.4% 1966 3.4%4.8% 1956 6.2%6.7% Period Ending 10 years 20 years 50 years 90 years 2016 0.5%1.0%0.6%1.3% 2006 1.7%1.0%0.8% 1996 0.4%0.2%1.2% 1986 -0.1%0.3%1.8% 1976 0.5%1.1% 1966 1.6%2.6% 1956 3.7%3.2% Geometric Average Increase in National Average CPI for Previous Period of Years Geometric Average Increase in National Average Wages for Previous Period of Years Geometric Average Increase in National Average Wages Minus Geometric Average Increase in National Average CPI for Previous Period of Years AGENDA ITEM #7. a) This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 12 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo In addition to historical data, we reviewed current economic forecasts to find an economic forecast with a time frame suited to our purposes. We looked at the expected increase in the CPI used by the Office of the Chief Actuary for the Social Security Administration. In the 2016 Trustees Report, the ultimate projected annual increase in the CPI under the intermediate cost assumptions was 2.6%. The range was stated as 2.0% to 3.2%. The ultimate projected annual growth rate in U.S. earnings was 3.8% for the intermediate assumptions, with a range of 2.6% to 5.0%. Since the U.S. Treasury started issuing inflation indexed bonds (TIPS), it is possible to determine the approximate rate of inflation anticipated by the financial markets over the next 30 years by comparing the yields on inflation-indexed bonds with traditional fixed government bonds. This analysis implies expectations of inflation rates of about 2.0% as of January 2017. Capital market assumptions by investment advisors tend to range somewhere between the implied inflation rate and the inflation rate used by the Office of the Chief Actuary for the Social Security Administration. For this valuation, we assume that in the long-term wages increase at 3.25% per year and CPI increases at 2.25%, reflecting both historical data and economic forecasts. The actuarial assumptions are monitored for reasonableness and periodic changes are made when appropriate. Table 1 presents an analysis of the actuarial present value of future pension benefits to be paid by the FPF. The entire pension benefit of members retiring before the establishment of the LEOFF System is paid by the City. The City's actuarial accrued liability for members retiring after establishment of LEOFF is only for excess pension benefits, which can be substantial. Table 2 develops the Fund's actuarial deficiency for pension benefits, which is zero. AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 13 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo TABLE 1 Actuarial Present Value of All Future Pension Benefits Not Provided by LEOFF System Active Members Hired Prior to March 1, 1970:0$ Retirees and survivors: Retirements prior to March 1, 1970 334,141$ Retirements since March 1, 1970 2,534,201 2,868,342$ Total Present Value of Future Benefits 2,868,342$ AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 14 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo TABLE 2 Derivation of Contributions Required for Pension Benefits A.Actuarial present value of all future pension benefits not provided by the LEOFF System (Table 1): For active members 0$ For retirees and survivors 2,868,342 2,868,342$ B.Assets of the Fund:Market Value Cash 2,240,566$ Investments 7,366,510 Other Assets 0 9,607,076$ Less liabilities (426) 9,606,650$ C.Actuarial deficiency: Actuarial present value of amount to be funded from City appropriations, beginning in 2017 [A-B, not less than zero]:0$ AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 15 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo SECTION 3 Actuarial Information for Accounting Purposes Overview of GASB Statements No. 67 and 68 The Governmental Accounting Standards Board (GASB) released new accounting standards for public pension plans and participating employers in 2012. These standards, GASB Statements No. 67 and 68, have substantially revised the accounting requirements previously mandated under GASB Statements No. 25 and 27. The most notable change is the distinct separation of funding from financial reporting. The Annual Required Contribution (ARC) has been eliminated under GASB 67 and 68 and is no longer relevant for financial reporting purposes. As a result, plan sponsors have been encouraged to establish a formal funding policy that is separate from financial reporting calculations. GASB 67 applies to financial reporting for public pension plans and is required to be implemented for plan fiscal years beginning after June 15, 2013. For the City’s FPF plan, reporting was first done for GASB 67 as of December 31, 2014. For GASB 67, note that a plan's fiscal year might not be the same as the employer's fiscal year. Even if the Plan does not issue stand-alone financial statements, but rather is considered a pension trust fund of a government, it is our understanding that it is subject to GASB 67. Under GASB 67, enhancements to the financial statement disclosures are required, along with certain required supplementary information. Please note that we are actuaries and that Milliman’s advice is not intended to be a substitute for qualified accounting counsel. GASB 68 governs the specifics of accounting for public pension plan obligations for participating employers and is required to be implemented for employer fiscal years beginning after June 15, 2014. For the City’s FPF plan, reporting was first done for GASB 68 as of December 31, 2015. GASB 68 requires a liability for pension obligations, known as the Net Pension Liability, to be recognized on the balance sheets of participating employers. Changes in the Net Pension Liability will be immediately recognized as Pension Expense on the income statement or reported as deferred inflows/outflows of resources depending on the nature of the change. Relationship Between Valuation Date, Measurement Date, and Reporting Date The Valuation Date is January 1, 2017. This is the date as of which the actuarial valuation is performed. The Measurement Date is December 31, 2016. This is the date as of which the net pension liability is determined. The Reporting Date is December 31, 2016. This is the Plan's and/or employer's fiscal year ending date. AGENDA ITEM #7. a) This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 16 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo Actuarially Determined Contribution As mentioned in the Overview, GASB Statement 67 has separated funding from financial reporting. Paragraph 32c of GASB Statement 67 provides guidance for a schedule of an actuarially determined contribution, if such a contribution is calculated. For this report, the actuarially determined contribution is equal to zero for all years, as the plan assets have been significantly greater than the liabilities. It should be noted that for the fiscal years ending 2007- 2013, the reported Annual Required Contribution under GASB 25 and 27 had been negative. Changes of Net Pension Liability GASB Statement 67 requires a schedule of changes in Net Pension Liability from year to year. For this report, the December 31, 2015 amount in this schedule is based on the January 1, 2015 actuarial valuation and uses a discount rate of 3.50%. The December 31, 2016 amount is based on the January 1, 2017 actuarial valuation and uses a discount rate of 3.75%. AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 17 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo TABLE 3 GASB Statement No. 67 Schedule of Employer Contributions Fiscal Year Actuarially Actual Contribution Contribution Ending Determined Employer Deficiency Covered as a % of December 31 Contribution Contribution*(Excess)Payroll Covered Payroll 2007 $0 $59,777 ($59,777)$0 N/A 2008 0 66,055 (66,055)0 N/A 2009 0 70,327 (70,327)0 N/A 2010 0 107,068 (107,068)0 N/A 2011 0 102,354 (102,354)0 N/A 2012 0 118,775 (118,775)0 N/A 2013 0 124,391 (124,391)0 N/A 2014 0 142,706 (142,706)0 N/A 2015 0 146,358 (146,358)0 N/A 2016 0 148,034 (148,034)0 N/A *Employer contributions for pensions are total contributions to the Fund net of disbursements from the Fund for medical expenses under RCW 41.26.150. It includes revenues from fire insurance premium taxes. Prior to 2014, administrative expenses were also subtracted from employer contributions. AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 18 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo TABLE 4 GASB Statement No. 67 Money-Weighted Rate of Return Calculation of Money-Weighted Rate of Return The money-weighted rate of return considers the changing amounts actually invested during a period and weights the amount of pension plan investments by the proportion of time they are available to earn a return during that period. External cash flows are determined on a monthly basis and are assumed to occur at the beginning of each month. External cash inflows are netted with external cash outflows, resulting in a net external cash flow in each month. The money-weighted rate of return is calculated net of investment expenses. Fiscal Year Net Ending Money-Weighted December 31 Rate of Return 2007 N/A 2008 N/A 2009 N/A 2010 N/A 2011 N/A 2012 N/A 2013 N/A 2014 4.31% 2015 1.42% 2016 1.43% Net External Net External Periods Period Cash Flows Cash Flows Invested Weight With Interest Beginning Value - January 1, 2016 $9,531,202 12.00 1.00 $9,667,426 Monthly net external cash flows: January (16,582)12.00 1.00 (16,819) February (16,582)11.00 0.92 (16,800) March (16,582)10.00 0.83 (16,778) April (15,966)9.00 0.75 (16,136) May 132,068 8.00 0.67 133,330 June (15,966)7.00 0.58 (16,097) July (18,394)6.00 0.50 (18,525) August (18,894)5.00 0.42 (19,007) September (18,894)4.00 0.33 (18,983) October (18,135)3.00 0.25 (18,200) November (18,135)2.00 0.17 (18,179) December (18,561)1.00 0.08 (18,582) Ending Value - December 31, 2016 9,606,650 9,606,650 Money-Weighted Rate of Return 1.43% AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 19 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo TABLE 5 GASB Statement No. 67 Long-Term Expected Rate of Return The long-term expected rate of return is determined by combining expected inflation to expected long-term real returns and reflecting expected volatility and correlation. The capital market assumptions are per Milliman's investment consulting practice as of December 31, 2016. Asset Class Cash Citigroup 90-Day T-Bills Short-Term Bonds Barclays 1-3 Year Gov/Cred Long-Term Bonds Barclays Long Gov/Cred Assumed Inflation - Mean Long-Term Expected Rate of Return Index Long-Term Expected Real Rate of Return 0.50% 1.41% 2.97% 2.25% 3.75% AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 20 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo TABLE 6 GASB Statement No. 67 Calculation of the Discount Rate GASB 67 generally requires that a blended discount rate be used to measure the Total Pension Liability (the Actuarial Accrued Liability calculated using the Individual Entry Age Normal Cost Method). The long-term expected return on plan investments may be used to discount liabilities to the extent that the Plan’s Fiduciary Net Position (fair market value of assets) is projected to cover benefit payments and administrative expenses. A 20-year high quality (AA/Aa or higher) municipal bond rate must be used for periods where the Fiduciary Net Position is not projected to cover benefit payments and administrative expenses. Determining the discount rate under GASB 67 will often require that the actuary perform complex projections of future benefit payments and asset values. We believe that the assumption of 3.75% as of December 31, 2016 is an appropriate long-term expected rate of return on investments such as those in the City's trust. The Bond Buyer General Obligation 20-bond municipal bond index for bonds that mature in 20 years is 3.78% as of December 31, 2016. Rounding this to the nearest 1/4% results in a discount rate of 3.75%. Using 3.75% for both the long-term expected rate of return and the bond index will mean that 3.75% could be used as the single discount rate. This will need to be re-evaluated as of later valuation dates. AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 21 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo TABLE 7 GASB Statement No. 67 Net Pension Liability Net Pension Liability The total pension liability was determined by an actuarial valuation as of the valuation date, calculated based on the discount rate and actuarial assumptions below. Discount Rate Other Key Actuarial Assumptions Valuation Date January 1, 2015 January 1, 2017 Measurement Date December 31, 2015 December 31, 2016 Inflation 2.25% 2.25% Salary increases including inflation 3.25% 2.50% in 2017 (reflected in data) 2.50% in 2018 3.25% thereafter Mortality RP-2000 Mortality Table (combined healthy) with generational projection using 100% of Projection Scale BB, with ages set back one year for males and forward one year for females (set forward two years for disabled members) RP-2000 Mortality Table (combined healthy) with generational projection using 100% of Projection Scale BB, with ages set back one year for males and forward one year for females (set forward two years for disabled members) Actuarial cost method Entry Age Normal Entry Age Normal December 31, 2015 December 31, 2016 Total pension liability $3,124,670 $2,868,342 Fiduciary net position 9,531,202 9,606,650 Net pension liability (6,406,532)(6,738,308) Fiduciary net position as a % of total pension liability 305.03%334.92% Covered payroll 0 0 Net pension liability as a % of covered payroll N/A N/A Discount rate 3.50%3.75% Long-term expected rate of return, net of investment expense 3.50%3.75% Municipal bond rate 3.50%3.75% AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 22 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo TABLE 8 GASB Statement No. 67 Changes in Net Pension Liability Sensitivity Analysis The following presents the net pension liability of the City, calculated using the discount rate of 3.75%, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (2.75%) or 1 percentage point higher (4.75%) than the current rate. Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability Changes in Net Pension Liability (a)(b)(a) - (b) Balances as of December 31, 2015 $3,124,670 $9,531,202 ($6,406,532) Changes for the year: Service cost 0 0 Interest on total pension liability 105,750 105,750 Effect of plan changes 0 0 Effect of economic/demographic gains or losses (28,709)(28,709) Effect of assumptions changes or inputs (125,138)(125,138) Benefit payments (208,231)(208,231)0 Medical payments from fund 0 0 Employer contributions 0 0 Contributions from state fire insurance premium tax 148,034 (148,034) Net investment income 136,071 (136,071) Adminstrative expenses (426)426 Balances as of December 31, 2016 2,868,342 9,606,650 (6,738,308) 1%Current 1% Decrease Discount Rate Increase 2.75%3.75%4.75% Total pension liability $3,109,560 $2,868,342 $2,657,386 Fiduciary net position 9,606,650 9,606,650 9,606,650 Net pension liability (6,497,090)(6,738,308)(6,949,264) AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 23 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo TABLE 9 GASB Statement No. 67 Schedule of Changes in Net Pension Liability and Related Ratios $ Thousands Fiscal Year Ending December 31 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Total Pension Liability Service cost $0 $0 $0 N/A N/A N/A N/A N/A N/A N/A Interest on total pension liability 106 109 112 N/A N/A N/A N/A N/A N/A N/A Effect of plan changes 0 0 0 N/A N/A N/A N/A N/A N/A N/A Effect of economic/demographic (gains) or losses (29)0 0 N/A N/A N/A N/A N/A N/A N/A Effect of assumption changes or inputs (125)0 0 N/A N/A N/A N/A N/A N/A N/A Benefit payments (208)(205)(204)N/A N/A N/A N/A N/A N/A N/A Net change in total pension liability (256)(96)(92)N/A N/A N/A N/A N/A N/A N/A Total pension liability, beginning 3,125 3,221 3,313 N/A N/A N/A N/A N/A N/A N/A Total pension liability, ending (a)2,868 3,125 3,221 N/A N/A N/A N/A N/A N/A N/A Fiduciary Net Position Employer contributions $0 $0 $0 N/A N/A N/A N/A N/A N/A N/A Contributions from state fire insurance premium tax 148 146 143 N/A N/A N/A N/A N/A N/A N/A Investment income net of investment expenses 136 134 394 N/A N/A N/A N/A N/A N/A N/A Benefit payments (208)(205)(204)N/A N/A N/A N/A N/A N/A N/A Medical payments from fund 0 0 0 N/A N/A N/A N/A N/A N/A N/A Administrative expenses 0 (12)0 N/A N/A N/A N/A N/A N/A N/A Net change in plan fiduciary net position 75 63 331 N/A N/A N/A N/A N/A N/A N/A Fiduciary net position, beginning 9,531 9,468 9,136 N/A N/A N/A N/A N/A N/A N/A Fiduciary net position, ending (b)9,607 9,531 9,468 N/A N/A N/A N/A N/A N/A N/A Net pension liability, ending = (a) - (b)($6,738)($6,407)($6,247)N/A N/A N/A N/A N/A N/A N/A Fiduciary net position as a % of total pension liability 334.92%305.03%293.97%N/A N/A N/A N/A N/A N/A N/A Covered payroll $0 $0 $0 N/A N/A N/A N/A N/A N/A N/A Net pension liability as a % of covered payroll N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A This schedule is presented to illustrate the requirement to show information for 10 years.However,recalculations of prior years are not required,and if prior years are not reported in accordance with the current GASB standards, they should not be reported. A G E N D A I T E M # 7 . a ) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 24 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo TABLE 10 GASB Statement No. 68 Pension Expense January 1, 2015 to January 1, 2016 to Pension Expense December 31, 2015 December 31, 2016 Service cost $0 $0 Interest on total pension liability 109,164 105,750 Effect of plan changes 0 0 Administrative expenses 11,775 426 Medical payments from fund 0 0 Contributions from state fire insurance premium tax (146,358)(148,034) Expected investment return net of investment expenses (330,148)(332,540) Recognition of Deferred Inflows/Outflows of Resources Recognition of economic/demographic gains or losses 0 (28,709) Recognition of assumption changes or inputs 0 (125,138) Recognition of investment gains or losses 39,231 78,525 Pension Expense (316,336)(449,720) Paragraph 33d of GASB Statement 68 states that contributions to the pension plan from nonemployer contributing entities that are not in a special funding situation should be recognized as revenue. Accordingly, we have treated the contributions from the state fire insurance premium tax as revenue. As of December 31, 2016, the deferred inflows and outflows of resources are as follows: Deferred Inflows Deferred Outflows Deferred Inflows / Outflows of Resources of Resources of Resources Differences between expected and actual experience $0 $0 Changes of assumptions 0 0 Net difference between projected and actual earnings 0 274,870 Contributions made subsequent to measurement date 0 0 Total 0 274,870 Year ended June 30: 2017 $78,525 2018 78,525 2019 78,527 2020 39,293 2021 0 Thereafter*0 Amounts currently reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: * Note that additional future deferred inflows and outflows of resources may impact these numbers. AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 25 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo TABLE 11 GASB Statement No. 68 Schedule of Deferred Inflows and Outflows of Resources Amount Balance of Balance of Original Recognized Deferred Deferred Original Date Recognition in 12/31/2016 Inflows Outflows Amount Established Period*Expense 12/31/2016 12/31/2016 Investment $196,469 12/31/2016 5.0 $39,294 $0 $157,175 (gains) or losses 196,157 12/31/2015 5.0 39,231 0 117,695 Total 78,525 0 274,870 Economic/demographic (28,709)12/31/2016 1.0 (28,709)0 0 (gains) or losses Total (28,709)0 0 Assumption (125,138)12/31/2016 1.0 (125,138)0 0 changes or inputs Total (125,138)0 0 * Investment (gains)/losses are recognized in pension expense over a period of five years; economic/demographic (gains)/losses and assumption changes or inputs are recognized over the average remaining service life for all active and inactive members; immediate recognition is used when the average remaining service life is less than one. AGENDA ITEM #7. a) This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 26 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo This page intentionally left blank. AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 27 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo SECTION 4 Supplemental Information Cash-Flow Projections The table on the next page illustrates the projected excess annual pension payments for retired members eligible for retirement benefits under FPF. The table is based on the actuarial assumptions stated in Appendix A. See Appendix B for a summary of plan provisions. A summary of valuation data is found in Appendix C. Appendix D contains a glossary of terms. AGENDA ITEM #7. a) Ac tuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 28 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo TABLE 12 Projection of Future Excess Pension Benefits Year Ending December 31 Total Estimated Payouts 2017 238,000$ 2018 235,000 2019 236,000 2020 235,000 2021 234,000 2022 231,000 2023 226,000 2024 219,000 2025 211,000 2026 202,000 2027 192,000 2028 181,000 2029 168,000 2030 155,000 2031 142,000 2032 128,000 2033 115,000 2034 102,000 2035 90,000 2036 78,000 2037 68,000 2038 58,000 2039 48,000 2040 40,000 2041 33,000 2042 27,000 2043 21,000 2044 17,000 2045 13,000 2046 10,000 AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 29 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo APPENDIX A Actuarial Procedures and Assumptions The actuarial procedures and assumptions used in this valuation are described in this appendix. Note that since all active members have retired, some of these assumptions, such as termination rates, are not applicable. The actuarial assumptions are intended to estimate the future experience of the members of the City's FPF. Any variations in future experience from that expected under these assumptions will result in corresponding changes in the estimated costs of the System's benefits. Since our last valuation, the economic assumptions have changed. The discount rate assumption increased 0.25%. In addition, the salary inflation assumption was updated to reflect known and expected amounts. Table A-1 gives a brief summary of the assumptions. Actuarial Cost Method We are using the Entry Age Normal Cost Method. This funding method meets the parameters required for GASB disclosure purposes. Records and Data The data regarding active members, retirees and survivors and the financial information used in this valuation were supplied by the City and are accepted for valuation purposes without audit. Replacement of Terminated Members The City's FPF is a closed group. No new members are permitted. Valuation of Assets (where applicable) All assets are carried on a market value basis. Investment Earnings The future investment earnings of the assets of the City's FPF are assumed to accrue at an annual rate of 3.75%. Postretirement Benefit Increases Certain benefits increase at the same rate as the salaries for active members of the same rank the retiree had attained at retirement. These salaries were assumed to increase at the rate of 3.25% per annum in the long term (2.50% for 2017, reflected in data, and 2.50% for 2018). Other benefits increase at the same rate as the CPI. The CPI was assumed to increase at the rate of 2.25% per annum. AGENDA ITEM #7. a) Appendix A (continued) This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 30 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo Service Retirement N/A. Disability N/A. Other Terminations of Employment N/A. Mortality The mortality assumptions used in this valuation are based on the 2007-2012 Experience Study for the LEOFF Retirement System prepared by the Office of the State Actuary. Mortality rates are expected to continue to decrease in the future, and the resulting longevity should be anticipated in the actuarial valuation. This is done through the use of a generational mortality table. A generational mortality table anticipates future improvements in mortality by using a different static mortality table for each year of birth, with the tables for later years of birth assuming lower mortality than the tables for earlier years of birth. Members Retired from Service and Spouses: The mortality rates are based on the RP-2000 Mortality Table (combined healthy) with generational projection using 100% of Projection Scale BB, with ages set back one year for males and forward one year for females. Disabled Members: The mortality rates are based on the RP-2000 Mortality Table (combined healthy) with generational projection using 100% of Projection Scale BB, with ages set forward two years. Family Composition All active members are assumed to be married with no children when they retire. Marital status of retirees was supplied by the City. Wives are assumed to be three years younger than their husbands. Surviving spouses are assumed not to remarry. AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 31 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo TABLE A-1 Summary of Valuation Assumptions I. Economic assumptions A. Salary increases 2.50% in 2017 (reflected in data) 2.50% in 2018 3.25% thereafter B. Investment return assumption (discount rate) 3.75% C. Growth in membership 0.0% D. Postretirement benefit increases 1. Related to salaries 2.50% in 2017 (reflected in data) 2.50% in 2018 3.25% thereafter 2. Related to consumer price index 2.25% II. Noneconomic assumptions A. Service retirement N/A. B. Disability N/A. C. Other Terminations of Employment N/A. D. Mortality 1. Service-retired RP-2000 Mortality Table (combined healthy) members and spouses with generational projection using 100% of Projection Scale BB, with ages set back one year for males and set forward one year for females. 2. Disabled members RP-2000 Mortality Table (combined healthy) with generational projection using 100% of Projection Scale BB, with ages set forward two years. AGENDA ITEM #7. a) This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 32 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo This page intentionally left blank. AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 33 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo APPENDIX B Provisions of Governing Law All actuarial calculations are based on our understanding of RCW 41.16 and 41.18, the statutes establishing FPF, and RCW 41.26, the statute establishing the Washington Law Enforcement Officers' and Firefighters' Retirement System. Each firefighter in service on March 1, 1970 receives the greater of the benefit payable under the Washington Law Enforcement Officers' and Firefighters' Retirement System and the benefits available under the provisions of prior law. Where benefits under the old law exceed those under the new for any firefighter, the excess benefits are paid from the FPF of the city employing him on March 1, 1970. The benefit provisions of the FPF are summarized briefly below for reference purposes. This summary does not attempt to cover all of the detailed provisions of the laws. For comparative purposes, the bracketed statements describe the corresponding LEOFF law. Definitions Salary: Basic salary attached to rank of firefighter at time of retirement. (RCW 41.18.010(1)) [Same if he had the rank for at least 12 months; otherwise, the highest 24-month average from the last 10 years of service. (RCW 41.26.030(15a))] Spouse: Surviving spouse who was married to, or in a state-registered domestic partnership with, a disabled firefighter at time of disability or to a retired firefighter for five years prior to retirement (RCW 41.18.010(14)). [Same, except marriage to retired firefighter for one year prior to retirement qualifies. (RCW 41.26.030(33))] Child: Firefighter’s unmarried child under age 18. (RCW 41.18.010(4)) [Firefighter’s unmarried child under age 18 or up to age 20 years 11 months while attending an educational institution accredited or approved by the state of Washington. (RCW 41.26.030(6))] AGENDA ITEM #7. a) Appendix B (continued) This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 34 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo Service Retirement Benefit Member’s Benefit: Eligibility Age 50 and 25 years of service. (RCW 41.18.040) [Age 50 and five years of service. (RCW 41.26.090)] Amount of benefit 50% of salary plus an additional 2% for each year of service in excess of 25 years. Maximum benefit of 60% of salary. (RCW 41.18.040) [2% of salary for each year of service if 20 or more years; 1½% of salary for each year of service if at least 10 but less than 20 years of service; 1% of salary for each year of service if at least five but less than 10 years of service. For those retiring prior to July 1, 2006 the maximum initial benefit of 60% of salary. That maximum does not apply for those retiring after July 1, 2006. (RCW 41.26.100)] Survivor’s Benefit: Eligibility Spouse or child (RCW 41.18.040). [Same. (RCW 41.26.160)] Amount of benefit Continuation of firefighter’s benefit. (RCW 41.18.040) [If spouse - same plus additional 5% of salary per child. If no spouse - 30% of salary for first child, 10% for each additional child. Maximum benefit in either case - 60% of salary. (RCW 41.26.160)] Duty Disability Retirement Benefit Member’s Benefit: Eligibility Disabled after six-month waiting period, during which time salary is payable from the Fund. (RCW 41.18.050) [Same, except salary is payable by City during the waiting period. (RCW 41.26.120)] Amount of benefit Determined same as Service Retirement Benefit. (RCW 41.18.060) [50% of salary plus an additional 5% for each child; maximum benefit of 60% of salary. (RCW 41.26.130(1))] Recovery from disability Restoration to service. (RCW 41.18.090) [Upon recovery before age 50, restoration to service with full credit for service while disabled. Upon recovery after age 50, benefit continues as the greater of service retirement benefit or current benefit. (RCW 41.26.130(3))] Survivor’s Benefit: See Survivor’s Benefit section under Service Retirement. AGENDA ITEM #7. a) Appendix B (continued) This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 35 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo Non-Duty Disability Retirement Benefit Member’s Benefit: Eligibility Disabled after 90-day waiting period, during which time salary is payable from the Fund. (RCW 41.18.080) [Disabled after six-month waiting period, during which time salary is payable by the City. (RCW 41.26.125)] Amount of benefit 50% of salary, or service retirement benefit, if greater. (RCW 41.18.080) [50% of salary plus an additional 5% for each child; maximum benefit of 60% of salary, or service retirement benefit, if greater. (RCW 41.26.130(1))] Recovery from disability See section under Duty Disability Retirement. Limitations No benefits payable if firefighter employed elsewhere when disabled. (RCW 41.18.080) [All benefits are reduced by Workers’ Compensation, Social Security, or insurance provided by another employer. Allowance cannot exceed difference between wage from current gainful employment and salary currently attached to rank held at retirement. (RCW 41.26.130(4))] Survivor’s Benefit: Eligibility Spouse or child. (RCW 41.18.080) [Same. (RCW 41.26.161)] Amount of benefit Percentage of salary, as follows: 33.3% to widow only 45.8% to widow and one child 47.6% to widow and two children 50.0% to widow and three children 33.3% to children only (RCW 41.18.080) [Determined same as under Service Retirement Survivor’s Benefit. (RCW 41.26.161)] Duty Death Benefit Eligibility Spouse or child. (RCW 41.18.100) [Same. (RCW 41.26.160)] Amount of benefit 50% of salary. (RCW 41.18.100) [If spouse – 50% of salary plus an additional 5% of salary per child; maximum benefit 60% of salary. If no spouse - 30% of salary for first child; 10% for each additional child. Maximum benefit in either case of 60% of salary. (RCW 41.26.160)] AGENDA ITEM #7. a) Appendix B (continued) This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 36 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo Non-Duty Death Benefit Provisions same as Survivor’s Benefit under Non-Duty Disability Retirement. (RCW 41.18.080) [Provisions same as Survivor’s Benefit under Duty Death Retirement. (RCW 41.26.161)] Special Provisions Under disability or death benefits, a surviving spouse may elect a lump-sum payment of $5,000 in lieu of future monthly benefits. (RCW 41.18.080) [If firefighter’s contributions are not exhausted by payments to survivors, the balance goes to the firefighter’s legal heirs. Applies to service, disability and death benefits. (RCW 41.26.160(3) and 41.26.161(3))] Vesting Eligibility Termination after 20 years of service. (RCW 41.18.130) [Termination after five years of service. (RCW 41.26.090)] Deferred Benefit Commences When firefighter would have had 25 years of service. (RCW 41.18.130) [Age 50. (RCW 41.26.090(2))] Amount of benefit 2% of salary for each year of service. (RCW 41.18.130) [Same, if at least 20 years of service; 1.5% of salary for each year of service if at least 10 but less than 20 years of service; 1% of salary for each year of service if at least five but less than 10 years of service. (RCW 41.26.090 and RCW 41.26.100)] Death while vested prior to commencement of benefits: Payment of firefighter’s deferred benefit to his spouse or child. (RCW 41.18.130) [a. Firefighter with 20 or more years of service: If spouse - firefighter’s deferred benefit plus an additional 5% of salary per child. If no spouse - 30% of salary for first child, 10% for each additional child. Maximum benefit in either case - 60% of salary. (RCW 41.26.161) b. Firefighter with less than 20 years of service: Payment to spouse or estate of accumulated contributions less any payments made to firefighter. (RCW 41.26.090)] Withdrawal Eligibility Termination with no other benefit. (RCW 41.18.130) [Same. (RCW 41.26.170)] Benefit Return of accumulated contributions less any benefit paid. (RCW 41.18.130) [Same. (RCW 41.26.170)] AGENDA ITEM #7. a) Appendix B (continued) This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 37 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo Postretirement Increase Type 1. Escalation by salary in proportion to current salary of rank from which firefighter retired. (RCW 41.18.040) 2. Increase proportionate to the increase in the Seattle-area CPI, with change computed annually. Regardless of the increase (or decrease) in the CPI, the benefits are increased at least 2% each year. (RCW 41.18.104) [Increase or decrease proportionate to the increase or decrease in the Seattle-area CPI, with change computed annually. No benefit may decrease below original amount. (RCW 41.26.240)] Applicability Escalation Type 1 applies to firefighters who retired from service after 1969, their survivors, and to firefighters who retired for duty disability (but not their survivors) after 1961. The second type applies to all other types of monthly benefits. (RCW 41.18.104) [All monthly benefits. (RCW 41.26.240)] Minimum Benefit After April 25, 1973, a minimum benefit of $300 per month to all retired firefighters and their survivors. This minimum is increased by the CPI. (RCW 41.18.200) [No provision under RCW 41.26.] Funeral Benefit $500 to defray funeral expenses. (RCW 41.18.140) [No provision under RCW 41.26.] AGENDA ITEM #7. a) This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 38 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo This page intentionally left blank. AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 39 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo APPENDIX C Valuation Data This valuation is based on the membership of the City's FPF as of January 1, 2017. It is our understanding that, as of the valuation date, the only liabilities for future benefits to present or retired firefighters or their survivors are those allocable to the persons included in Tables C-1 through C-3. Tables C-1 through C-3 show the distributions of retirees and surviving spouses of retirees receiving service and disability retirement pensions and the amount of the monthly benefits received. Active Members Retired Members and Survivors Monthly Pensions Number Annual Salaries Average Annual Salaries Number Paid by City Paid by LEOFF 0 0.00$ 0.00$ 28 20,669.28$ 114,117.27$ AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 40 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo TABLE C-1 Firefighters Retired for Service TABLE C-2 Firefighters Disabled in Line of Duty TABLE C-3 Survivors of Firefighters Monthly Pension Age Number Paid by City Paid by LEOFF 70 - 74 1 0$ 7,051.97$ 80 - 84 3 729.80 17,036.39 85 - 89 2 559.66 12,798.74 Totals 6 1,289.46$ 36,887.10$ Monthly Pension Age Number Paid by City Paid by LEOFF 70 - 74 1 211.10$ 3,426.90$ 75 - 79 4 1,476.31 15,925.49 80 - 84 1 508.82 4,314.68 85 - 89 1 644.54 4,247.96 Totals 7 2,840.77$ 27,915.03$ Monthly Pension Age Number Paid by City Paid by LEOFF 70 - 74 3 2,502.77$ 13,963.21$ 75 - 79 3 4,416.68 6,499.61 80 - 84 5 7,501.93 9,699.59 85 - 89 2 1,710.50 7,454.98 90 - 94 2 407.17 11,697.75 Totals 15 16,539.05$ 49,315.14$ AGENDA ITEM #7. a) Actuarial Valuation of Firefighters' Pension Fund City of Renton January 1, 2017 This work product was prepared solely for the City of Renton for the purposes described herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties be aided by their own actuary or other qualified professional when reviewing the Milliman work product. 41 Fqh0013.docx 0003 FQH 38 / 003.FQH.38.2017 / DRW/RFB/nlo APPENDIX D Glossary Actuarially Determined Contribution A target or recommended contribution to a defined benefit pension plan for the reporting period, determined based on the funding policy and most recent measurement available when the contribution for the reporting period was adopted. Deferred Inflows/Outflows of Resources Portion of changes in net pension liability that is not immediately recognized in Pension Expense. These changes include differences between expected and actual experience, changes in assumptions, and differences between expected and actual earnings on a plan investments. Discount Rate Single rate of return that, when applied to all projected benefit payments, results in an actuarial present value of projected benefit payments equal to the sum of: 1) The actuarial present value of benefit payments projected to be made in future periods where the plan assets are projected to be sufficient to meet benefit payments, calculated using the Long-Term Expected Rate of Return. 2) The actuarial present value of projected benefit payments not included in (1), calculated using the Municipal Bond Rate. Fiduciary Net Position Equal to market value of assets. Long-Term Expected Rate of Return Long-term expected rate of return on pension plan investments expected to be used to finance the payment of benefits, net of investment expenses. Money-Weighted Rate of Return The internal rate of return on pension plan investments, net of investment expenses. Municipal Bond Rate Yield or index rate for 20-year, tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher. Net Pension Liability Total Pension Liability minus the Plan's Fiduciary Net Position. Projected Benefit Payments All benefits estimated to be payable through the pension plan to current active and inactive employees as a result of their past service and expected future service. Service Cost The portion of the actuarial present value of projected benefit payments that is attributed to a valuation year. Total Pension Liability The portion of actuarial present value of projected benefit payments that is attributable to past periods of member service using the Entry Age Normal cost method based on the requirements of GASB 67 and 68. AGENDA ITEM #7. a)