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HomeMy WebLinkAboutFinal Agenda PacketCITY OF RENTON FIREMEN'S PENSION BOARD Regular Meeting 7th Floor -Mayor's Conference Room Thursday, May 16, 2013 2:00 P.M. 1. CALLTOORDER 2. APPROVAL OF MINUTES OF MARCH 28, 2013 3. CORRESPONDENCE Certification for Fire Insurance Premium Distribution Purposes 4. MONTHLY STATEMENTS FOR MARCH 31 & APRIL 30, 2012 5. MONTHLY BILLS AND PENSION PAYMENTS 6. UNFINISHED BUSINESS 7. NEW BUSINESS Pension Fund Actuarial Valuation as of December 31, 2012 8. ADJOURNMENT MINUTES FIREMEN'S PENSION BOARD CITY OF RENTON March 28, 2013 Denis Law, Mayor Terri Briere, Council Finance Committee Chair (Substitute: Don Persson, Council Finance Committee Vice -Chair) Bonnie Walton, City Clerk Ray Barilleaux, Fire Department Representative Bruce Phillips, Fire Department Representative Chuck Christensen, Fire Department Alternate The regular meeting of the Firemen's Pension Board was called to order by Mayor Denis Law at 2:00 p.m. in the Mayor's Conference room, 7th floor of Renton City Hall. In attendance were Board members Mayor Denis Law, Don Persson (substitute), Ray Barilleaux, Bruce Phillips, and Bonnie Walton. Also present was Jill Masunaga, Finance Department Representative. MINUTES APPROVAL MOVED BY PHILLIPS, SECONDED BY BARILLEAUX, THE PENSION BOARD APPROVE THE MINUTES OF THE JANUARY 17, 2013 MEETING. CARRIED. MONTHLY STATEMENT The financial reports for December 31, 2012, January 31, 2013, and February 28, 2013, were reviewed. Total cash/investment balance as of February 28, 2013, was $4,522,384.12. MONTHLY BILLS AND PENSION PAYMENTS MOVED BY PHILLIPS, SECONDED BY BARILLEAUX, THE BOARD APPROVE THE PENSION/MEDICAL PAYMENTS FOR FEBRUARY AND MARCH 2013 IN THE AMOUNTS OF $17,233.61 PER MONTH TO BE PAID FROM THE FIREMEN'S PENSION FUND. CARRIED. ADJOURNMENT MOVED BY PERSSON, SECONDED BY PHILLIPS, THE MEETING OF THE FIREMEN'S PENSION BOARD BE ADJOURNED. CARRIED. Time: 2:02 p.m. Bonnie I. Walton, City Clerk Member and Secretary, Firemen's Pension Board Next Meeting: May 16, 2013 Denis Law _ Mayor City of ; �Y City Clerk- Bonnie I. Walton May 8, 2013 Office of the State Treasurer Attn: James Porter, Distribution Assistant P.O. Box 40209 Olympia,-WA 98504-0209 Re:- May 2013 Fire Insurance Premium Distribution Dear Mr. Porter: The following information is provided in compliance with RCW 41:16.050 in order for the City of Renton to receive the annual fire insurance premium tax: There were 138 paid firemen employed in the City of Renton Fire Department as of December 31, 2012. Sincerely; Bonnie 1. Walton City Clerk CERTIFICATION I, Bonnie I: Walton, duly appointed and qualified City Clerk/Cable Manager of and for the City of Renton, Washington, do hereby certify that the above-cited information is true and correct as appearing on file in the records of the Renton Finance Department. Signed and sealed this 8th day of May 2013. Bonnie I. Walton, City Clerk i 1055 South Grady Way • Renton; Washington 98057 • (425) 430-6510/ Fax (425) 430-6516 • rentonwa.gov - - 6 �6i N R 0 4 0 0 c 3 0 2 1 CITY OF RENTON - FIREMEN'S PENSION FUND CASH & INVESTMENT ACTIVITY REPORT AS OF MARCH 31, 2013 Fireman's Pension Fund Comparison of Cash and Investment Activity E3 2013 ®2012 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec BEGINNING CASH/INV BALANCE $4,522,384.12 $4,556,003.05 $4,556,003 $4,330,485.52 $4,377,696.45 $4,377,696 RECEIPTS: �.. ..M4'NTk�;-. ,,,,;':MOAL7H , i^. .:::CURRM(7;-:` �PREVM0,3:5 CASH/State Investment Pool $2,184,316.39 Fire Insurance Premium Tax 0.00 0.00 100,000 0.00 119,667.72 100,000 Investment Interest 391.33 1,239.62 200,000 587.31 285,038.37 200,000 DISBURSEMENTS: Treasury Strips & Zero Coupon Bonds 2,217,524.06 2,217,524.06 2,406,901.08 2,406,901.08 Fire Pension 17,233.61 51,700.83 225,000 21,465.52 225,506.07 525,000 Fire Pension Medical 0.00 0.00 0 0.00 566.04 25,000 Office/Operating Supplies 0.00 0.00 475 0.00 327.38 475 Actuarial/Firemen's Pens 0.00 0.00 15,000 0.00 0.00 0 H:\FINANCE\FINPLAN\FIREPEN\1_Fire_Pension_2013.xls\Mar13 Page 1 04/24/2013 .. CUFREN,T„ PREVIOUS T YEAR iASTYEAR^, ,..s .:......... .: . v - .aa .... �.. ..M4'NTk�;-. ,,,,;':MOAL7H , i^. .:::CURRM(7;-:` �PREVM0,3:5 CASH/State Investment Pool $2,184,316.39 $2,201,515.27 $1,796,326.84 $1,817,769.07 INVESTMENTS: Federal National Mortgage Assn 99,555.84 99,555.84 99,555.84 99,555.84 Treasury Strips & Zero Coupon Bonds 2,217,524.06 2,217,524.06 2,406,901.08 2,406,901.08 Interest Receivable 4,145.55 3,788.95 6,823.55 6,259.53 :TOTAL CAS, HJAND INVESTMENTS;. ;* , �'?, ` ,x05,541.84, $4,522,3 ='1,2`=;; ,$4;30,8, -31 $4,,VO,L ;5 The State Investment Pool interest 0.1789% 0.1650% 0.1367% 0.13941 H:\FINANCE\FINPLAN\FIREPEN\1_Fire_Pension_2013.xls\Mar13 Page 1 04/24/2013 CITY OF RENTON - FIREMEN'S PENSION FUND CASH & INVESTMENT ACTIVITY REPORT AS OF APRIL 30, 2013 Report will be distributed at the meeting on Thursday, May 16, 2013 H:\FINANCE\FINPLAN\FIREPEN\1_Fire_Pension_2013.xls\Apr draft Page 1 05/09/2013 FIREMEN'S PENSION BOARD PENSION/MEDICAL PAYMENTS FOR APRIL, 2013 * Adjusted to reflect a 2.54% LEOFF cost of living increase effective April 1. Prior Year Pension/Medical Payments: Fatal Pension Payments for April, 2012 18,343.89 Fatal Medical Bills Reimbursed in April, 2012 0.00 Total Expenses: Medical/Pension 18,343.89 4 -SUMMARY 2013.XLS 03/29/2013 P@nsrbnkfm> 'MfJ�cal w. :-?.Ptah- ANKENY, Charlie (Captain) - - BARILLEAUX, Ray (Battalion Chief) - - BEATTEAY, Karlen (Widow) $134.08 134.08 BERGMAN, Claudette (Widow) $53.19 53.19 CHRISTENSON, Chuck (Firefighter) $146.88 146.88 GEISSLER, Dick (Fire Chief) - - GOODWIN, Kathryn Lorayne (Widow) $946.20 946.20 HAWORTH, Constance (Widow) $3,109.45 3,109.45 HURST, Gerald (Firefighter) $461.64 461.64 JONES, Evelyn M. (Widow) $150.19 150.19 LARSON, William (Firefighter) - - LAVALLEY, Theodele (Captain) $235.75 235.75 MATTHEW, James (Deputy Chief) - - MC LAUGHLIN, JACK (Battalion Chief) $871.81 871.81 NEWTON, Gary (Lieutenant) $158.09 158.09 NICHOLS, Gerald (Battalion Chief) $399.75 399.75 PARKS -AN DREASON, Arlene (Widow) $116.20 116.20 PHILLIPS, Bruce H. (Deputy Chief) $66.17 66.17 PRINGLE, Arthur (Captain) $362.34 362.34 PRINGLE, S. Joan (Widow) $2,671.37 2,671.37 RIGGLE, David E. (Firefighter D Step) - - RUPPRECHT, Jim (Firefighter D Step) $12.46 12.46 SMITH, Leroy (Firefighter) $327.07 327.07 STROM, Doris (Widow) $3,410.09 3,410.09 TODD, Franklin (Firefighter) $391.16 391.16 TONDA, Lila Jean (Widow) - _ VACCA, Nick (Lieutenant) $205.42 205.42 WALLS, Camille (Widow) $37.78 37.78 WALLS, Mercedes (Widow) - - WEISS, Cheryl (Widow) $627.44 627.44 WILLIAMS, Alta (Widow) - - WOOTEN, Marilyn E. (Widow) $145.81 145.81 Total Expenses:;pensioriNledical:;:' ,14Q;3k ,;;;;' $0 00 y _ ;. $15,040 34 * Adjusted to reflect a 2.54% LEOFF cost of living increase effective April 1. Prior Year Pension/Medical Payments: Fatal Pension Payments for April, 2012 18,343.89 Fatal Medical Bills Reimbursed in April, 2012 0.00 Total Expenses: Medical/Pension 18,343.89 4 -SUMMARY 2013.XLS 03/29/2013 FIREMEN'S PENSION BOARD PENSION/MEDICAL PAYMENTS FOR MAY, 2013 Rotip'ietit' ,''.< a;Pensidri"Amc d�cal ANKENY, Charlie (Captain) - - BARILLEAUX, Ray (Battalion Chief) - _ BEATTEAY, Karlen (Widow) $134.08 134.08 BERGMAN, Claudette (Widow) $53.19 53.19 CHRISTENSON, Chuck (Firefighter) $146.88 146.88 GEISSLER, Dick (Fire Chief) _ GOODWIN, Kathryn Lorayne (Widow) $946.20 946.20 HAWORTH, Constance (Widow) $3,109.45 3,109.45 HURST, Gerald (Firefighter) $461.64 461.64 JONES, Evelyn M. (Widow) $150.19 150.19 LARSON, William (Firefighter) - _ LAVALLEY, Theodele (Captain) $235.75 235.75 MATTHEW, James (Deputy Chief) - _ MC LAUGHLIN, JACK (Battalion Chief) $871.81 871.81 NEWTON, Gary (Lieutenant) $158.09 158.09 NICHOLS, Gerald (Battalion Chief) $399.75 399.75 PARKS-ANDREASON, Arlene (Widow) $116.20 116.20 PHILLIPS, Bruce H. (Deputy Chief) $66.17 66.17 PRINGLE, Arthur (Captain) $362.34 362.34 PRINGLE, S. Joan (Widow) $2,671.37 2,671.37 RIGGLE, David E. (Firefighter D Step) - - RUPPRECHT, Jim (Firefighter D Step) $12.46 12.46 SMITH, Leroy (Firefighter) $327.07 327.07 STROM, Doris (Widow) $3,410.09 3,410.09 TODD, Franklin (Firefighter) $391.16 391.16 TONDA, Lila Jean (Widow) _ - _ VACCA, Nick (Lieutenant) $205.42 205.42 WALLS, Camille (Widow) $37.78 37.78 WALLS, Mercedes (Widow) - _ WEISS, Cheryl (Widow) $627.44 627.44 WILLIAMS, Alta (Widow) - - WOOTEN, Marilyn E. (Widow) $145.81 145.81 Total Expenses , Pensit t %Medical, k&R 15'090;34 G 00 4 15;04U.F Prior Year Pension/Medical Payments: Total Pension Payments for May, 2012 17,491.98 Total Medical Bills Reimbursed in May, 2012 0.00 Total Expenses: Medical/Pension 17,491.98 4 -SUMMARY 2013.XLS 05/10/2013 GASB 67 and 68 Firefighters' Pension Fund Valuation Report as of December 31, 2012 April 1, 2013 ealtheaTe JW Actuaries 16519 107th Place NE Bothell, Washington 98011 t: (425) 939-7444 f: (425) 939-0089 www. H ealthcareActuaries. cam ealthcare Md IfA � C-UUarieS Uh, Technobyy M P.idl Cosi-EfFeetive Con11&11,9 April 1, 2013 Iwen Wang, Finance Director City of Renton 1055 South Grady Way Renton, Washington 98057-3232 16519 107th Place NE I Bothell. VVA 98011 t (425) 939-74'41 f (425) 939-0089 W vaww.Hea!thcareActuaries.com Re: GASB 67 and 68 Firefighters' Pension Fund Valuation Report as.of December 31, 2012 Dearlwen: At your request, we completed an actuarial valuation of the Firefighters' Pension Fund as of December 31, 2012. This valuation is based on input from the City of Renton, as well as our understanding of GASB Statement No. 67 "Financial Reporting for Pension Plans' and GASB Statement No. 68 "Accounting and Financial Reporting for Pensions" (GASB 68). As we understand it, the City adopted GASB 67 and 68 for the fiscal year ending December 31, 2012. In addition, the City elected to perform full valuations every two years and projected valuations in between the full valuations. This valuation represents a full valuation. The liabilities are highly sensitive to the salary increase assumption. This assumption was changed from 3.75% to 3.00% this year, resulting in a decrease in the liability of 28.8%. We greatly appreciate your business. If you have any questions, please feet free to call us at (425) 939- 7444. Best Regards, � 6rSr,.c,.. tiJ% Roger T. Burton, FSA, FCA, MAAA Executive Summary Overview Accounting Summary Accounting Information Statement of Fiduciary Net Position Fiscal Year Ending 12/31/2012 Statement of Changes in Fiduciary Net PositionFor the Year Ended 12/31/2012 Statement of Changes in Fiduciary Net Position Changes in the Net Pension Liability Calculation of Expense Under GASB 68 FPF Cash Flow Projections Projected Cash Flow Chart Schedule of Changes in the City's Net Pension Liability and Related Ratios Schedule of Contributions Schedule of Investment Returns Draft Notes to the Financial Statements Basis of Valuation Substantive Plan Participant Summary Actuarial Assumptions Page i Contents 4 5 6 7 8 9 10 11 12 13 14 17 19 20 Executive Summary nni n Overview Purpose of the Report Healthcare Actuaries prepared this report to meet employer financial accounting requirements under GASB Statement No. 67 and 68 "Accounting and Financial Reporting for Pensions' (GASB 67 and 68), issued in June 2012. This report includes information with respect to the obligation to provide ongoing pension benefits for retired firefighters for the fiscal year ending December 31, 2012. Changes Since the Prior Valuation The salary increase assumption was changed from 3.75% to 3.00% Impact of GASB 67 and 68 This report implements the changes of GASB 67 and 68. The previous report was prepared under GASB 25, 27, and 50. The new GASB standards substantially change the presentation of required disclosures. Actuarial Certification Our determinations reflect the provisions and methods prescribed by GASB 67 and 68. In preparing this report, we relied on employee census, plan design, and plan assets provided directly or indirectly by the plan sponsor. We based the results in this report on this information, along with the actuarial assumptions and methods used. The plan sponsor, with the concurrence of its auditors, selected the actuarial assumptions. In our opinion, the assumptions used represent reasonable expectations of anticipated plan experience. We reviewed the census information for reasonableness, but we did not audit it. Actuarial computations under GASB 67 and 68 fulfill plan and employer accounting and financial reporting requirements. The calculations are on a basis consistent with our understanding of GASB 67 and 68. Determinations for purposes other than meeting employer financial accounting requirements may be significantly different from the results in our report. Accordingly, additional determinations may be necessary for other purposes, such as judging benefit security at termination or the adequacy of funding for an on-going plan. The Board has the final decision regarding the appropriateness of the assumptions. Healthcare Actuaries' work is prepared solely for the internal business use of the City of Renton. To the extent that Healthcare Actuaries' work is not subject to disclosure under applicable public record laws, our work may not be provided to third parties without Healthcare Actuaries' prior written consent. No third party recipient of Healthcare Actuaries' work product should rely on Healthcare Actuaries' work product. The third party reception should engage qualified professionals for advice appropriate to their own needs. There is no relationship between Healthcare Actuaries, its owner, subcontractors, or staff, and the City of Renton beyond the contractual services that we perform for the City of Renton. Page 1 Overview On the basis of the foregoing, we hereby certify that, to the best of our knowledge and belief, the report is complete and accurate and we prepared it in accordance with generally recognized and accepted actuarial principles and practices which are consistent with the applicable "Actuarial Standards of Practice" and "Actuarial Compliance Guidelines" as promulgated by the American Academy of Actuaries. The undersigneds are members of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. f�C,rl� /t �j % April 1, 2013 Nadine J Pileggi, ASA, EA, MAAA Date Associate of the Society of Actuaries (ASA) Member of the American Academy of Actuaries (MAAA) Enrolled Actuary (EA) April 1, 2013 Roger T. Burton, FSA, FCA, MAAA Date Fellow of the Society of Actuaries (FSA) Member of the American Academy of Actuaries (MAAA) Fellow of the Conference of Consulting Actuaries (FCA) Page 2 A summary of the key valuation results follows. Accounting Summary For Fiscal Year Ending Funded Status 12/31/2012 Total Pension Liability $ 2,787,814 Fiduciary Net Position 9,501,264 Net Pension Liability $ (6,713,450) Plan fiduciary net position as a percentage of the total pension liability 340.81% Covered payroll n/a UAAL as a percentage of covered payroll n/a 2012 Expense $ (259,158) 2013 Expense $ (254,801) Page 3 Accounting Information Statement of Fiduciary Net Position Fiscal Year Ending 12/31/2012 Assets Cash and deposits $ Securities lending cash collateral Total cash Receivables: Contributions Due from broker for investments sold Investment income (interest on investments) Other Total receivables Investments: Domestic fixed income securities Domestic equities International equities Real estate Total Investments Total Assets Liabilities Payables: Investment management fees Due to broker for investments purchased Collateral payable for securities lending Other Total Liabitities Net Position Restricted for Pensions 1 $ Page 4 2,235,765 2,235,765 3,105, 803 3,105,803 4,159, 696 4,159, 696 9,501,264 9,501,264 Statement of Changes in Fiduciary Net Position For the Year Ended 12/31/2012 2012 Additions Contributions: Employer $ 119,668 Member Total contributions 119,668 Investment income: Net appreciation in fair value of investments 7,095 Interest and dividends 282,735 Less investment expense, other than from securities lending - Net income from investing, other than from securities lending 289,830 Securities lending income - Less securities lending expense Net income from securities lending - Net investment income 289,830 Other - Total additions 409,498 Deductions Benefit payments, including refund of member contributions 225,506 Administrative expense 893 Other - Total deductions 226,399 Net increase in net position 183,099 Net Position Restricted for Pensions Beginning of year 9,321,323 End of year $ 9,501,264 Page 5 Changes in the Net Pension Liability The funded status of the Plan as of fiscal. year-end as well as other required disclosure information follows. Balances at January 1, 2012 Changes for the year: Service Cost Interest Differences between expected and actual experience Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at December 31, 2012 s Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a) -(b) $ 2,901,760 $ 9,321,323 $ (6,419,563) 111,560 111.560 119,668 (119,668) 289,830 (289,830) (225,506) (225,506) (893) 893 (113,946) 183,099 (297,045) $ 2,787,814 $ 9,504,422 $ (6,716,608) Page 6 Calculation of Expense Under GASB 68 Expense 2013 2012 Service Cost $ - $ Interest (on liabilities) 107,206 111,560 Interest (on assets) (378,185) (370,718) Differences between expected and actual experience* - Differences between expected and actual earnings** 16,178 Total Expense 2013 $ (254,801) $ (259,158) *As there are no active members, all differences between expected and actual demographic and economic experience are recognized immediately. GASB 68 was adopted for the 2012 fiscal year, with liabilities measured as of December 31, 2012, therefore there are no differences in liability experience. '*Amounts to include in expense are calculated as follows: 2012 Expected Earnings $ 370,718 2012 Actual Earnings 289,830 Difference 80,888 Straight -Line amortization over 5 years $ 16,178 Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual experience $ - $ Changes of assumptions - Net difference between projected and actual earnings on pension plan investments 16,178 Total $ 16,178 $ Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended December 31: 2013 2014 2015 2016 2017 Page 7 $ 16,178 16,178 16,178 16,178 $ 16,178 FPF Cash Flow Projections The following shows the FPF cash flow projections for the next twenty years. Calendar Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 $ Projected Pension Payments 215,T24 217,998 219,662 220,192 219,642 218,020 215,230 211,157 205,762 199,088 191,215 182,207 172,372 161,743 150,512 138,884 127,095 115,320 103,701 92,402 Page 8 v,. C W N N m i o I N ci m 0 N I I a M O I I N O N I� N O N N O N I N O N N I. o Y � I v CL I O N N O I O N N � c N v V CL N V ( O O N �- O � •1 rl O O N 0 I I I I 0 N ci O V1 O I I I a O N N O N O O O O O O O O 4N/} tN/T VF '✓1 ' W N Schedule of Changes in the City's Net Pension Liability and Related Ratios GASB 68 requires a disclosure of the changes in Net Pension Liability for the last 10 fiscal years, or as many years as are available Total Pension Liability 2012 Service Cost $ Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions Benefit payments, included refunds of employee contributions Net change in total pension liability Total pension liability — beginning Total pension liability — ending (a) Plan Fiduciary Net Position Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position — ending (b) City's net pension,liability — ending (a) — (b) Plan fiduciary net position as a percentage of the total pension liability Covered -employee payroll City's net pension liability as a percentage of covered -employee payroll 111,560 (225,506) (113,946) 2,901,760 $ 2,787,814 $ 119,668 289,830 (225,506) (893) 183,099 9,321,323 9,504,422 $ (6,716,608) 340.93% n/a Notes to schedule: Changes of Assumptions. The expected salary increase was changed to 3.0% at January 1, 2012. This change of assumption and experience differences decreased liabilities approximately $878,000. GASB 67 and 68 were adopted as of January 1, 2012, therefore liabilities were fresh -started at this date. Page 10 Schedule of Contributions GASB 68 requires a schedule of Contributions for the last 10 fiscal years, or as many years as are available. 2012 Statutorily determined contribution $ 119,668 Contributions in relation to the statutorily determined contribution 119,668 Contribution deficiency (excess) Covered -employee payroll Contributions as a percentage of covered -employee payroll Notes to Schedule: Contributions are a portion of State Fire Insurance Premiums. Page 11 n/a Schedule of Investment Returns 2012 2011 Annual money -weighted rate of return, net of investment expense 3.13% 8.30% Ten-year schedule required. However, until a full 10 -year trend is compiled, information is presented for those years where information is available. Page 12 Draft Notes to the Financial Statements A draft of the required notes to the City's financial statements, based on the requirements of GASB 67 and 68 and our understanding of the City's Firefighters Pension Plan, follows. Notes to the Financial Statements for the Year Ended December 31, 2012 Summary of Significant Accounting Policies Method used to value investments . Investments are reported at fair value. Plan Description Plan Administration: The Firefighters' Pension Fund is administered by the City of Renton. The plan is a single -employer defined benefit pension plan that provides pensions for firefighters that were hired prior to 1970. The firefighters' pension board consists of the following five members, the chairperson of the fire commissioners for said district who shall be chairperson of the board, the county auditor, county treasurer, and in addition, two regularly employed or retired firefighters elected by secret ballot of the employed and retired firefighters. Retired members who are subject to the jurisdiction of the pension board have both the right to elect and the right to be elected under this section. The first members to be elected by the firefighters shall be elected annually for a two-year term. The two firefighter elected members shall, in turn, select a third eligible member who shall serve in the event of an absence of one of the regularly elected members. Plan Membership: Plan membership is limited to active members of the Firefighters' Pension Fund (FPF) as of March 1, 1970. On that date, the Washington Law Enforcement Officers' and Firefighters' System (LEOFF) was established. FPF is responsible for paying the pensions of those members retired prior to March 1, 1970 and for providing the "excess benefit", the excess of FEE formula benefits over the LEOFF benefits. Therefore, the plan is closed to new members. At December 31, 2012, FPF membership consisted of the following: Inactive plan members retired prior to March t, 1970: 1 Inactive plan members retired March 1, 1970 or after: 31 Active Plan Members: 0 Page 13 F Draft Notes to the Financial Statements Benefits provided. All benefit terms are in statutes RCW 41.16, 41.18, and 41.26. FPF provides retirement, disability, and death benefits. 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 taw for any firefighter, the excess benefits are paid from the FPF of the city employing the member on March 1. 1970. All members are retired and drawing benefits. Benefit terms provide for cost -of -living adjustments to each member's retirement benefit. There are two types of increases: escalation by salary in proportion to current salary of rank from which the firefighter retired or Increase proportionate to the increase in the Seattle - area CPI, with the change compute annually. Regardless of the increase (or decrease) in the CPI, the benefits are increased at least 2% each year. The former 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 tatter applies to all other types of monthly benefits. Contributions. As long as the FPF provides for benefits to covered members, the City will be eligible to receive a share of the State's distribution of the fire insurance premium taxes. The amount the City receives is 25% of all monies received by the State from taxes on fire insurance premiums. Contributions can also come from taxes paid pursuant to the provisions of RCW 41.16.060. This statute 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. Page 14 V Draft Notes to the Financial Statements Investments Investment Policy. The pension fund holds laddered investments with annual maturities to meet cash-flow requirements. The City is currently assessing options to deploy the growing cash balance. Rate of Return. For the year ended December 31, 2012, the annual money -weighted rate of return on pension plan investments, net of pension plan investment expense, was 3.13%. The money -weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amount actually invested. Net Pension Liability of the City The components of the net pension liability of the City at December 31, 2012 were as follows: Total pension liability $ 2,787,814 Plan fiduciary net position 9,504,422 City's net pension liability $ (6,716,608) Plan fiduciary net position as a percentage of the total pension liability 340.93% Page 15 Draft Notes to the Financial Statements Actuarial Assumptions: The total pension liability was determined by an actuarial valuation as of December 31, 2012, using the following actuarial assumptions, applied to all periods included in the measurement: Inflation Salary increases Investment rate of return 2.75% 3.00% 4.00% Mortality rates were based on the RP -2000 Healthy Annuitant Mortality Table for Males or Females, as --appropriate, with adjustments for mortality improvement based on 50% of Scale AA: -- — The long-term expected rate of return on pension plan investments was determined using a building-block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed. We used the weighted expected returns of the City's portfolio of cash, US Treasuries (to be held to maturity), and receivables to develop the long- term expected rate of return. Discount rate. The discount rate used to measure the total pension liability was 4.0%. The projection of cash flows used to determine the discount rate assumed City contributions were equal to revenue received from Fire Insurance premiums and the amount received would increase at the inflation rate of 2.75%. Based on this assumption, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payment of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the net pension liability to changes in the discount rate. The following presents the net pension liability of the City, calculated using the discount rate of 4.0%, 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, 3.0%, or.1-percentage point higher, 5.0%, than the current rate: City's net pension liablity: 1% Decrease $ 3,039,213 Current Discount Rate Page 16 2,787,814 $ 1% Increase 2,569,559 Basis of Valuation Substantive Plan A summary of the substantive plan used as the basis of the valuation follows. This summary is a general summary only. GENERAL INFORMATION Applicable Statutes RCW 41.16, 41.18, 41.26 Benefits Each firefighter in service on March 1, 1970 receives the great of the benefit payable under LEOFF or FPF. 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 the member on March 1, 1970. Service Retirement Benefit Member Eligibility: age 50 and 25 years of service (RCW 41.18.040) or 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 (does not apply for those retiring after July 1, 2006). Survivor Eligibility: spouse or child Amount of benefit: continuation of the firefighter's benefit. (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 of 60% of salary). Duty Disability Retirement Benefit Member Eligibility: disabled after six-month waiting period. Amount of benefit: determined the same as Service Retirement Benefit. Recovery: restoration to service. Survivor See Survivor's Benefit section under Service Retirement. Non Duty Disability Retirement Benefit Member Eligibility: disabled after 90 -day waiting period. Amount of benefit: 50% of salary, or service retirement benefit, if greater. Recovery: see Duty Disability Retirement. Limitations: no benefits payable if firefighter employed elsewhere when disabled. Survivor Eligibility: spouse or child Amount of benefit: 33% to widow or children only. 45.8% to widow and one child. 47.6% to widow and two children. 50.0% to widow and three children. Page 17 Substantive Plan Duty Death Benefit Eligibility: spouse or child Amount of benefit: If spouse — 50% of salary plus an additional 5% of salary per child; maximum benefit of 60% of salary. If no spouse — 50% of salary to children. Non Duty Death Benefit Eligibility: spouse or child Amount of benefit: provisions the same as Survivor's Benefit under Non -Duty Disability Retirement. 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. Vesting Termination after 20 years of service (RCW 41.18.130) or five years of service (RCW 41.26.090). Deferred Benefit Commences: when a firefighter would have had 25 years of service (RCW 41.18.130) or age 50 (RCW 41.26.090). Amount of benefit: 2% of salary for each year of service. Other provisions apply, see statutes. Death while vested prior to commencement of benefits: payment of firefighter's deferred benefit to spouse or child. Postretirement Increase Type 1 Escalation by salary in proportion to current salary or rank from which the firefighter retired. Type 2 Annual increase proportionate to the increase in the Seattle -area CPI. Minimum increase at least 2% each year. Applicability 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. Type 2 applies to all other types of monthly benefits Minimum Benefit After April 25, 1973, a minimum benefit of $300 per month to all retired firefighters and their survivors. This minimum is increase by the CPI. Funeral Benefit $500 RCW 41.18.140, no provision under RCW 41.26. Page 18 Participant Summary January 1, 2013 Age and service determined as of the census date. Monthly Pension Amounts as of December 31 2012 Paid by City Paid by LEOFF $ 17,233 $ 120,695 Page 19 LEOFF Plan 1 Inactive Participants Service Disabled Surviving Age Retirees Retirees Spouses Total < 65 0 0 0 0 65-69 1 2 2 5 70-74 0_. , 4 _ 1 . 75-79 3 2 7 12 80-84 1 2 2 5 85-89 1 1 2 4 90+ 1 0 0 1 Total 7 11 14 32 Monthly Pension Amounts as of December 31 2012 Paid by City Paid by LEOFF $ 17,233 $ 120,695 Page 19 Actuarial Assumptions A summary of the actuarial assumptions used for this valuation follows. We considered the reasonableness of each assumption independently based on its own merits, consistent with each other assumption, and the combined impact of alt assumptions. Assumption Rates Actuarial Cost Method Asset Valuation Method Entry Age Fair Market Value Measurement Date January 1, 2013 Discount Rate (or Selected the assumed discount rate of 4% based on the five-year average Investment Return) investment yield on the investments expected to finance the payment of benefits. Cost of Living 2.75%, based on SSA OASDI 2012 report. Salary Increases (for calculated benefit increases based on rank) 3.00%, based on City recommendation of future salary increases. Healthy Mortality RP -2000 Combined Healthy Table projected to 2019 with 50% of Scale AA set back one year for males and set forward one year for females. Disabled Mortality RP -2000 Combined Healthy Table projected to 2018 with 50% of Scale AA. Turnover n/a Disability n/a Retirement n/a Spouse Age Wives are assumed to be three years younger than husbands Page 20