Pension Actuary Projection Study
April 29, 2016
Mr. Alfred Riverol
Finance Director
City Hall
6130 Sunset Drive
South Miami, Florida 33143
Re: South Miami Pension Plan (City DB Plan)
Updated Actuarial Projection Study as of October 1, 2014 – Future Service
Retirement Benefits Based Upon New Tier of Benefits for Current DC Employees
Dear Alfred:
As requested, we are pleased to enclose our updated Actuarial Projection Study including thirty
(30) year projections for the City’s proposed changes for general employees to provide future
service retirement benefits under a new tier of benefits as specified by the City under the City
DB Plan.
Financial and census data is reported as of October 1, 2014.
Census data for regular part time staff is reported. We understand regular part time staff does
not currently participate in any City retirement plan. We further understand regular part time
would continue to not participate in the proposed retirement plan.
If you should have any question concerning the above or if we may be of further assistance with
this matter, please do not hesitate to contact us.
Sincerest regards,
Lawrence F. Wilson, A.S.A. Kelly L. Adams, A.S.A.
Senior Consultant and Actuary Consultant and Actuary
Enclosures
SOUTH MIAMI PENSION PLAN
UPDATED ACTUARIAL PROJECTION STUDY
April 29, 2016
SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
TABLE OF CONTENTS
Page
I. Executive Summary ....................................................................................................1
II. Projection Results .......................................................................................................8
III. Outline of Principal Provisions of the South Miami Pension Plan ..........................15
IV. Actuarial Assumptions and Cost Methods ................................................................20
SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
- 1 -
EXECUTIVE SUMMARY
At the request of the City, we have completed thirty (30) year projections illustrating the
financial impact of City proposed changes to the South Miami Pension Plan (City DB Plan) and
the City of South Miami Defined Contribution Plans (City DC Plans).
Background – The City DB Plan currently allows participation by full-time General Employees
hired before October 1, 2011 and requires participation of all full-time Police Officers of the City
– excluding Police Chief.
The City DB Plan currently provides:
Normal Retirement is attained age of 55 and completion of ten (10) years of credited
service (attained age 60 and completion of ten (10) years of credited service for benefits
earned after September 30, 2011) for General Employees.
Future service benefit multiplier is 2.25% for General Employees.
Full vesting upon completion of ten (10) years of credited service.
Final Average Compensation is the 1/60th of the final 60 consecutive months of basic
compensation but not less than 1/36th of the final 36 consecutive months of
compensation as of September 30, 2011 for General Employees.
General Employees contribute 7.0% of pay. City contributions greater than the general
employee contributions are split evenly between the City and general employees – City
pays administrative expenses.
3% cost-of-living increase (subject to consumer price index) to qualifying retires (limited
to benefits earned prior to October 1, 2011 for General Employees).
The City offers Defined Contribution Plans (City DC Plans) qualified under IRC Section 401(a)
for General Employees hired on or after October 1, 2011 and for other select City Employees
with a 100% match-up to 7% of pay.
Proposed Changes – We understand the City wishes to determine the projected effect on future
City contributions if the City DB Plan is re-opened to General Employees hired on or after
October 1, 2011 under a new tier of benefits. Additionally a new defined benefit pension plan
will be established for the Administration Management Service Class (AMSC).
SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
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The City provided the group of employees who may comprise the AMSC as follows:
- City Manager
- City Clerk
- Assistant City Manager
- Finance and Administration Director, C.F.O.
- Police Chief
- Planning Director
- Building Director
- Public Works Director
- Chief Administrative Officer (currently Finance Office Manager)
- Chief Procurement Officer (currently Purchasing Manager)
- Personnel Manager
- Parks and Recreation Director
The proposed retirement programs will provide:
General Employees electing the new tier in the City DB Plan will receive the
following:
o Full vesting upon completion of ten (10) years of credited service.
o Future service benefit multiplier is 1.60%.
o Final Average Compensation will be the average of the highest eight (8) years of
compensation.
o Normal Retirement is the earlier of (a) attained age 65 and completion of ten (10)
years of credited service or (b) completion of thirty-three (33) years of credited
service.
o General Employees entering the City DB Plan will contribute three percent (3%)
of compensation (current General Employees in the City DB Plan not electing the
new tier of benefits will have their contributions capped at ten percent (10%) of
compensation).
o No cost-of-living adjustments will be provided.
General Employees currently in the City DB plan will have the option to freeze their
current benefits and receive benefits under the new tier.
AMSC employees will receive the following benefits:
o Participants currently employed by the City will be vested upon completion of
three (3) years of service as of the date of adoption.
o Future AMSC participants will be vested upon completion of three (3) years of
service.
o Benefit multiplier is 3.00%.
o Final Average Compensation will be the average of the highest eight (8) years of
compensation.
SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
- 3 -
o Normal Retirement is the earlier of (a) attained age 65 and completion of three
(3) years of credited service or (b) completion of thirty-three (33) years of
credited service.
o AMSC employees will be required to contribute seven percent (7%) of
compensation.
o AMSC employees who will receive the above benefits and who are currently
participating in the City DB Plan will have their City DB Plan benefits frozen as
of the date of adoption.
Additionally an Alternative Defined Contribution Plan (Alternative DC Plan) will be
offered to all General Employees with the following provisions:
o Employees are required to contribute three percent (3%) of compensation.
o City will contribute seven percent (7%) of compensation.
o Employees will be vested after one (1) year of service.
Results – The following Tables shows the current City / Employee contribution (cost) and the
sum of the projected City / Employee contributions (costs) over the next five (5), ten (10) and
thirty (30) years for the baseline (City DB Plan and City DC Plans) and for the proposed changes
described above as a dollar amount and as a percentage of projected covered payroll,
respectively.
SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
- 4 -
CurrentProposedIncrease /
AmountAmount(Decrease)
Next Year
- Department Payroll$4,145 $4,249 N/A
- Net City Cost $$245 $198 ($47)
- Net City Cost %5.9%4.7%(1.2%)
- Net Employee Cost $$255 $246 ($9)
- Net Employee Cost %6.2%5.8%(0.4%)
Next 5 Years
- Department Payroll$21,549 $22,509 N/A
- Net City Cost $$1,413 $1,066 ($347)
- Net City Cost %6.6%4.7%(1.9%)
- Net Employee Cost $$1,358 $1,239 ($119)
- Net Employee Cost %6.3%5.5%(0.8%)
Next 10 Years
- Department Payroll$47,131 $49,804 N/A
- Net City Cost $$3,162 $2,410 ($752)
- Net City Cost %6.7%4.8%(1.9%)
- Net Employee Cost $$3,045 $2,604 ($441)
- Net Employee Cost %6.5%5.2%(1.3%)
Next 30 Years
- Department Payroll$207,313 $221,968 N/A
- Net City Cost $$14,898 $11,263 ($3,635)
- Net City Cost %7.2%5.1%(2.1%)
- Net Employee Cost $$14,051 $10,167 ($3,884)
- Net Employee Cost %6.8%4.6%(2.2%)
Summary of Costs
($1,000s)
General Employees
SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
- 5 -
Actuarial Assumptions and Methods, City DB Plan Provisions, Financial Data and Member
Census Data – The actuarial assumptions and methods, City DB Plan provisions (as modified
above), financial data and member census data employed for purposes of our Actuarial
Projection Study are the same actuarial assumptions and methods, City DB Plan provisions (as
modified above), financial data and member census data utilized for the October 1, 2014
Actuarial Valuation with the following projection modifications.
Two-thirds of current employees in the City DC plans along with two-thirds of future
General Employees are assumed to enroll in the new tier of benefits for General
Employees (assumption provided by City).
The remaining one-third of current employees in the City DC plans along with one-third
of future General Employees are assumed to enroll in the Alternative DC Plan
(assumption provided by City).
All AMSC employees are assumed to enroll in the proposed City AMSC Defined Benefit
Plan.
Demographic data for twelve AMSC employees was reported by the City.
All current General Employees participating in the City DB Plan are assumed to continue
to participate in the current City DB Plan (assumption provided by City).
No future City contributions are assumed to be made to the current City DC Plans for all
General Employees.
Under the proposed structure, the City DB Plan future amortization period for the change
in unfunded liability is twenty-five (25) years.
A payroll growth assumption of 3.25% is used for determining the amortization payments
under the re-opened plan for General Employees.
New AMSC defined benefit plan will use the same actuarial methods and assumptions as
the City DB Plan for General Employees.
Under the current City Senior Management DC Plan, participants are eligible for normal
retirement at age 45. For all others in the City DC Plans, participants are eligible for
normal retirement at age 60.
Demographic assumptions of the City DB Plan for General Employees are assumed to
apply to the Alternative DC Plan including the retirement age of the earlier of (a) attained
65 or (b) completion of 33 years of service.
No upfront contribution to fund additional liabilities under the proposed tier of benefits or
the proposed ASMC Plan is assumed.
Throughout the forecast period new employees are assumed to be hired each year at a
rate sufficient to maintain a constant active headcount – stationary population. New
SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
- 6 -
employees are assumed to have the same average demographic characteristics (age,
gender, salary – adjusted each year for inflation) and group (General Employee or
AMSC) as those employees hired over the past five (5) years.
Under the City DB Plan, expenses paid by the City are assumed to be 0.3% of the
projected market value of assets during the projection period.
Effective October 1, 2016, the rates of mortality in the projections are the rates of
mortality used by the Florida Retirement System (FRS) in the July 1, 2014 and July 1,
2015 FRS Actuarial Valuations.
Projections are deterministic – throughout the projection period experience is expected to match
the assumptions – including a 7.375% annual market value investment return for fiscal year
ended September 30, 2015 and thereafter.
This Actuarial Projection Study is intended to describe the estimated future financial effects of
the proposed benefit changes and is not intended as a recommendation in favor of the change nor
in opposition to the change.
These calculations are based upon assumptions regarding future events. However, the City DB
Plan and AMSC Plan long term costs will be determined by actual future events, which may
differ materially from the assumptions made.
If you have reason to believe the assumptions used are unreasonable, the City DB Plan
provisions are incorrectly described or referenced, important City DB Plan provisions relevant to
this Actuarial Projection Study are not described or that conditions have changed since the
calculations were made, you should contact the undersigned prior to relying on information in
this Actuarial Projection Study. If you have reason to believe that the information provided in
this Actuarial Projection Study is inaccurate, or is in any way incomplete, or if you need further
information in order to make an informed decision on the subject matter of this report, please
contact the undersigned prior to making such decision.
The Unfunded Actuarial Accrued Liability (UAAL) may not be appropriate for assessing the
sufficiency of Plan assets to meet the estimated cost of settling benefit obligations but may be
appropriate for assessing the need for or the amount of future contributions. The UAAL would
be different if it reflected the market value of assets rather than the actuarial value of assets.
Future actuarial measurements may differ significantly from the current measurements presented
in this report due to such factors as the following: City DB 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 City DB Plan’s funded status); and changes in City DB
Plan provisions or applicable law. Due to the limited scope of the actuary’s assignment, the
actuary did not perform an analysis of the potential range of such future measurements.
SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
- 7 -
This report should not be relied on for any purpose other than the purpose described in the
primary communication. Determinations of the financial results associated with the benefits
described in this report in a manner other than the intended purpose may produce significantly
different results.
This report has been prepared by actuaries who have substantial experience valuing public
employee retirement systems. To the best of our knowledge the information contained in this
report is accurate and fairly presents the actuarial position of the South Miami Pension Plan as of
the valuation date. All calculations have been made in conformity with generally accepted
actuarial principles and practices, with the Actuarial Standards of Practice issued by the
Actuarial Standards Board and with applicable statutes.
The signing actuaries are independent of the Plan sponsor.
The undersigned 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.
If you should have any question concerning the above or if we may be of further assistance with
this matter, please do not hesitate to contact us.
Sincerest regards,
Lawrence F. Wilson, A.S.A. Kelly L. Adams, A.S.A.
Senior Consultant and Actuary Consultant and Actuary
Enclosures
SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
- 8 -
PROJECTION RESULTS
General Employee– Re-open the City DB Plan to General Employees hired on or after October
1, 2011 with a new tier of benefits for General Employees. Create a defined benefit plan for
AMSC employees. Create an Alternative DC plan.
The following Tables show projected covered payroll, comparison of projected City and
Employee (EE) costs and Unfunded Actuarial Accrued Liability (UAAL) under the baseline
forecast versus providing benefit accruals similar to FRS – ($1,000s). UAAL shown is for the
Valuation Date two years prior to fiscal year end.
FiscalDepartmentCurrentDepartment(Increase) /Cumulative
YearCoveredPlanCoveredReduction in(Inc) / Red in
End Payroll Dollar % of Pay UAAL Payroll Dollar % of Pay UAAL City Cost City Cost
20164,1452455.9%(175)4,2491984.7%1764747
20174,1272786.7%(762)4,2732195.3%(125)59106
20184,2632856.7%(955)4,4742114.9%(339)74180
20194,4242966.7%(1,347)4,6632144.8%(750)82262
20204,5903096.7%(1,547)4,8502244.9%(956)85347
20214,7483186.7%(1,669)5,0512455.2%(1,091)73420
20224,9323346.8%(1,803)5,2512575.2%(1,227)77497
20235,1113506.8%(1,945)5,4662595.1%(1,387)91588
20245,3013666.9%(2,099)5,6792895.5%(1,591)77665
20255,4903816.9%(2,264)5,8482945.4%(1,790)87752
20265,6853987.0%(2,442)6,0623125.5%(2,060)86838
20275,8814157.1%(2,632)6,2803285.6%(2,354)87925
20286,0814327.1%(2,835)6,5043345.5%(2,682)981,023
20296,2944497.1%(3,056)6,7483515.6%(3,061)981,121
20306,5114677.2%(3,293)6,9913675.6%(3,460)1001,221
20316,7354867.2%(3,545)7,2423815.7%(3,915)1051,326
20326,9605047.2%(3,815)7,4773875.6%(4,428)1171,443
20337,1995247.3%(4,106)7,7414035.6%(5,033)1211,564
20347,4515437.3%(4,418)8,0064165.6%(5,718)1271,691
20357,7155647.3%(4,752)8,2944295.6%(6,501)1351,826
20367,9865867.3%(5,111)8,5964455.6%(7,383)1411,967
20378,2696097.4%(5,495)8,9054625.6%(8,360)1472,114
20388,5556327.4%(5,907)9,2224775.6%(9,444)1552,269
20398,8576567.4%(6,351)9,5514895.5%(10,643)1672,436
20409,1696807.4%(6,826)9,8875075.5%(11,973)1732,609
20419,4897057.4%(7,336)10,2265225.5%(13,457)1832,792
20429,8197317.4%(7,884)10,5625355.4%(15,132)1962,988
204310,1547587.5%(8,473)10,9185535.4%(16,990)2053,193
204410,5077857.5%(9,105)11,2885705.4%(19,013)2153,408
204510,8658127.5%(9,783)11,6645855.4%(21,218)2273,635
5 Year
Totals21,5491,4136.6%(1,547)22,5091,0664.7%(956)3471.9%
10 Year
Totals47,1313,1626.7%(2,264)49,8042,4104.8%(1,790)7521.9%
30 Year
Totals207,31314,8987.2%(9,783)221,96811,2635.1%(21,218)3,6352.1%
Current PlansProposed Plans
Projected City CostProjected City Cost
SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
- 9 -
FiscalDepartment(Increase) /Cumulative
YearDepartmentCoveredReduction in(Inc) / Red in
End Payroll Dollar % of Pay Payroll Dollar % of Pay EE Cost EE Cost
20164,1452556.2%4,2492465.8%99
20174,1272576.2%4,2732405.6%1726
20184,2632696.3%4,4742465.5%2349
20194,4242826.4%4,6632515.4%3180
20204,5902956.4%4,8502565.3%39119
20214,7483106.5%5,0512615.2%49168
20224,9323246.6%5,2512675.1%57225
20235,1113376.6%5,4662745.0%63288
20245,3013516.6%5,6792804.9%71359
20255,4903656.6%5,8482834.8%82441
20265,6853796.7%6,0622904.8%89530
20275,8813946.7%6,2802964.7%98628
20286,0814106.7%6,5043034.7%107735
20296,2944256.8%6,7483114.6%114849
20306,5114416.8%6,9913194.6%122971
20316,7354586.8%7,2423284.5%1301,101
20326,9604756.8%7,4773364.5%1391,240
20337,1994926.8%7,7413454.5%1471,387
20347,4515116.9%8,0063544.4%1571,544
20357,7155306.9%8,2943644.4%1661,710
20367,9865506.9%8,5963754.4%1751,885
20378,2695706.9%8,9053874.3%1832,068
20388,5555916.9%9,2223994.3%1922,260
20398,8576126.9%9,5514114.3%2012,461
20409,1696356.9%9,8874244.3%2112,672
20419,4896586.9%10,2264374.3%2212,893
20429,8196816.9%10,5624504.3%2313,124
204310,1547067.0%10,9184634.2%2433,367
204410,5077317.0%11,2884784.2%2533,620
204510,8657577.0%11,6644934.2%2643,884
5 Year
Totals21,5491,3586.3%22,5091,2395.5%1190.8%
10 Year
Totals47,1313,0456.5%49,8042,6045.2%4411.3%
30 Year
Totals207,31314,0516.8%221,96810,1674.6%3,8842.2%
Projected EE CostProjected EE Cost
Current PlansScenario 1
SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
- 10 -
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SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
- 11 -
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SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
- 12 -
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SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
- 13 -
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SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
- 14 -
The following table shows a summary of the reduction in City and Employee Costs.
Fiscal
Year
End
2016479
20175917
20187423
20198231
20208539
20217349
20227757
20239163
20247771
20258782
20268689
20278798
202898107
202998114
2030100122
2031105130
2032117139
2033121147
2034127157
2035135166
2036141175
2037147183
2038155192
2039167201
2040173211
2041183221
2042196231
2043205243
2044215253
2045227264
5 Year Savings ($)347119
5 Yr Average 6924
30 Year Savings ($)3,6353,884
30 Yr Average 121129
CityEmployee
Summary of Reduction / (Increase) in Costs -
($1,000s)
SOUTH MIAMI PENSION PLAN
ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
- 15 -
OUTLINE OF PRINCIPAL PROVISIONS OF THE RETIREMENT PLAN PRIOR TO
ANY PROPOSED CHANGES INCLUDED IN THIS STUDY
A. Effective Date:
October 1, 1965. Most recently amended by Ordinance 06-14-2184 adopted April 15, 2014.
B. Eligibility Requirements:
1. General Employees
Any regular full-time employee hired before October 1, 2011 is eligible to enter the plan
following the completion of six months of Credited Service and attainment of age 20.
2. Police Officers
Any regular full-time Police Officer is eligible to enter the plan as of date of employment.
C. Credited Service:
1. General Employees
Continuous employment. Credited service shall exclude continuous employment prior to
plan participation as follows: (1) If employed prior to October 1, 1973, credited service
shall exclude the first two years of continuous employment and any additional year of
continuous employment prior to attainment of age 25. (2) If employed on or after October
1, 1973, credited service shall exclude the first six (6) months of continuous employment
and continuous employment prior to age 20.
2. Police Officers
Continuous employment. For Police Officers who did not participate when first eligible
for the plan, credited service shall exclude continuous employment prior to plan
participation as follows: (1) If employed prior to October 1, 1973, credited service shall
exclude the first two years of continuous employment and any additional year of
continuous employment prior to attainment of age 25. (2) If employed on or after October
1, 1973, credited service shall exclude the first six (6) months of continuous employment
and continuous employment prior to age 20.
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D. Final Monthly Compensation (FMC):
Final Monthly Compensation is 1/36th of the final 36 consecutive months of compensation.
For Police Officers, not less than 1/5th of the highest five (5) years out of the last (10) ten
years of compensation. Compensation shall mean regular wages and salaries, excluding
bonuses, vacation, sick leave and other additional compensation.
Effective October 1, 2011, Final Average Compensation for General Employees is 1/60th of
the final 60 consecutive months of basic compensation, provided it is not less than the Final
Average Compensation as of September 30, 2011 based on the definition above. Basic
compensation shall mean base wages and salaries, excluding commissions, overtime pay,
bonuses and any other forms of additional compensation earned outside of base wages.
Effective October 1, 2011, Final Average Compensation for members covered under the
Police Officers and Sergeants collective bargaining agreement is the best five (5) years of
basic compensation, provided it is not less than the Final Average Compensation as of
September 30, 2011 based on the definition above. Basic compensation shall mean base
wages and salaries, including up to 300 hours of overtime in a fiscal year and excluding
payments for accrued unused sick or annual leave, extra duty or special detail work, shift
differential, assignment pay, bonuses and any other forms of additional compensation earned
outside of base wages.
E. Normal Retirement:
1. Eligibility:
a. General Employees: Attainment of age 55 and completion of ten (10) years of
credited service for benefits accrued as of September 30,
2011.
Attainment of age 60 and completion of ten (10) years of
credited service for benefits accrued after September 30,
2011, including increases in the accrued benefit as of
September 30, 2011 due to increases in the Final Average
Compensation.
b. Police Officers: Attainment of age 60 and completion of ten (10) years of
credited service of completion of twenty-five (25) years of
credited service regardless of age.
2. Benefit:
The monthly plan benefit is the product of:
a. FMC,
b. Credited service during the appropriate period and
c. The appropriate benefit percentage
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E. Normal Retirement (cont’d):
The appropriate benefit percentages are:
a. General Employees For Credited Service Percentage
Through September 30, 1999 2.50%
October 1, 1999 through September 30, 2011 2.75%
October 1, 2011 and thereafter 2.25%
b. Police Officers For Credited Service Percentage
Through September 30, 1995 2.00%
October 1, 1995 through September 30, 1996 2.25%
October 1, 1996 through September 30, 1997 2.50%
October 1, 1997 through September 30, 2001 2.75%
October 1, 2001 through September 30, 2002 2.80%
October 1, 2002 through September 30, 2003 2.90%
October 1, 2003 and thereafter 3.00%
F. Supplemental Benefit:
A cost-of-living supplemental benefit based upon the consumer price index is provided upon
retirement. The annual increase is limited to 3%.
For General Employees the cost-of-living supplemental benefit is only provided on the
accrued benefit as of September 30, 2011 and does not apply to increases in this accrued
benefit due to increases in the Final Average Compensation.
G. Early Retirement:
1. Eligibility: Attainment of age 50 and completion of 15 years of credited service
for Police Officers.
2. Benefit: Accrued benefit based upon FMC and credited service as of early
retirement date, reduced 3% for Police Officers for each year that the
benefit commencements date precedes Normal Retirement.
H. Delayed Retirement:
1. Eligibility: Retirement subsequent to normal retirement date.
2. Benefit: Accrued benefit based upon FMC and credited service as of delayed
retirement date.
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I. Disability Retirement:
1. Eligibility: Totally and permanently disabled for a six month period while
actively employed.
2. Benefit: Accrued benefit based upon FMC and credited service as of date of
disability, actuarially reduced as for early retirement for early
commencement.
J. Pre-Retirement Death Benefit:
The beneficiary shall receive the member’s accumulated employee contributions.
K. Benefit Upon Termination of Service:
1. Benefit payable at normal retirement equal to the greater of:
a. Accrued benefit based upon FMC and credited service as of date of termination
times the vesting percentage shown below, or
b. Benefit which can be supported by the accumulated member contributions with
interest to normal retirement date.
No Supplemental benefit shall be payable to vested terminees.
2. Vesting Schedule:
3. Refund Options:
A terminated member may elect to receive a refund of accumulated contributions without
interest in lieu of receiving any other plan benefits.
L. Member Contributions:
Members contribute 7.0% (7.5% for Police Officers) of member’s basic annual
compensation. Should the City contribution for General Employees be actuarially determined
to exceed 7.0%, not including expenses, both the City and the General Employees will share
equally in the amount in excess of 7.0%.
Years of Credited Service Vesting Percentage
Less than 10 0%
10 or more years 100%
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Should the City contribution for Police Officers be actuarially determined to exceed 7.5%,
not including expenses, both the City and the Police Officers will share equally in the amount
in excess of 7.5%.
M. Normal Form of Retirement Income:
The normal form of payment shall be a life annuity with a guarantee of a refund of
accumulated employee contributions.
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ACTUARIAL PROJECTION STUDY AS OF OCTOBER 1, 2014
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ACTUARIAL ASSUMPTIONS AND METHODS
A. Mortality
For October 1, 2014 and 2015 the following rates of mortality were utilized:
For healthy General Employee participants, RP-2000 Mortality Tables, separate rates for
males and females and for annuitants and non-annuitants, with fully generational
mortality improvements projected to each future decrement date with Scale AA.
For healthy Police Officer participants, RP-2000 Combined Healthy Participant Mortality
Tables, separate rates for males and females, with Blue Collar Adjustment and fully
generational mortality improvements projected to each future decrement date with Scale
AA.
For disabled participants, RP-2000 Disabled Mortality Tables, separate rates for males
and females, with fully generational mortality improvements projected to each future
decrement date with Scale AA.
For October 1, 2016 and thereafter the following rates of mortality were utilized:
For healthy General Employee male participants, 50% of the RP-2000 Annuitant
Mortality Table with White Collar Adjustment - 50% of the RP-2000 Annuitant Mortality
Table with Blue Collar Adjustment, with fully generational mortality improvements
projected to each future decrement date with Scale BB.
For healthy Police Officer male participants, 10% of the RP-2000 Annuitant Mortality
Table with White Collar Adjustment - 90% of the RP-2000 Annuitant Mortality Table
with Blue Collar Adjustment, with fully generational mortality improvements projected
to each future decrement date with Scale BB.
For healthy General Employee and Police Officer female participants, 100% of the RP-
2000 Annuitant Mortality Table with White Collar Adjustment, with fully generational
mortality improvements projected to each future decrement date with Scale BB.
For disabled General Employee participants, 100% of the RP-2000 Disabled Mortality
Table with separate rates for males set back four (4) years and females set forward two
(2) years, and no future mortality improvement.
For disabled Police Officer participants, 60% of the RP-2000 Disabled Mortality Table
with separate rates for males set back four (4) years and females set forward two (2) years
- 40% of the RP-2000 Annuitant Mortality Table with White Collar Adjustment, and no
future mortality improvement.
These are the rates of mortality used in the July 1, 2014 FRS Actuarial Valuation.
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B. Investment Return to be Earned by Fund
7.375%, compounded annually.
C. Allowances for Expenses or Contingencies
Actual expenses paid in previous year.
D. Employee Withdrawal Rates
Withdrawal rates for males and for females were used in accordance with the following
illustrative example based upon number of years of service:
Withdrawal Rates
Per 100 Employees
Service Police General
1 – 2 12.00 20.00
3 – 6 8.00 9.25
7 – 10 8.00 5.00
11 & Over 3.50 5.00
E. Disability Rates
1985 Disability Study, Class 1 with separate rates for females was used.
F. Martial Assumptions
100% of active members are assumed to be married. Where applicable, females are assumed
to be three years younger than their male spouses.
G. Salary Increase Factors
Current salary is assumed to increase in accordance with the following table based upon
number of years of service.
Service Police General
0 – 9 5.25% 5.25%
10 – 14 3.75% 4.75%
15 – 19 3.75% 4.25%
20 & over 3.75% 3.75%
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H. Increase in Covered Payroll
4.0% per year, limited to average annual increase over most recent ten years (0.9%) but not
less than 0.0% for Police Officers. No increase in covered payroll is assumed for General
Employees - Plan was closed to newly hired General Employees October 1, 2011.
I. Retirement Rates
Rates of early retirement for Police Officers were used in accordance with the following
table.
Rates of normal retirement were used in accordance with the following tables.
General Employees who retire prior to age sixty (60) but after attainment of ten (10) years of
service (55 & 10) are assumed to receive an actuarially reduced benefit payable immediately
upon retirement.
I. Cost of Living Increases
Future cost of living increases are assumed to be 3.0% per annum.
J. Valuation of Assets
The method used for determining the actuarial value of assets phases in the deviation
between the expected and actual return on assets at the rate of 20% per year. The actuarial
value of assets will be further adjusted to the extent necessary to fall within the corridor
whose lower limit is 80% of the fair market value of plan assets and whose upper limit is
120% of the fair market value of plan assets.
Years Preceding
Normal Retirement
Police
1 – 6 5%
7 – 10 10%
Age Police General
55 – 59 N/A 10%
60 – 61 25% 10%
62 – 64 40% 25%
65 – 66 100% 25%
67 & above 100% 100%
Date of Hire Service Police
Prior to October 1, 2014 25 Years 100%
On or after October 1, 2014 30 Years 100%
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K. Cost Methods
Normal Retirement, Termination, Disability and Pre-Retirement Death Benefit:
Entry-Age-Actuarial Cost Method
Under this method the normal cost for each active employee is the amount which is
calculated to be a level percentage of pay that would be required annually from his date of
hire to his retirement age to fund his estimated benefits, assuming the Plan had always been
in effect. The normal cost for the Plan is the sum of the individual normal costs for all active
participants. The actuarial accrued liability as of any valuation date for each active employee
or inactive employee who is eligible to receive benefits under the plan is the excess of the
actuarial present value of estimated future benefits over the actuarial present value of current
and future normal costs. The unfunded actuarial accrued liability as of any valuation date is
the excess of the actuarial accrued liability over the actuarial value of assets of the plan.