6 - Actuarial Impact Statement
January 12, 2017
Pension Board
South Miami Pension Fund
c/o Ms. Kyle Tintle
Pension Administrator
The Resource Centers, LLC
4360 Northlake Boulevard, Suite 206
Palm Beach Gardens, Florida 33410
Re: South Miami Pension Plan
Actuarial Impact Statement
Dear Kyle:
As requested, we are pleased to enclose three (3) copies of an Actuarial Impact Statement
as of October 1, 2015 for the Proposed Ordinance under the South Miami Pension Plan
(Plan) with the State of Florida (copy enclosed).
Background – For Police Lieutenants and Police Captains there is currently:
• No cap on employee contributions.
• Final Average Compensation is 1/36th of the final 36 consecutive months of
compensation.
• There is no Ordinance limit on the number of overtime hours included in
pensionable pay for each fiscal year of pay.
Proposed Ordinance – The proposed Ordinance:
For Police Lieutenants and Police Captains
o Cap employee contributions at twelve percent (12%) of pensionable pay.
o Final Average Compensation shall be best five-year average but not less
than Final Average Compensation as of September 30, 2016.
o Overtime hours included in pensionable pay capped at three hundred (300)
hours each fiscal year.
o Clarifies payments for accrued unused sick leave or accrued unused
annual leave earned on or after October 1, 2016, shall not be considered
pensionable compensation.
Creation of Preservation of Benefits Plan
o Provides for a Plan to pay retirement benefits, if any, earned in excess of
limits permitted by Section 415 of the Internal Revenue Code.
Ms. Ms. Kyle Tintle
January 12, 2017
Page Two
Results – The following sets out the projected changes in the minimum annual required
contributions for the City and Police Officers as a dollar amount and as a percentage of
covered annual payroll.
Item
Incremental
Reduction in Net
City Annual
Required
Contribution
Incremental
Reduction in Police
Officer Annual
Contribution
Proposed Ordinance $ 1,145
(0.0%)
$ 1,145
(0.0%)
Filing Requirements – We have prepared the Actuarial Impact Statement for filing with
the State of Florida. Please note that this Statement must be signed and dated on behalf
of the Board of Trustees. Copies of the Ordinance upon passage at first reading along
with the signed and dated Actuarial Impact Statement are generally required to be filed
with the State at the following address:
Mr. Douglas E. Beckendorf, A.S.A.
Bureau of Local Retirement Services
Division of Retirement
Building 8
Post Office Box 9000
Tallahassee, Florida 32315-9000
We understand the State requires funding no later than the fiscal year next following the
effective date of any increase in costs resulting from the proposed Ordinance.
Please forward a copy of the Ordinance upon passage at second reading to update our
files.
Actuarial Assumptions and Methods, Plan Provisions, Financial Data, Member
Census Data – The actuarial assumptions and methods, financial data and member
census data employed for purposes of our Actuarial Impact Statement are the same
actuarial assumptions and methods, financial data and member census data to be utilized
for the October 1, 2015 Actuarial Valuation unless otherwise specified herein.
Based upon overtime pay reported by the City overtime pay reported for the October 1,
2015 Actuarial Valuation was less than three hundred (300) hours. We assumed this
pattern would continue in the future.
We understand unused sick leave and / or accrued unused annual leave was not
considered pensionable earnings prior to the proposed Ordinance.
Ms. Ms. Kyle Tintle
January 12, 2017
Page Three
Plan provisions employed for purposes of our Actuarial Impact Statement are the same
Plan provisions to be utilized for the October 1, 2015 Actuarial Valuation as modified
above.
This Actuarial Impact Statement is intended to describe the estimated future financial
effects of the proposed Plan provision changes on the Plan, and is not intended as a
recommendation in favor of the benefit changes or in opposition of the Plan provision
changes.
If all actuarial assumptions are met and if all future minimum required contributions are
paid, Plan assets will be sufficient to pay all Plan benefits. Plan minimum required
contributions are determined in compliance with the requirements of the Florida
Protection of Public Employee Retirement Benefits Act with normal cost determined as a
level percent of covered payroll and a level dollar amortization payment using a
maximum amortization period of 25 years.
The Unfunded actuarial liabilities (UAL) shown on page 2 item 6 of the enclosed exhibits
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 UAL would be different if it reflected the market
value of assets rather than the smoothed actuarial value of assets.
These calculations are based upon assumptions regarding future events. However, the
Plan’s long term costs will be determined by actual future events, which may differ
materially from the assumptions made. These calculations are also based upon present
Plan provisions that are referenced in this Actuarial Impact Statement.
If you have reason to believe the assumptions used are unreasonable, the Plan provisions
are incorrectly described as referenced, important Plan provisions relevant to this
proposed Actuarial Impact Statement 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 Impact Statement.
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); and changes in 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.
Ms. Ms. Kyle Tintle
January 12, 2017
Page Four
This Actuarial Impact Statement 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 Actuarial Impact Statement has been prepared by actuaries who have substantial
experience valuing public employee retirement plans. To the best of our knowledge the
information contained in this report is accurate and fairly presents the actuarial position
of the Plan as of the Actuarial Impact Statement 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.
This Actuarial Impact Statement may be provided to parties other than the Board only in
its entirety and only with the permission of an approved representative of the Board.
The signing actuaries are independent of the Plan sponsor.
If you have reason to believe that the information provided in this Actuarial Impact
Statement 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 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, E.A., A.S.A.
Senior Consultant and Actuary
Kelly L. Adams, E.A., A.S.A.
Consultant and Actuary
Enclosures
1 ORDINANCE NO. _____ _
2
3 An Ordinance amending the South Miami Pension Plan to implement the
4 Collective Bargaining Agreement between the City of South Miami and Dade
5 County Police Benevolent Association Lieutenants and Captains by
6 amending Chapter 16, Article II, Section 16-12, "Definitions" by amending
7 the definitions of Annual Compensation and final average compensation, as
8 it applies to the Police Lieutenants and Police Captains and by Adding A
9 Definition for Police Officer; by amending Sec. 16-19, "Contributions" to
10 place a limit on the total contributions made in any fiscal year by Police
11 Lieutenants and Police Captains; and amending Chapter 16, Article II
12 Section 16-23 (a)(2) to clarify how certain payments are to be treated under
13 Section 41S(b) of the Internal Revenue Code and amending Chapter 16,
14 Article II, by creating Section 16-27, "Preservation of Benefits Plan".
15
16 WHEREAS, the City of South Miami and the Dade County Police Benevolent
17 Association Lieutenants and Captains have entered into a new Collective Bargaining
18 Agreement ("Agreement"), effective October 1,2015 to September 30,2018; and
19
20 WHEREAS, it is the purpose and intention of the Agreement to provide for salaries,
21 fringe benefits and other terms and conditions of employment except as otherwise provided
22 by Constitution, Statute, Charter, Ordinance, Administrative Order or Personnel Rules and
23 Regulations; and
24
25 WHEREAS, Florida law requires that if any provIsion of a collective bargaining
26 agreement is in conflict with any ordinance over which the chief executive officer has no
27 amendatory power, the chief executive officer shall submit to the appropriate governmental
28 body having amendatory power a proposed amendment to such ordinance; and
29
30 WHEREAS, the City Commission wishes to change the terms of the South Miami
31 Pension Plan to effectuate the changes called for in the Agreement; and
32
33 WHEREAS, the City is desirous of creating a preservation of benefits plan to provide
34 for the payment of benefits that may be in excess of the limitations imposed by section 415(b)
35 of the Internal Revenue Code; and
36
37 WHEREAS the City is desirous of clarifying how COLA and other payments are to be
38 treated for purposes of determining the limitations imposed by section 415(b) of the Internal
39 Revenue Code; and
40
41 WHEREAS, the City Commission has received and reviewed an actuarial impact
42 statement related to such amendments; and
43
44
45 WHEREAS, the City Commission deems it to be in the public interest to provide these
46 changes to the pension plan;
1
47
48 NOW, THEREFORE, BE IT HEREBY ORDAINED BY THE MAYOR AND CITY
49 COMMISSION OF THE CITY OF SOUTH MIAMI, FLORIDA, THAT:
50
51 Section 1: That Chapter 16 Article II, Section 16-12, "Definitions" of the City of
52 South Miami Code of Ordinances is hereby amended by amending the definition of
53 annual compensation as follows:
54
55 Annual compensation shall mean base wages and salaries, including
56 hazardous pay, overtime pay, vacation, sick leave, holiday pay, clothing allowance,
57 educational incentive and extra duty pay. However, for compensation earned by police
58 officers or sergeants on or after October 1, 2011, or for compensation earned by
59 lieutenants and captains on or after October 1! 2016. the maximum amount of
60 overtime hours that may be used to determine annual compensation for calculating
61 retirement benefits for anyone (1) fiscal year shall not exceed three hundred (300)
62 hours. Additionally, for police officers and sergeants, payments for accrued unused
63 sick leave or accrued unused annual leave earned on or after October 1, 2011, and
64 payments for extra duty or special detail work for a second party employer, performed
65 on or after October 1, 2011, shall not be considered a part of their annual
66 compensation for purposes of calculating their retirement benefits. Additionally. for
67 lieutenants and captains. payments for accrued unused sick leave or accrued unused
68 annual leave earned on or after October 1! 2016. shall not be considered a part of their
69 annual compensation for purposes of calculating their retirement benefits. In addition,
70 shift differential pay, assignment pay and bonuses for police officers and sergeants
71 shall not be considered a part of their annual compensation for purposes of calculating
72 their retirement benefits. Any additional or other forms of pay not specifically
73 mentioned hereinabove, for any and all employees, shall be excluded from the
74 definition of annual compensation. Additionally, for compensation earned by general
75 employees, on or after October 1, 2011, annual compensation excludescor:nmissions,
76 overtime pay, bonuses and any other forms of additional compensation earned outside
77 of base wages.
78
79 _Section 2: That Chapter 16 Article II, Section 16-12, "Definitions" of the City of South
80 Miami Code of Ordinances is hereby amended by amending the definition of average final
81 compensation as follows:
82
83 Final average compensation shall mean the participant's annual compensation, as
84 determined by the employer, acting in a uniform and nondiscriminatory manner. For general
85 employees, except for Second Tier Members, and AMSC Members effective October 1,
86 2011, final average compensation shall be averaged over the last five-year period, provided
87 however final average compensation over the last five-year period shall not be less than the
88 final average compensation as of September 30, 2011, under the definition of final average
89 compensation which existed as of September 30, 2011. For Second Tier Members, final
90 average compensation will be the average of the highest eight (8) years of credited service.
91 For ~MSC Members, final average compensation will be the average of the highest eight (8)
92 years of credited service. In the event an AMSC Member has less than eight (8) years, of
93 credited service, final average compensation will be the average of all the participant's annual
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compensation over the period for which the Member received credited service. For Police
Officers members covered under the police officers and sergeants collective bargaining
agreement, final average compensation shall be the best five-year period of the Police
Officer's or sergeant's career with the City of South Miami, provided however that for police
officers and Sergeants, final average compensation over the best five-year period shall not
be less than the final average compensation as of September 30, 2011, under the definition
of final average compensation which existed as of September 30, 2011. Provided further that
for Police Lieutenants and Police Captains, final average compensation over the best five-
year period shall not be less than the final average compensation as of September 30, 2016,
under the definition of final average compensation which existed as of September 30,
2016.The best five (5) years is defined as the highest five (5), twenty-six (26) consecutive pay
periods within a police officers career and such consecutive year periods shall not overlap
one another. For all other members, final average compensation shall be averaged over the
last three year period but not less than the average of the participant's five (5) best years of
annual compensation during the last ten (10) years of service. For all members final average
compensation will end on the participant's retirement date, date of disability, date of
termination of employment or the date of termination of the plan, whichever is applicable.
Section 3: That Chapter 16 Article II, Section 16-12, "Definitions" of the City of South
Miami Code of Ordinances is hereby amended by adding the definition of police officer as
follows;
Police Officer generally means all sworn police personnel, of whatever rank, provided
however, where different rights and benefits are afforded to Police Captains and Police
Lieutenants, the Plan may specifically apply those rights and benefits to Police Lieutenants or
Captains.
* * *
Section 4. That Chapter 16 Article II, Section 16-19, Contributions, is amended to
read as follows:
a) Each participant, except as otherwise provided herein, shall contribute in each calendar
year towards the cost of the participant's pension an amount equal to three (3) percent of the
participant's earnings. Except as otherwise provided herein, no participant shall make any
contributions toward the cost of any past service pension to which the participant is entitled
under this plan. The employer shall contribute the balance of the cost, actuarially determined,
of providing the benefits of the plan. The employer's contributions shall be deposited into the
pension plan on at least a quarterly basis. Effective October 1, 1995, the pension contribution
for all general employee participants, including those general employees that are now
members of the retirement system, shall be increased from three (3) percent to five (5)
percent of earnings. Effective October 1, 2001, the pension contribution for all general
employee participants, including those general employees that are now members of the plan,
shall be increased from five (5) percent to seven (7) percent of earnings. Police officer
participant including bargaining unit employees, that are now members of the plan and any
police officers who join the plan in the future shall, effective October 1, 1993, have their
contribution increased from three (3) percent to five (5) percent of earnings. Effective October
1, 2001, police officer participants shall contribute 7.5 percent of earnings.
3
140
141 (1) General employee participants. Should the employer's annual contribution be
142 actuarially determined to exceed twelve (12) percent, both the employer and the participants
143 shall share equally the amount in excess of twelve (12) percent for that fiscal year Effective
144 October 1, 2005, should the total participant and employer's annual contribution be actuarially
145 determined to exceed fourteen (14) percent, both the employer and the general employee
146 participants shall share equally the amount in excess of fourteen (14) percent for that fiscal
147 year. Notwithstanding the above, the maximum general employee contribution rate will be
148 10% of earnings for fiscal years beginning on or after October 1, 2016.
149
150 (2) Police officer participants. Effective October 1, 2004, if the total Ppolice Oafficer
151 participants contributions and employer'§ contribution exceeds fifteen (15) percent of covered
152 police payroll for any fiscal year, the excess over fifteen (15) percent shall be shared equally
153 by the employer and Police Officer participants, provided however, that effective October 1,
154 2016, Police Lieutenants and Police Captains shall have their contributions capped at 12% of
155 earnings. Police Officer participant contributions shall be deposited in the plan immediately
156 after each pay period. Effective October 1, 2001 an amount actuarially determined, to provide
157 for certain minimum benefits required by Chapter 185, F.S. shall be paid from the South
158 Miami Police Officers Retirement Trust Fund to the plan each year, regardless of the growth
159 or diminution in future Chapter 185, F.S. funds.
160
161 (3) Second Tier Member participants. Second Tier Members shall contribute three (3)
162 percent of earnings.
163
164 (4) AMSC Member participants in the South Miami Pension Plan. AMSC Members shall
165 contribute seven (7) percent of earnings.
166
167 (5) General employees and AMSC Member participants in the defined contribution plan of
168 the City of South Miami referenced in Section 16-13 above. General employees and AMSC
169 Member participants in the defined contribution plan of the City of South Miami referenced in
170 Section 16-13 above shall contribute a minimum of three (3) percent of earnings. The City of
171 South Miami shall contribute seven (7) percent of earnings.
172
173 @ [Other participants.] Effective October 1, 2009, and for one (1) fiscal year thereafter
174 participant contributions for the following employee designations shall be reduced from the
175 above calculated percentages by two (2) percentage points:
176
177 (a) Nonbargaining unit employees.
178 (b) Members of the AFSME bargaining unit.
179 (c) Members of the police lieutenants and captains bargaining unit.
180
181 ill 415(c) Limitations. To the extent applicable, all employee contributions shall be in
182 accordance with Subsection 415(c) of the Internal Revenue Code and all regulations
183 thereunder, which subsections and regulations are incorporated herein by reference.
184
4
185 (b) All amounts paid by the employer to the insurance company in accordance with this plan
186 shall represent irrecoverable contributions, except as may be otherwise provided in
187 subsection 16-22(b).
188
189 (c) The employer shall pay the reasonable expenses of the pension board, including any
190 expenses for legal and actuarial services. .
191
192 Section 5. That Chapter 16 Article II, Section 16-23 (a)(2), "Compliance with
193 Internal Revenue Code" shall be amended to provide as follows:
194 (2) "Annual pension" means the sum of all annual benefits, payable in the form of a
195 straight life annuity. Benefits payable in any other form shall be adjusted to the larger of:
196 a. For limitation years beginning on or after July 1, 2007
197 (I) The straight life annuity (if any) payable to the member under the plan
198 commencing at the same annuity starting date as the member's form of benefit, or
199 (II) The actuarially equivalent straight life annuity commencing at the same
200 annuity starting date, computed using a 5.00 percent interest rate and the mortality
201 basis prescribed in Code Section 415(b)(2)(E)(v).
202 b. For limitation years beginning before July 1 , 2007.
203 (I) The actuarially equivalent straight life annuity commencing at the same
204 annuity starting date, computed using the interest rate and mortality basis specified by
205 the board of trustees for determining actuarial equivalence under the plan for the
206 particular form of payment, or
207 (II) The actuarially equivalent straight life annuity commencing at the same
208 annuity starting date, computed using a 5.00 percent interest rate and the mortality
209 basis prescribed in Code Section 415(b)(2)(E)(v).
210 No actuarial adjustment to the benefit shall be made for benefits that are not directly
211 related to retirement benefits (such as a qualified disability benefit, preretirement incidental
212 death benefits, and postretirement medical benefits); or the inclusion in the form of benefit of
213 an automatic benefit increase feature, provided the form of benefit is not subject to Section
214 417(e)(3) of the Internal Revenue Code and would otherwise satisfy the limitations of this
215 Subsection (a), and the amount payable under the form of benefit in any Limitation Year shall
216 not exceed the limits of this subsection (a) applicable at the annuity starting date, as
217 increased in subsequent years pursuant to Section 415(d) of the Code.
218 For this purpose, the dollar limit of section 415(b) of the Code shall be automatically adjusted
219 beginning with the first limitation year following a Member's severance of employment. in
220 accordance with Section 415(d) of the Code. For this purpose, an automatic benefit increase
5
221 feature is included in a form of benefit if the form of benefit provides for automatic, periodic
222 increases to the benefits paid in that form.
223
224 Section 6. That Chapter 16 Article II, Section 16-27, "Preservation of Benefit Plan"
225 of the City of South Miami Code of Ordinances is hereby created by adding as follows:
226 "Preservation of Benefits Plan"
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(1) There is hereby created a preservation of benefits plan
(2) Definitions.
Maximum benefit means the retirement benefit a member is entitled to
receive from the retirement system in any month after giving effect to any
provision of a qualified plan designed to conform to section 415 of the Internal
Revenue Code of 1986. as amended.
Excess benefit participant means any member whose retirement benefit
is determined on the basis of the retirement system without regard to limitations
set forth in this division that exceed the maximum benefit under section 415 of
the Internal Revenue Code of 1986. as amended.
Preservation of benefits plan means the unfunded plan created by the
City of South Miami to provide benefits to members that would be provided
under the retirement system. but for the limitations imposed by section 415 of
the Internal Revenue Code of 1986. as amended.
Unrestricted benefit means the monthly retirement benefit. including. but
not limited to. periodic increases provided in Sec. 16-14(b)(4) that a member.
spouse. child or other beneficiary. would receive under the terms of the South
Miami Pension Plan. except for the restrictions contained in this division.
(2) Excess Retirement Benefits.
246 The excess retirement benefits above the limits permitted by the Internal
247 Revenue Code shall be as follows:
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254
(a)
(b)
Funded from the general fund of the City of South Miami; and
Paid annually concurrently with the City of South Miami's annual
contribution to normal pension costs. which shall cause the City of
South Miami to realize a reduction in normal pension costs in the
same amount; and
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(c) Be deposited into a separate account established to receive the
City of South Miami's excess retirement benefit contributions,
which accounts shall be separate and apart from the accounts
established to receive the City of South Miami's normal pension
contribution for the South Miami Pension Plan.
(3) Administration of the Preservation of Benefits Plan.
(a) The Board of Trustees of the South Miami Pension Plan is
appointed as the committee to administer the Preservation of
Benefits Plan for the retirees.
(b) The actuaries for the South Miami Pension Plan shall calculate
the amounts necessary to fund the defined benefit plan giving
effect to the reductions caused by implementation of Section 415
of the Internal Revenue Code.
(4) Payment of Excess Benefit.
(a)
(b)
The unrestricted excess benefits shall be paid to each eligible
excess benefit participant on a monthly basis in an amount equal
to the difference between the allowable pension to be paid under
the Internal Revenue Code and the amount of the defined benefit
that would otherwise be paid if not for the benefit limitations.
Should additional retirements occur during the year where the
eligible member's retirement benefit exceeds the Section 415
limits, the Board of Trustees of the South Miami Pension Plan
shall calculate the additional excess benefit amount required for
the remainder of the fiscal year and should such amount exceed
the amount available from the funds provided for the fiscal year,
the Board of Trustees shall notify the City of South Miami of the
additional funds required. Upon the City of South Miami's receipt
of notice of the additional funds required, the City of South Miami
shall forward the additional funds required. The requirement for
additional funds paid by the City of South Miami shall be reflected
as a reduction in the City of South Miami's contribution of normal
pension costs for the following year.
7
294 (5) Intent.
295 IRC Section 415(m). This Preservation of Benefits Plan is
296 intended to be a "qualified governmental excess benefit
297 arrangement" described in Section 414(m) of the Internal
298 Revenue Code and shall be administered in a manner consistent
299 with those requirements.
300
301 Section 6. Rules of Construction. This ordinance will be construed in accordance
302 with Florida statutory law and Florida case law.
303 Section 7. Codification. The provisions of this ordinance shall become and be
304 made part of the Code of Ordinances of the City of South Miami as amended; that the
305 sections of this ordinance may be renumbered or re-Iettered to accomplish such intention;
306 and that the word "ordinance" may be changed to "section" or other appropriate word.
307
308 Section 8. Severability. If any section, clause, sentence, or phrase of this ordinance
309 is for any reason held invalid or unconstitutional by a court of competent jurisdiction, this
310 holding shall not affect the validity of the remaining portions of this ordinance.
311
312 Section 9. Ordinances in Conflict. All ordinances or parts of ordinances and all
313 section and parts of sections of ordinances in direct conflict herewith are hereby repealed.
314
315 Section 10. Effective Date. This ordinance shall become effective upon enactment.
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PASSED AND ENACTED this __ day of _____ , 2016.
ATTEST:
CITY CLERK
1st Reading
2nd Reading
READ AND APPROVED AS TO FORM:
LANGUAGE, LEGALITY AND
EXECUTION THEREOF
CITY ATTORNEY
8
APPROVED:
MAYOR
COMMISSION VOTE:
Mayor Stoddard:
Vice Mayor Welsh
Commissioner Edmond:
Commissioner Harris:
Commissioner Liebman:
A.Description of Proposed Amendment
Police Lieutenants and Police Captains
Creation of Preservation of Benefits Plan
B. An estimate of the cost of implementing this amendment (see attachment)
C.In my opinion,theproposed changesare in compliance with Part VII,Chapter 112,Florida
Statutes and Section 14, Article X of the State Constitution.
Chairman, Pension Board
Date
Pay for overtime hours capped at three hundred (300) hours per fiscal year on or after October 1, 2016.
South Miami Pension Plan
Actuarial Impact Statement as of October 1, 2015
Final Average Compensation is bestfive-yearaverage not lessthan the Final Average Compensation as of
September 30, 2016.
Employee contributions capped at twelve percent (12%) effective October 1, 2016.
Clarifies pay for unused sick and / or accrued leave shall not be included in pensionable pay.
Provides for a Plan to payretirementbenefits,if any,earned in excess of limitspermitted by Section 415ofthe
Internal Revenue Code.
A.Description of Proposed Amendment
Police Lieutenants and Police Captains
B. An estimate of the cost of implementing this amendment (see attachment)
C.In my opinion,theproposed changesare in compliance with Part VII,Chapter 112,Florida
Statutes and Section 14, Article X of the State Constitution.
Chairman, Pension Board
Date
Pay for overtime hours capped at three hundred (300) hours per fiscal year on or after October 1, 2016.
South Miami Pension Plan
Actuarial Impact Statement as of October 1, 2015
Final Average Compensation is bestfive-yearaverage not lessthan the Final Average Compensation as of
September 30, 2016.
Employee contributions capped at twelve percent (12%) effective October 1, 2016.
Clarifies pay for unused sick and / or accrued leave shall not be included in pensionable pay.
-1-
Proposed
Valuation Ordinance
10/01/2015 10/01/2015
A.Participant Data
1.Active participants 48 48
2.Retired participants and beneficiaries
receiving benefits 16 16
3.Disabled participants receiving benefits 0 0
4.Terminated vested participants 4 4
5.Annual payroll of active participants 3,229,332$ 3,229,332$
6.Expected payroll of active employees for the
following year 3,316,524$ 3,316,524$
7.Annual benefits payable to those currently
receiving benefits 622,523$ 622,523$
B.Assets
1.Market Value of Assets 18,502,750$ 18,502,750$
2.Smoothed Actuarial Value of Assets 18,525,155$ 18,525,155$
C.Liabilities
1.Actuarial present value of future expected benefit
payments for active members
a.Retirement benefits 14,351,993$ 14,333,012$
b.Vesting benefits 1,220,015 1,220,015
c.Death benefits 52,330 52,330
d.Disability benefits 366,920 366,368
e.Refunds 270,621 270,621
f.Total 16,261,879$ 16,242,346$
2.Actuarial present value of future expected benefit
payments for terminated vested members 729,062$ 729,062$
South Miami Pension Plan
Actuarial Impact Statement as of October 1, 2015
(Police Officers)
-2-
Proposed
Valuation Ordinance
10/01/2015 10/01/2015
3.Actuarial present value of future expected benefit
payments for members currently receiving benefits
a.Service retired 7,692,059$ 7,692,059$
b.Disability retired 0 0
c.Beneficiaries 0 0
d.Miscellaneous 75,355 75,355
e.Total 7,767,414$ 7,767,414$
4.Total actuarial present value of future
expected benefit payments 24,758,355$ 24,738,822$
5.Actuarial accrued liabilities 20,715,579$ 20,696,839$
6.Unfunded actuarial liabilities 2,190,424$ 2,171,684$
D.Statement of Accumulated Plan Benefits
1.Actuarial present value of accumulated
vested benefits
a.Participants currently receiving benefits 7,692,059$ 7,692,059$
b.Other participants 7,964,322 7,964,322
c.Total 15,656,381$ 15,656,381$
2.Actuarial present value of accumulated non-
vested plan benefits 1,623,447 1,623,447
3.Total actuarial present value of accumulated
plan benefits 17,279,828$ 17,279,828$
South Miami Pension Plan
Actuarial Impact Statement as of October 1, 2015
(Police Officers)
-3-
Proposed
Valuation Ordinance
10/01/2015 10/01/2015
E.Pension Cost
1.Total normal cost (including expenses)629,716$ 629,319$
2.Payment required to amortize unfunded liability 189,592 188,485
3.Interest adjustment 29,809 29,084
4.Total required contribution 849,117$ 846,888$
5.Item 4 as a percentage of payroll 26.3%26.2%
6.Estimated member contributions 377,353$ 376,208$
7.Item 6 as a percentage of payroll 11.4%1 11.3%1
8.Estimated State contributions 37,780$ 37,780$
9.Item 8 as a percentage of payroll 1.1%1 1.1%1
10.Net amount payable by City 456,910$ 455,765$
11.Item 10 as a percentage of payroll 13.8%1 13.7%1
F.Disclosure of Following Items:
1.Actuarial present value of future salaries - attained age 22,978,643$ 22,978,643$
2.Actuarial present value of future employee contributions
- attained age 1,723,398$ 1,723,398$
3.Actuarial present value of future contributions
from other sources N/A N/A
4.Amount of active members' accumulated contributions 3,508,610$ 3,508,610$
5.Actuarial present value of future salaries and
future benefits at entry age N/A N/A
6.Actuarial present value of future employee
contributions at entry age N/A N/A
1 Percent of expected 2016-2017 covered payroll ($3,316,524)
(Police Officers)
Actuarial Impact Statement as of October 1, 2015
South Miami Pension Plan
-4-
Remaining
Unfunded Actuarial Current Unfunded Amortization Funding
Accrued Liabilities - Police Liabilities Payment Period
10/01/2013 Combined Bases *(39,803) (5,250) 9 years
10/01/1995 Actuarial Loss (Gain)(112,263) (13,605) 10 years
10/01/1995 Plan Amendment 161,155 19,530 10 years
10/01/1996 Actuarial Loss (Gain)(67,550) (7,596) 11 years
10/01/1997 Actuarial Loss (Gain)(134,458) (14,146) 12 years
10/01/1998 Actuarial Loss (Gain)(223,284) (22,126) 13 years
10/01/1999 Actuarial Loss (Gain)(73,919) (6,939) 14 years
10/01/1999 Plan Amendment 97,388 9,143 14 years
10/01/2001 Actuarial Loss (Gain)845,048 72,219 16 years
10/01/2001 Method Change (425,006) (36,322) 16 years
10/01/2001 Plan Amendment 664,956 56,828 16 years
10/01/2002 Actuarial Loss (Gain)651,880 53,469 17 years
10/01/2002 Plan Amendment 162,795 13,353 17 years
10/01/2003 Actuarial Loss (Gain)485,723 38,364 18 years
10/01/2003 Plan Amendment 205,317 16,217 18 years
10/01/2004 Actuarial Loss (Gain)120,030 9,156 19 years
10/01/2004 Plan Amendment 187,023 14,266 19 years
10/01/2005 Actuarial Loss (Gain)(379,447) (28,026) 20 years
10/01/2006 Actuarial Loss (Gain)783,740 56,184 21 years
10/01/2006 Assumption Change 332,962 23,869 21 years
10/01/2007 Actuarial Loss (Gain)(321,441) (22,412) 22 years
10/01/2008 Actuarial Loss (Gain)151,426 10,289 23 years
10/01/2009 Actuarial Loss (Gain)333,489 22,119 24 years
10/01/2009 Assumption Change / Plan Amendment 479,013 31,771 24 years
10/01/2010 Actuarial Loss (Gain)121,704 7,892 25 years
10/01/2010 Assumption Change / Plan Amendment 1,178,980 76,456 25 years
10/01/2011 Actuarial Loss (Gain)(786,518) (49,941) 26 years
10/01/2011 Assumption Change / Plan Amendment (229,704) (14,585) 26 years
10/01/2012 Actuarial Loss (Gain)182,889 11,385 27 years
10/01/2012 Assumption Change (876,081) (54,539) 27 years
10/01/2013 Actuarial Loss (Gain)(499,367) (30,516) 28 years
10/01/2014 Actuarial Loss (Gain)(475,853) (28,577) 29 years
10/01/2015 Actuarial Loss (Gain)(310,400) (18,338) 30 years
10/01/2015 Proposed Ordinance (18,740) (1,107) 30 years
TOTAL 2,171,684$ 188,485$
* Combined per Internal Revenue Code Regulation 1.412(b)-1
Enrollment Number: 14-02802
Dated:January 12, 2017 Lawrence F. Wilson, A.S.A.
South Miami Pension Plan
Actuarial Impact Statement as of October 1, 2015
This actuarial valuation and/or cost determination was prepared and completed by me orunder my direct
supervision,andIacknowledge responsibility forthe results.To the best of my knowledge,the resultsare
completeand accurate,and in my opinion,thetechniquesandassumptions usedarereasonable and meet the
requirementsandintentof Part VII,Chapter112,Florida Statutes.Based uponourunderstandingoftheplan,
there is nobenefitorexpense to beprovidedbytheplanand/orpaid from theplan's assets for which liabilities or
current costs have not beenestablished orother wise providedfor in thevaluation.All known events ortrends
which may require materialincrease in plan costs orrequiredcontribution rates have beentaken into account in
the valuation.
-5-
A.Effective Date:
B.Eligibility Requirements:
1.General Employees
2.Police Officers
3.Administration Management Service Class (AMSC)
City Manager
City Attorney
City Clerk
Assistant / Deputy City Manager
Finance Director / Chief Financial Officer
Chief of Police
Planning and Zoning Director
Building Director
Director of Public Works
Chief Administrative Officer (currently Finance Office Manager)
Chief Procurement Officer (currently Purchasing Manager)
Parks and Recreation Director
Employees of the City with the following positions who do not elect to participate in a defined
contribution plan of the City:
Any regular full-time Police Officer is eligible to enter the plan as of date of employment.
Any regular full-time employeehired onor afterOctober 1,2011 and not participatingin the Planas
of October 1,2016 who elects tojoin or failsto makeanyelection within ninety(90)days from
effectivedate ofOrdinance iseligibleto enter the Planas a Tier 2 employeeas ofthe effectivedate of
Ordinance.
Any regular full-time employeehired onor afterOctober 1,2016 who elects tojoin or failsto make
anyelection within ninety(90)days from date of hire iseligibleto enter the Planas a Tier 2 employee
as of their date of hire.
South Miami Pension Plan
Outline of Principal Provisions of the Retirement Plan
October 1, 1965. Most recently amended by Ordinance 22-16-2255 adopted September 20, 2016.
Any regular full-time employeehired before October 1,2011 iseligibleto enter the plan followingthe
completion of six months of Credited Service and attainment of age 20.
-6-
C.Credited Service:
1.General Employees
2.Police Officers
D.Final Monthly Compensation (FMC):
South Miami Pension Plan
Outline of Principal Provisions of the Retirement Plan
EffectiveOctober 1,2011,Final Average Compensation for GeneralEmployees is 1/60thofthe final 60
consecutivemonthsof basic compensation,provided itis not lessthan the Final Average Compensation as of
September 30,2011 based onthe definition above.Basic compensation shallmeanbasewagesandsalaries,
excluding commissions,overtime pay,bonuses andany other forms ofadditionalcompensation earned outsideof
base wages.
EffectiveOctober 1,2011,Final Average Compensation for memberscovered underthe Police Officers and
Sergeants collective bargaining agreement is the best five(5)years of basic compensation,provided itis not less
than the Final Average Compensation as of September 30,2011 based onthe definition above.Basic
compensation shallmeanbasewagesandsalaries,includingup to 300hoursof overtimein a fiscalyearand
excluding payments for accrued unused sick orannual leave,extra dutyor specialdetail work,shift differential,
assignment pay, bonuses and any other forms of additional compensation earned outside of base wages.
Final Average Compensation is 1/36thofthe final 36consecutivemonthsofcompensation.For Police Officers,
not lessthan 1/5thofthehighest five(5)years outofthe last (10)tenyears ofcompensation.Compensation shall
mean regular wages and salaries, excluding bonuses, vacation, sick leave and other additional compensation.
Continuous employment.Creditedserviceshallexclude continuousemploymentprior to plan participation as
follows:(1)If employed prior to October 1,1973,creditedserviceshallexclude the first two years of
continuousemployment andany additional year ofcontinuousemploymentprior toattainment of age 25.(2)
If employed onor afterOctober 1,1973,creditedserviceshallexclude the first six (6)monthsofcontinuous
employment and continuous employment prior to age 20.
Creditedservice for Tier 2 employeesand AMSC will becontinuousemployment from the date of hirefor all
purposes except for benefit accruals which will be from the later of October 1, 2016 or date of hire.
Continuous employment.For Police Officers who didnot participate when first eligible for theplan,credited
serviceshallexclude continuousemploymentprior to plan participation as follows:(1)If employed prior to
October 1,1973,creditedserviceshallexclude the first two years ofcontinuousemployment andany
additional year ofcontinuousemploymentprior toattainment of age 25.(2)If employed onor afterOctober
1,1973,creditedserviceshallexclude the first six (6)monthsofcontinuousemployment and continuous
employment prior to age 20.
-7-
D.Final Monthly Compensation (FMC) (cont'd):
E.Normal Retirement:
1.Eligibility:
a.General Employees:
b.Police Officers:
c.AMSC:
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
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%
Attainment of age 55 and completion of ten (10)years of creditedservice
for benefits accrued as of September 30, 2011.
Attainment of age 60 and completion of ten (10)years of creditedservice
for benefitsaccruedafterSeptember 30,2011,including increases in the
accruedbenefitas of September 30,2011due to increases in the Final
Average Compensation.
Attainment of age 60 and completion of ten (10)years of creditedservice or
completion of twenty-five (25) years of credited service regardless of age.
Attainment of age 65 and completion of three (3)years of creditedservice
or completion of thirty-three (33) years of credited service regardless of age.
South Miami Pension Plan
Outline of Principal Provisions of the Retirement Plan
Attainment of age 65 and completion of ten (10)years of creditedservice or
completion of thirty-three (33)years of creditedserviceregardless of age for
Tier 2 employees.
Final Average Compenation for Tier 2 GeneralEmployeesand AMSC shall bethe average ofthehighest eight (8)
years of credit service.
EffectiveOctober 1,2016,Final Average Compensation for memberscovered underthe Miami-Dade County
Police Benevolent Association Upper-CollectiveBargainningUnion (Lieutenants &Captains)collective
bargaining agreement is the best five(5)years of basic compensation,provided itis not lessthan the Final
Average Compensation as of September 30,2016 based onthe definition above.Basic compensation shallmean
basewagesandsalaries,includingup to 300hoursof overtimein a fiscalyearand excluding payments for accrued
unused sick orannual leave,extra dutyor specialdetail work,shift differential,assignment pay,bonuses andany
other forms of additional compensation earned outside of base wages.
-8-
E.Normal Retirement (cont'd):
2.Benefit:
b.Police Officers For Credited Service Percentage
Through September 30, 1995 2.00%
October 1, 1995 through Septe 2.25%
October 1, 1996 through Septe 2.50%
October 1, 1997 through Septe 2.75%
October 1, 2001 through Septe 2.80%
October 1, 2002 through Septe 2.90%
October 1, 2003 and thereafter 3.00%
c.General Employees (Tier 2)For Credited Service Percentage
October 1, 2016 and thereafter 1.60%
d.AMSC For Credited Service Percentage
October 1, 2016 and thereafter 3.00%
F.Supplemental Benefit:
G.Early Retirement:
1.Eligibility:
a.Police Officers:
b.AMSC:
2.Benefit:
a.Police Officers:
No cost-of-living supplemental benefit is provided for AMSC Employees for benefit accruals on or
after October 1, 2011.
Attainment of age 50 and completion of 15 years of credited service.
Attainment of age 55 and completion of 10 years of credited service.
Accrued benefit based upon FMC and credited service as of early retirement
date, reduced 3% for each year that the benefit commencement date precedes
Normal Retirement.
Outline of Principal Provisions of the Retirement Plan
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.
No cost-of-living supplemental benefit is provided for Tier 2 General Employees.
-9-
G.Early Retirement (cont'd):
2.Benefit:
b.AMSC:
H.Delayed Retirement:
1.Eligibility:
2.Benefit:
I.Disability Retirement:
1.Eligibility:
2.Benefit:
J.Pre-Retirement Death Benefit:
K.Benefit Upon Termination of Service:
1.
a.
b.
South Miami Pension Plan
Outline of Principal Provisions of the Retirement Plan
No supplemental benefit shall be payable to vested terminees.
Benefit payable at normal retirement equal to the greater of:
Accruedbenefitbased upon FMC andcreditedserviceas of date of terminationtimes the
vesting percentage shown below, or
Benefitwhichcan besupportedbythe accumulatedmember contributions with interest to
normal retirement date.
The beneficiary shall receive the member's accumulated employee contributions.
Retirement subsequent to normal retirement date.
Accrued benefit based upon FMC and credited service as of delayed retirement date.
Totally and permanently disabled for a six month period while actively employed.
Accrued benefit based upon FMC and credited service as of date of disability, actuaria
reduced as for early retirement for early commencement.
Accrued benefit based upon FMC and credited service as of early retirement date, redu
for each of the first five years and 1/30 for the next five years that the benefit commen
date precedes Normal Retirement.
-10-
K.Benefit Upon Termination of Service:
2.Vesting Schedule:
All employees except AMSC:
Years of Vesting
Credited Service Percentage
Less than 10 0%
10 or more years 100%
AMSC employees:
Years of Vesting
Credited Service Percentage
Less than 3 0%
3 or more years 100%
3.Refund Option:
L.Member Contributions:
M.Normal Form of Retirement Income:
South Miami Pension Plan
Outline of Principal Provisions of the Retirement Plan
The normal form of paymentshall bea life annuity with a guarantee ofa refund of accumulated
employee contributions.
Members contribute7.0%(3.0%for Tier 2 GeneralEmployeesand 7.5%for Police Officers)of
member's basic annual compensation.
Shouldthe City contribution for Police Officers be actuariallydetermined to exceed 7.5%,not
including expenses,boththe City and the Police Officers will shareequally in theamount in
excess of 7.5% but not more than 12.0% for Police Lieutenants and Police Captains.
Shouldthe City contribution for GeneralEmployees be actuariallydetermined to exceed 7.0%,
notincluding expenses,boththe City and the GeneralEmployees (other thanTier 2 and AMSC
participants)will shareequally in theamount in excess of7.0%.The employee contribution is
capped at 10% as of October 1, 2016.
A terminated membermayelect to receive a refund of accumulated contributionswithout
interest in lieu of receiving any other plan benefits.
-11-
N.Changes Since Previous Actuarial Impact Statement:
Final Monthly Compensation (FMC) was:
L.Member Contributions (was):
Members contribute7.0%(3.0%for Tier 2 GeneralEmployeesand 7.5%for Police Officers)of member's
basic annual compensation.
Shouldthe City contribution for GeneralEmployees be actuariallydetermined to exceed 7.0%,notincluding
expenses,boththe City and the GeneralEmployees (other thanTier 2 and AMSC participants)will share
equally in the amount in excess of 7.0%. The employee contribution is capped at 10% as of October 1, 2016.
Shouldthe City contribution for Police Officers be actuariallydetermined to exceed 7.5%,notincluding
expenses, both the City and the Police Officers will share equally in the amount in excess of 7.5%.
EffectiveOctober 1,2011,Final Average Compensation for GeneralEmployees is 1/60thofthe final 60
consecutivemonthsof basic compensation,provided itis not lessthan the Final Average Compensation as of
September 30,2011 based onthe definition above.Basic compensation shallmeanbasewagesandsalaries,
excluding commissions,overtime pay,bonuses andany other forms ofadditionalcompensation earned outside
of base wages.
South Miami Pension Plan
Outline of Principal Provisions of the Retirement Plan
EffectiveOctober 1,2011,Final Average Compensation for memberscovered underthe Police Officers and
Sergeants collective bargaining agreement is the best five(5)years of basic compensation,provided itis not
lessthan the Final Average Compensation as of September 30,2011 based onthe definition above.Basic
compensation shallmeanbasewagesandsalaries,includingup to 300hoursof overtimein a fiscalyearand
excluding payments for accrued unused sick orannual leave,extra dutyor specialdetail work,shift
differential,assignment pay,bonuses andany other forms ofadditionalcompensation earned outsideof base
Final Average Compensation is 1/36thofthe final 36consecutivemonthsofcompensation.For Police
Officers,not lessthan 1/5thofthehighest five(5)years outofthe last (10)tenyears ofcompensation.
Compensation shallmeanregularwagesandsalaries,excludingbonuses,vacation,sickleaveand other
additional compensation.
Final Average Compenation for Tier 2 GeneralEmployeesand AMSC shall bethe average ofthehighest eight
(8) years of credit service.
-12-
A.Mortality
B.Investment Return to be Earned by Fund
C.Allowances for Expenses or Contingencies
D.Employee Withdrawal Rates
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
Per 100 Employees
For healthyGeneral Employee participants,the RP 2000 Mortality Tablewasused with separate
rates for malesandfemalesand for annuitants and non-annuitants,and fully generational mortality
improvements projected to each future decrement date with Scale AA.
1985 Disability Study, Class 1 with separate rates for females was used.
South Miami Pension Plan
Actuarial Assumptions and Methods
Used in the Valuation
Withdrawal Rates
Actual expenses paid in previous year.
7.375%, compounded annually, net of investment expenses.
For healthy Police Officer participants,the RP 2000Combined Mortality Table with Blue Collar
Adjustment wasused with separaterates for malesandfemalesand fully generational mortality
improvements projected to each future decrement date with Scale AA.
For disabled participants,the RP 2000 Disabled Mortality Tablewasused with separaterates for
malesandfemalesand fully generational mortality improvements projected to each future
decrement date with Scale AA.
Withdrawalrates for malesand for femaleswereused in accordance with thefollowing illustrative
example based upon number of years of service:
-13-
F.Marital Assumptions
G.Salary Increase Factors
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%
H.Increase in Covered Payroll
I.Retirement Rates
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%
Service Police
25 years 100%
General Employees who retire priorto age sixty(60)but after attainmentof ten (10)years ofservice (55&
10) are assumed to receive an actuarially reduced benefit payable immediately upon retirement.
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.
Used in the Valuation
South Miami Pension Plan
Actuarial Assumptions and Methods
4.0%peryear,limitedto average annual increase overmost recenttenyears (2.7%)butnotlessthan0.0%
for Police Officers.No increase in covered payrollisassumed for General Employees -Plan was closedto
newly hired General Employees October 1, 2011.
100%ofactive members are assumedtobe married.Where applicable,females are assumedtobethree
years younger than their male spouses.
Current salary isassumedto increase in accordance withthefollowingtable based uponnumberof years of
service.
-14-
J.Cost of Living Increases
K.Valuation of Assets
L.Cost Methods
Normal Retirement, Termination, Disability and Pre-Retirement Death Benefit:
Entry-Age-Actuarial Cost Method
M.Changes Since Previous Valuation
None.
South Miami Pension Plan
Actuarial Assumptions and Methods
Future cost of living increases are assumed to be 3.0% per annum.
The method used for determining the actuarial valueof assetsphases in thedeviation between
the expectedandactual return on assetsat the rate of20%peryear.The actuarial valueof
assets will be further adjusted to the extentnecessary to fall within thecorridorwhose lower
limitis 80%ofthe fairmarket valueof planassetsand whoseupper limitis 120%ofthe fair
market value of plan assets.
Under this methodthenormal cost for eachactiveemployee is theamount which is calculated
to bea levelpercentage of paythat wouldbe required annually from his date of hire to his
retirement age to fundhis estimated benefits,assumingthe Planhadalwaysbeen in effect.The
normal cost for the Plan is thesumoftheindividualnormal costs for allactive participants.
The actuarialaccrued liability as of any valuation date for eachactiveemployee or inactive
employee who iseligibleto receivebenefits underthe plan is the excess ofthe actuarialpresent
valueof estimated future benefits overthe actuarialpresent valueof currentand future normal
costs.The unfunded actuarialaccrued liability as of any valuation date is the excess ofthe
actuarial accrued liability over the actuarial value of assets of the Plan.
Used in the Valuation