City of Hallandale Beach Retirement Plan Actuarial Review March 17, 2014

2 October 1, 2012 Valuation Review

3 Basic Funding Equation

4 The Annual Required Contribution (ARC) for the 2013 and 2014 fiscal year is $3,940,595 and $3,659,156. The 2013 ARC is equal to 53.46% of estimated participant compensation. The 2014 ARC is equal to 48.83% of estimated participant compensation. Expected employee contributions for the 2013 fiscal year are $221,137. Expected employee contributions for the 2014 fiscal year are $224,795.

5 Analysis of Actuarial Experience Total Normal Cost increased from $ 3,895,351 for the 2013 fiscal year to $3,636,595 for the 2014 fiscal year. As a percentage of estimated payroll, the decrease was from 52.85% to 48.53%. Participant salaries were slightly lower than expected. The expected increase for active participants was 5.02%; the actual increase was 4.61%. The actuarial value of plan assets increased approximately 9.41% due to investment earnings assuming mid-year cash flow. We anticipated an increase of 7.25%. The market value of assets increased approximately 8.9%.

6 Smooth unexpected investment return over 4 years Reduces volatility of ARC Development of Actuarial Value of Assets

7 Development of Actuarial Value of Assets continued…. a)Market Value of Assets as of 10/01/2012$36,956,563 b)Contributions/Transfers4,629,717 c)Benefit payments(2,189,188) d)Expenses(52,260) e)Expected Interest on (a, b, c, and d)2,767,309 f)Expected Value of Assets as of 10/01/2013 (a+b+c+d+e) 42,112,141 g)Market Value of Assets as of 10/01/201342,758,149 h)Current year excess appreciation/(shortfall) (g-f)646,008 i)Adjustments to market value (sum of deferred amounts)1,584,652 j)Actuarial value of assets (g-i)41,173,497

8 Deferred Asset Gains/(Losses) Plan Year Allocation Year $213, $213,464$(503,819) 2012 $213,463$(503,819) $801, $213,463$(503,819) $801,983 $161, $(503,818)$801,982 $161, $801,982 $161, $161,502 Total $853,854 $(2,015,275) $3,207,930 $646,008 Deferred$0 $(503,818) $1,603,964 $484,506 Adjustment to market value (sum of deferred amounts) $1,584,652

9 Valuation History Deposit calculations are based on the plan’s actuarial funding method and the City’s funding policy. The City’s funding policy has been to calculate the Annual Required Contribution equal to the City’s Normal Cost. Plan Year Beginning10/1/201310/1/201210/1/201110/1/2010 Total Normal Cost (% of Estimated Payroll) $3,636,595 (48.53%) $3,895,351 (52.85%) $3,491,371 (46.81%) $3,379,069 (42.17%) Employee Normal Cost$224,795$221,137$223,757$224,223 Employer Normal Cost$3,411,800$3,674,214$3,267,614$3,154,846 Annual Required Contribution (% of Estimated Payroll) $3,659,156 (48.8%) $3,940,595 (53.5%) $3,512,685 (47.1%) $3,391,459 (45.3%)

10 Funded Status Present Value of Accrued Benefits: The comparison uses the asset values divided by the present value of all benefits accrued to date. The liability measure does not include a provision for future service accruals or salary increases. Present Value of Future Benefits: Ultimately, the plan will need to fund the Present Value of Future Benefits. This present value assumes future salary increases and service credits. It is the present value of the projected benefit payable at retirement for each current plan participant. The funded status is a measurement of the plan’s assets compared to the benefit liabilities. The value of these benefit liabilities on either an “accrued” or “projected” basis. Another measure that we have not shown includes the plan termination liabilities. The actual cost to terminate the plan would be based on annuity purchase rates at the time of termination.

11 Plan Year Beginning10/1/201310/1/201210/1/201110/1/2010 Plan Assets Market Value Actuarial Value * $42,758,149 $41,173,497 $37,804,428 $36,192,655 $31,026,638 $32,766,978 $29,592,676 $32,088,033 Present Value of Accrued Bens Funded % (Market Value) Funded % (Actuarial Value) $48,869,792 87% 84% $46,052,116 82% 79% $41,548,860 75% 79% $39,943,354 74% 80% Present Value of Proj. Bens Funded % (Market Value) Funded % (Actuarial Value) * Limited to 120% MVA $63,584,992 67% 65% $61,025,913 62% 59% $55,583,324 56% 59% $54,511,310 54% 59% Funded Status

12 Actuarial History Plan Year Beginning10/1/201310/1/2012 Liability (Accumulated Plan Benefits) Active Vested Terminated/DROP Retired Total $20,996,093 6,062,296 21,811,403 $48,869,792 $20,911,483 5,788,676 19,351,957 $46,052,116 Liability (PV Projected Plan Benefits) Active Vested Terminated/DROP Retired Total $35,711,293 6,062,296 21,811,403 $63,584,992 $35,885,280 5,788,676 19,351,957 $61,025,913 Asset Information Market City Contributions Pension Payment $42,758,149$37,804,428 $3,391,459 $2,189,188

13 Actuarial History Plan Year Beginning10/1/201310/1/201210/1/201110/1/2010 Lives Covered Active Vested Terminated/DROP Retired Total Salary Increases Actual Expected 4.6% 5.0% 7.5% 5.5% 3.1% 5.6% 1.2% 5.6% Investment Return Market Actuarial 8.94% 9.41% 17.78% 6.67% 0.70% 0.53% 10.63% 0.54%

Defined Benefit Plan Sponsors are in a Challenging Environment Plan Sponsor Law changes Accounting Changes Market Conditions Administrative Complexity Forecasting & Projections Plan Design Review Asset Liability Modeling Frozen Plan Solutions Bundled Services Principal Financial Group