City of Hallandale Beach Professional/Management Retirement Plan Actuarial Review April 15, 2013

2 October 1, 2012 Valuation Review

3 Basic Funding Equation

4 The Annual Required Contribution (ARC) for the 2012 and 2013 fiscal year is $762,010 and $912,745. The 2012 ARC is equal to 57.53% of estimated participant compensation. The 2013 ARC is equal to 87.38% of estimated participant compensation. Expected employee contributions for the 2012 plan year are $100,221. Expected employee contributions for the 2013 plan year are $80,622.

5 Analysis of Actuarial Experience Total Normal Cost increased from $452,071 for the 2012 fiscal year to $480,722 for the 2013 fiscal year. As a percentage of estimated payroll, the increase was from 34.13% to 46.02%. Participant salaries were lower than expected. The expected increase for active participants was 7.40%; the actual increase was 4.39%. The actuarial value of plan assets increased approximately 6.8% due to investment earnings assuming mid-year cash flow. We anticipated an increase of 7.75%. The market value of assets increased approximately 19.3%.

6 Analysis of Actuarial Experience Cont. With the 2012 valuation report, the following changes were made this year: The valuation interest rate was lowered to reflect current expectations of your plan's long term investment performance. The new rate was decreased to 7.50%. The mortality table was updated to the IRS Prescribed Mortality – Generational Annuitant and Non-annuitant, male and female. The salary scale was decreased 80 basis points to reflect past experience and the expected level of future salary increases. The inflation assumption was decreased to 2.5%.

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

8 Development of Actuarial Value of Assets continued…. a)Market Value of Assets as of 10/01/2011$10,102,657 b)Contributions/Transfers823,015 c)Benefit payments(326,813) d)Expenses(26,730) e)Expected Interest on (a, b, c, and d)801,573 f)Expected Value of Assets as of 10/01/2012 (a+b+c+d+e) 11,373,702 g)Market Value of Assets as of 10/01/201212,571,796 h)Current year excess appreciation/(shortfall) (g-f)1,198,094 i)Adjustments to market value (sum of deferred amounts)561,842 j)Actuarial value of assets (g-i)12,009,954

9 Deferred Asset Gains/(Losses) Plan Year Allocation Year $(210,757) 2010 $(210,757)$59, $(210,757) $59,097$(197,913) 2012 $(210,756) $59,097 $(197,912) $ 299, $59,096 $(197,912) $299, $(197,912) $299, $299,523 Total $(843,027) $236,387 $(791,649) $1,198,094 Deferred$0 $59,096 $(395,824) $898,570 Adjustment to market value (sum of deferred amounts) $561,842

10 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 plus an amount to fund the unfunded Frozen Initial Liability over 30 years. Plan Year Beginning10/1/201210/1/201110/1/201010/1/2009 Total Normal Cost (% of Estimated Payroll) $480,722 (46.02%) $452,071 (34.13%) $673,627 (39.58%) $772,490 (44.24%) Employee Normal Cost$80,622$100,221$129,320$136,795 Employer Normal Cost$400,100$351,850$544,307$635,695 Annual Required Contribution (% of Estimated Payroll) $912,745 (87.3%) $762,010 (57.5) $953,218 (56.0%) $1,051,450 (60.2%)

11 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.

12 Plan Year Beginning10/1/201210/1/201110/1/201010/1/2009 Plan Assets Market Value Actuarial Value * $12,810,101 $12,248,259 $10,102,657 $10,788,956 $9,370,501 $10,186,540 $7,921,579 $9,505,895 Present Value of Accrued Bens Funded % (Market Value) Funded % (Actuarial Value) $15,251,081 84% 80% $12,443,511 81% 87% $11,519,812 81% 88% $10,269,646 77% 93% Present Value of Proj. Bens Funded % (Market Value) Funded % (Actuarial Value) * Limited to 120% of MVA $19,144,638 67% 64% $16,608,976 61% 65% $17,853,094 52% 57% $18,628,881 42% 51% Funded Status

13 Actuarial History Plan Year Beginning10/1/201210/1/201110/1/201010/1/2009 Lives Covered Active Vested Terminated/DROP Retired Total Salary Increases Actual Expected 4.4% 7.4% 3.2% 7.4% 3.0% 7.5% 6.8% 5.6% Investment Return Market Actuarial 19.34% 6.81% (0.44)% (1.65)% 10.53% 0.98% (3.09)% (1.65)%

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