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

2 October 1, 2013 Valuation Review

3 Basic Funding Equation

4 The Annual Required Contribution (ARC) for the 2013 and 2014 fiscal year is $912,745 and 748,978. The 2013 ARC is equal to 87.38% of estimated participant compensation. The 2014 ARC is equal to 101.6% of estimated participant compensation Expected employee contributions for the 2013 plan year are $80,622. Expected employee contributions for the 2014 plan year are $59,103.

5 Analysis of Actuarial Experience Total Normal Cost decreased from $480,722 for the 2013 fiscal year to $305,201 for the 2014 fiscal year. As a percentage of estimated payroll, the decrease was from 46.02% to 41.40%. Participant salaries were slightly higher than expected. The actuarial value of plan assets increased approximately 10% due to investment earnings assuming mid-year cash flow. We anticipated an increase of 7.5%. The market value of assets increased approximately 11%.

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$12,571,796 b)Contributions/Transfers1,092,332 c)Benefit payments(499,162) d)Expenses(32,593) e)Expected Interest on (a, b, c, and d)967,538 f)Expected Value of Assets as of 10/01/2013 (a+b+c+d+e) 14,099,911 g)Market Value of Assets as of 10/01/201314,565,895 h)Current year excess appreciation/(shortfall) (g-f)465,984 i)Adjustments to market value (sum of deferred amounts)750,622 j)Actuarial value of assets (g-i)13,815,273

8 Deferred Asset Gains/(Losses) Plan Year Allocation Year $59, $59,097$(197,913) 2012 $59,097 $(197,912)$299, $59,096 $(197,912) $299,524 $116, $(197,912) $299,523 $116, $299,523 $116, $116,496 Total $236,387 $(791,649) $1,198,094 $465,984 Deferred$0 $(197,912) $599,046 $349,488 Adjustment to market value (sum of deferred amounts) $750,622

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 plus an amount to find the unfunded Frozen Initial Liability over 30 years. Plan Year Beginning10/1/201310/1/201210/1/201110/1/2010 Total Normal Cost (% of Estimated Payroll) $305,201 (41.40%) $480,722 (46.02%) $452,071 (34.13%) $673,627 (39.58%) Employee Normal Cost$59,103$80,622$100,221$129,320 Employer Normal Cost$246,098$400,100$351,850$544,307 Annual Required Contribution (% of Estimated Payroll) $748,978 (101.6%) $912,745 (87.3%) $762,010 (57.5) $953,218 (56.0%)

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 * $14,565,895 $13,815,273 $12,810,101 $12,248,259 $10,102,657 $10,788,956 $9,370,501 $10,186,540 Present Value of Accrued Bens Funded % (Market Value) Funded % (Actuarial Value) $16,618,695 88% 83% $15,251,081 84% 80% $12,443,511 81% 87% $11,519,812 81% 88% Present Value of Proj. Bens Funded % (Market Value) Funded % (Actuarial Value) * Limited to 120% of MVA $19,817,057 74% 70% $19,144,638 67% 64% $16,608,976 61% 65% $17,853,094 52% 57% Funded Status

12 Actuarial History Plan Year Beginning10/1/201310/1/2012 Liability (Accumulated Plan Benefits) Active Vested Terminated/DROP Retired Total $6,134,429 2,332,937 8,151,329 $16,618,695 $5,881,963 3,263,910 6,105,208 $15,251,081 Liability (PV Projected Plan Benefits) Active Vested Terminated/DROP Retired Total $9,332,791 2,332,937 8,151,329 $19,817,057 $9,775,520 3,263,910 6,105,208 $19,144,638 Asset Information Market City Contributions Pension Payment $14,565,895$12,810,101 $746,022 $499,162

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 7.2% 6.6% 4.4% 7.4% 3.2% 7.4% 3.0% 7.5% Investment Return Market Actuarial Expected 11.11% 10.09% 7.50% 19.34% 6.81% 7.50% (0.44)% (1.65)% 7.75% 10.53% 0.98% 7.75%

Entry Age Cost Method (possible new Method) Active Present Value of Projected Benefits Total Normal Cost Sum Equals Spread evenly over each Participant Working Career Times Interest Equals Annual Required Contribution Note: Results will vary depending on assumptions used. Administrative expenses paid from Trust are added to Normal Cost each year. Initial unfunded plus future Gains/Losses spread over 15 years Amortization Amounts

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

GASB Statements 67 & 68 Statement No. 67 (Financial Reporting for Pension Plans) replaces Statement No. 25. Statement No. 68 (Accounting and Financial Reporting for Pension) replaces Statement No. 27. Key matter from GASB Board is that these statements are completely separate from funding calculations and policies 16

17 GASB 67 Will divorce accounting and funding  funding policy is established separately Approved 6/25/2012. Statements available from GASB in Aug 2012 Effective Date: – Fiscal year beginning after June 15, – Statement No. 67 does not significantly change present framework under Statement No. 25. Enhances Note to Financials Disclosures –Some of the key information to be included in the Note disclosures Plan description Information on investments and policies Deferred retirement option program information (DROP) Components of net pension liability (NPL) Significant assumptions (especially those related to the determination of the discount rate)

GASB Statement No. 68 Effective for fiscal years beginning after June 15, Implementation Guide released January 30, Significant in that this will likely require a second report each year (similar to private sector) The Net Pension Liability will move from notes to entity’s balance sheet. NPL is a measure of plan assets vs. plan liabilities. Pension Expense (PE) will now be calculated (similar to FASB expense for private sector). Immediate (or shorter) recognition of some components is expected to lead to volatility. Pension Liabilities include future salaries and service along with COLAs if written in the plan or effectively automatic EAN (% of pay) is the required cost method for attribution 18