1. City of Phoenix Employees’ Retirement System
Retirees' Association
COPERS
City of Phoenix Employees’ Retirement System
March 2009

2. Agenda Economic Overview COPERS’ Financial Condition Funded Status
Employer Contributions

3. Agenda Post-Retirement Increases Questions PEP 13th Check
Calculation Process
Status
Future Outlook
Questions

4. Economic Overview – Ryan Harvey, RV Kuhns & Assoc.
2008
Market Volatility
U.S. Government Banking Plan
Federal Reserve cut rates
December 31, 2008 Unemployment Rate = 7.2%
4.9% at beginning of 2008
U.S. economy officially entered into a recession during late 2007

5. Economic Overview – Ryan Harvey, RV Kuhns & Assoc.
Returns as of December 31, 2008
One Year
5 Years Annualized
Large Company Stocks – S&P 500
-37.00%
-2.19%
Small Company Stocks –
Russell 2000
-33.79%
-0.93%
International Stocks – MSCI EAFE
-43.06%
2.10%
Corporate & Govt Bonds – BC aggregate
5.24%
4.65%
Real Estate – NCREIF Property
-6.46%
11.67%

6. COPERS’ Financial Condition
Funded Status
Employer Contributions

7. Funded Ratio

8. History of Contributions
Employee Contribution 5% per charter

9. Post-Retirement Increases
PEP
13th Check
Calculation Process
Status
Future Outlook

10. Pension Increases 13th Check One time payment
Eligible if retired by June 30th of payment year
Paid with December pension payment
Lesser of ½ of prior year’s CPI increase or 3%; minimum of 1%; if excess returns reserve balance sufficient
Based on excess investment returns reserve

11. Pension Increases PEP Permanent increase
Eligible if retired 36 months by January 1st
Paid with April pension payment retroactive to January
Lesser of prior year’s CPI increase or percentage supported by excess returns reserve
Based on excess investment returns reserve

12. PEP Pension Increases – Calculation Process
(1) Determine Investment Earnings
Average over last five calendar years
2004
10.44%
2005
6.74%
2006
12.10%
2007
7.85%
2008
-25.88%
Average =
2.25%

13. Average Rate of return (5 cal year)

14. PEP Pension Increases – Calculation Process
(2) Are there “Excess Earnings”?
Earnings over 8%
Rate is in Charter
Equals the target rate used by actuary
Average = 2.25%

15. Average Rate of return (5 cal year)
Actuarial Return Target = 8%

16. PEP Pension Increases – Calculation Process
(3) If yes, an amount is added to the “PEP Reserve”
A portion also goes to the retirement fund to help fund the general obligations of the fund
2009 – No addition but balance exists due to previous activity
Determine increase supported by reserve balance = 1.7%

17. PEP

18. PEP Pension Increases – Calculation Process
(4) Phoenix-Mesa CPI for prior year
2004
1.8%
2005
2.9%
2006
3.0%
2007
3.4%
2008
3.5%
(5) PEP is lesser of CPI or amount supported by reserve balance
1.7%

19. 2009 PEP Calculation Five Year Investment Earnings 2.25%
(2) Excess Earnings? No
(3) Deposit to PEP Reserve? No but PEP Reserve balance of approx. $15 million will support increase of 1.7%
(4) Phoenix-Mesa CPI for %
(5) 2009 PEP %

20. Pension Equalization Program (PEP)
10yr Cumulative: 26.6%
10yr Average: 2.7%

21. 13th Check – Pension Increases – Calculation Process
(1) Phoenix-Mesa CPI for prior year
2004
1.8%
2005
2.9%
2006
3.0%
2007
3.4%
2008
3.5%

22. 13th Check – Pension Increases – Calculation Process
(2) 13th Check is lesser of ½ CPI or 3% with minimum of 1% if PEP Reserve balance is sufficient
½ CPI = 3.5% / 2 = 1.75%
PEP Reserve = Unknown
Determined after payment of 2009 PEP + end of year adjustments
th Check = Unknown

23. 13th Check
*Minimum rate per amended City Charter

24. Future Outlook for Post-Retirement Increases
PEP Reserve
Investment/Economic Conditions

25. Questions?

26. City of Phoenix Employees’ Retirement System
Retirees' Association
COPERS
City of Phoenix Employees’ Retirement System
March 2009