1. City of Phoenix Employees’ Retirement System
Retirees' Association
COPERS
City of Phoenix Employees’ Retirement System
March 2011

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

3. Agenda Post-Retirement Increases Update on Pension Reform Task Force
PEP
13th Check
Calculation Process
Status
Future Outlook
Update on Pension Reform Task Force
Questions

4. Economic & Market Overview – Ryan Harvey, R.V. Kuhns & Associates, Inc.
2010
Equity market rebound continued
Additional U.S. Government stimulus
Federal Reserve maintained historically low rates
U.S. economy officially entered into the current economic recovery, following a 18-month long recession that ended June 2009 4

5. Economic & Market Overview – Ryan Harvey, R.V. Kuhns & Associates, Inc.
Generally Improving Economic Indicators
Positive:
Unemployment Rate: 9.7%  9.4%
GDP Growth: 0.2%  3.3% (9/30/2010)
Leading Economic Index:  112.4
Coincident Economic Index:  101.9
Neutral:
Inflation Expectations: 2.4%  2.3%
Negative:
Consumer Confidence Index: 53.6  52.5 5

6. Economic & Market Overview – Ryan Harvey, R.V. Kuhns & Associates, Inc.
Returns as of December 31, 2010
1 Year
2 Years Cumulative
3 Years Cumulative
5 Years Annualized
Large Company Stocks –
S&P 500
15.06%
45.51%
-8.32%
2.29%
Small Company Stocks –
Russell 2000
26.86%
61.33%
6.82%
4.47%
International Stocks –
MSCI EAFE
8.21%
43.33%
-18.38%
2.94%
Corporate & Gov’t Bonds – BC Aggregate
6.54%
12.86%
18.77%
5.80%
Real Estate –
NCREIF Property
13.11%
-5.96%
-12.04%
3.51% 6

7. COPERS’ Financial Condition
Funded Status
Employer Contributions

8. Funded Ratio Aggregate 2009 Funding Level for Public Funds: 79.8% **
** Source: NASRA Public Funds Survey
Valuation Date (June 30/December 30*)

9. History of Contributions
Employee Contribution 5% per charter

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

11. 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

12. 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 (not less than zero) or percentage supported by excess returns reserve
Based on excess investment returns reserve

13. PEP Pension Increases – Calculation Process
(1) Determine Investment Earnings
Average over last five calendar years
2006
12.10%
2007
7.85%
2008
-25.88%
2009
13.77%
2010
12.65%
Average =
4.10%

14. Average Rate of return (5 cal year)

15. 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 = 4.10%

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

17. 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
2011 – No addition, minimal balance exists
Determine increase supported by reserve balance = 0.05%

18. PEP

19. PEP Pension Increases – Calculation Process
(4) Phoenix-Mesa CPI for prior year
2006
3.0%
2007
3.4%
2008
3.5%
2009
2010
-1.4%
0.6%
(5) PEP is lesser of CPI (not less than zero) or amount supported by reserve balance

20. 2011 PEP Calculation Five Year Investment Earnings 4.10%
(2) Excess Earnings? No
(3) Deposit to PEP Reserve? No
Increase supported by Reserve 0.05%
(4) Phoenix-Mesa CPI for %
(5) 2011 PEP ? No

21. Pension Equalization Program (PEP)
10 year Cumulative: 19.90%
10 year Average: 1.99%

22. 13th Check – Pension Increases – Calculation Process
(1) Phoenix-Mesa CPI for prior year
2006
3.0%
2007
3.4%
2008
3.5%
2009
-1.4%
2010
0.6%

23. 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 = 0.6% / 2 = 0.3%
PEP Reserve = Minimal
th Check = Unlikely

24. 13th Check

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

26. Update on Pension Reform Task Force - Rick Naimark, Deputy City Manager
Membership
Charge and timeline
Next steps:
Pension Consulting Services
Legal Services

27. Questions?