January 1, 2019 Actuarial Valuation City of Fort Collins General - PowerPoint PPT Presentation

January 1, 2019 Actuarial Valuation City of Fort Collins General Employees’ Retirement Plan Joel Stewart, FSA, EA, MAAA Katie Antoline, FSA, EA, MAAA MARCH 18, 2019

Meeting Agenda  Purpose of Valuation 1. Actuarial Topics – 2. Legislative/Compliance 3. Other Topics  Pension Valuation Elements [company X] Topics Pension Plan  Review Assets and Liabilities  Overview of Results  Funding Analysis (Resources vs. Obligations)  Solvency Projections This work product was prepared solely for the City of Fort Collins and the General Employees Retirement Committee, and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty 2 or liability to other parties who receive this work. Any recipient of this work product who desires professional guidance should engage qualified professionals for advice appropriate to its own specific needs.

Purposes of a valuation  Review demographic and financial experience  Determine the funded status of the plan  Measure adequacy of the plan’s funding policy  Provide financial reporting information pursuant to accounting standards  Provide an assessment and disclosure of risk (see full valuation report for additional detail) . This work product was prepared solely for the City of Fort Collins and the General Employees Retirement Committee, and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty 3 or liability to other parties who receive this work. Any recipient of this work product who desires professional guidance should engage qualified professionals for advice appropriate to its own specific needs.

Necessary Elements of a Valuation Actuaries provide information based on: 1. Actuarial Topics – 2. Legislative/Compliance 3. Other Topics Data Assumptions [company X] Topics  Probability, Pension Plan  Statistics,  Financial mathematics Actuarial So the Plan Sponsor is informed Cost about… Method  Projected annual level of plan benefits Plan of Assets  Funding of those benefits Benefits Valuation Results This work product was prepared solely for the City of Fort Collins and the General Employees Retirement Committee, and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty 4 or liability to other parties who receive this work. Any recipient of this work product who desires professional guidance should engage qualified professionals for advice appropriate to its own specific needs.

Pension Plan Equation Assumptions do affect calculated rates and liabilities  Assumptions do not affect the plan’s long-term contribution cost  contributions investment earnings $ $ $ $ $ $ $ $ $ $ $ $ $ $ Assets 7 $ $ $ PENSION FUND $ $ $ $ $ $ $ expenses $ $ benefits This work product was prepared solely for the City of Fort Collins and the General Employees Retirement Committee, and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty 5 or liability to other parties who receive this work. Any recipient of this work product who desires professional guidance should engage qualified professionals for advice appropriate to its own specific needs.

Data summary 2018 2019  Number of Participants 70 57  Average Age 59.7 59.1 Actives Average Compensation $67,700 $68,838   Average Years of Service 27.2 28.2  Number of Participants 89 78 Vested Inactive  Average Monthly Benefits $859 $854  Number of Participants 242 257 Retirees  Average Monthly Benefits $1,213 $1,249  Total Participants 401 392 This work product was prepared solely for the City of Fort Collins and the General Employees Retirement Committee, and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty 6 or liability to other parties who receive this work. Any recipient of this work product who desires professional guidance should engage qualified professionals for advice appropriate to its own specific needs.

Review of key assumptions  20-year geometric mean return using Milliman capital market assumptions and 2.5% inflation is 6.2% Long-term Investment Return Assumption of 6.25%  6.2% also 10-year outlook from Horizon study  6.25% long-term remains reasonable  Adopted this year; increased life expectancy 2-3 years (M/F) Longevity: Pub-2010 / MP2018  Reflects longer life expectancy for younger members (Generational)  I.e., a 65 year old today has a different life expectancy than someone turning 65 20 years from now Assumed retirement age  Graded based on age (55-69)  15% for retirement from active status; 30% for retirement from terminated status Lump sum election  Adopted this year for terminated status This work product was prepared solely for the City of Fort Collins and the General Employees Retirement Committee, and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty 7 or liability to other parties who receive this work. Any recipient of this work product who desires professional guidance should engage qualified professionals for advice appropriate to its own specific needs. .

Summary of Plan Provisions Normal Retirement Benefit  1.5% x Average Compensation x Credited Service 1. Actuarial Topics – 2. Legislative/Compliance 3. Other Topics Average Compensation  60 Month Average of Annualized Compensation [company X] Topics Pension Plan Credited Service  Hours worked in a plan year ÷ 2,080  Life Annuity (other optional forms available, including single sum Normal Form of Payment payment) Normal Retirement  Age 65 Early Retirement  Age 55 (benefit reduced for earlier commencement) This work product was prepared solely for the City of Fort Collins and the General Employees Retirement Committee, and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty 8 or liability to other parties who receive this work. Any recipient of this work product who desires professional guidance should engage qualified professionals for advice appropriate to its own specific needs.

Financial Data - 2018 Market Value of Assets, January 1, 2018 $ 48,807,732 1. 1. Actuarial Topics – 2. Legislative/Compliance 3. Other Topics Income 2. [company X] Topics a) Contributions $ 1,576,991 Pension Plan b) Income and appreciation (2,458,032) c) Total (881,041) Disbursements 3. a) Monthly benefits $ 3,748,406 b) Lump sum payments 1,099,085 c) Expenses 20,131 d) Total $ 4,867,622 Net Increase/(Decrease) $ (5,748,663) 4. Market Value of Assets, January 1, 2019 $ 43,059,069 5. Return on Plan Assets (Prior Year) -5.2% 6. This work product was prepared solely for the City of Fort Collins and the General Employees Retirement Committee, and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty 9 or liability to other parties who receive this work. Any recipient of this work product who desires professional guidance should engage qualified professionals for advice appropriate to its own specific needs.

Development of projected benefit payments 1/1/2019 valuation's projected benefit payments 2019 project payments 2029 project payments $5.0 million $4.9 million Actual benefit payments (including lump sums):  2018 = $4.8 million  2017 = $3.7 million This work product was prepared solely for the City of Fort Collins and the General Employees Retirement Committee, and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty 10 or liability to other parties who receive this work. Any recipient of this work product who desires professional guidance should engage qualified professionals for advice appropriate to its own specific needs. .

Development of liabilities  Liabilities are the present value of projected benefit payments  Present values are as of a particular date and use a discount rate to convert the estimated value of future payments in today’s dollars  Present values for this valuation  “As of” valuation date is 1/1/2019  The discount rate used is a 6.25% investment return assumption Year of Projected 1/1/2019 Present Value of As of 1/1/2019… Payment Payment Projected Payment Discounted present value at 6.25% of all projected 2019 $5.0 million $5.0 million benefits is $63.4 million 2029 $4.9 million $2.7 million* * $2.7 million invested at 1/1/2019 grows to $4.9 million in 10 years if it earns 6.25% per year This work product was prepared solely for the City of Fort Collins and the General Employees Retirement Committee, and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty 11 or liability to other parties who receive this work. Any recipient of this work product who desires professional guidance should engage qualified professionals for advice appropriate to its own specific needs.

Actuarial Liability 24% Actives Vested Inactive Retirees 11% 65% This work product was prepared solely for the City of Fort Collins and the General Employees Retirement Committee, and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty 12 or liability to other parties who receive this work. Any recipient of this work product who desires professional guidance should engage qualified professionals for advice appropriate to its own specific needs.