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R-1498 - 10/13/2015 - FINANCE - Resolutions Supporting Documents ITEM 7.13.5) vG� Of Ogko 0 ItHUS ��caUN11,�ti. AGEN®A 'TEM Regular Board of Trustees Meeting of October 13, 2015 SUBJECT: Award of Contract for Actuarial Services FROM: Sharon Dangles, Assistant Village Manager/Finance Director BUDGET SOURCE/BUDGET IMPACT: 211-77150, Financial Management Program for Actuarial Services. RECOMMENDED MOTION: The Village Board award a Professional Service Agreement to the firm with the best overall value,Nyhart, Inc.,Deerfield, Illinois, for actuarial services for fiscal year 2016 in the amount of$17,500 and approve Resolution R-1498. Background/History: The Village entered into an agreement for actuarial services on December 13, 2013 with Foster & Foster and Eisenberg Associates. Foster & Foster performed the police actuarial reports for years 2014 and 2015, Other Post Employment Benefit report as required by Governmental Accounting Standards (GASB 45), and special reporting in reference to the pension modelers. Eisenberg Associates performed the fire actuarial reports for years 2014 and 2015. In total,the Village spent $11,600 in 2014 and $29,700 in 2015 for actuarial services, For the year 2015, included was $10,000 for the pension modeler's of the police and fire pension plans. Actuarial fees have increased over time due to Governmental Accounting Standards Board (GASB) requirements as presented in the Village's Comprehensive Annual Financial Report (CAFR). The Village received five (5) proposals for actuarial services consisting of police and fire pension valuations and other post employment benefit valuation. The total one year fee for each firm is as follows: Arthur J. Gallagher& Co. (OPEB Valuation only) $ 8,000 Foster& Foster (excludes Fire Valuation) $ 8,200 Mitchell I. Serota& Associates $ 18,000 Nyhart $ 17,500 Hay Group $ 32,500 The Finance Director and Assistant Finance Director performed an initial evaluation of the proposals and Mitchell 1. Serota&Associates and Nyhart were interviewed. The selection was based on the overall quality of their proposal, fees, qualifications, ability to meet deadlines and understanding the needs of the Village. Nyhart was selected for the best overall value and the ability to convey actuarial information to non-financial constituents, no additional charge to create a pension modeler (similar to what Foster& Foster developed for the Village at a cost of $10,000), on screen technology at Village Board meeting to instantly see results based on various scenarios of investment rate of return, salary, and other assumptions, and efficiencies gained with utilizing one actuarial firm for the Village. Nyhart is an employee benefit consulting, actuarial, and administration firm that has been in business since 1943. Headquartered in Indianapolis, IN, they have 118 employees with offices in Atlanta, Chicago, Denver, Houston, Kansas City, San Diego, and St. Louis. In 2009,Nyhart was selected as a "Company to Watch"by the Indiana Economic Development Corporation and chosen "Best Places to Work". The Village's Relationship Manager will be Mike Zurek who works out of their Chicago office. The agreement term is for one year with four additional one year options for renewal, at the Village's sole option. The Village can terminate the agreement upon 15 day notice. The agreement for actuarial services with Nyhart, Inc. is attached for your review. Recommendation: The Village Board award a Professional Service Agreement to Nyhart Inc., Deerfield, Illinois, for actuarial services for fiscal year 2016. RESOLUTION 2015-FIN-CNTRCT-ACT-R-1498 A RESOLUTION APPROVING AND AUTHORIZING THE AWARD OF A CONTRACT TO NYHART, INC. FOR ACTUARIAL SERVICES WHEREAS, the Village desires to retain a firm to provide the Village actuarial services ("Services'j; and WHEREAS, the Village issued a request for proposals to provide the Village with the Services ("RFP ); and WHEREAS, the Village received five proposals from firms desiring to provide the Village with the Services; and WHEREAS, after evaluating the proposals, the Village has determined that Nyhart, Inc. of Deerfield, Illinois ("Nyhart'l presented the best overall value to the Village based on factors including, without limitation, price, qualifications, and the understanding of the Village's needs; and WHEREAS, the Village desires to enter into an agreement with Nyhart to provide the Services, which agreement is attached to this Resolution as Exhibit A ("Agreement"); and WHEREAS, the President and Board of Trustees have determined that it is in the best interests of the Village to enter into the Agreement with Nyhart; NOW THEREFORE, BE IT RESOLVED BY THE PRESIDENT AND BOARD OF TRUSTEES OF THE VILLAGE OF OAK BROOK, DU PAGE AND COOK COUNTIES, ILLINOIS as follows: Section 1: Recitals. The foregoing recitals are hereby incorporated into, and made a part of, this Resolution as the findings of the President and Board of Trustees of the Village of Oak Brook. Section 2: Approval of Agreement. The President and Board of Trustees hereby approve the Agreement with Nyhart in substantially the same form as attached as Exhibit A, and in a final form approved by the Village Attorney. Section 3: Authorization and Execution of Agreements. The Village Manager and Village Clerk shall be, and hereby are, authorized to execute the Agreement between the Village and Nyhart after receipt of the final Agreement fully executed by Nyhart. Section 4: Effective Date. This Resolution shall be in full force and effect upon passage and approval in the manner provided by law. [SIGNATURE PAGE FOLLOWS] Resolution 2015-FIN-CNTRCT-ACT-R-1498 Authorizing Contract for Actuarial Services Page 2 of 3 APPROVED THIS 13th day of October, 2015 Gopal G. Lalmalani Village President PASSED THIS 13th day of October, 2015 Ayes: Nays: Absent: ATTEST: Charlotte K. Pruss Village Clerk Resolution 2015-FIN-CNTRCT-ACT-R-1498 Authorizing Contract for Actuarial Services Page 3 of 3 EXHIBIT A #37449756 v1 VILLAGE OF OAK BROOK PROFESSIONAL SERVICES AGREEMENT This AGREEMENT is dated as of the SECTION 2. TIME OF PERFORMANCE. The day of October, 2015 ("Agreement"), and is by and Consultant shall perform the Services as mutually agreed between the VILLAGE OF OAK BROOK, an Illinois upon by Village and Consultant, but in no event shall the municipal corporation ("Village's, and THE NYHART Consultant provide the Village the completed annual COMPANY, INC., 707 Lake Cook Road, Suite 250, valuation reports later than March 15`h of each year during Deerfield, Illinois 60015 ("Consultant"). the term of this Agreement("Time of Performance"). IN CONSIDERATION OF the recitals and the SECTION 3. COMPENSATION. mutual covenants and agreements set forth in the Agreement, and pursuant to the Village's statutory powers, the parties A. Agreement Amount. The total amount billed agree as follows: by the Consultant for the Services under this Agreement shall be as follows: SECTION 1. SCOPE OF SERVICES. The Village retains the Consultant to perform, and the Consultant agrees Year FD PD OPEB Attend to perform, all necessary services to perform the work in Pension Pension Valuation Additional connection with the project identified below ("Services"), Valuation Valuation Board of which Services the Consultant shall provide pursuant to the Trustees terms and conditions of this Agreement: Meetings A. Services. 2016 $7,500 $7,500 $2,500 $300/hr A.I.. Pension actuarial services for the Village 2017 $7,750 $7,750 $2,500 $310/hr of Oak Brook Fire Pension Fund, Police Pension Fund, and Other Post-Employment 2018 $8,000 $8,000 $6,000 $320/hr Benefits ("OPEB") Plan for the Village's 2016,2017,2018, 2019, and 2020 fiscal years, 2019 $8,250 $8,250 $3,000 $330/hr which Services are more fully described in the Consultant's Response to the Village's Request 2020 $8,500 $8,500 $6,500 $340/hr for Proposal, dated August 2015, which is attached hereto as Exhibit A. A_2. Starting with the January 2016 FD The Consultant shall not bill, and the Village shall not be Pension valuation, PD Pension valuation, and liable for, any additional fees or charges without the prior the OPEB valuation, Consultant agrees to express written authorization of the Village Manager. provide the Village with a 35 year projection modeler(out to year 2050) in an Excel format, for each plan,that allows the Village to see the B. Taxes, Benefits, and Royalties. Each estimated financial results based on various payment by the Village to the Consultant includes all assumptions, asset returns, amortization applicable federal, state, and Village taxes of every kind and methods, and cost methods to allow the nature applicable to the Services as well as all taxes, Village's Finance Department to perform contributions, and premiums for unemployment insurance, different scenario's allowing the user m old age or retirement benefits, pensions, annuities, or similar change the input information. There is no benefits and all costs,royalties, and fees arising from the use additional cost for the modeler. of, or the incorporation into, the Services, of patented or copyrighted equipment, materials, supplies, tools, B. Term of Agreement. The term of this appliances, devices, processes, or inventions. All claim or Agreement shall begin on the Effective date and right to claim additional compensation by reason of the end after the completion and delivery to the payment of any such tax, contribution, premium, costs, Village of the Oak Brook Fire Pension Fund, royalties, or fees is hereby waived and released by Police Pension Fund, and Other Post- Consultant. Employment Benefits ("OPEB") Plan for the SECTION 4. REPRESENTATIONS OF Village's 2016 fiscal year. The Village, at its CONSULTANT. The Consultant represents and certifies sole discretion, may extend the Term of this that the Services shall be performed in accordance with the Agreement for four one-year periods by standards of professional practice, care, and diligence providing the Consultant written notice. practiced by recognized consultants in performing services 1 of a similar nature in existence at the Time of Performance. the Consultant or this Agreement; (2) as of the date of this The representations and certifications expressed shall be in Agreement, neither the Consultant nor any person employed addition to any other representations and certifications or associated with the Consultant has any interest that would expressed in this Agreement,or expressed or implied by law, conflict in any manner or degree with the performance of the which are hereby reserved unto the Village. obligations under this Agreement; and (3) neither the Consultant nor any person employed by or associated with The Consultant further represents that it is financially the Consultant shall at any time during the term of this solvent, has the necessary financial resources, and is Agreement obtain or acquire any interest that would conflict sufficiently experienced and competent to perform and in any manner or degree with the performance of the complete the Services in a manner consistent with the obligations under this Agreement. standards of professional practice by recognized consultants providing services of a similar nature. Mike Zurek, FCA, C. No Collusion. The Consultant represents EA, MAAA, shall be primarily responsible for carrying out and certifies that the Consultant is not barred from the Services on behalf of the Consultant ("Key Project contracting with a unit of state or local government as a Personnel'). The Key Project Personnel shall not be result of (1) a delinquency in the payment of any tax changed without the Village's prior written approval. The administered by the Illinois Department of Revenue unless Consultant shall provide all personnel necessary to complete the Consultant is contesting, in accordance with the the Services. procedures established by the appropriate revenue act, its liability for the tax or the amount of the tax, as set forth in SECTION 5. INDEMNIFICATION; INSURANCE; Section 11-42.1-1 et seq. of the Illinois Municipal Code, 65 LIABILITY. ILCS 5/11-42.1-1 et seq.; or(2) a violation of either Section 33E-3 or Section 3313-4 of Article 33E of the Criminal Code A. Indemnification. The Consultant of 1961, 720 ILCS 5/33E-1 et seq. If at any time it shall be proposes and agrees that the Consultant shall indemnify and found that the Consultant has, in procuring this Agreement, save harmless the Village against all damages, liability, colluded with any other person,firm,or corporation,then the claims, losses, and expenses (including attorneys' fee) that Consultant shall be liable to the Village for all loss or may arise, or be alleged to have arisen, out of or in damage that the Village may suffer, and this Agreement connection with the Consultant's performance of, or failure shall,at the Village's option,be null and void. to perform,the Services or any part thereof, or any failure to meet the representations and certifications set forth in D. Termination. Notwithstanding any other Section 4 of this Agreement. provision hereof, the Village may terminate this Agreement at any time upon 15 days prior written notice to the B. Insurance. The Consultant acknowledges Consultant. In the event that this Agreement is so and agrees that the Consultant shall, and has a duty to terminated,the Consultant shall be paid for Services actually maintain adequate insurance, in an amount, in a form, from performed and reimbursable expenses actually incurred, if companies, and pursuant to the terms, as set forth in Exhibit any, prior to termination, not exceeding the value of the B. The Consultant's maintenance of adequate insurance shall Services completed. not be construed in any way as a limitation on the Consultant's liability for losses or damages under this E. Compliance with Laws and Grants. Agreement. Consultant shall give all notices, pay all fees, and take all other action that may be necessary to ensure that the C. No Personal Liability. No elected or Services are provided, performed, and completed in appointed official or employee of the Village shall be accordance with all required governmental permits, licenses, personally liable, in law or in contract, to the Consultant as or other approvals and authorizations that may be required in the result of the execution of this Agreement. connection with providing, performing, and completing the Services, and with all applicable statutes, ordinances, rules, SECTION 6. GENERAL PROVISIONS. and regulations, including without limitation the Fair Labor Standards Act; any statutes regarding qualification to do A. Relationship of the Parties. The business; any statutes prohibiting discrimination because of, Consultant shall act as an independent contractor in or requiring affirmative action based on, race, creed, color, providing and performing the Services. Nothing in or done national origin, age, sex, or other prohibited classification, pursuant to this Agreement shall be construed to: (1) create including, without limitation, the Americans with the relationship of principal and agent, employer and Disabilities Act of 1990,42 U.S.C. §§ 12101 et seq., and the employee, partners, or joint venturers between the Village Illinois Human Rights Act, 775 ILCS 511-101 et seq. and Consultant; or(2)to create any relationship between the Consultant shall also comply with all conditions of any Village and any subcontractor of the Consultant. federal, state, or local grant received by the Village or Consultant with respect to this Agreement or the Services. B. Conflicts of Interest. The Consultant Consultant shall be solely liable for any fines or civil represents and certifies that, to the best of its knowledge: (1) penalties that are imposed by any governmental or quasi- no Village employee or agent is interested in the business of governmental agency or body that may arise,or be alleged to 2 have arisen, out of or in connection with Consultant's, or its subcontractors, performance of, or failure to perform, the Services or any part thereof. Every provision of law required by law to be inserted into this Agreement shall be Village of Oak Brook deemed to be inserted herein. 1200 Oak Brook Road Oak Brook,Illinois 60523 F. Default. If it should appear at any time Attention: Sharon Dangles, that the Consultant has failed or refused to prosecute, or has AVM/Finance Director delayed in the prosecution of, the Services with diligence at a rate that assures completion of the Services in full Notices and communications to the Consultant shall be compliance with the requirements of this Agreement, or has addressed to, and delivered at,the following address: otherwise failed, refused,or delayed to perform or satisfy the Services or any other requirement of this Agreement("Event The Nyhart Company,Inc. of Default', and fails to cure any such Event of Default 707 Lake Cook Road, Suite 250 within ten business days after the Consultant's receipt of Deerfield, Illinois 60115 written notice of such Event of Default from the Village, Attention: Mike Zurek,FCA,EA,MAAA then the Village shall have the right,without prejudice to any other remedies provided by law or equity, to (1) terminate L Waiver. Neither the Village nor the this Agreement without liability for further payment; or (2) Consultant shall be under any obligation to exercise any of withhold from any payment or recover from the Consultant, the rights granted to them in this Agreement except as it any and all costs, including attorneys' fees and shall determine to be in its best interest from time to time. administrative expenses, incurred by the Village as the result The failure of the Village or the Consultant to exercise at any of any Event of Default by the Consultant or as a result of time any such rights shall not be deemed or construed as a actions taken by the Village in response to any Event of waiver of that right, nor shall the failure void or affect the Default by the Consultant. Village's or the Consultant's right to enforce such rights or any other rights. G. Assignment. This Agreement may not be assigned by the Village or by the Consultant without the J. Third Party Beneficiary. No claim as a prior written consent of the other party, third party beneficiary under this Agreement by any person, firm, or corporation shall be made or be valid against the H. Notice. All notices required or permitted Village. to be given under this Agreement shall be in writing and shall be delivered: (1) personally; (2) by a reputable K. Governing Law; Venue. This Agreement overnight courier; or by (3) by certified mail, return receipt shall be governed by, construed and enforced in accordance requested, and deposited in the U.S. Mail, postage prepaid. with the internal laws, but not the conflicts of laws rules, of Unless otherwise expressly provided in this Agreement, the State of Illinois. Venue for any action arising out of this notices shall be deemed received upon the earlier o£ (a) Agreement shall be in the Circuit Court for DuPage County, actual receipt; (b) one business day after deposit with an Illinois. overnight courier as evidenced by a receipt of deposit; or(c) three business days following deposit in the U.S. mail, as J. Exhibits. If any conflict exists between this evidenced by a return receipt. Notices and communications Agreement and any exhibit attached hereto, the terms of this to the Village shall be addressed to, and delivered at, the Agreement shall prevail. following address: ATTEST: VILLAGE OF OAK BROOK By: By: Charlotte Pruss,Village Clerk Riccardo F. Ginex,Village Manager ATTEST: THE NYHART COMPANY,INC. By: By Title: Its: i 3 i ayhart &EMPLOYEE BENEFITS Village of Oak Brook Proposal to Provide Actuarial Services for the Police and Fire Pension Funds and OPEB Actuarial Services Presented August, 2015 Presented By: Mike Zurek, FCA, EA, MAAA Randy Gomez, FSA, FICA, MAAA The N hart Company, Inc. The N hart Company, Inc. T- ° 707 Lake Cook Road, Suite 250 8415 Allison Pointe Boulevard, Suite 300 Deerfield, IL 60015 Indianapolis, IN 46250 _D, 847-400-9601 /800-428-7106 X 3700 317-845-3595/800-428-7106 X 3595 317-845-3670 FAX 317-845-3654 FAX mike.zurek @nyhart.com randy.gomez @nyhart.com Indianapolis Learn more at www.nyhart.com August 26, 2015 C. Lette r Ms. Rania Serences Senior Purchasing Assistant Village of Oak Brook 1200 Oak Brook Road Oak Brook, IL 60523 Dear Ms. Serences: Thank you for considering our proposal for actuarial services for the Village of Oak Brook. Naturally, we believe Nyhart would be the best choice for the Village. Let me tell you why we believe that to be true. We are uniquely qualified to serve the Village as we have supplied the same services to a great many other governmental entities across the country...states, counties, cities, towns, school districts, colleges, universities, and villages. We also believe there are certain advantages to the Village in having Nyhart perform their requested services. Customer Service: Most actuaries can get the numbers right; however, where many fail is in customer service. At Nyhart, we believe customer service has to be our #1 priority. As an employee-owned company, our livelihood depends on satisfying our clients and keeping them that way. The extra effort we put into customer service shows up in a number of places — returning phone calls the same day, responding to questions without"turning on the clock", and always thinking of ways to improve the process and deliverables — are just a few. Our goal is to be treated as an extension of your staff and as a trusted partner; accordingly, we will respond in the way that best attains those goals. Other areas where our focus on customer service shines through is our flexibility in working with our clients. We know "one size doesn't fit all" and we tailor our services to meet the specific needs of each client. When thinking about the future our clients face, we are always asking ourselves, 'What would we want to know to manage the retirement system?." It's questions like that that have sparked the innovating ideas and tools we use with our clients today. Communication: We know financial equations and charts can be rather daunting for the non- actuary; that is why we prefer to summarize information in a way that is easier for our clients to use. Our communication approach is not just to give the minimum necessary information but to educate our clients as we explain actuarial issues. This communication approach (and the associated tools) allow our clients to make effective decisions regarding their plans. We consistently hear feedback from our clients that our communication style is a key reason they love to work with us. 8415 Allison Pointe Boulevard Suite 300 Indianapolis,IN 46250 (p)317-845-3500 (p)800-428-7106 (f) 317-845-3650 www.nyhart.com An Alliance Benefit Group Licensee nyhert Ms. Rania Serences August 26, 2015 Page 2 One example of our"easier to understand" approach is the development of our management summary report. Actuarial reports tend to contain so much information that the important results get lost in the details. At Nyhart, we try to avoid this concern by providing a management summary report that brings the most important information to the forefront and allows our clients to more efficiently manage their plans. Management summary reports generally include the key valuation results, cost projections, topics of interest for our clients, and retirement plan trend information. Experienced Team: We have selected well-qualified actuaries to serve as part of your team. Mike Zurek and Nick Meggos will lead your pension team and Randy Gomez and Evi Laksana will lead your healthcare team. Firm Size and Background: We are a national firm; however, we still have the small-firm touch when it comes to working with our clients and pricing. Nyhart works with many clients, both private and public sector plans. We believe this is a benefit to our clients as our consultants experience and resolve many different challenges and then that knowledge can be applied to your projects. Again, Nyhart is an ESOP company. This means every employee is an owner and has a vested interest in the satisfaction of our clients. We all recognize that for us (Nyhart) to succeed, we need to provide exceptional service so that our clients can successfully manage their plans and continue to offer the best benefits to their participants. Quality: We get the numbers right. We have built processes to improve efficiencies and ensure accuracy. All actuarial information is technically reviewed and peer reviewed before being delivered to the client. Last but not least, we love what we do. This may sound cliche, but it's the truth. We believe this shows through in our high-quality services and client relationships. We would truly appreciate the opportunity to become your trusted business partner. If you have any questions regarding our response, please do not hesitate to call Mike or Randy at 800-428-7106, or email, mike.zurek @nyhart.com or randy.gomez @nyhart.com. All information contained in our enclosed proposals is true and complete, to the best of our knowledge. LEANNE M WILLETT Sincere) Notary Public-Seal Sincerely, State of Indiana Nyhart _ State of INDIANA ) )SS: My Commission Expires Oct 1,2021 County of MARION ) / On this,the 26'h day of August, 2015, before me, a notary public,the undersigned officer, personally appeared Tayt V. Odom, known to ayt V. Odom, FSA, FICA, EA, MAAA me (or satisfactorily proven) to be the person whose name is COO & Consulting Actuary subscribed to the within instrument, and acknowledged that he f Principal executed the same for the purposes therein contained. In witness hereof, I hereunto set my hand and official seal. Notary Public nyhart ACTUARY &EMPLOYEE BENEFITS Table of Contents A. Contact Information ....................................................................................1 B. List of Qualifications and Certifications, and Required Licensing.........2 1. Firm Overview....................................................................................2 Other Services Available....................................................................3 2. Consulting Actuary/ Relationship Manager - Mike Zurek...................4 Consulting Actuary - Nick Meggos......................................................5 Consulting Actuary/GASB Actuary/ Peer Review - Randy Gomez...6 Consulting Actuary/GASB Project Manager- Evi Laksana...............7 Actuarial Credentials from the SOA....................................................8 3. Nyhart's Understanding of the Work to be Performed.......................10 Our Approach to the Transition of Actuarial Services..................11 Our Approach to Annual Pension Actuarial Valuations ............... 12 Our Approach to Recommending Appropriate Pension Assumptions .....13 Nyhart Pension Tools .................................................................13 Our Approach to OPEB Actuarial Valuations....................................14 High-Level Project Execution Plan..............................................14 Work with the Village of Oak Brooks' Staff and Auditors.............14 Methodology for Selection OPEB Actuarial Cost Method............15 Sample Timeline for GASB Valuation Process ...........................17 Our"Deadline" Philosophy..........................................................17 4. References - All Current and /or Past Illinois Clients .......................18 5. Fees.................................................................................................21 Attachment D - Schedule of Audit & Professional Fees Appendix............................................................................................................22 Village of Oak Brook nyhart ACTUARY &EMPLOYEE BENEFITS "Know what your customers want most and what your A. Contact Information company does best. Focus on where those two meet." Kevin Stirtz 1. Name of Proposer: The Nyhart Company, Inc. 2. Headquarters: 8415 Allison Pointe Boulevard, Suite 300 Indianapolis, IN 46250 317-845-3500/800-428-7106/317-845-3650 FAX www.nyhart.com Servicing Offices: Chicago Office St. Louis Office Indianapolis Office Mike Zurek Nick Meggos Randy Gomez 707 Lake Cook Road, Suite 250 101 W. Vandalia Street, Suite 240 8415 Allison Pointe Blvd, Ste. 300 Deerfield, IL 60015 Edwardsville, IL 62025 Indianapolis, IN 46205 mike.zurek @nyhart.com nick.meggos @nyhart.com randy.gomez @nyhart.com 847-400-9601 /800-428-7106 618-307-9090/800-428-7106 317-845-3595 /800-428-7106 317-845-3670 FAX 317-845-3654 FAX 317-845-3654 FAX Village of Oak Brook P a g e l 1 ayhart &EMPLOYEE BENEFITS B. List of Qualifications and Certifications, and Required Licensing 1. Firm Overview Nyhart is an employee benefit consulting, actuarial, and administration firm that has been in business since 1943. We are 100% employee owned, a unique factor that makes the success of our clients personally important to every one of our employee-owners. We provide actuarial services, consulting and administrative services for defined contribution and defined benefit plans, consulting and administrative services for Flexible Spending Accounts (FSA), Health Reimbursement Arrangements (HRA), Health Savings Accounts (HSA) and COBRA, as well as human resource consulting and compensation studies to more than 1,000 clients in 48 States. Headquartered in Indianapolis, IN, we have 118 employees with offices in Atlanta, Chicago, Denver, Houston, Kansas City, San Diego, and St. Louis. In 2009, our Company was selected as a "Company to Watch" by the Indiana Economic Development Corporation. We are also one of a very few firms that has been chosen a "Best Places to Work" company every year since we started in the program in 2009. Both honors are due to our dedicated, high-end staff. Nyhart is an Indiana corporation, having been incorporated in the State of Indiana in September, 1955 "The single most important thing to remember about any enterprise is that there are no results inside its walls. The result of a business is a satisfied customer." Peter Drucker Village of Oak Brook P a g e 12 nyhert ACTUARY &EMPLOYEE BENEFITS Other Services Available • Retirement Services • Health Care Actuarial Consulting ► Defined Benefit ► GASB 45 Interactive Modeler ❖ Pension Financial Manager (See the Appendix) ► Medicare Part D Subsidy Report ❖ Pension Design Modeler(See the Appendix) ► Rate Setting, Design Modeling, & IBNR Reserving for Self-Insured Plans ❖ Online Pension Administration Software ► Medicare Part D Creditable Coverage Determination ❖ Benefit Statements ► ACA Minimum Actuarial Value Determination ► Defined Contribution ► Annuity Purchases and Consulting ❖ Balance Forward • HR Consulting ❖ Daily Valuation • Compensation Studies • Flex Administration ► Flexible Spending Accounts/Dependent Care Accounts ► Health Savings Accounts ► Health Reimbursement Accounts ► COBRA There are no expected changes in the ownership of our company. Village of Oak Brook P a g e 13 nyhart ACTUARY &EMPLOYEE BENEFITS "We are what we repeatedly do. Excellence then, is not an act,but a habit." Aristotle 2. Consulting Actuary / Relationship Manager Mike Zurek, FCA, EA, MAAA Mike works out of our Chicago Office. He has 28 years of pension experience and works with several different types of plans with varying sizes and structures. Mike will work directly with the Village of Oak Brook to provide timely and thorough valuation results utilizing his experience and detailed knowledge of your plan. Clients find Mike's ability to simply explain complex actuarial topics to be an important element of the actuarial services he provides. Educations` • B.S. in Actuarial Science, University of Illinois Professional Designations , • Enrolled Actuary • Fellow of the Conference of Consulting Actuaries • Member of the American Academy of Actuaries g, Corporate Role • Responsible for consulting with clients • Specializes in plan design and sustainability • Principal of the firm Village of Oak Brook P a g e i 4 nyhart ACTUARY &EMPLOYEE BENEFITS Consulting Actuary Nick Meggos, FICA, EA Nick will work closely with Mike to provide all pension-related services. His background includes: Education • B.S. in Mathematics and Economics - Bradley University Current Work Assignments • Performs accounting and funding valuations • Performs retirement program design studies =° • Consults on retirement plan sustainability • Consults on total retirement (DB and DC) adequacy • Has 16 years of pension actuarial experience • Development of pension plan administration solutions Education • B.S. in Mathematics and Economics - Bradley University Corporate Role • 16 years of pension actuarial experience • Provides leadership for Defined Benefit Business Development • Manages several of our retirement professionals Village of Oak Brook P a g e 5 nyhart ACTUARY &EMPLOYEE BENEFITS Consulting Actuary / GASB Actuary / Peer Review Randy Gomez, FSA, FCA, MAAA Randy Gomez, a senior actuarial consultant in our health area, will be leading the GASB r project team. Randy has been with Nyhart for 20 years and provides a broad range of healthcare related services to his clients. Since the inception of GASB 45 in July 2004, Randy has led the Nyhart healthcare team in completing over 600+ GASB 45 valuations. In addition to his experience in GASB 45 valuations, Randy has also consulted on key postretirement benefit plan issues such as premium rate setting, cost projections, funding strategies, bargaining, and optimization of benefit plan structures. Some highlights of Randy's background follow: Education • B.B.A. and M.A.S in Actuarial Science, Georgia State University Current Work Assignments • Senior consultant on eight key accounts and client relationships • Peer review on all first year clients (24 clients per year on average) and more complicated clients • Research and development and business development Corporate Role • Chief Healthcare Actuary and Principal • Consults on key accounts, determines team policies and procedures, responsible for overall quality of services. • Has over 29 years in the retirement business including 18 years with public sector clients GASB 45 and Healthcare Specialties • Final peer review of work products • Modeling of plan design and funding strategies • Long-term cost projections Village of Oak Brook P a g e 16 n R� hart ACTUA &EMPLOYEE BENEFITS Consulting Actuary / GASB Project Manager Evi Laksana, ASA, MAAA Evi will be the Project Manager for the GASB team. As Project Manager, Evi and her team of analysts will manage the day-to-day operations of the engagement, which include activities such as project planning and execution, quality control, and on-time delivery of our GASB reports. Evi has been with Nyhart for eight years. Some highlights of Evi's background follow: Education • B.S. Actuarial Science and Statistics, Purdue University Current Work Assignments • Manages OPEB client base served by Indianapolis office Coordinates 3 teams of senior/junior actuarial analysts • Project manager for 15 funded GASB clients (49,000 participants and $480 million in assets) • Main analyst for takeover cases; main peer review for most other OPEB clients. Corporate Role • Responsible for project execution and deliverables • Manages team of healthcare actuarial analysts GASB 45 and Healthcare Specialties • Postretirement healthcare valuations and assumption setting • Development of modeling tools • Health rate setting and budget projections • Part D plan administration Village of Oak Brook P a g e 17 nyhart ACTUARY &EMPLOYEE BENEFITS Actuarial Credentials from the Society of Actuaries Michael Zurek Nick Haralambos Meggos Personal Information Designations Personal Information Designations Michael Zurek EA 1997 Nick Haralambos Meggos EA 2009 Nyhart MAAA 2007 Nyhart FCA 2013 8415 Allison Pointe Blvd. FICA 2011 101 West Vandalia Street Suite 300 Suite 240 Indianapolis,IN 46250-4201 Academic Degrees Edwardsville,IL 62025 Academic Degrees United States United States Other Professional Designations Other Professional Designations Tel: NA Tel: N/A Fax: NA Email: nick.meggos @nyhart.com Email: mike.zurek@nyhart.com Industry Industry Consulting Consulting Primary Area of Practice Primary Area of Practice Specializations Specializations Society of Actuaries Sections Society of Actuaries Sections Village of Oak Brook P a g e 18 nyhart ACTUARY &EMPLOYEE BENEFITS Evi Kusumadewi Laksana F[Randy Gomez Personal Information Designations Evi Kusumadewi Laksana ASA 2009 ormation Designations Nyhart MAAA 2009 mez EA 1986 8415 All ison Pointe Blvd Nyhart MAAA 1990 Suite 300 SOA Continuing Professional 8415 Allison Pointe Blvd FSA 1991 Indianapolis, IN 46250-4201 Development Requirement Suite 300 FICA 2014 United States Compliant(2013—2014) Indianapolis,IN 46250-4201 Compliant(2012—2013) United States SOA Continuing Professional Development Requirement Tel: (317)845-3597 Academic Degrees Compliant(2013—2014) Fax: NA Tel: 1 (317)845-3395 Compliant(2012—2013) Email: evi.laksana@nyhart.com Other Professional Designations Fax: 1 (317)845-3654 Email: randy.gomez@nyhart.com Academic Degrees Industry B.B.A. M.A.S. Consulting Other Professional Designations Primary Area of Practice Health Industry Consulting Specializations Financial Reporting Primary Area of Practice Health Society of Actuaries Sections Health Specializations Employee Health Benefits Health Insurance-Commercial Public Sector—Pension Underwriting Society of Actuaries Sections Health Reinsurance Village of Oak Brook P a g e 9 nyhart ACTUARY &EMPLOYEE BENEFITS 3. Nyhart's Understanding of the Work to be Performed Nyhart fully understands the work to be performed as requested by the Village of Oak Brook. We have provided actuarial services since our company was founded in 1943 and we provide the same services requested to several hundred retirement plans. We know how to get the numbers right. In addition, we put forth the extra effort to summarize information in a way that is easier for our clients to understand. Our communication approach is to educate our clients as we explain actuarial topics. Our communication approach and associated tools allow our clients to make effective decisions regarding their pension plans. We consistently hear feedback from our clients that our communication style is a key reason they love to work with us! One example of this extra effort is our development of management summary report. Actuarial reports tend to contain so much detail, the key results get lost in translation. At Nyhart, we avoid this issue by providing a management summary report that brings the most important information to the forefront and allows our clients to more efficiently manage their plans. Management summary reports generally include the key valuation results, cost projections, topics of interest for our clients, and retirement plan trend information. Nyhart serves several Police and Firefighters pension plans in other states. We also serve several Fire Protection Districts. We currently serve approximately 55 municipal retirement systems and approximately 425 retiree healthcare accounts. Our Approach to the Client Relationship An integral part of being the actuarial consultant to the Village of Oak Brook is the delivery of proactive consultant and advisement on all matters that may affect the Village. Our philosophy for providing actuarial consulting services is based on our desire to be a value-added resource and trusted advisor to our clients. We believe this is achieved by consistently performing requested services at a level that meets or exceeds the client's expectations, by putting forth the extra effort to ensure the client's satisfaction, and by maintaining frequent communication with our clients. It is through this kind of relationship that excellent service becomes routine. We prefer to interact with our clients as if we were a part of their staff. We want our clients to call on us with questions and requests. It tells us that we are doing the right things. Village of Oak Brook P a g e 110 nyhart ACTUARY &EMPLOYEE BENEFITS Nyhart will participate in the labor negotiations to the extent the Village requests, though we feel our involvement early in the process benefits all parties. Pension negotiations generally follow one of two paths: a desired plan design or a desired cost target. In either case, Nyhart has the expertise and resources to complement the process. For desired plan designs, we can provide the long-term costs of changes in additional to benchmarking plan design decisions being made across the country. For cost targets, Nyhart can determine changes needed to achieve the desired target, which may include hybrid plan designs, defined contribution plans, and/or plan freezes in addition to the traditional benefit formula changes. Workforce projections may reveal a particular demographic group being significantly impacted, and this becomes valuable information when crafting final plan designs and communications to members. However we are used, Nyhart commits itself to deliver timely & accurate results. Our Approach to the Transition of Actuarial Services Conference call or face-to-face meeting with the This provides us an opportunity to better understand timing,the Village's specific needs, define Village to kick-off our relationship deliverables, etc. Our first step in this relationship is to ensure we fully understand your retirement plans and make sure we can match the prior year results. During this process, we will complete an audit of last Match prior year actuarial results year's valuation. Any significant differences will be reconciled with the actuary who prepared the report. In addition,we will identify any items that may warrant further review with the Village. We do not charge for these services. This is our investment in the relationship. Gather data inputs for the current valuation Once we've collected the participant data, we will complete a comprehensive data reconciliation, (participant data and assets) check data for reasonableness, and ask any questions that warrant further information. Complete liability calculations and determine gain Trace liability and cost movements and explain factors creating increases or decreases to plan loss costs. The management summary report is designed to provide the key results for the Village's Develop management summary reports and draft consideration, identify topics that my warrant further review, review cost projections, and share valuation reports latest trends in the retirement landscape. The valuation report documents all calculations, assumptions, and participant data used in the valuation. We prefer to present valuation results in person. This allows us and our clients to have an open, Present valuation results productive meeting to ensure we have provided our clients with the information they need and answered all questions. Village of Oak Brook P a g e 111 nyhart ACTUARY &EMPLOYEE BENEFITS I When we present valuation results,we consider them to be in draft form. We view the results as draft until we have presented the results and gathered feedback from our clients. Issue final valuation reports Issue final valuation report with any refinements identified during the presentation of results. Our Approach to Annual Pension Actuarial Valuations The annual valuation steps are fairly standard and we expect the valuation to be complete within 8 to 12 weeks after receiving all required data. The valuation timeline is determined based on the Village's specific needs. The following outlines the typical valuation steps: • Annual kick-off meeting/conference call to discuss timing requirements for the valuation, data required by Nyhart to complete the valuation, and identify changes (plan amendments, assumptions, etc.) that may be needed. • Receive, reconcile and clean participant data. • Review benefit provisions coding and actuarial assumptions coding. Make any necessary changes. • Run liability program, check individual test cases, and compare liability results to the projected results based on the prior valuation. • If actual results vary significantly from projected results, pinpoint the source of the differences and confirm that this year's results are accurate. • Develop annual recommended contribution based on submitted asset values and calculated liability results. • Present the valuation results to the client. In addition to the formal report, we provide a management summary report that allows the plan sponsor to focus on the key results. Included in the management summary is several cost projections showing estimated costs over the next five years. These projections are very helpful as different funding strategies are considered. • After presenting the valuation results, the formal report will be issued. Village of Oak Brook Page 112 nyhart ACTUARY &EMPLOYEE BENEFITS Our Approach to Recommending Appropriate Pension Actuarial Assumptions and Methods Assumptions that we use are based on the specifics of each plan. When assessing the assumptions for a plan, we look to a number factors (plan provisions, asset allocation, historical returns, past pay increases, etc.) to help set a reasonable range for each assumption. We then work collaboratively with the Board to determine the best estimate. We recommend reviewing the assumptions every 3-5 years to ensure assumptions remain reasonable." It is our responsibility to recommend appropriate and reasonable methods and assumptions to the Village of Oak Brook. We believe the determination of appropriate actuarial assumptions is best achieved through the explicit analysis of historical experience and trends, current employer policies (contracts, staffing forecasts, etc.), and reliable future trends and forecasts. Once each individual assumption is determined, the set of assumptions should be checked for consistency and overall reasonableness. A basic tenet of public pension policy is that the burden of pension costs borne by current and future generations of taxpayers should be as equal as possible. For contributory plans, this tenet should be extended to the generations of contributing members. Generational inequalities can be avoided by using reasonable and experience-based assumptions and methods. Our approach includes periodic experience studies resulting in recommendations that are each expected to minimize inequalities. Nyhart Pension Tools As we continue to invest in our business, we have developed a number of tools that add value for our clients. One of these tools often used by our clients is our Pension Financial Manager. This tools helps our clients make well-informed yet difficult decisions by providing results under multiple different economic scenarios. More details about this tool are presented on the next page. Another key tool Nyhart's clients often use is our Pension Design Manager. This tool focusses on evaluating plan design and helping plans understand things like pay replacement and plan value at various age and service combinations. Samples are in the Appendix. Village of Oak Brook P a g e 113 n hart ACTUA Y &EMPLOYEE BENEFITS Our Approach to OPEB Actuarial Valuations High-Level Project Execution Plan Project planning is what Nyhart does best. In order to efficiently manage our more than 300 municipal clients, understanding what needs to be done and when is critical. For all of our health care projects, the project steps are very similar. Briefly, the steps are described below: Understanding what has been done in the past and what needs to be done now and when it needs to be done is key to a successful project. 1. Planning Identify the players involved and assign appropriate tasks. We are used to working with the client's staff and their other advisors(consultants,TPAs, lawyers,accountants). 2. Data The client is responsible for providing timely data to Nyhart.The data will be screened for errors and problems resolved. 3. Assumptions All actuarial calculations involve projections of future outcomes so it is necessary to use reasonable assumptions. It is our policy to set assumptions based on actual experience to the extent it is creditable and explain why the assumptions were recommended. Nyhart will use Proval valuation software for the GASB 45 valuations. Proval is the leading actuarial valuation software because of its 4. Calculations flexibility in handling complicated cases and transparency in its calculations. For the health care relative values, Nyhart uses the HealthMAPS underwriting software leased from Towers Watson. It is our practice to release actuarial products on a preliminary basis to give our clients the opportunity to review the results and have a 5. Review Session constructive discussion on the results and ask questions. If necessary,data or assumption are changed based on feedback from the review session and the results updated. 6. Final Results After all questions have been answered and the client approves the preliminary results,the final signed report is released. Work with the Village of Oak Brook's Staff and Auditors Generally speaking, Nyhart would like to relieve as much responsibility from the Village as possible. However, we will rely on the Village to provide accurate census data, be prepared to discuss different actuarial assumptions, and to assist with other third-party vendors (if appropriate). Village of Oak Brook P a g e 114 nyhrart ACTUARY &EMPLOYEE BENEFITS Nyhart typically will interact with the Village and its' auditors in the following areas: Collection of Data Formal data request will be prepared and discussed with the Village's staff to clarify what is needed and and Documents in what format. It is our policy to allow clients to use whatever systems and programs they are comfortable with instead of forcing them to comply with our internal requirements. Project Management Key project deadlines will be discussed and agreed to early in the engagement. Our clients tell us when they want their results and it is our responsibility and job to adhere to those expectations. The Village will be expected to participate in the assumption setting process to help create modeling assumptions that are experience-based and appropriate for retiree health care purposes. Assumption Setting Our data request will include specific historical information that will help Nyhart develop appropriate assumptions. Review of Preliminary The Village's staff will have the opportunity to review and discuss the preliminary GASB 45 results prior to Results finalizing the report. This review session is typically done in a conference call and last 45—60 minutes. Auditors Outside auditors are welcome to ask questions or request documentation necessary to do their due diligence. Methodology for Selecting OPEB Actuarial Cost Method and Amortization Period Our approach will be to calculate the required contribution amounts using each of the approved actuarial cost methods and amortization periods allowed under the standard. We fully expect the results to produce a fairly large range from the lowest to highest liability-producing method. Our actuarial software (Proval) is designed to produce each set of results very efficiently during the calculation phase. We will be able to make a recommendation to the Village for the most appropriate cost and amortization method once we understand your current programs, underlying demographics, and future salary and benefits expectations. Village of Oak Brook P a g e 115 ACTUARY &EMPLOYEE BENEFITS The most common actuarial methods used for government accounting t and funding purposes are: w • the aggregate cost method (for its simplicity of use), • the entry age normal method as a percentage of salary (for its r Y g p 9 Y stability as a percentage of total salary), and • the unit credit cost method (since it generally produces the lowest ` contribution of all the approved methods). Our goal in the assumption setting process is to recommend appropriate assumptions that are founded on actual employer experience and can be substantiated with reliable data. On a periodic basis, the actuarial assumptions will be re-evaluated for reasonableness and future expectations using a comparison of expected and actuarial experience as well as discussions with the Village staff. Village of Oak Brook P a g e 116 n '{�-,�r/ hrart ACTUARY&EMPLOYEE BENEFITS Sample Timeline for GASB Valuation Process Step Milestone Responsibility Estimated Timeline 1 Meeting to discuss GASB requirements and actuarial Client & Nyhart 1 st Week After Hiring assumptions and confirm expectations and deadline. Decision is Made 2 Collection of census and premium information Client 2 to 4 Weeks After Complete 3 Data preparation, programming, testing, and peer review Nyhart Information is Received from the Client 4 Preparation of draft report Nyhart Included Above 5 Meeting to review preliminary report Client & Nyhart 1st Week After Preliminary Report is Released 6 Internal review and discussion of preliminary report Client 7 Release of final report following any changes to plan provisions, Nyhart 1st Week After Client Notifies assumptions, and/or data y Nyhart of Changes 8 Meeting to review final report Client & Nyhart 1 st Week After Final Report is Released Our "Deadline" Philosophy It is our philosophy that the GASB 45 valuation is a significant project that must be managed aggressively in order to meet the deadlines that the Village of Oak Brook might be under. The deadlines within our work plan are, essentially, arbitrary for any single municipality. We work on YOUR schedule. We will meet YOUR DEADLINE. Village of Oak Brook Page 117 nyharr ACTUARY &EMPLOYEE BENEFITS "Customer service is not a department, it's everyone's job. Anonymous" 4. References b ,. ,h City of East Peoria 309-698-4715 100 South Main Street Terri Gualandi,Treasurer terrigualandi @cityofeastpeoria.com GASB Actuarial/Part D Attestation East Peoria,IL 61611 City of Rock Island Cynthia L Parchert (309)732-2117 1528 Third Avenue Finance Director parchert.cynthia 0 rigov.org Actuarial-Police&Firefighters Rock Island,IL 61201-8678 City of Sandwich Tim Barker 815-786-9321 144 E.Railroad Street Accounting Clerk accounting.clerk@sandwich.i1.us GASB Actuarial Sandwich,IL 60548 City of Waukegan Tina Smigielski 847-599.2540 100 N.Martin L King,Jr.Avenue Director of Finance&Administration tina.sm igielski 0 waukeganil.gov GASB Actuarial Waukegan,IL 60085 Greater Peoria Mass Transit Christine Feng 309-676-4040 2105 NE Jefferson Avenue Finance Director cfeng @ridecitylink.org GASB Actuarial Peoria, IL 61603 Greater Peoria Sanitary District 309-272-4830 2322 South Darst Street Joseph Merkle jmerkle @gpsd.org GASB Actuarial Peoria,IL 61607 Illinois Education Association Linda Fox 217-544-0706 Actuarial-Staff Retirement Plan 100 East Edwards Street Insurance Administrator/Accounting linda.fox @ieanea.org Part D Attestation Springfield,IL 62704 Joliet Public Schools District 86 815-740-3196 420 N.Raynor Drive Joan Holm jholm @joliet86.org GASB Actuarial Joliet,IL 60435 Mason County 309-543-6661 100 N Broadway William Blessman cclerk @grics.net GASB Actuarial Havana,IL 62644 McLean County 309-888-5148 115 E.Washington Street,Room 402 Michelle Anderson miche lle.anderson @mcleancountyil.gov GASB Actuarial Bloomington,IL 61701 Mt.Carmel Public Utility Co. 618-262-5151 FASB Actuarial 316 N.Market Street Margaret Felts mfelts @mtcpu.com Actuarial-Retirement Plan for Employees Mount Carmel,IL 62863 Village of Oak Brook P a g e 118 nyhart ACTUARY &EMPLOYEE BENEFITS Peoria Park District 309-681-2802 2218 North Prospect Road Karrie Ross kross @peoriaparks.org GASB Actuarial Peoria,IL 61603 Peoria Public Schools District 150 Michael McKenzie 309-282-2034 3202 N.Wisconsin Avenue Assistant Controller michael.mckenzie @psd150.org GASB Actuarial Peoria,IL 61603 Plainfield Community Consolidated SD 202 Ryan Abramhamson 815-577-4046 15732 Howard Street Director of Fiscal Services rabraham@psd202.org GASB Actuarial Plainfield,IL 60544 Regional Office of Education#20 Seth Cockrum 618-253-5581 512 N.Main Street Chief Financial Officer scockrum @roe20.k12.il.us GASB Actuarial Harrisburg,IL 62946 Regional Office of Education Jennifer Yoder 309-672-6906 324 Main Street, Room 401 Office Manager jyoder @peoriacounty.org GASB Actuarial Peoria, IL 61602 River Valley Metro Mass Transit System Lois Bentley (815)935-1403 1137 E.5000 N.Rd Director of Finance and Grants Ibentley@rivervaReymetro.com Actuarial-Defined Benefit Plan Bourbonnais,IL 60914 Tazewell County Christie Webb 309-477-2264 11 S.4th Street,#203 Tazewell County Clerk cwebb @tazewell.com GASB Actuarial Pekin,IL 61554 Township of Schaumburg Judy Morganti 847-884-0030 One Illinois Boulevard Personnel Director jmorganti @schaumburgtownship.org Actuarial-Defined Benefit Plan Hoffman Estates,IL 60194-3399 Urbana&Champaign Sanitary District 217-367-3409 1100 E.University Avenue Kim Lytle,SPHR,SHRM-SCP kadlytle @u-csd.com GASB Actuarial Urbana,IL 61802 Village of Creve Coeur 103 N.Thomcrest Avenue Brian Scudder brianscudder37 @yahoo.com Actuarial-Police Pension Fund Creve Coeur,IL 61610 Village of Morton Wendy K.Ferrill 309-266-5361 120 N.Main Street Treasurer/Comptroller wferrill @morton-ii.gov GASB Actuarial Morton,IL 61550 (Village Administrator) Village of Oak Brook P a g e 19 nyhart ACTUARY &EMPLOYEE BENEFITS The Village of Oak Brook will be served out of our St. Louis office (Edwardsville, IL), our Chicago office (Deerfield, IL) and our headquarters in Indianapolis, IN, all of which are within easy driving or flying distance. We are always just one phone call, Skype, etc. away. i a F A MINNESOTA -"- - MihneJ®nlls � i 4 ry(ICHIGAAN IOWA M r �y� • ;Nw,s 'uv R „" Y .00r Ma&n Pp. buf9h wz s WEST .VIRGINIA. stlow c MISSOURI 'SYwprnk. VIRGINIA: NORTN- N�xnnlle TI N NSS SS .r CAI NA R ,r R Village of Oak Brook P a g e 120 nyh-�art ACTUARY &EMPLOYEE BENEFITS 5. Fees See the following Attachment D. Village of Oak Brook Page 121 Attachment D—Schedule of Pricing for Actuarial Services Maximum Fees PD Pension FD Pension OPEB Valuation Valuation Valuation (Audit Year) All Inclusive Fee for 2016 $ 7,500 $ 7,500 $ 2,500 (updated report) All Inclusive Fee for 2017 $ 7,750 $ 7,750 $ 2,500 (updated report) All Inclusive Fee for 2018 $ 8,000 $ 8,000 $ 6,000 (full report) All Inclusive Fee for 2019 $ 8,250 $ 8,250 $ 3,000 (updated report) All Inclusive Fee for 2020 $ 8,500 $ 8,500 $ 6,500* (full report) Hourly Rate to attend additional Board of Trustees Meetings 2016 $300 /hr 'It is our understanding that effective in 2017 $310 /hr FY2018, GASB 75"kicks in"and, therefore, a full valuation is required 201$ $320 /hr every other year.That is why you see a valuation fee for 2020. 2019 $330 /hr 2020 $340 /hr The Police and Fire valuation fees include a projection modeler that allows the Village finance staff and Board members to review estimated financial results based on various inputs. nyhart ACTUARY &EMPLOYEE BENEFITS Appendix Attachment E - Vendor Questionnaire Sample Valuation Report Sample Management Summary Report Pension Financial Manager Pension Design Manager Sample GASB Financial Report Sample Management Summary Report Village of Oak Brook P a g e l 22 Attachment E—Vendor Questionnaire FIRM NAME The Howard E Nyhart Company Inc CONTACT PERSON Mike Zurek ADDRESS 707 Lake Cook Road Suite 250 Deerfield IL 60015 PHONE NUMBER 847-400-9601 /800-428-7106 X 3700 WHEN ORGANIZED Started in 1943/Incorporated in 09/55 WHERE ORGANIZED State of Indiana LICENSED IN ILLINOIS? NUMBER OF YEARS IN PRACTICE? 72 HAS THE FIRM EVER REFUSED A CONTRACT? If yes, please submit details No HAS THE FIRM EVER DEFAULTED ON A CONTRACT? If yes, please submit details No WHERE IS YOUR NEAREST OFFICE TO OAK BROOK? Deerfield, IL HOW MANY PEOPLE ARE EMPLOYED IN THE NEAREST OFFICE TO OAK BROOK? 2 Page 7 Table of Contents Page Highlights......................................................................................................................................1 Actuary's Opinion..........................................................................................................................3 Any City, Town, or Place Section 1—Assets 1.1 Reconciliation of Plan Assets....................:...........................................................4 Pension Plan 1.2 Summary of Assets...............................................................................................5 1.3 Actuarial Value of Assets.......................................................................................5 1.4 Rates of Return on Assets.....................................................................................6 Section 2—Contribution Alternatives 2.1 Annual Required Contribution...............................................................................7 2.2 Regular Funding Contribution................................................................................7 Section 3—Results of the Valuation 3.1 Development of Unfunded Accrued Liability—Annual Required Contribution......8 3.2 Development of Normal Cost—Regular Funding Contribution.............................9 Section 4—Basis for the Valuation 4.1 Plan Participants..................................................................................................10 4.2 Information about Participants.............................................................................11 4.3 Summary of Plan Provisions...............................................................................12 4.4 Actuarial Assumptions.........................................................................................16 4.5 Valuation Procedures..........................................................................................18 Appendices Appendix A-Financial Reporting for Statement No.25/27 Actuarial Valuation Report January 1, 2015 nyhart Any City,Town,or Place Pension Plan Page 2 Any City,Town,or Place Pension Plan Page 1 Highlights-Continued Highlights Plan Year Beginning 01/01115 01101114 01/01/13 Purpose of the Valuation Participants This report summarizes actuarial information regarding the plan's liabilities and benefit obligations as Number of participants: compared to assets available for benefits on the valuation date. The report was prepared by Nyhart to: Active 108 109 108 Inactive with deferred benefits 7 7 e -determine the acceptable range of employer contributions; Inactive receiving benefits 89 87 86 determine the plan's funded status;and Beneficiary receiving benefits 8 8 8 measure values of plan benefits and obligations under governmental financial accounting standards. Alternate payee receiving benefits 6 6 6 Total in valuation 218 217 216 Principal results of the actuarial valuation are shown below. Please see the appropriate sections of the Active participant averages: report for details of the valuation. Age 40.0 39.4 38.6 Service 11.7 11.2 10.6 Plan Year Beginning 01101/15 01/01114 01/01113 Compensation $ 60,029 $ 58,546 $ 55,121 Employer Contributions Changes Since the Last Valuation Participating payroll $ 6,483,130 $ 6,381,523 $ 5,953,035 The mortality assumption for healthy lives has changed from the RP-2000 Mortality Tables for Men and Annual Required Contribution $ 1,148,768 $ 1,147,822 $ 1,181,427 Women to the RP-2014 Blue Collar with Social Security Mortality Improvements from 2006 to 2015 used As percent of payroll 17.72% 17.99% 19.85% in the 2014 SSA trustee report. Regular Funding Contribution $ 1,438,477 $ 1,371,341 $ 1,408,533 Assumed payment forms have changed from 100%receiving the normal form of benefit,a life annuity,to As percent of payroll 22.19% 21.49% 23.66% assuming that 50%elect a life annuity,20%elect a 10-year certain and life annuity,and 30%elect a 50% joint and survivor annuity. Employer contribution N/A $ 578,390 $ 507,636 As percent of payroll N/A 9.06% 8.53% Optional forms of payment are calculated based on the 2015 PBGC mortality rates for plan termination and an assumed long-term PBGC interest rate of 2.50%. Plan Assets Retirement rates have been updated to reflect 5.0%of participants retiring between 45-49 for employees hired both before and after 1/1/2010. Fair market value $40,539,053 $37,959,391 $33,962,062 Actuarial value for funding $37,280,792 $34,992,678 $32,731,753 nyhert nLihart Any City,Town,or Place Pension Plan Page 4 Any City,Town,or Place Pension Plan Page 3 Section 1 -Assets Actuary's Opinion 1.1 Reconciliation of Plan Assets This report provides information regarding the actuarial valuation prepared for the Transaction activity is summarized in Section A and the market value of assets Is reconciled in Any City,Town,or Place Pension Plan Section B for the plan year ending 12/31/14 as follows: The actuarial valuation was prepared as of January 1,2015 using information which we reconciled to prior A. Net income(loss): years data and reviewed for reasonableness.Our review was not performed at the source nor did we audit the data,and we therefore do not accept responsibility for the accuracy or completeness of the data on (1) Contributions: which the information is based.Any errors in the data provided may result in a different result than those From county/subpoena fees $ 578,390 provided in the report.Employee census information was provided by the plan administrator;and asset From participants 396.778 $ 975,168 information was provided by the trustee. (2) Earnings on investments: To the best of our knowledge,the report presents a fair position of the funded status of the plan in Interest $ 196,990 accordance with the Actuarial Standards of Practice as described by the American Academy of Actuaries. Dividends 440,971 637,961 In addition,information has been prepared in accordance with applicable governmental standards of financial reporting for defined benefit pension plans. (3) Net appreciation/depreciation 3,640,953 In our opinion,the actuarial assumptions and methods are individually reasonable and in combination (4) Other income 0 represent our best estimate of anticipated experience of the plan. (5) Disbursements: Future actuarial measurements may differ significantly from the current measurements presented in this Benefit payments $ 2,643,819 report due to such factors as the following: Transfer to Advantage Plan 0 • plan experience differing from that anticipated by the economic or demographic assumptions; Administrative expenses 30.601 2,674,420 • changes in economic or demographic assumptions; • increases or decreases expected as part of the natural operation of the methodology used for these measurements and • changes in plan provisions or applicable law. (6) Net income(loss),(1)+(2)+(3)+(4)—(5) $ 2,579,662 We did not perform an analysis of the potential range of future measurements due to the limited scope of B. Reconciliation of market value of assets: our engagement. (1) Market value of assets as of 12/31113 $37,959,391 Neither Nyhart nor any of its employees have any relationship with the plan or its sponsor which could impair or appear to impair the objectivity of this report. (2) Adjustment to match trust statement 0 To the extent that this report or any attachment concerns tax matters,it is not intended to be used and (3) Net income(loss)from A(6) 2.579.662 cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. (4) Market value of assets as of 12/31/14, The undersigned are compliant with the continuing education requirements of the Qualification Standards (1)+(2)+(3) $40,539,053 for Actuaries Issuing Statements of Actuarial Opinion in the United States. Nyhart Valuation prepared by: Valuation reviewed by: Malcolm Merrill,ASA,EA John L.Dowell,FSA,EA 3/27/2015 Date nyhart nyhart Any City,Town,or Place Pension Plan Page 6 Any City,Town,or Place Pension Plan Page 5 Section 1 -continued Section 1 -continued 1.4 Rates of Return on Assets 1.2 Summary of Assets Average rates of investment return have been determined using the formula (1)General investments: Money market funds $ 410,843 (1%) Two times(1)divided by(A+B—1),where Bond funds 8,047,750 (20%) Equity and real estate funds 32,031,257 (79%) 1 is the dollar amount of earnings(including unrealized appreciation Other 0 (0%) 40,489,850 or depreciation of plan assets)for the plan year; (2)Receivables: A is the value of assets at the beginning of the plan year;and Employer contributions $ 0 Income 49.203 49.203 B is the value of assets at the end of the plan year (3)Total assets(1)+(2) $40,539,053 Under this formula,all transactions are assumed to occur in the middle of the year,therefore rates of return determined in this manner are estimates and should be used only for comparison with actuarial assumptions. 1.3 Actuarial Value of Assets Plan Year Ending 12/31/14 12/31/13 12/31112 The market value of plan assets has been adjusted for valuation purposes to smooth the effects of appreciation and/or depreciation in assets in excess of the expected return on assets over a 5- Based on average market value: year period. Determination of the actuarial value of plan assets is detailed below. Earnings before administrative expenses 11.5% 17.4% 1010% (1) Fair market value of assets as of 01/01/15 $40,539,053 Earnings after administrative expenses 11.5% 17.3% 9.9% (2) Five-year smoothing of gain/(loss): Based on average actuarial value: 2014 $ 1,462,801 x 80% _ $ 1,170,241 2013 3,236,189 x 60% = 1,941,713 Earnings after administrative expenses 11.7% 12.5% 2.3% 2012 756,585 x 40% = 302,634 2011 (781,637) x 20% _ (156,327) $ 3,258,261 (3) Actuarial value of assets,(1)—(2) $37,280,792 nyhart nyh eirt Any City,Town,or Place Pension Plan Page 8 Any City,Town,or Place Pension Plan Page 7 Section 3—Results of the Valuation Section 2—Contribution Alternatives 3.1 Development of Unfunded Accrued Liability—Annual Required Contribution 2.1 Annual Required Contribution The contribution required under GASB#27 is shown for the current and prior plan years. (1) Entry age accrued liability: Plan Year Ending 12131/15 12/31114 12/31/13 (a) Active $ 16,511,638 (1) Employer normal cost $ 481,540 $ 489,623 $ 461,535 (b) Terminated vested 1,236,689 (c) Retired 25,396,780 (2) Net amortization payment 587,081 578,118 637,467 (d) Beneficiary 1,201,943 (e) Disabled 387.421 (3) Interest on(1)+(2) 80.147 80.081 82.425 (f) Total,(a)+(b)+(c)+(d)+(e) $ 44,734,471 (4) Annual Required Contribution, (1)+(2)+(3) $ 1,148,768 $1,147,822 $1,181,427 (2) Actuarial value of assets $ 37,280,792 (3) Unfunded accrued liability $ 7,453,679 2.2 Regular Funding Contribution (4) 30-year amortization of(3) $ 587,081 The regular funding contribution is determined below for the plan year ending 12131. Results are (5) Funded Percentage,(2)=1(f) 83.3% shown for the current and prior plan years. Plan Year Ending 12131115 12131/14 12/31/13 (1) Employer normal cost $ 1,338,118 $1,275,666 $1,310,263 (2) Interest on(1) 100.359 95.675 98.270 (3) Regular Funding Contribution,(1)+(2) $ 1,438,477 $1,371,341 $1,408,533 nyhart nyhart Any City,Town,or Place Pension Plan Page 10 Any City,Town,or Place Pension Plan Page 9 Section 4—Basis for the Valuation Section 3—Continued 4.1 Plan Participants 3.2 Development of Normal Cost—Regular Funding Contribution Participant information provided by the plan administrator is summarized in the following table. Inactive Participants (1) Actuarial present value of projected benefits: Benefits Receiving Active Deferred Benefits Total (a) Active $ 23,187,671 (b) Terminated vested 1,236,689 Participants as of 01/01/14 109 7 101 217 (c) Retired 25,396,780 Retired (d) Beneficiary 1,201,943 (1) (1) 2 0 (e) Disabled 387.421 Deaths without survivor 0 0 0 0 (f) Total,(a)+(b)+(c)+(d)+(e) $ 51,410,504 Deaths with survivor benefits 0 0 0 0 (2) Actuarial value of assets 37,280,792 New survivors 0 0 0 0 (3) Present value of future participant contributions $ 2,909,132 Vested terminations (2) 2 0 0 (4) Present value of future employer Nonvested terminations 0 0 0 0 normal cost, (1)(f)—(2)—(3) $ 11,220,580 (5) Present value of future participating payroll New alternate payees 0 0 0 0 of active participants under assumed full Benefits paid in full (1) (1) 0 (2) retirement age $ 54,371,403 ( New participants during the plan year 3 0 0 3 6) Normal cost rate,100 x[(4)+(5)] 20.64 Adjustment to data 0 0 0 0 (7) Expected participating payroll of active participants $ 6,483,130 Participants as of 01/01/15 108 7 103 218 (8) Employer normal cost,(6)x(7) $ 1,338,118 nyhert nyh ert Any City,Town,or Place Pension Plan Page 12 Any City,Town,or Place Pension Plan Page 11 Section 4-continued Section 4-continued 4.3 Summary of Plan Provisions 4.2 Information about.Participants Name of plan Active Participants Any City,Town,or Place Pension Plan Number accruing benefits 108 Effective date Average age for valuation 40.0 Average years of employment 11.7 The plan was originally effective as of January 1,1962 and was last restated effective as of Average expected pay $ 60,029 January 1,2010. Terminated Vesteds Participation Number of former participants with deferred benefits 7 A employee who agrees to make required participant contributions shall become a participant on Total deferred monthly benefits $ 11,563 his/her date of hire. Total deferred lump sums $ 2,309 Average deferred monthly benefit $ 1,927 Normal retirement benefit Retired Participants and Alternate Payees A participant who has attained the age of 55 and has completed at least 5 years of credited service is eligible for a retirement pension payable for his lifetime beginning the first day of the Number of retired pensioners 87 month following his 55th birthday. For anyone who was a participant on or before December 31, Number of alternate payees 6 2009,the attained age requirement is age 50. Total monthly benefits $ 206,669 Average monthly benefit $ 2,222 The monthly pension payable is determined as the sum of(1)plus(2): Disabled Participants (1)a percentage of average monthly salary based an years of credited service equal to: Number of disabled participants 2 If service is 5 but less than 10 years 12.5% Total monthly benefits $ 3,151 If service is 10 but less than 15 years 25.0% Average monthly benefit $ 1,575 If service is at least 15 years 37.5 If service is at least 16 years 40.0% Beneficiaries If service is at least 17 years 42.5% If service is at least 18 years 45.0% Number of beneficiaries 8 If service is at least 19 years 47.5% Total monthly benefits $ 11,960 If service is at least 20 years 50.0% Average monthly benefit $ 1,495 For each year of service in excess of 20 years to a maximum of 12 years 2.0% (2)$1 multiplied by years of credited service to a maximum of 20 years. nyhart nyhart Any City,Town,or Place Pension Plan Page 14 Any City,Town,or Place Pension Plan Page 13 Section 4—Continued Section 4—Continued 4.3 Summary of Plan Provisions—Continued 4.3 Summary of Plan Provisions—Continued Termination of employment Average monthly salary A participant who terminates employment for a reason other than death,disablement or retirement The average of a participant's compensation for the highest 60 consecutive calendar months of prior to completing 5 years of credited service shall receive a payment equal to his net amount of employment. This amount is limited to the minimum salary that a full-time******is entitled to be contributions. paid by the***at the time of the participant's retirement. For anyone who was a participant on or before December 31,2009,average monthly salary is based on the highest 36 consecutive A participant who terminates employment for a reason other than death,disablement or retirement calendar months. after completing at least 5 years of credited service may choose to receive his normal retirement benefit based on compensation and credited service at date of termination and commencing at his Early retirement normal retirement age. After completing 5 years of credited service,a participant may retire and receive an immediate Compensation monthly benefit equal to the participant's accumulated normal retirement benefit reduced 5%for For benefit purposes a participant's compensation is his monthly compensation received from his each year by which the participant's early retirement date precedes his normal retirement date. employer,excluding***and/or education allowances. Late retirement Cost-of-living increases If a participant works beyond his normal retirement age,benefits continue to accumulate based on Each pensioner or beneficiary who is receiving a monthly pension and who has attained the age compensation and credited service earned at his later retirement. of 55 may be eligible for a cost-of-living adjustment equal to his monthly pension in effect after Disability retirement attainment of age 55 multiplied by an adjustment percentage(not to exceed I%)determined as the arithmetic mean of the Consumer Price Index(United States City average)for the January, A participant who has completed at least 5 years of credited service and who becomes disabled February and March of his payment year compared to the same 3-month period of the preceding while actively accumulating credited service shall receive a monthly retirement benefit beginning year. These increases are effective as of each July 1 for monthly pensions in payment status to at his normal retirement age based on compensation and credited service earned prior to pensioners and beneficiaries who have attained at least age 55 on the preceding June 1. The disability. increase for years beginning on January 1,2009 or later has been determined to be 0%. Credited service Preretirement death benefit If a married participant dies after completing at least 5 years of credited service and before Service for all purposes is granted on the basis of years of employment during which a participant retirement benefits begin,his spouse shall be eligible to receive a death benefit equal to either(1) agrees to make required participant contributions. Credited service is calculated to the nearest or(2)below: 1/121h of a year. Credit is given for any month in which the participant works at least one day. Optional forms of payment (1) payment equal to the participant's net amount of contributions; (2) surviving spouse annuity determined as though the participant retired on the day A participant may choose to receive distributable benefits in an actuarially equivalent alternative before he died and elected his retirement pension in the form of a joint and 50% form of benefit as follows: survivor annuity. a monthly benefit payable for the participant's lifetime; If a participant dies with less than five years of credited service,or is unmarried,or elects a non- spouse month) benefit payable for the participant's lifetime with a guarantee that the spouse beneficiary,his beneficiary shall receive a payment equal to the participant's net amount Y P y P P 9 of contributions. remainder,if any,of either 120 or 240 monthly payments will be made to the participant's beneficiary following his death;or a monthly benefit payable for the participant's lifetime with 50%or 100%of such benefit continued to a surviving contingent annuitant following his death. nyhart nyhert Any City,Town,or Place Pension Plan Page 16 Any City,Town,or Place Pension Plan Page 15 Section 4—Continued Section 4—Continued 4.4 Actuarial Assumptions 4.3 Summary of Plan Provisions—Continued Actuarial assumptions concerning future events are described below.Please see the Highlights Actuarial Equivalence section for comments regarding changes in assumptions since the last valuation.Except where otherwise indicated,the following assumptions were selected by the plan sponsor with the Optional forms of payment are converted from the normal form of payment using PBGC mortality concurrence of the actuary. rates for plan terminations and PBGC interest used for valuing immediate annuities for plan terminations as of the preceding October I". Valuation Date January 1,2015 Participant contributions Participant and Asset Information Collected as of January 1,2015 As a condition for participation,an employee must agree to contribute 6%of his compensation to the plan. Retirement Rates FE Employees Hired Employees Hired Net amount of contributions Age Before 1/1/2010 After 1213112009 Participant contributions are increased for interest at a rate of 3%compounded annually from the 45-49 5.0% 5.0% last day of each plan year. 50-53 15.0% 5.0 Plan assets 54 20.0% 10.0% 55 12.5% 60.0% Assets of the plan are held by Whatever Bank under terms of a trust agreement. 56-59 12.5% 12.5% Plan Provision Not Included 60+ 100.0% 100.0% We are not aware of any plan provisions not included in the valuation. 100% retirement after age 55 with 32 years of credited service. Adjustments Made for Subsequent Events Mortality of healthy lives FE RP-2014 Blue Collar with Social Security Mortality We are not aware of any event following the measurement date and prior to the date of this report Improvements from 2006 to 2015 that would materially impact the results of this report. Mortality of disabled lives FE Rates in accordance with tables published by IRS in Revenue Ruling 96-7 for disabilities occurring in plan years after 12/31/94 Disablement FE 1955 UAW Disablement Table Representative rates of disablement Age Men Women 25 .03% .05% 30 .04% .06% 40 .07% .10% 50 .18% .26% 55 .36% .49% Withdrawal FE Rates in accordance with Table T-3 of The Pension Actuary's Handbook Age Percent 20 6.58% 30 4.83% 40 3.84% Future pay increases cc 4.0%compounded annually nyhort nyhort Any City,Town,or Place Pension Plan Page 18 Any City,Town,or Place Pension Plan Page 17 Section 4—Continued Section 4—Continued 4.5 Valuation Procedures 4.4 Actuarial Assumptions Funding method Valuation interest rate cc 7.5% Annual Required Contribution—Entry Age Normal Cost Method Eligible spouse FE 100%of participants assumed to be married with female The actuarial cost method used in determining the Annual Required Contribution is the entry age spouse 3 years younger normal cost method. Optional Forms of Payment FE Life Annuity—50% 10-year Certain and Life Annuity—20% In determining the Annual Required Contribution,the excess of the entry age actuarial accrued 50%Joint and Survivor Annuity—30% liability over the actuarial value of plan assets is amortized over 30 years. Conversion from Normal Form 2015 PBGC mortality rates for plan termination and Regular Funding Contribution—Aggregate(Level Percent of Salary)Cost Method 2.50%interest The actuarial cost method used in determining the Regular Funding Contribution is the aggregate Cost-of-living increases FE None (level percent of salary)cost method. In order to determine the normal cost,the first step is to determine the actuarial present value of future plan benefits for all members of the pension plan. The present value of future normal costs is then computed by taking the present value of benefits and then subtracting the actuarial value of assets and the actuarial present value of future employee contributions. The percentage of payroll necessary to fund the normal cost is then obtained by dividing the present value of future normal costs by the present value of future salaries. This percentage is then multiplied by the current year's payroll to obtain the normal cost. The total amount of the Regular Funding Contribution is the normal cost. Asset valuation method The actuarial value of assets is equal to the fair market value of assets on the valuation date adjusted for a 5-year phase-in of asset gains and losses. Other procedures Benefits projected to assumed retirement age for active participants have been limited so as not to exceed maximum benefit limits imposed by Code Section 415(b)and/or maximum compensation limits of Code Section 401(a)(17). FE indicates an assumption representing an estimate of future experience MD indicates an assumption representing observations of estimates inherent in market data CO indicates an assumption representing a combination of an estimate of future experience and observations of market data nyh ert nyh ert Any City,Town,or Place Statement of Plan Net Assets as of December 31,2014 and 2013 Pension Advantage Plan Plan 2014 Total 2013 Total Assets Money Market Funds $ 410,843 $ 237 $ 411,080 $ 390,186 Receivables Accrued income $ 49,203 $ 0 $ 49,203 $ 44,747 Investments,at fair value Bond Funds $ 8,047,750 $ 0 $ 8,047,750 $ 7,754,506 Equity and real estate funds 32,031,257 0 32,031,257 29,773,434 Other 0 0 0 0 Total investments $40,079,007 $ 0 $40,079,007 $37,527,940 Net assets held in trust for benefits $40,539,053 $ 237 $40,539,290 $37,962,873 Appendix A Financial Reporting for Statement No.25/27, As Amended by Statement No.50 Governmental Accounting Standards Board for Plan Year Ending 12/3112014 nyhiart nyhert Any City,Town, or Place Any City,Town, or Place Required Pension Disclosure Under GASB#27 Statement of Changes in Plan Net Assets Schedule of Funding Progress for the years ended December 31,2014 and 2013 Pension Plan Pension Advantage Plan Plan 2014 Total 2013 Total Actuarial Unfunded Unfunded Additions Valuation Value of Accrued Accrued Funded Covered Liability as Contributions Date Assets* Liabilityt Liability Ratio Payroll %of Payroll Employer $ 578,390 $ 79,280 $ 657,670 $ 594,156 Employees 396.778 0 396.778 358.452 01101/99 $25,778,708 $25,778,708 $ 0 100.0% $3,949,576 0.0% Total contributions $ 975,168 79,280 $ 1,054,448 $ 952,608 01/01/00 $28,877,043 $28,877,043 $ 0 100.0% $4,447,162 0.0% Investment income Interest $ 196,990 $ 0 $ 196,990 $ 196,457 01/01/01 $30,971,870 $30971,870 $ 0 100.0% $4,509,736 0.0% Dividends 440,971 0 440,971 413,095 Net appreciation/ 01/01/02 $32,168,664 $32,168,664 $ 0 100.0% $4,701,488 0.0% depreciation in fair value of investments 3,640.953 0 3.640,953 5.149.372 01/01/03 $31,942,814 $33,621,986 $1,679,172 95.0% $5,024,197 33.4% Net investment 01101/04 $31,817,307 $33,862,289 $2,044,982 94.0% $5,049,364 40,5 income $ 4,278,914 $ 0 $ 4,278,914 $ 5,758,924 01/01/05 $32,135,712 $32,040,016 $ 0 100.0% $5,127,685 0.0 Total additions $ 5,254,082 $ 79,280 $ 5,333,362 $ 6,711,532 Deductions 01/01/06 $35,145,119 $33,447,926 $ 0 100.0% $5,235,400 0.0% Benefits $ 2,643,819 $ 39,027 $ 2,682,846 $ 2,627,702 Payments to insurer 0 43,406 43,406 47,420 01/01/07 $35,973,136 $35,608,731 $ 0 100.0% $5,374,595 0.0% Administrative expenses 30.601 92 30.693 39.100 Total deductions $ 2,674,420 $ 82,525 $ 2,756,945 $ 22,714,222 01/01108 $38,114,932 $37,580,354 $ 0 100.0% $5,733,032 0.0% 01/01109 $37,263,478 $36,221,661 $ 0 100.0% $5,347,354 0.0% Transfer in(out) $ 0 $ 0 $ 0 $ 0 01101/10 $35,735,974 $37,687,043 $1,951,069 94.8% $5,611,294 34.8% Net increase $ 2,579,662 $ (3,245) $ 2,576,417 $ 3,997,310 01101/11 $34,874,897 $38,406,554 $3,531,657 90.8% $5,838,138 60.5% Trust Adjustment $ 0 $ 0 $ 0 $ 0 Net assets held in trust 01/01/12 $33,727,707 $39,990,310 $6,262,603 84.3% $5,635,150 111.1% for benefits 01101/13 $32,731,753 $40,825,139 $8,093,386 80.2% $5,953,035 136.0% Beginning of year $ 37.959.391 $ 3,482 $ 37.962.873 $ 33,965,563 01/01/14 $34,992,678 $42,332,563 $7,339,885 82.7% $6,381,523 115.0% End of year $ 40,539,053 $ 237 $ 40,539,290 $ 37,962,873 01101/15 $37,280,792 $44,734,471 $7,453,679 83.3% $6,483,130 115.0 *Beginning with the 01/01/09 valuation,asset gains and losses are being smoothed over 5 years. t Determined under the Entry Age actuarial cost method as defined in Statement#27 of the Governmental Accounting Standards Board. Under this method,the excess of the entry-age actuarial accrued liability over the actuarial value of plan assets is amortized over 30 years, n y h a r t n 7 h a r t Any City,Town,or Place Any City,Town,or Place Required Pension Disclosure Under GASB#27 Required Pension Disclosure Under GASB#27 Schedule of Contributions from the Employer and Other Contributing Entities Schedule of Funding Progress Pension Plan Advantage Plan Annual Employer Actuarial Unfunded Unfunded Year Ending Required Funding Percentage Net Pension Valuation Value of Accrued Accrued Funded Covered Liability as December 31 Contribution§ Contributions Contributed Obligation Date Assets Liability$ Liability Ratio Payroll %of Payroll 1997 $ 299,130 $ 469,478 156.9% $ (170,348) 01/01/99 $318,532 $318,532 $ 0 100.0% $3,949,576 0.0% 1998 $ 449,545 $ 529,795 117.9% $ (249,094) 01/01/00 $259,470 $259,470 $ 0 100.0% $4,447,162 0.0% 1999 $ 334,845 $ 484,744 144.7% $ (396,795) 01101/01 $213,275 $213,275 $ 0 100.0% $4,509,736 0.0% 2000 $ 421,217 $ 526,950 125.1% $ (499,026) 01/01/02 $154,282 $154,282 $ 0 100.0% $4,701,488 0.0% 2001 $ 445,165 $ 604,249 135.7% $ (653,705) 01/01/03 $ 95,144 $ 95,144 $ 0 100.0% $5,024,197 0.0% 2002 $ 675,829 $ 656,621 97.2% $ (628,726) 01101/04 $ 14,246 $ 14,246 $ 0 100.0% $5,049,364 0.0% 2003 $ 1,032,804 $ 468,333 45.3% $ (58,174) 01/01/05 $ 4,523 $ 4,523 $ 0 100.0% $5,127,685 0.0% 2004 $1,140,433 $ 597,133 52.4% $ 485,689 01/01/06 $ 20,146 $ 20,146 $ 0 100.0% $5,235,400 0.0% 2005 $ 660,920 $ 566,360 85.7% $ 575,552 01/01/07 $ 12,828 $ 12,828 $ 0 100.0% $5,374,595 0.0% 2006 $ 723,928 $ 523,608 72.3% $ 773,705 01/01/08 $ 178 $413,323 $413,145 0.0% $5,733,032 7.2% 2007 $ 684,319 $ 572,137 83.6% $ 882,975 01/01/09 $ 13,364 $407,704 $394,340 3.3% $5,347,354 7.4% 2008 $ 700,891 $ 636,946 90.9% $ 943,596 01/01/10 $ 3,487 $394,338 $390,851 0.9% $5,611,294 7.0% 2009 $ 498,086 $ 493,722 99.1% $ 944,409 01101/11 $ 3,870 $291,451 $287,581 1.3% $5,838,138 4.9% 2010 $ 670,245 $ 418,130 62.4% $ 1,192,970 01/01/12 $ 3,471 $277,259 $273,788 1.3% $5,635,150 4.9% 2011 $ 804,221 $ 561,114 69.8% $ 1,431,587 01/01/13 $ 3,501 $729,859 $726,358 0.5% $5,953,035 12.2% 2012 $ 1,012,470 $ 488,648 48.3% $ 1,950,021 01/01114 $ 3,482 $813,535 $810,053 0.4% $6,381,523 12.7% 2013 $1,181,427 $ 507,636 43.0% $ 2,616,473 01/01/15 $ 237 $952,019 $951,782 0.0% $6,483,130 14.7% 2014 $1,147,822 $ 578,390 50.4% $ 3,176,056 $Prior to 01/01/08,determined under the Aggregate actuarial cost method as defined in Statement#27 of the Governmental Accounting Standards Board. Under this method,the excess of the actuarial present value of projected benefits of the group over the actuarial value of plan assets is allocated on a level basis §Beginning in 2005 determined under the Entry Age actuarial cost method as defined in Statement#27 of over the future service of the group.Beginning on 01/01/08,this is calculated using the Entry Age actuarial the Governmental Accounting Standards Board. Under this method,the excess of the entry-age actuarial cost method as the Aggregate cost method does not identify or separately amortize unfunded actuarial accrued liability over the actuarial value of plan assets is amortized over 30 years.Prior to 2005 liabilities.This information is intended to serve as a surrogate for the funded status and funding progress determined under the Frozen Entry Age actuarial cost method. y n y hart of the plan.The ARC is calculated using the Aggregate cost method. rl h a r t Any City,Town,or Place Any City,Town,or Place Required Pension Disclosure Under GASB#27 Required Pension Disclosure Under GASB#27 Trend Information Schedule of Contributions from the Employer and Other Contributing Entities Pension Plan Advantage Plan Annual Employer Year Ending Pension Funding Percentage Net Pension Annual Annual Employer December 31 Costtt Contributions Contributed Obligation Year Ending Required Funding Percentage Net Pension 2002 $ 681,600 $ 656,621 96,3% $ (628,726) December 31 Contribution- Contributions Contributed Obligation 1997 $ 0 $ 0 100.0% $ 0 2003 $ 1,038,885 $ 468,333 45.1% $ (58,174) 1998 $ 952 $ 0 100.0% $ 952 2004 $ 1,140,996 $ 597,133 52.3% $ 485,689 1999 $ 1,323 $ 18,974 1327.8% $ (16,632) 2005 $ 656,223 $ 566,360 86.3% $ 575,552 2000 $ 34,059 $ 0 0.0% $ 17,573 2006 $ 721,761 $ 523,608 72.5% $ 773,705 2001 $ 39,457 $ 0 0.0% $ 56,875 2007 $ 681,407 $ 572,137 84.0% $ 882,975 2002 $ 46,277 $ 0 0.0% $ 102,650 2008 $ 697,567 $ 636,946 91.3% $ 943,596 2003 $ 59,124 $ 0 0.0% $ 160,781 2009 $ 494,535 $ 493,722 99.8% $ 944,409 2004 $ 59,856 $ 0 0.0% $ 219,082 2010 $ 666,691 $ 418,130 62.7% $ 1,192,970 2005 $ 108,928 $ 0 0.0% $ 325,891 2011 $ 799,731 $ 561,114 70.2% $ 1,431,587 2006 $ 104,921 $ 0 0.0% $ 429,586 2012 $ 1,007,082 $ 488,648 48.5% $ 1,950,021 2007 $ 88,040 $ 0 0.0% $ 516,009 2013 $ 1,174,088 $ 507,636 43.2% $ 2,616,473 2008 $ 88,414 $ 71,780 81.2% $ 530,701 2014 $ 1,137,973 $ 578,390 50.8% $ 3,176,056 2009 $ 79,545 $ 78,602 98.8% $ 507,626 2010 $ 79,681 $ 79,748 100.0% $ 484,585 2011 $ 66,431 $ 85,846 129.2% $ 443,239 2012 $ 51,900 $ 89,566 172.6% $ 385,513 2013 $ 106,769 $ 86,520 81.0% $ 388,314 2014 $ 82,456 $ 79,280 96.1% $ 373,916 tt Beginning in 2005 determined under the Entry Age actuarial cost method as defined in Statement#27 '•Determined under the Aggregate actuarial cost method,as defined in Statement#27 of the of the Governmental Accounting Standards Board. Under this method,the excess of the entry-age Governmental Account Standards Board. Under this method,the excess of the actuarial present value of actuarial accrued liability over the actuarial value of plan assets is amortized over 30 years.Prior to 2005 projected benefits of the group over the actuarial value of assets is allocated on a level basis over the determined under the Frozen Entry Age actuarial cost method. ny future service of the group. n y h a r t l-�art Any City,Town,or Place a T= Required Pension Disclosure Under GASB#27 0 O o u E N m 2 Trend Information 4. M U3 N 0 6 0 a T a Advantage Plan N a N Zc 'O J 0 5T 0 O (,p -' m ° v `' >ro a Annual Annual Employer $ m M o 0 ,0 Year Ending Pension Funding Percentage Net Pension N o 0 December 31 Cost$$ Contributions Contributed Obligation 0 o Q o 2002 $ 45,775 $ 0 0.0% $ 102,650 O ^" 2003 $ 58,131 $ 0 0.0% $ 160,781 D ;(1 z 2004 $ 58,301 $ 0 0.0% $ 219,082 C. °? 2005 $ 106,809 $ 0 0.0% $ 325,891 -o a 169 `n E" M 3 m 7 2006 $ 103,695 $ 0 0.0% $ 429,586-69 p m m rn a o o = to n 2007 $ 86,423 $ 0 0.0% $ 516,009 O coon�� °5' v o 3 :: (o = p 2008 $ 86,472 $ 71,780 83.0% $ 530,701 c a n O 2009 $ 55,527 $ 78,602 141.6% $ 507,626 ss �n cn G A >N a v m N m m a 2010 $ 56,707 $ 79,748 140.6% $ 484,585 Cow NCO [W1 mo ,m 3 -p m O C. om >m a = C -' 2011 $ 44,500 $ 85,846 192.9% $ 443,239 O V O W.N. +7 N 3 m n 2012 $ 31,840 $ 89,566 281.3% $ 385,513 O C) fD 6 D 2013 $ 89,321 $ 86,520 96.9% $ 388,314 n,N (O V m a o a o >>o_ m ° W 2014 $ 64,882 $ 79,280 122.2% $ 373,916 O m W V N-4 N t 7 O W O Cn A m 0 V W A >g: 3 N O WJ A �N J(M m 00 NM V H3 Efl lfl Ffl � V m O0) V W 7 - W O V N(J1 W m (O(n N W O o W >N O m N V (p ffl 4A ffl (fl T Ut Cn N > y m V V Cn V W O(DA �7 W m(O m V W6]V a- O O A(T W-4 •I V m A-' `7 O o m W W •W A CWn N J $$Determined under the Aggregate actuarial cost method,as defined in Statement#27 of the Governmental Account Standards Board. Under this method,the excess of the actuarial present value of J projected benefits of the group over the actuarial value of assets is allocated on a level basis over the future service of the group. n y h a r t rr Any City,Town, or Place Required Pension Disclosure Under GASB#27 Annual Pension Cost and Net Pension Obligation Advantage Plan Year Ending Year Ending Year Ending Year Ending Year Ending Year Ending 12131/10 12/31/11 12/31/12 12131/13 12131114 Annual Required Contribution(ARC) $ 79,681 $ 66,431 $ 51,900 $ 106,769 $ 82,456 Interest on Net Pension Obligation(NPO) 38,072 36,344 33,243 28,913 29,124 Adjustment to ARC (61.046) (58,2751 (53,303) (46,361) (46.698) Annual Pension Cost $ 56,707 $ 44,500 $ 31,840 $ 89,321 $ 64,882 Actual Contributions (79,748) (85,846) (89.566) (86.520) (79.280) Increase(decrease)in NPO $ (23,041) $ (41,346) $ (57,726) $ 2,801 $ (14,398) NPO Beginning of Year 507.626 484.585 443.239 385.513 388.314 NPO End of Year $484,585 $443,239 $385,513 $ 388,314 $ 373,916 Interest rate 7.50% 7.50% 7.50% 7.50% 7.50% Amortization Period 12 12 12 12 12 nyhar Any City, Town, or Place Pension Plan Management Summary of 11112015 Actuarial Valuation April 9, 2015 Table of Contents nyhart Certification 2 Defined Benefit Plan Overview 3-5 Participant Information 6 Annual Benefit Payments 7 Summary of Plan Provisions 8 Summary of Actuarial Assumptions and Methods 9 2014 Asset Reconciliation 10 Annual Investment Return Rates 11 Asset Class Allocation 12 Funded Status 13 Change in Funded Percentage 14 Normal Cost Percentage 15 Summary of Employer Contributions 16 What's Ahead? 17 Any City,Town,or Place—2015 Val Results ' Certification nyhiart This report was prepared for Any City,Town or Place to summarize the key results of the 2015 actuarial valuation relating to their pension plan and may not be appropriate for other uses. Please contact Nyhart prior to disclosing this report to any other party or relying on its content for any purpose other than the intended use. Except where indicated otherwise,the results included in this report are based on the same data, assumptions, methods,and plan provisions as the 1/1/2015 valuation.As a result,these sections of the 2015 funding report dated 3/2712015 should be considered part of this report. This report has been prepared in accordance with generally accepted actuarial principles and practice. The consultants indicated below are compliant with the continuing education requirements of the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States. John Dowell FSA, EA, MAAA J. Malcolm Merrill ASA, EA Any City,Town or Place—2015 Val Results 2 Defined Benefit Plan Overview: nyhiart Yesterday and Today ➢ Late 20th Century • Defined benefit plans were small relative to the size of their sponsoring organizations • Most of a plan's liability was associated with current employees • Capital markets were fairly stable • Resulting contribution requirements were manageable ➢ Early 21St Century • Defined benefit plans grew faster than their sponsoring organizations • A significant portion of a plan's liability is associated with former employees,i.e.retirees and terminated vested • Capital markets have been quite volatile • Resulting contribution requirements have been volatile and sometimes unsustainable Any City,Town or Place—2015 Val Results 3 Defined Benefit Plan Overview: nyhart Addressing the Fundamental Issues ➢ Contributions+Investment Return=Benefits Paid+Plan Expenses • Contributions—is the current funding strategy appropriate? • Investment Return—is the current investment mix resulting in a comfortable level of risk? • Benefits—is the current benefit design affordable and sustainable? ➢ Key Challenge—Retiree Liability • $28 million of the plan's liability(measured at 7.5%)is attributable to current retirees and deferred vesteds ■ Current low interest rates mean that an insurance company would charge something closer to $45-$50 million to issue annuities covering the liability,instead of$28 million ■ If interest rates increase substantially,annuity prices will become more appealing;an annuity purchase should be strongly considered at that point 4 Any City,Town,or Place—2015 Val Results Defined Benefit Plan Overview: nyhart Changes Since Prior Valuation ➢ Longevity and Mortality Assumption • Research on US longevity shows that lifespans continue to increase.The most recent study completed by the SOA and released in 2014 indicate the prior mortality assumption(RP-2000) may no longer be reasonable. • Results reflect an updated assumption for mortality based on the blue collar mortality table released in the SOA's study. • New table reflects lower mortality,and longer life expectancy ➢ Future Mortality Improvements Assumption • The new mortality assumption currently includes historical mortality improvements by the Social Security Administration through 2015 built in. • Each year going forward,we recommend applying an additional year of mortality improvements to the assumption.Alternatively,you could immediately build in all future years' improvements at once. 5 Any City,Town,or Place—2015 Val Results Participant Information nyhart 250 200 150 U Z100 ; 50 0 1/112010 111/2011 1/1/2012 1/1/2013 1/1/2014 111/2015 o Retirees 93 94 100 100 101 103 ■Deferred Vesteds 7 8 7 8 7 7 ■Actives 102 105 103 108 109 108 Average Age 38.2 38.7 38.3 38.6 39.4 40.0 Average Service 10.7 10.9 10.3 10.6 11.2 11.7 Average Plan $55,013 $55,601 $54,710 $55,121 $58,546 $60,029 Compensation Active DB Plan Payroll $5,611 $5,838 $5,635 $5,953 $6,382 $6,483 ($000'x) Any City,Town,or Place—2015 Val Results s Annual Benefit Payments nyhart $3,000 $2,500 $2,000 c N � 7 ° $1,500 H ea $1,000 $500 *4 $0 w, 2009 2010 2011 2012 2013 2014 ■Benefit Payments $2,293 $2,354 $2,519 $2,580 $2,589 $2,644 ■Total Contributions(Er+Ee) $782 $779 $912 $841 $866 $975 Benefit Payments as a•h of 293% 302% 276% 307% 299% 271% Contributions Actuary's Comment—Retiree benefit payments have significantly exceeded contributions for several years. Any City,Town,or Place—2015 Val Results 7 Summary of Plan Provisions nyhert > Effective Date > Termination Benefit January 1,1962 Normal Retirement benefit commencing at age 50 if termination after 5 years of Credited Service; if > Participation termination prior to 5 years,employee contribution An employee who agrees to make required balance is refunded Employee Contributions shall become a participant upon date of hire ➢ Average Monthly Salary Average of highest 36 consecutive calendar months > Normal Retirement of employment(60 consecutive calendar months if Eligibility— age 50 with 5 years of Credited Service hired in 2010 or later) (age 55 if hired in 2010 or later) Credited Service Benefit—(1)+(2): Years and months of employment during which employee makes required contributions,calculated to (1)%of Average Monthly Salary based on the nearest 1/12th years of Credited Service: 5-9 yrs 12.5% > Employee Contributions 10-14 yrs 25.0% In order to participate,an employee must contribute 15 yrs 37.5% 6%of his compensation to the plan (5%prior to 16 yrs 40.0% 10/1/2009,4%prior to 1/1/2008) 17 yrs 42.5% 18 yrs 45.0% > Cost of Living Increase 19 yrs 47.5% Effective 1/112009,cost-of-living increases have 20 yrs 50.0% been suspended +2%for each year above 20 yrs(max 12) (2) $1 x Credited Service(max 20) > Early Retirement After 5 years of Credited Service,participant may receive immediate monthly benefit,reduced 5%for each year commencement date precedes the Normal Retirement date 8 Any City,Town,or Place—2015 Val Results Summary of Actuarial Assumptions nyhert and Methods > Funding Interest Rate > Retirement Rates 7.50%(net of all expenses) I ' > Annual Pay Increases 4549 5.0% 5.0% 4.0% 50-53 15.0% 5.0% 54 20.0% 10.01% > Mortality Rates 55 12.5% 60% RP 2014 Blue Collar with Social Security mortality improvements projected from 2006 to 2015 56-59 12.5°% 12.5% 60+' 100% 100% > Expense Loading None "100%applies at age 55 and 32 years of credited service,if earlier > Actuarial Cost Method Withdrawal Rates Annual Required Contribution-Entry Age Normal Regular Contribution-Aggregate T-3 from the Pension Actuary's Handbook > Asset Valuation Method 20 6.58% Smoothed Value—investment gains/losses 30 4.83% recognized over five years 40 3.84% > Cost-of-Living Increases None > Disability Rates 1955 UAW Tables for Men and Women or Form of Future Payments ®� 50%-Life Annuity 20%-Life&10 year Certain 20 0.03% 0.04% 30%-50%Joint and Survivor 30 0.04% 0.06% 40 0.07% 0.10% 9 Any City,Town,or Place—2015 Val Results 2014 Asset Reconciliation nyhart $45,000 - $40,000 ,.' `. $35,000 $30,000 ; r .� $25,000 0 $20,000 r L $15,000 ca ,ti $10,000 $5,000 $0 ------ 1/1/2014 Benefits Paid EE ER Investment 12131/2014 Contributions Contributions Return Market Value of $37,959 ($2,644) $397 $578 $4,249 $40,539 Assets Plan Assets $34,993 ($2,644) $397 $578 $3,957 $37,281 Actuary's Comment—The 2014 return was 11.5%,resulting in a market value of assets that Is approximately$1.5 million higher than projected under last year's valuation.Gains and losses are being realized gradually over five years.Thus,the plan's funding requirements are based on the Actuarial Value of Assets,not the Market Value of Assets.While this"smoothing"approach will not reduce long-term costs,it will change the timing at which costs are accounted for.The theoretical rationale for this approach is that gains and losses will offset one another before they must be paid for. Any City,Town,or Place—2015 Val Results 10 Annual Investment Return Rates nyhart 30% , 20% 10% . 0% -10% -20% ._'. -30% 2008 2009 2010 2011 2012 2013 2014 ■Market Value of Assets -25.9% 19.4% 11.5% 5.0% 9.9% 17.3% 11.5% ■Actuarial Value of Assets 0.5% 0.0% 2.1% 1.4% 2.3% 12.5% 11.7% Actuary's Comment—Over the past seven plan years;the plan's average annual investment return has been 5.9%. Any City,Town,or Place—2015 Val Results 77 Asset Class Allocation nyhart 100% 80% 60% 0 0 40% U N a 20% fry: 0% 1/112010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 13 Other 1% 5% 3% 2% 1% 1% •Fixed Income 36% 29% 32% 33% 20% 20% •Equities/Real Estate 63% 66% 65% 65% 79% 79% Actuary's Comment—The plan asset mix should be considered when setting the expected investment return assumption used in determining the contribution requirements. Any City,Town,or Place—2015 Val Results 12 Funded Status n y h a r t The Accrued Liability is the present value of benefits to be paid in the future allocated to service earned to date. The future benefits are discounted from expected time of payment back to the valuation date at 7.5%. $60,000 $50,000 $40,000 v $30,000 v. m m 7 $20,000 $10,000 $0 1/1/201 1/1/201 1/1/201 1/1/201 1/1/201 1/1/201 0 1 2 3 4 5 ■Accrued Liability $37,687 $38,407 $39,990 $40,825 $42,333 $44,734 ■Market Value of Assets $30,741 $32,583 $32,566 $33,962 $37,959 $40,539 ■Actuarial Value of Assets $35,736 $34,875 $33,728 $32,732 $34,993 $37,281 Funded Percent-MVMAL 81.6% 84.8% 81.4% 83.2% 89.7% 90.6% Funded Percent—AVA I AL 94.8% 90.8% 84.3%. 80.2% 82.7% 83.3% Unfunded Accrued Liability(UAL) $1,951 $3,532 $6,262 $8,093 $7,340 $7,453 $000s UAL as a%of Payroll 35%. 61% 111% 136% 115% 1151% Actuary's Comment—The 2008 market decline hurt the plan's funded status significantly. However,on a market value basis(unsmoothed),the 11112015 shortfall is the smallest it has been since 11112008. 13 Any City,Town,or Place—2015 Val Results Change in Funded Percentage nyhart 100% 90% �3 a 80% J Q 70% r > 60% 50% 40% if 30% 20% 10% "= 4 Z`eyti \�\�oyy `o y1 ^\�p,�h Gm 2 Oyu� Py P Actuary's Comment-The decrease in funded position due to additional accruals and changes in assumptions was slightly more than offset by the contributions and asset returns. Any City,Town,or Place-2015 Val Results 14 Normal Cost Percentage nyhart The Normal Cost Percentage is the ratio of the present value of benefits earned by working the current year divided by the active participant payroll. If the plan were always 100%funded,this would represent the annual required contribution(to be paid by both the employer and employees,collectively). 20% 16% 12% r: 8% � 4% 0% uti 1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 ■NC Percentage 12.9% 12.7% 12.7% 12.6% 12.6% 12.4% ■Contribution Percentage 13.9% 15.6% 14.9% 14.6% 15.3% (ER+EE) Normal Cost-$000s $723 $742 $717 $752 $803 $803 Contributions-$000s $779 $912 $841 $866 $975 Actuary's Comment-The Normal Cost Percentage indicates the cost of benefits(paid for collectively by the employer and employees)earned in the current year as a percentage ofpay. It will vary based on the age of active participants,assumed salary growth during the year,and the interest and mortality rates used to discount future values. Any City,Town,or Place-2015 Val Results 15 Summary of Employer Contributions nyhart $1,800 $1,600 ' $1,400 $1,200 N a $1,000 C N 7 $800 (fl $600 $400 $200 $0 2010 2011 2012 2013 2014 2015 ®Annual Required Cont(GASB) $670 $804 $1,012 $1,181 $1,148 $1,149 ■Regular Contribution $676 $869 $1,153 $1,409 $1,371 $1,438 ■Actual Contribution $418 $561 $489 $508 $578 Actual Employer Cordnbut+on 7.5% 9.6% 8.7% 8.5% 9.1% as a%of Payroll Actuary's Comment—Contribution requirements increased in each year from 2010 to 2013 while the 2008 asset losses were gradually recognized. Requirements remained relatively stable from 2013 to 2015. Please note that the Actual Contributions shown above include only amounts staying in the Pension Plan.Amounts transferred to the Benefit Plan are excluded.For the past five years,actual contributions have fallen significantly short of the actuarially determined amounts. Any City,Town,or Place—2015 Val Results 96 What's Ahead? nyhart ➢ Demographic Environment The increase in the retiree population relative to the size of the active population will continue to create cost pressure. Economic Environment The most important factor in estimating future costs is the investment return achieved over the long haul. Extremely poor asset performance in 2008 will continue to put substantial pressure on cash requirements.Those losses can only be replaced by a continued stock market rebound or larger contributions. ➢ Population Changes The addition of several new hires in recent years will very gradually provide some help to the plan's funded status. i Benefit/Contribution Changes Benefit changes for recent hires will help the plan's long-term funded status. Whether or not additional benefit changes will be needed depends primarily on asset performance. 7 Any City,Town,or Place—2015 Val Results nyhart ACTUARY &EMPLOYEE BENEFITS Pension Financial Manager This modeling tool allows us to project costs for several years under a variety of scenarios. We would love the opportunity to present this Sample Pension Financial Manager nyharl: tool in person to demonstrate its modeling ability and flexibility. Our experience shows that use of these modeling capabilities PenslonFlnandal Manager:XYZRetUementFund ultimately leads to improved financial management of the plan, an elimination of surprises, and cost savings for our clients. ° How will Nyhart's Pension Financial Manager help you? Our Pension Financial Manager can help answer questions like the following... • How much will need to be contributed over the next five years? • How much will need to be expensed under current GASB rules over the next five years? °°°°°• °' "' "° "" "' "' "' "° • How much will costs increase if investment returns are poor or interest rates decrease? • If we contribute more than necessary this year, how are future ' costs affected? These questions and more can be answered in seconds using this cost modeler. It provides cost projections with the ability to instantly model multiple economic scenarios in face-to-face meetings. Village of Oak Brook nyl•-hert ACTUARY &EMPLOYEE BENEFITS Pension Design Manager This design-modeling tool illustrates the benefit value being delivered to current plan members. It can demonstrate the benefit delivered through a defined benefit plan, through a defined contribution plan, and through Social Security, in pieces or in total. Our Pension Design Manager can answer questions like... • For current members, what percent of pre-retirement income will be replaced if they retire at age 55? What if they retire at age 52? • How sensitive are the results to investment return performance in the defined contribution plan? XYZ Corporation Pension Design Manager What muldyou film to111wcoley Proposed Plan Value vs.Current Plan Value �wmmceNn.,w�ew.ar.aln.wvu• .. Values Included/tr.DB and OC Er-Pd On Like the cost-modeling tool this design tool can answer 0atdp3 P•$.n mist"mw O.0%Ol kuw/s What v0.DIM# N-you like Include? Y o Dennel eelmm these questions in a very short time. • e.0.1 AN91N6n o D4M4e COm9hW0tl-EmP10Ye Pal d A 30.34 1-18 20•♦ 2 29 3• Otale ❑ De9nel Ced9bWen-Employee�Pe14 0% ❑ Soslas.usy s25 - Inlu9l Inputs 90 Rellrom•d Age 66�i.�..w.yeem M1Om new 6 -.; ❑ Vaele,ml e9e 71% Im 16% PneeNV4 COmenlon Rtle 6.0% -•, 25.29 t A 3 10 DCl—dmenl Rtlun Rele 1.5% 35]71% ftpl.Pey lPCre4ees ].6% T4% Employee Dc..(..l M1tlw 30-34 H 3 14 ."".— 4A%' 814,961 Agetl ON. 68 I-:, n ee.Kp.d.d—Wl}ed4r ❑ in 76% C—MEmplo 00 Mtich 30.3]8 per91.00 Glfndl, d c 35-39 e 9 4n 411 Und*,CUnrntPI Ant $59,414 CWroN DB McNtl Rtle 9.99% Age 10 I':- al Te% Proposed Deslgn Inputs senlca �;x5 or 40-44 A e A 23 •Da Plen PoNIS 100 O 860.511 Typ.dProspW1l Plen w,Om+mu3sromurte� 94% I 1 O Ves • Ves < 45-40 f 3 22 %202 OB A,-.,Rtle 87% Ca PoyC dll RNs WA,.�_I• 50.56 2 e 41 CB IN CrodIMp ROe WA %]9233 0% •OC PIUr 1 O A91 O 9e1111 ca� � Polms 5559 ! 2T Makhlnl CanhWUllen Nen4AMChln9 Cen1r1hu0on %O,T6J Polme POINs <2o '3H — eJV%. 804 13 20.29 91{ 0Am 854,231 30-39 36% 3D39 CJm � ..E....._ ..1.._... 90% 6]% Be% 90% 95% 81% 4649 M 4.1 A,e3L TOh13 13 41 11 25 13 21 11 60h9 Im 30.59 eJm .- 358.935 %8.996 %9A90 %3.>6} %0,253 960?d %0AS6 %0'1}0 60.69 le% ��I.•...' 6689 !SAN _,.. }6]9 LR ]619 A.M% { palcss,o 6689 ]e1h BOb9 J.4m Meesw4% 90h M16 90f sAm PPI.Come "e"' AN PIS .,. All PIe • 6 ese4 On SeMw.enenlm4e8 Pryor 12,112009 Up to 6J% Avq CONObWl4n 0.00% 9Ra009 Village of Oak Brook Any City, State, or School District GASB 45 Actuarial Valuation Fiscal Year Ending June 30, 2013 Prepared by: Nyhart 8415 Allison Pointe Blvd.,Suite 300 Indianapolis, IN 46250 Ph:(317)845-3500 www.nyhart.com Table of Contents Page Certification 1 Actuary's Notes 2 Executive Summary 3 GASB Disclosures Development of Annual Required Contribution(ARC) 6 Development of Annual OPEB Cost and Net OPEB Obligation 7 Schedule of Funding Progress B Schedule of Employer Contributions B Historical Annual OPEB Cost B Reconciliation of Actuarial Accrued Liability(AAL) 9 Employer Contribution Cash Flow Projections 10 Substantive Plan Provisions 11 Actuarial Methods and Assumptions 14 Summary of Plan Participants 18 Appendix 20 GASB Results by Group 21 Comparison of Participant Demographic Information 22 Glossary 23 Decrements Exhibit 24 Retirement Rates Exhibit 25 Illustrations of GASB Calculations 26 Definitions 28 nyhart October 18,2013 John Brown 123 Any Street AnyState,AS 09876 This report summarizes the GASB actuarial valuation for the Any City,State,or School District 2012/13 fiscal year.To the best of our knowledge,the report presents a fair position of the funded status of the plan in accordance with GASB Statement No.45(Accounting and Financial Reporting by Employers for Post- Employment Benefits Other Than Pensions).The valuation is also based upon our understanding of the plan provisions as summarized within the report. The information presented herein is based on the information furnished to us by the Plan Sponsor that has been reconciled and reviewed for reasonableness. We are not aware of any material inadequacy in employee census provided by the Plan Sponsor.We have not audited the information at the source,and therefore do not accept responsibility for the accuracy or the completeness of the data on which the information is based. The actuarial assumptions were selected by the Plan Sponsor with the concurrence of Nyhart.In our opinion,the actuarial assumptions are individually reasonable and in combination represent our estimate of anticipated experience of the Plan.All computations have been made in accordance with generally accepted actuarial principles and practice. To our knowledge,there have been no significant events prior to the current year's measurement date or as of the date of this report that could materially affect the results contained herein. Neither Nyhart nor any of its employees has any relationship with the plan or its sponsorthat could impair or appear to impair the objectivity of this report. Should you have any questions please do not hesitate to contact us. Randy Gomez,FSA,MAAA Evi Laksana,ASA,MAAA Consulting Actuary Valuation Actuary 11i age Any City,State,or School District GASB Valuation Actuary's Notes For Fiscal Year Ending June 30,2013 There have been changes to the plan provisions since the last full valuation,which was for the fiscal year ending June 30,2011. 1. Retiree health benefits eligibility requirements for ACSSD have changed to age 55 with 5 years of service.In prior valuations,ACSSD employees are eligible for retiree health benefits once they are age 55 with 15 years of service.This change increased the Client's liabilities. 2. Employees belonging in the following groups are not eligible for retiree health benefits in this year's valuation: a. Technical/Professional(except for one grandfathered active employee) b. Central Division(except for one grandfathered active employee) c. Transportation UAW Local 1234 d. Executive Secretaries Additionally,employees belonging in the following groups remain ineligible for retiree health benefits as valued in prior valuations: a. Food Service Unit UAW Local 2345 b. Family Unit/COTTDA c. Assistants d. Substitutes This change reduced the Client's liabilities. Two actuarial assumptions have been updated since the last valuation: 1. Mortality table has been updated from(a)RP-2000 Combined Mortality table projected to 2010 using scale AA to(b)RP-2000 Combined Mortality Table fully generational using scale AA.This caused a slight increase in liabilities. 2. Medical trend rates have been reset to the prior valuation's levels.This caused an increase in liabilities. 2(Page Any City,State,or School District GASB Valuation For Fiscal Year Ending June 30,2013 Executive Summary Summary of Results Presented below is the summary of GASB 45 results for the fiscal year ending June 30,2013 compared to the prior fiscal years as shown in the Client's Notes to Financial Statement. As ofjuty 1,2011 As ofJuly 1, r Actuarial Accrued Liability $ 18,265,858 $ 20,147,995 Actuarial Value of Assets $ 0 $ 0 Unfunded Actuarial Accrued Liability $ 18,265,858 $ 20,147,995 Funded Ratio 0.0% 0.0% FY2011112 FY2012113 te Annual Required Contribution $ 1,937,441 $ 2,231,254 Annual OPEB Cost $ 1,940,764 $ 2,235,862 Annual Employer Contribution $ 1,399,857 $ 1,129,844 AsofJune3O,2012 As ofJune 30,2013 Net OPEB Obligation $ 1,938,653 $ 3,044,671 As ofJuly 1,2011 As ofJuly 1,2013 Active Participants 509 498 Total Retiree Participants 118 91 The active participants'number above may include active employees who currently have no health care coverage.Refer to Summary of Participants section for an accurate breakdown of active employees with and without coverage. 31 Page Any City,State,or School District GASB Valuation Executive Summary For Fiscal Year Ending June 30,2013 Below is a breakdown of total GASB 45 liabilities allocated to past,current,and future service as of July 1,2012 compared to the prior year. As of July 1,2011 As ofjuly 1,2012 Present Value of Future Benefits is the amount needed 31,770,950 $ 35,892,132 as of July 1,2012 to fully fund the diem's retiree health are Present Value of Future Benefits subsidies for existing and future retirees and their Active Employees 35,046,630 31,533,790 dependents assuming alactuarial assumptions are met. Retired Employees 3,724,320 4,359,042 Actuarial Accrued Liability is the portion of PVFB considered to be accrued or earned as of July 1,2012.This amount is a required disclosure In the Required Actuarial Accrued Liability $ 21,272,150 $ 20,147,995 Supplementary Information section. Active Employees 17,547,830 15,788,953 Normal Cost is the portion of the total liability amount that Retired Employees 3,724,320 4,359,042 B attributed and accrued forcorrent year's active employee service by the actuarial cost method. Normal Cost $ 1,108,987 $ 1,313,379 Future Normal Cast is the portion of the total liability amount that Is attributed to the future employee service by the current years valuation by the actuarial cost method. Future Normal Cost $ 16,389,813 $ 14,431,458 41 Page Any City,State,or School District GASB Valuation Executive Summary For Fiscal Year Ending June 30,2013 Below is a breakdown of total GASB 45 Actuarial Accrued Liability(AAL)allocated to pre and post Medicare eligibility.The liability shown below includes explicit (if any)and implicit subsidies.Refer to the Substantive Plan Provisions section for complete information on the Plan Sponsor's GASB subsidies. Change in AAL Actuarial Accrued Liability(AAL) As ofJuly 1, t t u $25.0 _o Active Pre-Medicare $ 13,251,484 $ 15,788,953 $20.0 Active Post-Medicare 0 0 Total Active AAL $ 13,251,484 $ 15,788,953 $15.0 LI Retirees Pre-Medicare $ 5,014,374 $ 4,359,042 $10.0 t Retirees Post-Medicare 0 0 $5.0 Total Retirees AAL $ 5,014,374 $ 4,359,042 $0.0 Total AAL $ 18,265,858 $ 20,147,995 Pre-Medicare Cost Post-Medicare Cost ■July 1,2011 OJuly 1,2012 . . 51 Page Any City,State,or School District GASB Valuation GASB Disclosures For Fiscal Year Ending June 30,2013 Development of Annual Required Contribution(ARC) Cash vs Accrual Accounting „$2.5 C 0 Required Supplementary Information t t $2.0 Actuarial Accrued Uab8lty as of beginning of year $ 18,265,858 $ 20,147,995 $1.5 Actuarial Value of Assets as of beginning ofyear 0 0 i[i[ Unfunded Actuarial Accrued Liability(UAAL) $ 18,265,858 $ 20,147,995 $1.0 Covered payroll' $ 30,057,347 $ 30,065,183 UAAL as a%of covered payroll 60.8% 67.0% $0.5 $0.0 Annual Required Contribution r 2012113 1 2011/12 2012/13 Normal cost as of beginning of year $ 1,108,987 $ 1,313,379 Pay-go cost MARC Amortization of the UAAL 745,024 821,792 Total normal cost and amortization payment $ 1,854,011 $ 2,135,171 Annual Required Contribution(ARC)is the annual expense recorded in the income statement under GAS@ 45 Interest to end of year 83,430 96,083 accrual accounting.R replaces the cash basis method of accounting recognition with an accrual method.The GAS@ 45 Total Annual Required Contribution(ARC) $ 1,937,441 $ 2,231,254 ARC is higher than the pay-as-you-go cost because it IrOucles recognition of employer costs expected to be paid in future accounting periods. '2011/12 covered payroll is based on 2010/11 covered payroll($29,191,890)increased by the payroll growth assumption(3.0%). 61 Page Any City,State,or School District GASB Valuation GASB Disclosures For Fiscal Year Ending June 30,2013 Development of Annual OPEB Cost and Net OPEB Obligation Annual employer contribution for pay-go costs are estimated for 2011/12 and 2012/13. OPEB r r Pay-as-you-go Cost is the expected total employer cash cost Net for the coming period based on all explicit and implicit ARC as of end of year $ 1,937,441 $ 2,231,254 subsidies.It is also the amount recognized as expense on the Income Statement under pay-as-you-go accounting. Interest on Net OPEB Obligation(NOO)to end of year 62,899 87,239 NOO amortization adjustment to the ARC (59,576) (82,631) Net OPEB Obligation is the cumulative difference between Annual OPEB cost $ 1,940,764 $ 2,235,862 the annual OPB cost and employer contributions.This obligation will be created if cash contributions are less than Annual employer contribution for pay-go cost (1,399,857) (1,129,844) the current year expense under GASB 45 accrual rules. Annual employer contribution for pre-funding 0 0 The net obligation Is recorded as liability on the employers balance sheet which will reduce the net fund balance. Change in NOO $ 540,907 $ 1,106,018 The value of implicit subsidies is considered as part of cash NOO as of beginning of year 1,397,746 1,938,653 contributions for the current period.Other cash expenditures that meet certain conditions are also considered as NOO as of end of year $ 1,938,653 $ 3,044,671 contributions for GASB 45 purposes. 71 Page Any City,State,or School District GASB Valuation GASB Disclosures For Fiscal Year Ending June 30,2013 Summary of GASB 45 Financial Results Presented below is the summary of GASB 45 results for the fiscal year ending June 30,2013 and prior fiscal years as shown in the Client's Notes to Financial Statements. Schedule of Funding Progress ActuarialAccrued Actuarial Value ofAssets, Unfunded Actuarial Funded UAAL as%of As of Liability(AALI (AVA) Accrue.d Liability(UAAL) Ratio Covered Payroll Covered Payroll r MMMM MMM July 1,2012 $ 20,147,995 $ - $ 20,147,995 0.0% $ 30,065,183 67.0% July 1,2011 $ 18,265,858 $ - $ 18,265,858 0.0% $ 30,057,347 60.8% July 1,2010 $ 21,314,421 $ - $ 21,314,421 0.0% $ 28,895,517 73.9% Schedule of Employer Contributions FIVE Employer Annual Required %ofARC Contributed Contributions Contribution(ARC) C=AIB June 30,2013 $ 1,129,844 $ 2,231,254 50.6% June 30,2012 $ 1,399,857 $ 1,937,441 72.3% June 30,2011 $ 1,790,604 $ 2,239,080 80.0% Historical Annual OPEB Cost As of Annual r• OPEB OPEB Obligation Contributed June 30,2013 $ 2,235,862 50.5% $ 3,044,671 June 30,2012 $ 1,940,764 72.1% $ 1,938,653 June 30,2011 $ 2,239,080 80.0% $ 1,397,746 81 Page Any City,State,or School District GASB Valuation Reconciliation of Actuarial Accrued Liability For Fiscal Year Ending June 30,2013 The Actuarial Accrued Liability(AAL)is expected to change on an annual basis as a result of expected and unexpected events.Under normal circumstances,it is generally expected to have a net increase each year.Below is a list of the most common events affecting the AAL and whether they increase or decrease the liability. Expected Events • Increases in AAL due to additional benefit accruals as employees continue to earn service each year • Increases in AAL due to interest as the employees and retirees age • Decreases in AAL due to benefit payments Unexpected Events • Increases in AALwhen actual premium rates increase more than expected.A liability decrease occurs when premium rates increase less than expected. • Increases in AAL when more new retirements occur than expected or fewer terminations occur than anticipated.Liability decreases occur when the opposite outcomes happen. • Increases or decreases in AAL depending on whether benefit provisions are improved or reduced. 2011112 20121132 Actuarial Accrued Liability as of beginning of year $ 18,265,858 $ 20,147,995 Normal cost as of beginning of year 1,108,987 1,313,379 Reconciliation of AAL shows what the actua ry expects the actua rial accrued liability to be at the beginning of the Expected benefit payments during the year (1,399,857) (1,129,844) following fiscal year based on current assumptions and plan provisions.The expected end of year AAL will change as actual Interest adjustment to end of year 840,718 940,620 plan experience varies from assumptions.Generally,the AAL is Expected Actuarial Accrued Liability as of end of year - $ 18,815,706 $ 21,272,150 expected to have a net Increate each year. Actuarial(gain)/loss due to experience 260,820 0 Actuarial(gain)/loss due to provisions/assumptions changes 1,071,469 21,272,150. Actual Actuarial Accrued Liability as of end of year $ 20,147,995 $ 20,147,995 'Actuarial Accrued Liability(AAL)as of beginning of year was actuarially rolled-back from end of year AAL on a"no gain/loss'basis. 9 1 P a g e Any City,State,or School District GASB Valuation Employer Contribution Cash Flow Projections For Fiscal Year Ending June 30,2013 The below projections show the actuarially estimated employer-paid contributions for retiree health benefits for the next ten years.Results are shown separately for current/future retirees and gross claim costs/retiree contributions.These projections include explicit and implicit subsidies. FYE Current Retirees Future Retirees" Total Projected Employer Pay-go Cost 2013 $ 812,792 $ 317,052 $ 1,129,844 $2.0 C O 2014 $ 877,815 $ 342,416 $ 1,220,231 2015 $ 819,447 $ 655,031 $ 1,474,478 $1.5 2016 $ 694,796 $ 936,968 $ 1,631,764 2017 $ 553,235 $ 1,149,708 $ 1,702,943 $1.0 2018 $ 474,623 $ 1,346,691 $ 1,821,314 2019 $ 322,640 $ 1,443,048 $ 1,765,688 $0.5 2020 $ 198,498 $ 1,527,345 $ 1,725,843 2021 $ 154,338 S 1,594,996 $ 1,749,334 $0.0 2022 $ 48,948 $ 1,646,421 $ 1,695,369 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 ■Current Retirees 0 Future Retirees FYE Estimated Retiree Net Employern claims Costs Projected Employer Pay-go Cost 2013 $ 1,572,302 $Contributions 442,458 $•• 1,129,844 $3.0 o0 2014 $ 1,698,086 $ 477,855 $ 1,220,231 $2.5 2015 $ 2,050,989 $ 576,512 $ 1,474,477 $2.0 2016 $ 2,262,319 $ 630,555 $ 1,631,764 2017 $ 2,365,362 $ 662,419 $ 1,702,943 $1.5 2018 $ 2,544,906 $ 723,592 $ 1,821,314 $1.0 2019 $ 2,461,463 $ 695,775 $ 1,765,688 2020 $ 2,417,747 $ 691,904 $ 1,725,843 $0.5 2021 $ 2,460,305 $ 710,971 $ 1,749,334 $0.0 2022 $ 2,380,173 $ 684,803 $ 1,695,370 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 ■Retiree Contributions CI Net Employer Paid Costs a Projections for future retirees do not take Into account future new hires. 101 Page Any City,State,or School District GASB Valuation For Fiscal Year Ending June 30,2013 Substantive Plan Provisions Eligibility Only full-time employees are eligible for retiree health care benefits. ACSSDA(Any City,State,or School District Association)employees are eligible for retiree health care benefits until Medicare eligibility once they meet the following requirements: 1. Hired on/before June 30,2007:Age 50 with 5 years of service 2. Hired after June 30,2007:Age 50 with 10 years of service ACSSDEA(Any City,State,or School District Education Association)employees are eligible for retiree health care benefits until Medicare eligibility upon reaching age 50 with 10 years of service. ACSSDEAA(Any City,State,or School District Educational Assistants Association)employees are eligible for retiree health care benefits until Medicare eligibility upon reaching age 55 with 5 years of service. Maintenance/Transportation employees are eligible for retiree health care benefits until Medicare eligibility upon reaching age 55 with 15 years of service. Central Division employees are eligible for retiree health care benefits until Medicare eligibility upon reaching age 50 with 5 years of service. All other bargaining units listed below are eligible for retiree health care benefits until Medicare eligibility upon reaching age 55 with 10 years of service: 1. ACSSDEOPA(Any City,State,or School District Educational Office Personnel Association) 2. Custodians 3. Mid-level Manager Employees belonging in the following bargaining units are not eligible for retiree health benefits: 1. Food Service Unit UAW Local 2345 2. Technical/Professional(except for one grandfathered active employee) 3. Transportation Unit UAW Local 1234 4. Executive Secretaries S. Central Division employees(except for one grandfathered active employee) 6. Family Unit/COTTDA 7. Assistants S. Substitutes 11 Page Any City,State,or School District GASB Valuation For Fiscal Year Ending June 30,2013 Substantive Plan Provisions Spouse Benefit Retiree health care coverage continues to surviving spouse upon death of retirees,but Any City,State,or School District explicit subsidy ends upon death of the retiree.Upon death of active employees,surviving spouse receives COBRA for 36 months. Retiree Cost Sharing Retirees are required to contribute the portion of premiums not covered by the Client's explicit subsidy. Explicit Subsidy The Any City,State,or School District contributes a percentage of single or 2-person premiums according to the table below: Bargaining Unit District ACSSDAA and Central Division* 60% ACSSDEA,ACSSDEOPA,Technical Professional— 65% Mid-level Manager,Executive Secretary Custodians 55% Maintenance/Transportation 50% *For one Central Division employee only.All other Central Division employees are not eligible for retiree health benefits. **For one Technical/Professional staff member only.All others in this group are not eligible for retiree health benefits. The Any City,State,or School District contributes 65%of single coverage premiums for ACSSDEAA employees who have at least 15 years of service at retirement.Otherwise the Client's contribution is 30%.There is no explicit subsidy for spouse of ACSSDEAA employees. Medical Benefit Same benefit options are available to retirees as active employees. The health plans are fully and partially experience rated.The 2013/14 monthly premiums by plan for pre-Medicare retirees effective July 1,2013 are as shown below. 1 Person 2 Persons ACSSD Care OOP IN $667.00 $1,334.00 ACSSD Care PPO $797.50 $1,595.00 ACSSD Care HMO $725.00 $1,450.00 121 Page Any City,State,or School District GASS Valuation Substantive Plan Provisions For Fiscal Year Ending June 30,2013 Post-Medicare Liability There is no post-Medicare GASB liabilities as retirees pay the full cost of coverage. ACSSD Medical Subsidy Any City,State,or School District(ACSSD)medical subsidy eligibility: 1. Members with at least 20 years of service who are eligible to retire on Service,Early Service,or Ordinary Disability Retirement on or before July 1,2008 and retire on/before July 1,2009 will be eligible at age 60. 2. Members with at least 30 years of service who are eligible to retire on Service,Early Service,or Ordinary Disability Retirement on or before July 1,2008 and who retire on/before July 1,2009 will be eligible at ages 55 through 59. Based on the eligibility requirements above all employees who are not retired as of July 1,2009 are not eligible for ACSSD medical subsidy. Early Service Retirement eligibility is the earlier of(i)age 50 with 10 years of service or(ii)20 years of service with 70 points(age+service).Service Retirement eligibility is age 60(no service requirement). The monthly ACSSD medical subsidy is as shown below: 1 Person 2 Persons Pre-Medicare $375.56 $751.12 Post-Medicare $236.84 $473.68 ACSSD Subsidy Coordination The Any City,State,or School District will collect the ACSSD medical subsidy on behalf of the retiree and apply it to the retiree's portion of the premium rate first.Any remaining ACSSD subsidy amount will be used to reduce the Client's subsidy.Examples are as shown below. Premium Retiree District A. ACSSD Care HMO premium $673.00 B. Retiree contribution(35%x A) $235.55 C. ACSSD subsidy(min of B and$375.56) ($235.55) D. Net retiree contribution $ 0.00 E. Client's explicit subsidy(65%x A) $437.45 F. Remaining ACSSD subsidy($375.56—C) ($140.01) G. Net Client's explicit subsidy $297.44 131 Page Any City,State,orSchool District GASS Valuation Actuarial Methods and Assumptions For Fiscal Year Ending June 30,2013 The actuarial assumptions used in this report represent a reasonable long-term expectation of future OPEB outcomes.As national economic and Any City,State, or School District experience change over time,the assumptions will be tested for ongoing reasonableness and,if necessary,updated. There are changes to the actuarial methods and assumptions since the last GASB valuation,which was for the fiscal year ending June 30,2011.Refer to Actuary's Notes section for complete information on these changes.For the current year GASB valuation,we have also updated the per capita costs.We expect to update health care trend rates and per capita costs again in the next full GASB valuation,which will be for the fiscal year ending June 30,2015. Measurement Date June 30,2013 with results actuarially rolled-back to July 1,2012 on a"no loss/no gain"basis. Discount Rate 4.5% Payroll Growth 3.0%per year Inflation Rate 3.0%per year Cost Method Projected Unit Credit with linear proration to decrement Amortization Level%of pay over thirty years based on an open group Census Data Census information was provided by Any City,State,or School District as of September 2013.We have reviewed it for reasonableness and no material modifications were made to the census data except as noted below: • Any retirees not found in prior year's census data are assumed to be active employees that recently retired and thus they are not eligible for ACSSD subsidy. Health Care Coverage Election Rate Active employees with current coverage:90% Active employees with no coverage:0% Inactive employees with current coverage:100% Inactive employees with no coverage:0% Spousal Coverage Spousal coverage for current retirees is based on actual data. 65%of male and 55%of female employees is assumed to be married at retirement.Husbands are assumed to be three years older than wives. Employer Funding Policy Pay-as-you-go cash basis 141 Page Any City,State,or School District GASB Valuation For Fiscal Year Ending June 30,2013 Actuarial Methods and Assumptions Mortality RP-2000 Combined Mortality Table fully generational using Scale AA Disability None Turnover Rate Assumption used to project terminations(voluntary and involuntary)prior to meeting minimum retirement eligibility for retiree health coverage.The rates represent the probability of termination in the next 12 months. The termination rates are based on standard actuarial termination table adjusted for the Client's historical termination experience. Sample annual turnover rates are shown below: Age Rate 25 1.1% 35 0.9% 45 0.4% 55 0.0% Retirement Rate Annual rates of retirement by group developed based on the Client's actual retirement experience in 2008 and 2009 are as shown below: All Age ADMIN/ACSSDEA Other 50-54 2% 0% 55 20% 20% 56 15% 2% 57 20% 2% 58-59 20% 5% 60 40% 50% 61 201 20% 62-64 3010 30% 65 100% 100% 15 Page Any City,State,or School District GASB Valuation For Fiscal Year Ending June 30,2013 Actuarial Methods and Assumptions Health Care Trend Rates FYE Medical FYE Medical 2014 8.00% 2020 6.00% The Initial trend me was based on a combination of employer history,national trend surveys,and 2015 7.50% 2021 5.75% professional judgment. 2016 7.00% 2022 5.50% The ultimate trend rate was selected based on 2017 6.75% 2023 5.25% historical medical CM information. 2018 6.50% 2024+ 5.00% 2019 6.25 ACSSD subsidy is assumed to remain the same in the future. Retiree Contributions Retiree contributions are assumed to increase according to health care trend rates. Per Capita Costs Annual per capita costs were calculated based on the Client's monthly premium rates effective on July 1,2013 actuarially increased using health index factors and current enrollment.The costs are assumed to increase with health care trend rates.Annual per capita Costs by plan are as shown below: ACSSD Care PPO ACSSD Care HMO The per capita costs represent the costof coverage Age Male Female Male Female fora retiree-only population 50-54 $ 9,600 $10,300 $ 8,700 $ 9,400 Actuarial standards require the recognition of higher 55-59 $11,800 $11,500 $10,800 $10,500 inherent costs for a retired population versus an 60-64 $15,100 $13,600 $13,800 $12,400 active population Explicit Subsidy The difference between(a)the premium rate and(b)the retiree contribution. Below is an example of the monthly explicit subsidies for a ACSSDEA future retiree who is enrolled in the ACSSD Care HMO plan. Premium Retiree Explicit Rate Contribution Subsidy A 6=35%xA C=A—B Retiree $725.00 $253.75 $471.25 Spouse $725.00 $253.75 $471.25 16 Page Any City,State,or School District GASB Valuation Actuarial Methods and Assumptions For Fiscal Year Ending June 30,2013 Implicit Subsidy The difference between(a)the per capita cost and(b)the premium rate. Below is an example of the monthly implicit subsidies for a 60—64 male retiree with spouse of the same age enrolled in the ACSSD Care HMO plan. Per Capita Premium Implicit Cost Rate Subsidy All employers that utilize premium rates based on A B C=A—B blended active/retiree claims experience will have an Retiree $1,150.00 $725.00 $425.00 implicit subsidy.There is an exception for plans using a true community-rated premium rate. Spouse $1,033.33 $725.00 $308.33 GASB Subsidy Breakdown Below is a breakdown of the GASB 45 monthly total cost for a male 60—64 retiree and his spouse of the GASB Subsidy Breakdown same age enrolled in the ACSSD Care HMO plan. $1,200 Retiree Spouse Retiree contribution $ 253.75 $ 253.75 $1000 s: Explicit subsidy $ 471.25 $ 471.25 $800 Implicit subsidy $ 425.00 $ 308.33 a Total monthly cost $ 1,150.00 $ 1,033.33 $600 ti $400 r $200 1 $0 Retiree Spouse •Retiree contribution ■Explicit subsidy •Implicit subsidy 171P_;ge Any City,State,or School District GASB Valuation Summary of Plan Participants For Fiscal Year Ending June 30,2013 Actives with coverage Single Non-Single Total Avg.Age Avg.Svc Salary ACSSD Care HMO 149 2S6 405 46.2 12.4 $ 22,772,264 ACSSD Care Access 4 7 11 39.3 8.0 $ 602,266 ACSSD Care PPO 28 54 82 53.4 18.9 $ 5,099,562 Total actives with coverage 181 317 498 47.3 13.4 $ 28,474,092 Enrollment information above is for full-time employees who are eligible for retiree health care benefits only.Additionally,there are 55 active employees with coverage that are not eligible for retiree health benefits.The total salary for this group is$1,591,091. No information was provided on active employees without coverage. Active employees without coverage were not provided for the valuation. Retirees with coverage Single Non-Single Total Avg.Age ACSSD Care HMO 18 10 28 61.6 ACSSD Care PPO 37 20 57 62.3 Medicare N/A N/A 6 60.4 Total retirees with coverage 55 30 91 61.9 Retirees'enrollment above is for pre-65 retirees only.There are no GASB liabilities for Medicare retirees as they pay the full cost of coverage.For the six retirees under the age of 65 noted as being enrolled in post-65 plan,the ACSSD Care HMO per capita costs are being applied to them. 181 Page Any City,State,or School District GASB Valuation For Fiscal Year Ending June 30,2013 Summary of Plan Participants Active Age-Service Distribution Includes active employees eligible for retiree health benefits only. Years of Service t r 30 to 34 35 to 39 40&up Total 5 Under 25 3 1 1 40 25 to 29 4 24 11 1 30 to 34 4 8 36 7 55 35 to 39 2 8 17 21 3 51 40 to 44 6 15 20 10 2 53 45 to 49 6 17 13 10 7 2 55 50 to 54 1 8 13 18 14 14 11 3 82 55 to 59 10 9 15 18 17 16 4 1 90 60 to 64 1 8 6 11 8 12 8 54 65 to 69 2 6 2 1 1 12 1 70&up 1 Total 14 72 127 104 72 50 42 15 1 1 498 191 Page Any City,State,or School District GASB Valuation For Fiscal Year Ending June 30,2013 Appendix APPENDIX 201 Page Any City,State,or School District GASB Valuation Appendix For Fiscal Year Ending June 30,2013 GAS13 Results by Group Below is the summary of the GASB results for fiscal year ending June 30,2013 based on the Projected Unit Credit cost method with a discount rate of 4.5%. UnfundedActuarial Accrued Annual Required Contribution Liability(VAAL) JARQ Net OP :O, eO Union Groups As ofJuly 1,2012 For2012113 As of June 30,2013 ACSSDAA $ 939,940 $ 107,479 $ 65,275 ACSSDEA $ 14,868,138 $ 1,618,862 $ 1,708,945 ACSSD $ 1,738,856 $ 225,653 $ 714,111 Central Division Administration $ 0 $ 0 $ 26,559 ACSSDEOPA $ 1,023,828 $ 105,427 $ 58,682 Custodian $ 964,510 $ 108,695 $ 360,087 Executive Secretaries $ 52,020 $ 2,218 $ -68,660 Maintenance/Transportation $ 279,726 $ 35,837 $ 106,260 Mid Level Managers $ 265,365 $ 24,394 $ -27,107 Technical Professional Staff $ 15,612 $ 2,689 $ 36,796 Transportation 1234 $ 0 $ 0 $ 63,723 Total $ 20,147,995 $ 2,231,254 $ 3,044,671 211 Page Any City,State,or School District GASB Valuation Appendix For Fiscal Year Ending June 30,2013 Comparison of Participant Demographic Information The active participants'number below may include active employees who currently have no health care coverage.Refer to Summary of Participants section for an accurate breakdown of active employees with and without coverage. As of July 1,2011 As of July 1,2013 Active Participants 509 498 Retired Participants 118 56 Averages for Active Age 453 47.3 Service 12.2 13.4 Averages for Inactive Age 62.0 61.9 221 Page Any City,State,or School District GASB Valuation Glossary For Fiscal Year Ending June 30,2013 Glossary 231 Page Any City,State,or school District GASB Valuation For Fiscal Year Ending June 30,2013 Glossary Decrements Exhibit The table below illustrates how actuarial assumptions can affect a long-term projection of future liabilities.Starting with 100 employees at age 35,the illustrated actuarial assumptions show that 44.430 employees out of the original 100 are expected to retire and could elect retiree health benefits at age 55. Age Employees er Year* er Year* D- '"cTroemtael nts 35 100.000 ,6.276 ,0.000 6.276 46 55.938 2.085 ,0.000 2.085 36 93.724 5.677 0.000 5.677 47 53.853 1.866 0.000 1.866 37 88.047 5.136 0.000 5.136 48 51.987 1.656 0.000 1.656 38 82.911 4.648 0.000 4.648 49 50.331 1.452 0.000 1.452 39 78.262 4.209 0.000 4.209 so 48.880 1.253 0.000 1.253 40 74.053 3.814 0.000 3.814 51 47.627 1.060 0.000 1.060 41 70.239 3.456 0.000 3.456 52 46.567 0.877 0.000 0.877 42 66.783 3.131 0.000 3.131 53 45.690 0.707 0.000 0.707 43 63.652 2.835 0.000 2.835 54 44.983 0.559 0.000 0.553 44 60.817 2.564 0.000 2.564 55 44.430 0.000 44.430 .44.430 45 58.253 2.316 0.000 2.316 Decrements Exhibit 100 I so 60 40 20 0 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 !Actives ®Total Terminations BTotal Retirements *The above rates are illustrative rates and are not used in our GASB calculations. 24 Page Any City,State,or school District GASB Valuation Glossary For Fiscal Year Ending June 30,2013 Retirement Rates Exhibit The table below illustrates how actuarial assumptions can affect a long-term projection of future liabilities.The illustrated retirement rates show the number of employees who are assumed to retire annually based on 100 employees age 55 who are eligible for retiree health care coverage.The average age at retirement is 62.0. Active Annual #Retirements Active Age Employees Retirement per Year Employees Retirement Rates Exhibit BOY Rates* EOY 55 100.000 5.0% 5.000 95.000 100 , - 56 95.000 5.0% 4.750 90.250 80 57 90.250 5.0% 4.513 85.738 58 85.738 5.0% 4.287 81.451 60 59 81.451 5.0% 4.073 77.378 60 77.378 5.0% 3.869 73.509 40 61 73.509 5.0% 3.675 69.834 20 62 69.834 30.0% 20.950 48.884 63 48.884 15.0% 7.333 41.551 0 Rim, 64 41.551 15.0% 6.233 35.318 55 56 57 58 59 60 61 62 63 64 65 65 35.318 100.0% 35.318 0.000 ■Actives ©Total Retirements *The above rates are illustrative rates and are not used in our GASB calculations. 251 Page Any City,State,or School District GASB Valuation Glossary For Fiscal Year Ending June 30,2013 Illustration of GASB Calculations The purpose of the illustration is to familiarize non-actuaries with the GASB 45 actuarial calculation process. I. Facts 1. The employer provides subsidized retiree health coverage worth$100,000 to employees retiring at age 55 with 25 years of service.The employer funds for retiree health coverage on a pay-as-you-go basis. 2. Employee X is age 50 and has worked 20 years with the employer. 3. Retiree health subsidies are paid from the general fund assets which are expected to earn 4.5%per year on a long-term basis. 4. Based on Employee X's age and sex he has a 98.0%probability of living to age 55 and a 95.0%probability of continuing to work to age 55. H. Calculation of Present Value of Future Benefits Present Value of Future Benefits represents the cost to finance benefits payable in the future to current and future retirees and beneficiaries,discounted to reflect the expected effects ofthe time value(present value)of money and the probabilities of payment. Value Description A. $100,000 Projected benefit at retirement B. 80.2% Interest discount for five years=(1/1.045)5 C. 98.0% Probability of living to retirement age D. 95.0% Probability of continuing to work to retirement age E. $74,666 Present value of projected retirement benefit measured at employee's current age=Ax B x C x D 261 Page Any City,State,or School District GASB Valuation For Fiscal Year Ending June 30,2013 Glossary illustration of GASB Calculations(continued) Ill. Calculation of Actuarial Accrued Liability Actuarial Accrued Liability represents the portion of the Present Value of Future Benefits which has been accrued recognizing the employee's past service with the employer.The Actuarial Accrued Liability is a required disclosure in the Required Supplementary Information section of the employer's financial statement. Description Value A. $74,666 Present value of projected retirement benefit measured at employee's current age B. 20 Current years of service with employer C. 25 Projected years of service with employer at retirement D. $59,733 Actuarial accrued liability measured at employee's currentage=Ax B/C IV. Calculation of Normal Cost Normal Cost represents the portion of the Present Value of Future Benefits allocated to the current year. Value escription$74,666 Present value of projected retirement benefit measured at employee's current age B. 25 Projected years of service with employer at retirement C. $2,987 Normal cost measured at employee's current age=A/B V. Calculation of Annual Required Contribution Annual Required Contribution is the total expense for the current year to be shown in the employer's income statement. Value Description A. $2,987 Normal Cost for the current year B. $3,509 30-year amortization(level dollar method)of Unfunded Actuarial Accrued Liability using a 4.5%interest rate discount factor C. $292 Interest adjustment=4.5%x(A+B) D. $6,788 Annual Required Contribution=A+B+C 271Page Any City,State,or School District GASB Valuation For Fiscal Year Ending June 30,2013 Glossary Definitions GASB 45 defines several unique terms not commonly employed in the funding of pension and retiree health plans.The definitions of the terms used in the GASB actuarial valuations are noted below. 1. Actuarial Accrued Liability—That portion,as determined by a particular Actuarial Cost Method,of the Actuarial Present Value of plan benefits and expenses which is not provided for by the future Normal Costs. 2. Actuarial Assumptions—Assumptions as to the occurrence of future events affecting health care costs,such as:mortality,withdrawal,disablement and retirement;changes in compensation and Government provided health care benefits;rates of investment earnings and asset appreciation or depreciation; procedures used to determine the Actuarial Value of Assets;characteristics of future entrants for Open Group Actuarial Cost Methods;and other relevant items. 3. Actuarial Cost Method—A procedure for determining the Actuarial Present Value of future benefits and expenses and for developing an actuarially equivalent allocation of such value to time periods,usually in the form of a Normal Cost and an Actuarial Accrued Liability. 4. Actuarial Present Value—The value of an amount or series of amounts payable or receivable at various times,determined as of a given date by the application of a particular set of Actuarial Assumptions.For purposes of this standard,each such amount or series of amounts is: a) adjusted for the probable financial effect of certain intervening events(such as changes in compensation levels,Social Security,marital status,etc.); b) multiplied by the probability of the occurrence of an event(such as survival,death,disability,termination of employment,etc.)on which the payment is conditioned;and c) discounted according to an assumed rate(or rates)of return to reflect the time value of money. 5. Annual OPEB Cost—An accrual-basis measure of the periodic cost of an employer's participation in a defined benefit OPEB plan. 6. Annual Required Contribution(ARC)—The employer's periodic required contributions to a defined benefit OPEB plan,calculated in accordance with the parameters. 7. Explicit Subsidy—The difference between(a)the amounts required to be contributed by the retirees based on the premium rates and(b)actual cash contribution made by the employer. 8. Funded Ratio—The actuarial value of assets expressed as a percentage of the actuarial accrued liability. 9. Healthcare Cost Trend Rate—The rate of change in the per capita health claims costs overtime as a result of factors such as medical inflation,utilization of healthcare services,plan design,and technological developments. 281 Page Any City,State,or School District GASB Valuation Glossary For Fiscal Year Ending June 30,2013 Definitions(continued) 10.Implicit Subsidy—In an experience-rated healthcare plan that includes both active employees and retirees with blended premium rates for all plan members,the difference between(a)the age-adjusted premiums approximating claim costs for retirees in the group(which,because of the effect of age on claim costs,generally will be higher than the blended premium rates for all group members)and(b)the amounts required to be contributed by the retirees. 11.Net OPES Obligation—The cumulative difference since the effective date of this Statement between annual OPEB cost and the employer's contributions to the plan,including the OPEB liability(asset)at transition,if any,and excluding(a)short-term differences and(b)unpaid contributions that have been converted to OPEB-related debt. 12.Normal Cost—The portion of the Actuarial Present Value of plan benefits and expenses which is allocated to a valuation year by the Actuarial Cost Method. 13.Pay-as-you-go—A method offinancing a benefit plan under which the contributions to the plan are generally made at about the same time and in about the same amount as benefit payments and expenses becoming due. 14.Per Capita Costs—The current cost of providing postretirement health care benefits for one year at each age from the youngest age to the oldest age at which plan participants are expected to receive benefits under the plan. 15.Present Value of Future Benefits—Total projected benefits include all benefits estimated to be payable to plan members(retirees and beneficiaries, terminated employees entitled to benefits but not yet receiving them,and current active members)as a result of their service through the valuation date and their expected future service.The actuarial present value oftotal projected benefits as of the valuation date is the present value of the cost to finance benefits payable in the future,discounted to reflect the expected effects ofthe time value(present value)of money and the probabilities of payment. Expressed another way,it is the amount that would haveto be invested on the valuation date so that the amount invested plus investment earnings will provide sufficient assets to pay total projected benefits when due. 16.Select and Ultimate Rates—Actuarial assumptions that contemplate different rates for successive years.Instead of a single assumed rate with respect to,for example,the investment return assumption,the actuary may apply different rates for the early years of a projection and a single rate for all subsequent years.For example,if an actuary applies an assumed investment return of 8%for year 20W0,then 7.5%for 20W1,and 7%for 20W2 and thereafter,then 8% and 7.5%select rates,and 7%is the ultimate rate. 17.Substantive Plan—The terms of an OPEB plan as understood by the employer(s)and plan members. 291 Page I 2012 Management Summary GASB No. 45 Retiree Healthcare for Sample Municipal Client Postemployment Benefit Plan Coprizht '-1012. All Rights Resenud. . Agenda • Know your plan • Actuarial Model • Financial Impact • Manage Risks nyl-hert What benefits are offered? What people changes happened? What happened to health care costs? Know your , Know Your Plan Earl y retirement: (a) 10 years before normal retirement and have+25 YOS OR (b)Five years before normal Goal is fully fund annual Eligibility : retirement and have+15 YOS OPEB Cost by (7) Paying PAYGO and Plus benefits provided for (2) Building Trust asset pre-retirement death and disability No Fundin Changes Plans Since Offered Last Year Free to retirees if hired Pre-Medicare health prior to 2009 Medicare health 5% of premium if hired Explicit Dental after 2009 Life insurance Subsidy Part B reimbursement Subsidies continue to Cash in lieu of benefits surviving spouses f' yheFt 3 I Know Your Plan spouse Active Retired Surv. Disabled All March 2011 696 436 155 89 1,376 Left with health coverage -30 29 1 0 Left with no health coverage -10 -6 -7 -1 -24 Died with surviving spouse -9 15 -6 0 New hires and rehires 40 -2 38 Data corrections 1 5 6 March 2012 696 449 168 83 1,396 People Chan • Know Your Plan 2011 Expected Actual 2012 Change from 2012 Expected Pre-Medicare Retiree Rates Medical $698 $764 $672 (12.0%) Rx $352 $386 $355 (8.0%) Total $1,050 $1,150 $1,027 (10.7%) Medicare Retiree Rates Medical $210 $230 $213 (7.4%) Rx $367 $402 $371 (7.7%) Total $577 $632 $584 (7.6%) Part B Reimb. $104 $100 $90 (10.0%) Health Care Cost Changes i i t` R ., a t � 4 & , Actuarial Model Projected Number of Active Employees 800 700 696 600 630 575 500 525 479 400 437 396 357 300 321 288 257 200 100 - - 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Key Concept : Not everyone makes it to retirement Actuarial Model Health care trend 9.5% to 5.0% in nine years increases Lower trend for dental benefit 7.5%; how employer invests assets matters Interest earnings Must be consistent with investment policy When can you start to Eligibility requirements are negotiated retire Free for pre-2009 retirees and spouses What does it cost Introduced contributions to post-2009 retirees Duration of benefits Lifetime coverage is most expensive Key Assumptions and Designs That Drive Cos s Financial,. a Impact Financial Impact Mercer FYE Nyhart Early . . Key Questions 2012 FYE 2013 FYE , , What is present value of future benefits? $275M $261 M $272M How much has been actuarially earned? $260M $245M $255M How well funded is the plan? 38.7% 44.8% 47.4% How much has been recognized on the balance sheet? ($0.6M) ($0.6M) ($0.6M) What Is the current period's cash PAYGO? $9.5M paid by $10.9M paid $11.9M paid Trust by Trust by Trust What is the total Trust contribution? $16.4M $14.OM $14.OM Important Numbers Financial Impact Current Retirees Future Reti�rees 2013 $10,398,128 $513,955 $10,912,083 2014 $10,826,987 $1,060,043 $11,887,030 2015 $11,179,769 $1,680,617 $12,860,386 2016 $11,517,124 $2,362,225 $13,879,349 2017 $11,884,964 $3,116,148 $15,001,112 2018 $12,273,130 $3,914,818 $16,187,948 2019 $12,576,332 $4,771,821 $17,348,153 2020 $12,769,249 $5,607,133 $18,376,382 2021 $12,919,919 $6,440,739 $19,360,658 2022 $12,951,672 $7,108,791 $20,060,463 Projected • for Retiree r Manage Risks • Healthcare cost — Provider cost — Participant utilization • Regulation — Health care reform — GASB move towards corporate-style accounting recognition — Michigan caps • Investment • Mortality Major Manage Risks • Increasing retiree share of monthly premium • Eliminating Medicare coverage or changing to Medicare Advantage products • Changing to funded individual healthcare accounts • Capping employer subsidy at fixed dollar amount • Raising deductibles, copayments, coinsurance and changing to high deductible plans • Same changes as active healthcare plans • Eliminating coverage for new hires Most Common Changes to Retiree Healthcare Next Steps • Release draft of FYE 2013 reports • Input from client on internal priorities • What-if modeling for liabilities and assets — Short-term and long-term • Assumption review • Planning for next financial cycle ahead?What is EXHIBIT B Consultant Insurance Requirements Consultant shall maintain for the term of this Agreement, and for a period of twelve months after the services is contracted for hereunder have been completed, insurance policies covering: 1. Workers Compensation and Employers Liability Insurance: Statutory limits = $500,000 per accident. 2. Comprehensive General Liability Insurance: $4,000,000 per occurrence combined single limit. 3. Comprehensive Automobile Liability Insurance: $1,000,000 combined single limit, any auto. 4. Professional Liability Insurance (errors and omissions): $2,000,000 per claim and in aggregate. 5. Umbrella or excess liability: $1,000,000 per occurrence. If CONSULTANT carries Comprehensive General Liability Insurance in an amount of$2,000,000 or greater, this requirement may be waived. 6. Consultant will provide the Village with a certificate of insurance and additional insured endorsement showing the Village added to the General Liability Insurance as an additional insured. 7. Coverage shall not be suspended, voided, canceled, or reduced except after thirty (30) days prior written notice by certified mail has been given to the Village. 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