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Boards & Commissions Supporting Documents - 05/22/2007 - Board of Trustees- Z�� • ITEM I O.H. Ej NN .01 iso :, AGENDA ITEM Regular Board of Trustees Meeting of May 22, 2007 SUBJECT: Police and Firefighters' Pension Fund Actuarial Studies FROM: Darrell Langlois BUDGET SOURCE/BUDGET IMPACT: Various Accounts in the Police and Fire Departments RECOMMENDED MOTION: I move that 1) The Village Board accept the attached actuarial reports of the Police Pension Fund and Firefighters' Pension Fund and 2) The Village Board approve a Village contribution of 18.53% of payroll for police officers and 22.81% for firefighters retroactive to January 1, 2007. Background/History: An actuarial study of the Police Pension Fund and Firefighters' Pension Fund is performed annually in order to monitor the funding progress of the two funds as well as determining the Village's contribution for the coming year. Since it is in both the Village's interest and the two pension fund's interest that these studies be performed, 50% of the cost of each study is paid for by the Village and 50% is paid for by the respective pension fund. The studies presented were once again performed by Timothy W. Sharpe, Actuary. The actuarial study process begins with the Finance Department providing the actuary with participant salary, contribution, and service credit data. From there, the actuary calculates various scenarios based on prior actuarial assumptions as well as what the impact would be for various changes in actuarial assumptions. The actuary then attends a meeting with each respective Pension Board where the preliminary results and various changes in actuarial assumptions are discussed. Based on the direction given at the meeting, the actuarial studies are then completed and a funding request is forwarded to the Village Board (ultimately responsible for funding the pension programs). The following is a brief summary of the two reports: Last saved by Default J \WORD \ACTUARY2007 doc Last printed 5/16/2007 4 33 PM Police Pension Fund As the actuarial report indicates, the Police Pension Fund was 86.2% funded as of December 31, 2006, a decrease of 0.1 % from the funded percentage in 2005. The cause of this minor decrease in the funded percentage is that the average salary increased by 6.7% during 2006 when for actuarial purposed 5.25% was assumed. The Fund's approxaimate investment return was 8.97 %, which is 1.47% above the actuarially assumed rate of 7.50 %. For 2007, the actuary recommends a Village contribution of 18.53% of payroll, an increase of 0.06% of payroll from 2006. The recommended Village contribution of 18.53% of payroll for 2007 is slightly below the 18.60% of payroll used in preparation of the 2007 Budget. To date in 2006 the Village has continued to contribute to the Police Pension Fund at the 2006 rate of 18.59 %. The past practice has been that the contribution rate is made retroactive to January 1. Accordingly, if the contribution rate of 1 8.53% is approved, a retroactive credit of $625.15 will be applied to the Village's May contribution. Firefighters' Pension Fund The actuarial report indicates that the Firefighters' Pension Fund was 78.8% funded as of December 31, 2006, an increase of 1.7% from the funded percentage in 2005. The cause of the increase in the funded percentage was due to the Fund's investment return of 9.44% being 1.94% above the actuarially assumed rate of 7.50 %. For 2007, the actuary recommends a Village contribution of 22.81 % of payroll, an decrease of 0.87% of payroll from 2006. The recommended Village contribution of 22.81% of payroll for 2007 is under the 23.70% of payroll used in preparation of the 2007 Budget. To date in 2007 the Village has continued to contribute to the Firefighters' Pension Fund at the 2006 rate of 23.68 %. The past practice has been that the contribution rate is made retroactive to January 1. Accordingly, if the contribution rate of 22.81 % is approved, a retroactive credit of $7,618.89 will applied to the Village's May contribution. Trend Information To faciliate additional analysis, attached to this memorandum is trend data on both pension funds for the last nine years. As you can see, from year to year the actuarial results can vary greatly. The two biggest reasons for the variations have been State - mandated benefit enhancements and the volatile investment markets. Also, when comparing investment returns between the two funds it should be noted that in general the Firefighters' Pension Fund has had a greater percentage of their assets in equity investments when compared to the Police Pension Fund. Thus, when the equity markets have performed well the Firefighters' Pension Fund has had better performance, and when the equity markets have performed poorly the Police Pension Fund had better performance. Last saved by Default J \WORD\ACTUARY2007 doc Last printed 5/16/2007 4 33 PM The Village's Funded Percentage In prior years the Village Board has expressed concern about the Village's funded percentage being below 100 %, especially considering that as late as 2000 both pension funds were in fact over 100% funded. As previously mentioned, the two principal causes for the decline (benefit enhancements and volatile investment markets) are beyond the control of the Village. What can't be ignored, though, is that these two situations have impacted not just Oak Brook but every other pension fund in the State. The current funded percentages are considered very good from an actuarial standpoint and compare quite favorably with other Illinois police and fire pension funds. In order to demonstrate this fact, the attached chart was prepared based on data provided by our actuary from neighboring pension funds he also works for. As you can see, the Police Pension Fund funded percentage ranks #1 out of the 19 funds selected and is 17.14% above the average. The Firefighters' Pension Fund ranks 8 out of 15 funds selected, but is still 4.0% above the average. The reason for the Firefighters' Pension Fund funded percentage being below that of the Police is due to a higher rate of disability pensions in our Fire Department. In summary, the Village is doing a very good job managing it pension obligations. Recommendation: I recommend that the Village Board accept the actuarial studies of the Police Pension Fund and Firefighters' Pension Fund and authorize a Village contribution of 18.53% of payroll for Police and 22.81% of payroll for Firefighters retroactive to January 1, 2007. Last saved by Default J \WORD \ACTUARY2007 doc Last printed 5/16/2007 4 33 PM Village of Oak Brook Pension Fund Trend Information Trailing 12 \Unfunded Accrued Month Village Liability Total % of Assset Value Liability % Funded Return Normal Cost Amortization Contribution Payroll Police Pension Fund 1/1/2007 26,414,388 30,625,818 86.2% 8.97% 383,403 202,586 585,989 18.53% 1/1/2006 24,752,561 28,683,431 86.3% 4.73% 370,090 184,677 554,767 18.59% 1/1/2005 24,157,442 27,106, 938 89.1% 8.04% 358,478 137,643 496,121 17.66% 1/1/2004 22, 790, 550 25,499, 316 89.4% 11.81% 348,213 121,593 469,806 16.46% 1/1/2003 20, 521, 085 23, 581, 098 870% 1.85% 336,064 133,260 469,324 17 15% 1/1/2002 20,496,069 21,849,564 93.8% 1.43% 298,121 57,603 355,724 1360% 1/1/2001 20,448,157 20,140,332 101.5% 5.96% 262,036 (21,476) 240,560 1149% 1/1/2000 19,542,081 18,564,949 105.3% 5.45% 271,589 (68,172) 203,417 10.07% 1/1/1999 18,904,148 17,216,822 109.8% 10.85% 276,211 (117,720) 158,491 7.84% Firefighters' Pension Fund 1/1/2007 21, 567, 521 27, 373,120 78.8% 9.44% 305,357 279,272 584,629 22.81% 1/1/2006 20,053,194 26,016,602 77.1% 5.55% 297,359 280,302 577,661 23.68% 1/1/2005 19,395,277 24,131,120 80.4% 8.29% 272,616 219,982 492,598 2143% 1/1/2004 18,254,770 22,439,963 81.3% 14.54% 281,168 189,051 470,219 2180% 1/1/2003 16,240, 617 20, 878, 039 77.8% -5.16% 312,335 201,821 514,156 23.13% 1/1/2002 17,487,247 19,819,493 88.2% -1.04% 320,936 99,257 420,193 19.60% 1/1/2001 18, 050, 631 18, 772, 810 962% 0.71% 305,115 30,084 335,199 1776% 1/1/2000 18,203,402 18,051,091 100.8% 7.68% 285,660 (10,626) 275,034 16.53% 1/1/1999 17,364,674 15,659,293 110.9% 9.97% 243,227 (118,980) 124,247 8.73% � 4 Village of Oak Brook Pension Fund Funding Percentages Source: Actuary Timothy Sharpe Police Fire Addison 81.50% Aurora 56.40% 56.10% Bartlett 87.70% Bensenville 71.90% 71.40% Bloomingdale 81.00% Clarendon Hills 71.10% 81.90% Glen Ellyn 70.60% Glendale Heights 54.60% Hinsdale 81.80% 71.60% Lemont 60.30% Lisle 71.20% Lombard 71.10% 79.70% Naperville 71.80% 73.90% Oak Brook 86.20% 78.80% Roselle 68.00% 80.90% Schaumburg 71.50% 70.10% St Charles 66.80% 85.90% Villa Park 73.00% 81.30% Warrenville 52.80% West Chicago 64.00% Wesmont 59.40% Wheaton 68.90% 75.90% Average 69.06% 75.80% T§ Actuary VILLAGE OF OAK BROOK OAK BROOK POLICE PENSION FUND Actuarial Valuation Report For the Year Beginning January 1, 2007 And Ending December 31, 2007 Timothy W. Sharpe, Actuary, Geneva, IL (630) 262 -0600 T t 1 f 1 1 1 1 t t t 1 1 1 1 1 1 1 1 TABLE OF CONTENTS Page Introduction 3 Summary of Results 4 Actuarial Valuation of Assets 6 Asset Changes During Prior Year 7 Normal Cost 8 Accrued Liability 9 Tax Levy Requirement 10 Summary of Plan Participants 11 Duration 12 Projected Pension Payments 12 Summary of Plan Provisions 13 Actuarial Method 14 Actuarial Assumptions 15 GASB Statements No. 25 & 27 Disclosure 16 1 I 1 1 1 I 1 1 I 1 1 1 1 1 1 r 1 1 INTRODUCTION Police -sworn personnel of the Village of Oak Brook are covered by the Police Pension Plan that is a defined- benefit, single- employer pension plan. The purpose of this report is to disclose the Tax Levy Requirement and GASB Statements No. 25 & 27 financial information and related actuarial information for the year beginning January 1, 2007, and ending December 31, 2007. The valuation results reported herein are based on plan provisions in effect as of January 1, 2007, the employee data furnished by the Village, the financial data provided by the Fund's trustee and the actuarial methods and assumptions described later in this report. I hereby certify that this report is complete and accurate and fairly presents the actuarial position of the Fund as of December 31, 2006, in accordance with generally accepted actuarial principles and procedures. In my opinion, the assumptions used are reasonably related to the experience of the Plan and to reasonable expectations. Respectfully submitted, Timothy W. Sharpe, EA, MAAA Enrolled Actuary No. 05 -4384 �, 4/0 -? Date -3- P, 1 1 1 I 1 t t 1 1 1 I t t I 1 SUMMARY OF RESULTS There were no changes with respect to Plan Provisions, Actuarial Methods or Actuarial Assumptions from the prior year. There were no unexpected changes with respect to the participants included in this actuarial valuation (1 new member, 0 terminations, 1 retirement, 0 incidents of disability, annual payroll increase 6.0 %, average salary increased 6.7 %). There were no unexpected changes with respect to the Fund's investments from the prior year (annual investment return 8.97 %). The Village's Tax Levy Requirement has increased from $554,767 last year to $585,989 this year (5.6 %). The increase in the Tax Levy is due to the increase in salaries and was offset due to the investment return was greater than expected. The Percent Funded has decreased slightly from 86.3% last year to 86.2% this year. In 1 t 1 1 1 1 1 i t t t i 1 i 1 i 1 1 SUMMARY OF RESULTS (Continued) For Year Ending December 31 2007 2006 Tax Levy Requirement $ 585,989 $ 554,767 Tax Levy as a Percentage of Payroll 18.53% 18.59% as of January 1 2007 2006 Village Normal Cost 383,403 3701090 Anticipated Employee Contributions 29704 2815021 Accrued Liability 30,6255818 285683,431 Actuarial Value of Assets 26,414,388 24,752,561 Unfunded Accrued Liability /(Surplus) 4,2115430 35930,870 Amortization of Unfunded 202,586 1845677 Accrued Liability /(Surplus) Percent Funded 86.2% 86.3% Annual Payroll $ 3,1621,857 $ 2,9845609 TAX LEVY REQUIREMENT -5- 2007 ❑ zoos 1 1 1 1 t 1 1 t t 1 1 t 1 1 1 1 t 1 ACTUARIAL VALUATION OF ASSETS in as of January 1 2007 2006 Cash and Equivalents $ 437,493 $ 3575778 Certificates of Deposit 985594 98,193 Government Securities 14,070,488 13,869,557 Mutual Funds 11095969 10,293,243 Interest Receivable 1225479 137,230 Miscellaneous Receivable /(Payable) 4� ,635) (3,440) Actuarial Value of Assets $ 26 ;414,388 $ 240752;561 in 1 t 1 t 1 1 1 t 1 t 1 1 1 1 t i i 1 ASSET CHANGES DURING PRIOR YEAR Trust Balance as of January 1, 2006 $ 24,752,561 Contributions Village 549,750 Employee 329,926 Total 879,676 Payments Benefit Payments 1,296,184 Expenses 114,418 Total 1341002 Investment Income 2,192,753 Trust Balance as of January 1, 2007 $ 26 414 88 Approximate Annual Rate of Return 8.95% ASSET CHANGES DURING PRIOR YEAR $30 $25 N $20 $15 $10 $5 $0 _7_ ® Trust Balance as of January 1, 2006 Contributions Payments ❑ Investment Income ® Trust Balance as of January 1, 2007 1 t t i 1 t i i 1 1 1 1 i 1 t 1 1 1 NORMAL COST The Normal Cost is the actuarial present value of the portion of the projected benefits that are expected to accrue during the year based upon the actuarial valuation method and actuarial assumptions employed in the valuation. as of January 1 2007 2006 Total Normal Cost $ 6815207 $ 651,111 Anticipated Employee Contributions 297,804 281,021 Village Normal Cost 383.403 370,090 Normal Cost Payroll $ 31162,857 $ 2,9845609 Village Normal Cost Rate 12.12% 12.40% Total Normal Cost Rate 21.54% 21.82% 10 1 l t 1 1 1 f 1 1 t t 1 t 1 1 t t 1 1 ACCRUED LIABILITY The Accrued Liability is the actuarial present value of the portion of the projected benefits that has been accrued as of the valuation date based upon the actuarial valuation method and actuarial assumptions employed in the valuation. The Unfunded Accrued Liability is the excess of the Accrued Liability over the Actuarial Value of Assets. Accrued Liability Active Employees Children Annuities Disability Annuities Retirement Annuities Surviving Spouse Annuities Terminated Vested Annuities Total Annuities Total Accrued Liability Actuarial Value of Assets Unfunded Accrued Liability /(Surplus) Percent Funded as of January 1 2007 2006 $ 13,675,256 $ 125393,296 M 0 1,538,265 15,224,331 187,966 0 16,950,562 30,625,818 26,414,388 4,21 L430 86.2% is ® Total Accrued Liability Lq Actuarial Value of Assets ® Unfunded Accrued Liability /(Surplus) 0 1,509,448 14,589,155 191,532 0 16,290,135 28,683,431 24,752,561 3,930 70 86.3% t t i t t i TAX LEVY REQUIREMENT The Tax Levy Requirement is determined as the annual contribution necessary to fund the normal cost, plus the amount to amortize the unfunded accrued liability as a level percentage of payroll over a forty (40) year period which commenced in 1993. Village Normal Cost as of Beginning of Year $ Amortization of Unfunded Accrued Liability /(Surplus) Tax Levy Requirement as of End of Year Annual Payroll $ Tax Levy Requirement as a Percentage of Payroll For Year Ending December 31 2007 2006 383,403 $ 370,090 202,586 184,677 585;989 554.767 31162,857 $ 2,984,609 18.53% 18.59% TAX LEVY REQUIREMENT -10- ® Village Normal Cost ® Amortization of UAL/(S) 1 1 1 1 I l 1 t i 1 t t 1 1 t I 1 1 SUMMARY OF PLAN PARTICIPANTS The actuarial valuation of the Plan is based upon the employee data furnished by the Village. The information provided for Active participants included: Name Sex Date of Birth Date of Hire Compensation Employee Contributions The information provided for Inactive participants included: Name Sex Date of Birth Date of Pension Commencement Monthly Pension Benefit Form of Payment Membership 2007 2007 2006 2006 Current Employees Vested 27 25 Nonvested 15 17 Total 42 42 Inactive Participants Annual Benefits Annual Benefits Children 0 $ 0 0 $ 0 Disabled Employees 4 84,776 4 84,776 Retired Employees 24 15212,410 23 19143,684 Surviving Spouses 1 19,476 1 19,476 Terminated Vesteds 0 0 0 0 Total 2,2 1,316,662 2$ 1,247,93(2 Annual Payroll $ 3,162,857 $ 2,984,609 -11- r i i i E r r i r t r SUMMARY OF PLAN PARTICIPANTS (Continued) Aye and Service Distribution Service 0 -4 5 -9 10 -14 15 -19 20 -24 25 -29 30+ Age 20 -24 1 25 -29 4 2 30 -34 3 6 1 35 -39 1 3 2 1 40 -44 2 6 45 -49 3 1 50 -54 1 1 55 -59 60+ 3 1 Total 2 12 5- ID 2 _a 1 Salary 59,321 68,857 78,084 77,867 87,024 70,814 89,348 Total Salary 1 49,161 6 61,825 10 66,482 7 74,582 8 75,243 4 88,419 5 70,624 0 1 89,348 42 Average Age: 38.2 Average Service: 12.2 DURATION (years) Active Members: 17.0 Retired Members: 9.2 All Members: 12.7 PROJECTED PENSION PAYMENTS 2007 2008 2009 2010 2011 $1,562,385 $1,593,998 $107,181 $1,612,366 $1,767,985 PROJECTED PENSION PAYMENTS $2,000 $1,500 N c N $1,000 0 L $500 $0 -12- 2007 ® 2008 2009 ❑ 2010 2011 h SUMMARY OF PLAN PROVISIONS The Plan Provisions have not been changed from the prior year. The Village of Oak Brook Police Pension Fund was created and is administered as prescribed by "Article 3. Police Pension Fund - Municipalities 500,000 and Under" of the Illinois Pension Code (Illinois Compiled Statutes, 1992, Chapter 40). A brief summary of the plan provisions is provided below. Employees attaining the age of (50) or more with (20) or more years of creditable service are entitled to receive an annual retirement benefit of (2.5 %) of final salary for each year of service up to (30) years, to a maximum of (75 %) of such salary. Employees with at least (8) years but less than (20) years of credited service may retire at or after age (60) and receive a reduced benefit of (2.5 %) of final salary for each year of service. Surviving spouses receive the greater of (50 %) of final salary or the employee's retirement benefit. Employees disabled in the line of duty receive (65 %) of final salary. The monthly pension of a covered employee who retired with (20) or more years of service after January 1, 1977, shall be increased annually, following the first anniversary date of retirement and be paid upon reaching the age of at least (55) years, by (3 %) of the originally granted pension. Beginning with increases granted on or after July 1, 1993, the second and subsequent automatic annual increases shall be calculated as (3 %) of the amount of the pension payable at the time of the increase. Employees are required to contribute (9.91%) of their base salary to the Police Pension Plan. If an employee leaves covered employment with less than (20) years of service, accumulated employee contributions may be refunded without accumulated interest. 1 1 [7 -13- 1 r i r 1 fi I I I t 1 ACTUARIAL METHODS The Actuarial Methods used for determining the Tax Levy and GASB Statements No. 25 & 27 financial disclosure have not been changed from the prior year. The Actuarial Method employed for this valuation is as follows: Entry ge Normal Cost Method Under the Entry Age Normal Cost Method the Normal Cost for each participant is computed as the level percentage of pay which, if paid from the earliest age the participant is eligible to enter the plan until retirement or termination, will accumulate with interest to sufficiently fund all benefits under the plan. The Normal Cost for the plan is determined as the sum of the Normal Costs for all active participants. The Accrued Liability is the theoretical amount that would have accumulated had annual contributions equal to the Normal Cost been paid. The Unfunded Accrued Liability is the excess of the Accrued Liability over the plan's assets. Experience gains or losses adjust the Unfunded Accrued Liability. -14- r i I I f i t t i 1 ACTUARIAL ASSUMPTIONS The Actuarial Assumptions used for determining the Tax Levy Requirement and GASB Statements No. 25 & 27 Disclosure Information are the same and have not been changed from the prior year. The Actuarial Assumptions employed for this valuation are as follows: Valuation Date January 1, 2007 Asset Valuation Method Market Value Investment Return 7.50% Salary Scale 5.25% Mortality 1984 Unisex Pensioners Mortality Table Withdrawal Graduated Rates Disability Graduated Rates Retirement Graduated Rates (100% by Age 62) Marital Status 85% Married, Spouse Same Age Plan Expenses None Sample Annual Rates Per 100 Participants Age Mortality Withdrawal Disability Retirement 20 0.13 11.00 0.05 30 0.11 4.16 0.26 40 0.21 1.19 0.71 50 0.56 1.59 20.00 60 1.43 83.33 62 1.59 100.00 -15- li 12/31/04 24,157,442 27,106,93 8 2,949,496 89.1% 2,808,631 105.0% 12/31/05 24,752,561 28,683,431 3,930,870 86.3% 2,984,609 131.7% 12/31/06 26,414,388 305625,818 4,211,430 86.2% 3,162,857 133.2% I [1 -16- i 25 & 27 DISCLOSURE INFORMATION GASB STATEMENTS NO. The Governmental Accounting Standards Board (GASB) issued Statements No. 25 & 27 that established generally accepted accounting principles for the annual financial statements for defined benefit pension plans. The required information is as follows: Membership in the plan consisted of the following as of: December 31, 2006 December 31, 2005 Retirees and beneficiaries 29 28 receiving benefits Terminated plan members entitled 0 0 to but not yet receiving benefits Active vested plan members 27 25 Active nonvested plan members 15 17 Total 7l ZQ Number of participating employers 1 1 SCHEDULE OF FUNDING PROGRESS UAAL as a Actuarial Actuarial Accrued Unfunded Percentage Actuarial Value of Liability (AAL) AAL Funded Valuation Assets -Entry Age (UAAL) Ratio Covered Payroll of Covered Payroll Date L (b-a) �� Lcj b -a /c 12/31/04 24,157,442 27,106,93 8 2,949,496 89.1% 2,808,631 105.0% 12/31/05 24,752,561 28,683,431 3,930,870 86.3% 2,984,609 131.7% 12/31/06 26,414,388 305625,818 4,211,430 86.2% 3,162,857 133.2% I [1 -16- i 1 t 1 1 1 1 I 1 1 t 1 i 1 1 i 1 1 GASB STATEMENTS NO. 25 & 27 DISCLOSURE INFORMATION (Continued) ANNUAL PENSION COST AND NET PENSION OBLIGATION Annual required contribution Interest on net pension obligation Adjustment to annual required contribution Annual pension cost Contributions made Increase (decrease) in net pension obligation Net pension obligation beginning of year Net pension obligation end of year THREE -YEAR TREND INFORMATION December 31, 2006 December 31, 2005 549,750 4971650 0 0 0 0 549,750 497,650 549,750 497,650 0 0 0 0 0 0 Fiscal Annual Percentage Net Year Pension of APC Pension Ending Cost (APC) Contributed Obli awn 12/31/04 449,652 100.0% 0 12/31/05 497,650 100.0% 0 12/31/06 549,750 100.0% 0 -17- r i e GASB STATEMENTS NO. 25 & 27 DISCLOSURE INFORMATION (Continued) FUNDING POLICY AND ANNUAL PENSION COST Contribution rates: Village 17.38% 16.67% Plan members 9.91% Same Annual pension cost 549,750 497,650 Contributions made 549,750 4971650 Actuarial valuation date 12/31/2006 12/31/2005 Actuarial cost method Entry age Same Amortization period Level percentage of pay, closed Same Remaining amortization period 28 years 29 years Asset valuation method Market Same Actuarial assumptions: Investment rate of return* 7.50% Same Projected salary increases* 5.25% Same *Includes inflation at 3.00% Same Cost -of- living adjustments 3.00% per year Same -18- 1 1 1 1 1 I 1 1 1 1 1 i 1 1 1 1 1 Tj§ Actuary VILLAGE OF OAK BROOK OAK BROOK FIREFIGHTERS PENSION FUND Actuarial Valuation Report For the Year Beginning January 1, 2007 And Ending December 31, 2007 Timothy W. Sharpe, Actuary, Geneva, IL (630) 262 -0600 1 1 1 1 1 1 1 1 i 1 1 t 1 i 1 1 i 1 1 TABLE OF CONTENTS Page Introduction 3 Summary of Results 4 Actuarial Valuation of Assets 6 Asset Changes During Prior Year 7 Normal Cost 8 Accrued Liability 9 Tax Levy Requirement 10 Summary of Plan Participants 11 Duration 12 Projected Pension Payments 12 Summary of Plan Provisions 13 Actuarial Methods 14 Actuarial Assumptions 15 GASB Statements No. 25 & 27 Disclosure 16 L1 1 1 1 1 1 1 1 1 t 1 1 1 1 [i INTRODUCTION Fire -sworn personnel of the Village of Oak Brook are covered by the Firefighters Pension Plan that is a defined - benefit, single- employer pension plan. The purpose of this report is to disclose the Tax Levy Requirement and GASB Statements No. 25 & 27 financial information and related actuarial information for the year beginning January 1, 2007, and ending December 31, 2007. The valuation results reported herein are based on plan provisions in effect as of January 1, 2007, the employee data furnished by the Village, the financial data provided by the Fund's trustee and the actuarial methods and assumptions described later in this report. I hereby certify that this report is complete and accurate and fairly presents the actuarial position of the Fund as of December 31, 2006, in accordance with generally accepted actuarial principles and procedures. In my opinion, the assumptions used are reasonably related to the experience of the Plan and to reasonable expectations. Respectfully submitted, Timothy W. Sharpe, EA, MAAA Enrolled Actuary No. 05 -4384 Date -3- 1 1 t 1 1 I. 1 1 i 1 [i LJ SUMMARY OF RESULTS There were no changes with respect to Plan Provisions, Actuarial Methods, or Actuarial Assumptions from the prior year. There were no unexpected changes with respect to the participants included in this actuarial valuation (1 new member, 0 terminations, 0 retirements, 1 incident of disability, annual payroll increase 5.0 %, average salary increase 6.0 %). There were no unexpected changes with respect to the Fund's investments from the prior year (annual investment return 9.44 %). The Village's Tax Levy Requirement has increased from $577,661 last year to $584,629 this year (1.2 %). The increase in the Tax Levy is due to the increase in salaries and was offset due to the investment return was greater than expected. The Percent Funded has increased from 77.1 % last year to 78.8% this year. In 1 1 t 1 1 t 1 1 1 i 1 L 1 1 t 1 i 1 I SUMMARY OF RESULTS (Continued) For Year Ending December 31 2007 2006 Tax Levy Requirement $ 584,629 $ 5771661 Tax Levy as a Percentage of Payroll 22.81% 23.68% as of January 1 2007 2006 Village Normal Cost 3055357 297,359 Anticipated Employee Contributions 230,249 219,185 Accrued Liability 27,373,120 26,016,602 Actuarial Value of Assets 219567,521 20,0535194 Unfunded Accrued Liability /(Surplus) 505,599 5,963,408 Amortization of Unfunded 279,272 280,302 Accrued Liability /(Surplus) Percent Funded 78.8% 77.1% Annual Payroll $ 255631057 $ 29439,899 TAX LEVY REQUIREMENT -5- 02007 F-1 Zoos i i t I 1 1 1 1 1 1 I I i t 1 1 1 1 ACTUARIAL VALUATION OF ASSETS Cash and Equivalents Government Securities Mutual Funds Interest Receivable Miscellaneous Receivable /(Payable) Actuarial Value of Assets as of January 1 2007 2006 $ 83402 $ 540,343 10,834,098 9,952,771 9,806,769 9,463,206 97,738 99,172 (5,966) 2� ,298) $ 210567,521 $ 20,053;194 rel ® Cash and Equivalents Government Securities ❑ Mutual Funds t f 1 1 1 1 I 1 1 1. I 1 i f i 1 1 l ASSET CHANGES DURING PRIOR YEAR Trust Balance as of January 1, 2006 $ 20,053,194 Contributions Village 584,388 Employee 235,053 Total 819,441 Payments Benefit Payments 1513703 Expenses 55,988 Total 15193,871 Investment Income 1,888,757 Trust Balance as of January 1, 2007 $ 21,567,521 Approximate Annual Rate of Return 9.51% ASSET CHANGES DURING PRIOR YEAR $25 $20 c $15 ZEE $10 $5 $0 Trust Balance as of January 1, 2006 Contributions ® Payments ❑ Investment income ® Trust Balance as of January 1, 2007 -7- r i t i i 1 i I t i 1 I 1 1 1 NORMAL COST The Normal Cost is the actuarial present value of the portion of the projected benefits that are expected to accrue during the year based upon the actuarial valuation method and actuarial assumptions employed in the valuation. as of January 1 2007 2006 Total Normal Cost $ 535,606 $ 516,544 Anticipated Employee Contributions 230,249 219,185 Village Normal Cost 3 297 35 Normal Cost Payroll $ 255635057 $ 21439,899 Village Normal Cost Rate 11.91% 12.19% Total Normal Cost Rate 20.90% 21.17% -8- Anticipated Employee Contributions ® Village Normal Cost 1 1 1 I 1 I 1 I t L 1 I 1 1 1 1 1 ACCRUED LIABILITY The Accrued Liability is the actuarial present value of the portion of the projected benefits that has been accrued as of the valuation date based upon the actuarial valuation method and actuarial assumptions employed in the valuation. The Unfunded Accrued Liability is the excess of the Accrued Liability over the Actuarial Value of Assets. as of January 1 Accrued Liability 2007 2006 Active Employees $ 11,601,687 $ 10,971,613 Children Annuities 14,034 14,263 Disability Annuities 70400 6,270,749 Retirement Annuities 7005320 7,6735500 Surviving Spouse Annuities 0 0 Terminated Vested Annuities 1,092,219 1,086,477 Total Annuities 15,771,433 15,0445989 Total Accrued Liability 27,373,120 26501 602 Actuarial Value of Assets 21,567,521 20,053,194 Unfunded Accrued Liability /(Surplus) $ 5,80 599 5,96 4 Percent Funded 78.8% 77.1% ACCRUED LIABILITY $30 ' $25 $20 $15zµ $10 $0 Total Accrued Liability Actuarial Value of Assets ® Unfunded Accrued Liability/(Surplus) In i i 1 1 1 1 L 1 I r t TAX LEVY REQUIREMENT The Tax Levy Requirement is determined as the annual contribution necessary to fund the normal cost, plus the amount to amortize the unfunded accrued liability as a level percentage of payroll over a forty (40) year period which commenced in 1993. Village Normal Cost as of Beginning of Year $ Amortization of Unfunded Accrued Liability /(Surplus) Tax Levy Requirement as of End of Year Annual Payroll Tax Levy Requirement as a Percentage of Payroll For Year Ending December 31 2007 305,357 $ 279,272 584,629 $ 2,563,057 22.81% TAX LEVY REQUIREMENT -10- ■ Village Normal Cost ■ Amortization of UAL/(S) 2006 297,359 280,302 577.661 $ 2,439,899 23.68% l 1 t 1 1 1 1 i t t I i t r I 1 SUMMARY OF PLAN PARTICIPANTS The actuarial valuation of the Plan is based upon the employee data furnished by the Village. The information provided for Active participants included: Name Sex Date of Birth Date of Hire Compensation Employee Contributions The information provided for Inactive participants included: Name Sex Date of Birth Date of Pension Commencement Monthly Pension Benefit Form of Payment Membership 2007 2007 2006 2006 Current Employees Vested 18 19 Nonvested 16 15 Total 3 Inactive Participants Annual Benefits Annual Benefits Children 9 $ 2,460 9 $ 2,434 Disabled Employees 15 521,646 14 468,708 Retired Employees 14 663,708 14 639,793 Surviving Spouses 0 0 0 0 Terminated Vesteds 1 67,308 1 67,308 Total 3-9 1,255,122 38 L 1780243 Annual Payroll $ 2,563,057 $ 2,439,899 -11- 1 1 t 1 t 1 i I 1 I 1 I I 1 1 1 1 SUMMARY OF PLAN PARTICIPANTS (Continued) Age and Service Distribution Service 0 -4 5 -9 10 -14 15 -19 20 -24 25 -29 30+ Age 25 -29 30 -34 35 -39 40 -44 45 -49 50 -54 55 -59 60+ 3 1 2 4 3 3 3 2 1 1 1 1 4 1 3 1 Total 8 8 .6 1 1 -6 4 Salary 53,958 68,454 73,905 81,145 81,145 79,606 93,140 Total Salary 4 58,029 6 62,979 6 65,084 5 68,614 3 86,649 5 75,909 4 89,393 1 94,582 3A 1 24 Average Age: 41.6 Average Service: 13.7 DURATION (years) Active Members: 14.2 Retired Members: 9.3 All Members: 11.4 PROJECTED PENSION PAYMENTS 2007 2008 2009 2010 2011 $1,722,337 $1,733,778 $15744,934 $1,9035215 $1,960,149 PROJECTED PENSION PAYMENTS $2,500 $2,000 $1,500 s $1,000 $500 $0 -12- 02007 02008 02009 ❑ 2010 02011 SUMMARY OF PLAN PROVISIONS The Plan Provisions have been changed from the prior year increasing the surviving spouse benefit and increasing the Employees contribution rate. The Village of Oak Brook Firefighters Pension Fund was created and is administered as prescribed by "Article 4. Firefighters' Pension Fund - Municipalities 500,000 and Under" of the Illinois Pension Code (Illinois Compiled Statutes, 1992, Chapter 40). A brief summary of the plan provisions is provided below. Employees attaining the age of (50) or more with (20) or more years of creditable service are entitled to receive an annual retirement benefit of one -half of the salary attached to the rank held on the last day of service. The pension shall be increased by (1/12) of (2.5 %) of such monthly salary for each additional month of service over (20) years up to (30) years, to a maximum of (75 %) of such monthly salary. Employees with at least (10) years but less than (20) years of credited service may retire at or after age (60) and receive a reduced benefit ranging from (15 %) of final salary for (10) years of service to (45.6 %) for 19 years of service. Surviving spouses receive (100 %) of final salary for fatalities resulting from an act of duty, or otherwise the greater of (54 %) of final salary or the monthly retirement pension that the deceased firefighter was receiving at the time of death. Surviving children receive (12 %) of final salary. The maximum family survivor benefit is (75 %) of final salary. Employees disabled in the line of duty receive (65 %) of final salary. The monthly pension of a covered employee who retired with (20) or more years of service after January 1, 1977, shall be increased annually, following the first anniversary date of retirement and be paid upon reaching the age of at least (55) years, by (3 %) of the amount of the pension payable at the time of the increase. Employees are required to contribute (9.455 %) of their base salary to the Firefighters' Pension Plan. If an employee leaves covered employment with less than twenty (20) years of service, accumulated employee contributions may be refunded without accumulated interest. I 1 -13- 1 1 ACTUARIAL METHODS The Actuarial Methods used for determining the Tax Levy and GASB Statements No. 25 & 27 financial disclosure have not been changed from the prior year. The Actuarial Method employed for this valuation is as follows: Entry Age Normal Cost Method Under the Entry Age Normal Cost Method the Normal Cost for each participant is computed as the level percentage of pay which, if paid from the earliest age the participant is eligible to enter the plan until retirement or termination, will accumulate with interest to sufficiently fund all benefits under the plan. The Normal Cost for the plan is determined as the greater of a) the sum of the Normal Costs for all active participants, and b) 17.5% of the total payroll of all active participants. The Accrued Liability is the theoretical amount that would have accumulated had annual contributions equal to the Normal Cost been paid. The Unfunded Accrued Liability is the excess of the Accrued Liability over the plan's assets. Experience gains or losses adjust the Unfunded Accrued Liability. r I f] 1 -14- 1 1 f l I l 1 t 1 1 1 I 1 1 1 1 1 ACTUARIAL ASSUMPTIONS The Actuarial Assumptions used for determining the Tax Levy Requirement and GASB Statements No. 25 & 27 Disclosure Information are the same and have not been changed from the prior year. The Actuarial Assumptions employed for this valuation are as follows: Valuation Date January 1, 2007 Asset Valuation Method Market Value Investment Return 7.50% Salary Scale 5.25% Mortality 1984 Unisex Pensioners Mortality Table Withdrawal Graduated Rates Disability Graduated Rates Retirement Graduated Rates (100% by Age 69) Marital Status 85% Married, Spouse Same Age Plan Expenses None Sample Annual Rates Per 100 Participants Age Mortality Withdrawal Disability Retirement 20 0.13 3.97 0.02 30 0.11 1.46 0.25 40 0.21 0.42 0.65 50 0.56 1.66 19.18 60 1.43 27.77 69 3.21 100.00 -15- H r 1 NO. 25 & 27 DISCLOSURE INFORMATION GASB STATEMENTS The Governmental Accounting Standards Board (GASB) issued Statements No. 25 & 27 that established generally accepted accounting principles for the annual financial statements for defined benefit pension plans. The required information is as follows: UAAL as a Actuarial Membership in the plan consisted of the following as of: Unfunded December 31, 2006 December 31, 2005 Retirees and beneficiaries 38 37 Liability (AAL) -Entry Age receiving benefits Funded Ratio Covered Payroll Terminated plan members entitled 1 1 Date to but not yet receiving benefits thl Active vested plan members 18 19 b -a /c Active nonvested plan members 16 15 19,395,277 Total la 72 80.4% Number of participating employers 1 1 r 1 1 1 I -16- I SCHEDULE OF FUNDING PROGRESS UAAL as a Actuarial Actuarial Accrued Unfunded Percentage Actuarial Valuation Value of Assets Liability (AAL) -Entry Age AAL (UAAL) Funded Ratio Covered Payroll of Covered Payroll Date I thl b -a /c 12/31/04 19,395,277 24,131,120 4,735,843 80.4% 2,298,601 206.0% 12/31/05 20,053,194 26,016,602 5,963,408 77.1% 2,439,899 244.4% 12/31/06 21,567,521 27,373,120 5,805,599 78.8% 2,563,057 226.5% 1 1 I -16- I 1 t i 1 1 r 1 i 1 1 1 1 1 GASB STATEMENTS NO. 25 & 27 DISCLOSURE INFORMATION (Continued) ANNUAL PENSION COST AND NET PENSION OBLIGATION Annual required contribution Interest on net pension obligation Adjustment to annual required contribution Annual pension cost Contributions made Increase (decrease) in net pension obligation Net pension obligation beginning of year Net pension obligation end of year THREE -YEAR TREND INFORMATION December 31. 2006 December 31, 2005 5845388 490,244 0 0 0 0 584,388 4905244 584,388 490,244 0 0 0 0 0 0 Fiscal Annual Percentage Net Year Pension of APC Pension Ending Cost ,APC) Contributed Obli ag_ tion 12/31/04 490,612 100.0% 0 12/31/05 4905244 100.0% 0 12/31/06 5845388 100.0% 0 -17- 1 1 1 I I 1 l 1 1 i f 1 1 1 1 1 1 1 1 GASB STATEMENTS NO. 25 & 27 DISCLOSURE INFORMATION (Continued) FUNDING POLICY AND ANNUAL PENSION COST Contribution rates: Village 22.800% 20.093% Plan members 9.455% Same Annual pension cost 584,388 4905244 Contributions made 5845388 4905244 Actuarial valuation date 12/31/2006 12/31/2005 Actuarial cost method Entry age Same Amortization period Level percentage of pay, closed Same Remaining amortization period 27 years 28 years Asset valuation method Market Same Actuarial assumptions: Investment rate of return* 7.50% Same Projected salary increases* 5.25% Same *Includes inflation at 3.00% Same Cost -of- living adjustments 3.00% per year Same -18-