Boards & Commissions Supporting Documents - 05/22/2007 - Board of Trustees- Z��
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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:
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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.
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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.
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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
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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
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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
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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.
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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
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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
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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
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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%
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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%
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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
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® Village Normal Cost
® Amortization of UAL/(S)
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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
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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
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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
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$1,000
0
L
$500
$0
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2007
® 2008
2009
❑ 2010
2011
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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.
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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.
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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
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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%
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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%
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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
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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
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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
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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
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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
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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.
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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
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02007
F-1 Zoos
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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
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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
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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%
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Anticipated Employee Contributions
® Village Normal Cost
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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)
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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
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■ Village Normal Cost
■ Amortization of UAL/(S)
2006
297,359
280,302
577.661
$ 2,439,899
23.68%
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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
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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
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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
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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.
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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.
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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
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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
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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
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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
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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%
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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
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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
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