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HomeMy WebLinkAboutAgenda Police Pension 042313 Agenda City of Palm Beach Gardens Police Officers’ Pension Fund MEETING OF APRIL 23, 2013 LOCATION: City Council Chambers’ 10500 North Military Trail Palm Beach Gardens, FL 33410 TIME: 9 AM 1. Call Meeting To Order 2. Roll Call: • Jay Spencer, Chairman • David Pierson, Secretary • Brad Seidensticker, Trustee • Greg Mull, Trustee • Marc Glass, Trustee 3. Presentation of the 9/30/2012 Actuarial Valuation Report – Gabriel, Roeder, Smith & Company: GRS (Pete Strong) 4. Presentation on Emerging Markets – SSGA (Max Cann) 5. Investment Manager Report – ICC Capital (Steve Stack) 6. Investment Consultant Report – Thistle Asset Consulting (John McCann) 7. Attorney Report – Law Offices of Perry & Jensen (Bonni Jensen) • Revised DROP Distribution Policy • Memo – Senate Bill 458 & House Bill 1399 8. Administrator Report – Resource Centers (Audrey Ross) • Discussion Regarding a Deceased Members Benefit 9. Approval of Minutes • January 31, 2013 Regular Meeting 10. Disbursements 11. Financial Statements 12. Other Business • Update on VEBA Refunds • Ullico Casualty Company Rehabilitation Action 13. Public Comments 14. Adjourn Next Meeting Date: Friday August 2, 2013 @ 9AM PLEASE NOTE: Should any interested party seek to appeal any decision of this Board with respect to any matter considered at such meeting or hearing, s/he will need a record of the proceedings and for such purpose may need to ensure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. In accordance with the Americans With Disabilities Act of 1990, persons needing a special accommodation to participate in this meeting should contact the The Pension Resource Center, LLC no later than four days prior to the meeting. Page 1 of 5 PALM BEACH GARDENS POLICE OFFICERS’ PENSION FUND STATEMENT OF POLICY REGARDING DROP DISTRIBUTIONS W HEREAS, the Palm Beach Gardens Police Officers’ Pension Fund Plan ("Plan") provides for Deferred Retirement Option Plan (“DROP”) benefits; W HEREAS, the Board of Trustees of the Plan (“Trustees”) desire to adopt a Statement of Policy regarding the distributions of these benefits; NOW , THEREFORE, it is hereby resolved that the following Statement of Policy Regarding DROP and Share Account Distributions is hereby adopted. I.DISTRIBUTION METHODS A.Lump sum - If the lump sum method of distribution is selected then the entire account balance will be paid. The full amount, or a portion thereof, will be paid to the Retiree or can be rolled over to another qualified plan, at the discretion of the Retiree. The payout/rollover can be made in any amount of the Retiree’s choosing but the full amount must be taken from the plan. Any amounts paid directly to a Retiree will have a 20% withholding deduction and may be subject to other taxes and/or penalties. B.Annuity - If a Retiree chooses monthly installments, then the account balance will be paid out on a monthly basis. The following rules will apply to this method of distribution: 1.For retirees who are age under 50 upon separation from service - The Retiree may choose any amount provided the payment is made in Page 2 of 5 substantially equal periodic payments over at least 5 years or, if later, until age 59 ½ and is in compliance with Revenue Ruling 2002-62. This amount will not be calculated by the Fund. The amount chosen cannot be modified before the Retiree attains age 59½ or within 5 years from the date of the first payment, whichever occurs last. The Retiree can be subject to additional taxes and/or penalties if the amount is not correctly calculated. At age 70½, the monthly installment shall be paid at a rate which meets the minimum distribution rules of Internal Revenue Code §401(a)(9). 2.For Retirees who are age 50 and older upon separation from service when the monthly installments begin - The monthly amounts may be determined by the Retiree according to his or her need. The amount of the monthly benefit or the method of payment (for example, from monthly to lump sum) can be changed on a monthly quarterly basis and will be made by on the 15 of any the month (February 15, Mayth 15, August 15, and November 15) and 30 days from the date a member exits the DROP. Members must provide at least 30 days notice for each DROP withdrawal. DROP assets can be distributed without Board approval up to the gross amount of $35,000.00. If the distribution is more, it must wait for approval at the next quarterly Board meeting. The amount of the monthly payment can be reduced to zero unless the payee has reached age 70½. Additionally, during these payment periods only, a member may Page 3 of 5 request a partial lump sum withdrawal and still continue to receive the monthly payments. 3.A 20% withholding tax applies to all payments paid directly to a Retiree. 4.If there are less than 15 times the monthly installment at the start of the fiscal year, then the remaining balance will be paid in a lump sum. 5.Between open enrollment periods, there will be no changes in the method or amount of the payment unless a Retiree has a hardship. Hardship withdrawals are permitted if both a and b below are met. a. The Retiree has an immediate and heavy financial need - A need may be immediate and heavy even though it was foreseeable or voluntarily incurred. A need is deemed to be immediate and heavy if it is: 1)medical expenses previously incurred by the Retiree, the Retiree’s spouse or dependents, or amounts necessary for these persons to obtain medical care; 2)costs related to the Retiree’s purchase of a principal residence (not including mortgage payments); 3)payment of tuition and related educational fees and room and board expenses for the next 12 months of post-secondary education for the Retiree, the Retiree’s spouse, children or dependents; or Page 4 of 5 4)payments necessary to prevent the eviction of the employee from the principal residence or to avoid foreclosure on the mortgage on that residence. b. the distribution is necessary to satisfy the Retiree’s financial need - A distribution generally may be treated as necessary to satisfy a financial need if the need cannot be relieved: 1)through reimbursement or compensation by insurance or otherwise; 2)by reasonable liquidation of the participants’s assets (to the extent that such liquidation would not itself cause an immediate and heavy financial need); 3)by other distributions or nontaxable (at the time of the loan) loans from the plans of the employer or by borrowing from commercial sources at reasonable terms; or 4)by cessation of elective contributions to other plans. II. GENERAL CONSIDERATIONS A.A Retiree may defer election of payment until age 70½. Any account balances participate in earnings according to the Retiree’s election of earnings method. B.Final distributions from the DROP account will be subject to a 10% hold back to account for the crediting of earnings/losses and administrative fees. Final Page 5 of 5 disbursements of DROP accounts will be made once the DROP statements for the prior quarter have been distributed. C.Participants and Retirees may designate beneficiaries to receive any balances in the DROP accounts upon their death. In the absence of such designation, the benefit will be paid to the Retiree’s estate. D.Lump sum payments in excess of $50,000.00 will be paid as soon as administratively possible but no later than 60 days after the date of approval by the Board of Trustees. E.No amount or number of payments from the DROP accounts are guaranteed. No member is entitled to payments greater than the balance in the account, as maybe reduced by losses and/or expenses. IN WITNESS WHEREOF the Board of Trustees of the Palm Beach Gardens Police Officers’ Pension Fund has adopted this STATEMENT OF POLICY REGARDING DROP AND SHARE ACCOUNT DISTRIBUTIONS this day of , 2013. TRUSTEES W itnessed by: H:\PBG 0003\POLICY\2013.2.15 DROP Distributions (draft).wpd BSJ/lg - February 15, 2013 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 1 of 36 3/25/2013 4:43:30 PM 576-02935-13 LEGISLATIVE ACTION Senate . . . . . . House The Committee on Appropriations (Ring and Bradley) recommended the following: Senate Amendment (with title amendment) 1 2 Delete everything after the enacting clause 3 and insert: 4 Section 1. Subsection (2) of section 175.021, Florida 5 Statutes, is amended to read: 6 175.021 Legislative declaration.— 7 (2) This chapter hereby establishes, for all municipal and 8 special district pension plans existing now or hereafter under 9 this chapter, including chapter plans and local law plans, 10 required minimum benefits and minimum standards for the 11 operation and funding of such plans, hereinafter referred to as 12 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 2 of 36 3/25/2013 4:43:30 PM 576-02935-13 firefighters’ pension trust funds, which must be met as a 13 condition precedent to the plan or plan sponsor receiving a 14 distribution of insurance premium tax revenues under s. 175.121. 15 The required minimum benefits and minimum standards for each 16 plan as set forth in this chapter may not be diminished by local 17 charter, ordinance, or resolution or by special act of the 18 Legislature, or nor may the minimum benefits or minimum 19 standards be reduced or offset by any other local, state, or 20 federal law that may include firefighters in its operation, 21 except as provided under s. 112.65. 22 Section 2. Section 175.032, Florida Statutes, is amended to 23 read: 24 175.032 Definitions.—For any municipality, special fire 25 control district, chapter plan, local law municipality, local 26 law special fire control district, or local law plan under this 27 chapter, the term following words and phrases have the following 28 meanings: 29 (1) “Additional premium tax revenues” means revenues 30 received by a municipality or special fire control district 31 pursuant to s. 175.121 which exceed base premium tax revenues. 32 (2)(1)(a) “Average final compensation” for: 33 (a) A full-time firefighter means one-twelfth of the 34 average annual compensation of the 5 best years of the last 10 35 years of creditable service before prior to retirement, 36 termination, or death, or the career average as a full-time 37 firefighter since July 1, 1953, whichever is greater. A year is 38 shall be 12 consecutive months or such other consecutive period 39 of time as is used and consistently applied. 40 (b) “Average final compensation” for A volunteer 41 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 3 of 36 3/25/2013 4:43:30 PM 576-02935-13 firefighter means the average salary of the 5 best years of the 42 last 10 best contributing years before a prior to change in 43 status to a permanent full-time firefighter or retirement as a 44 volunteer firefighter or the career average of a volunteer 45 firefighter, since July 1, 1953, whichever is greater. 46 (3) “Base benefits” means the level of benefits in 47 existence for firefighters on March 12, 1999. 48 (4) “Base premium tax revenues” means revenues received by 49 a municipality or special fire control district pursuant to s. 50 175.121 equal to the amount of such revenues received for 51 calendar year 1997. 52 (5)(2) “Chapter plan” means a separate defined benefit 53 pension plan for firefighters which incorporates by reference 54 the provisions of this chapter and has been adopted by the 55 governing body of a municipality or special district. Except as 56 may be specifically authorized in this chapter, the provisions 57 of a chapter plan may not differ from the plan provisions set 58 forth in ss. 175.021-175.341 and 175.361-175.401. Actuarial 59 valuations of chapter plans shall be conducted by the division 60 as provided by s. 175.261(1). 61 (6)(3) “Compensation” or “salary” means, for 62 noncollectively bargained service earned before July 1, 2011, or 63 for service earned under collective bargaining agreements in 64 place before July 1, 2011, the fixed monthly remuneration paid a 65 firefighter. If remuneration is based on actual services 66 rendered, as in the case of a volunteer firefighter, the term 67 means the total cash remuneration received yearly for such 68 services, prorated on a monthly basis. For noncollectively 69 bargained service earned on or after July 1, 2011, or for 70 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 4 of 36 3/25/2013 4:43:30 PM 576-02935-13 service earned under collective bargaining agreements entered 71 into on or after July 1, 2011, the term has the same meaning 72 except that when calculating retirement benefits, up to 300 73 hours per year in overtime compensation may be included as 74 specified in the plan or collective bargaining agreement, but 75 payments for accrued unused sick or annual leave may not be 76 included. 77 (a) Any retirement trust fund or plan that meets the 78 requirements of this chapter does not, solely by virtue of this 79 subsection, reduce or diminish the monthly retirement income 80 otherwise payable to each firefighter covered by the retirement 81 trust fund or plan. 82 (b) The member’s compensation or salary contributed as 83 employee-elective salary reductions or deferrals to any salary 84 reduction, deferred compensation, or tax-sheltered annuity 85 program authorized under the Internal Revenue Code shall be 86 deemed to be the compensation or salary the member would receive 87 if he or she were not participating in such program and shall be 88 treated as compensation for retirement purposes under this 89 chapter. 90 (c) For any person who first becomes a member in any plan 91 year beginning on or after January 1, 1996, compensation for 92 that plan year may not include any amounts in excess of the 93 Internal Revenue Code s. 401(a)(17) limitation, as amended by 94 the Omnibus Budget Reconciliation Act of 1993, which limitation 95 of $150,000 shall be adjusted as required by federal law for 96 qualified government plans and shall be further adjusted for 97 changes in the cost of living in the manner provided by Internal 98 Revenue Code s. 401(a)(17)(B). For any person who first became a 99 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 5 of 36 3/25/2013 4:43:30 PM 576-02935-13 member before the first plan year beginning on or after January 100 1, 1996, the limitation on compensation may not be less than the 101 maximum compensation amount that was allowed to be taken into 102 account under the plan in effect on July 1, 1993, which 103 limitation shall be adjusted for changes in the cost of living 104 since 1989 in the manner provided by Internal Revenue Code s. 105 401(a)(17)(1991). 106 (7)(4) “Creditable service” or “credited service” means the 107 aggregate number of years of service, and fractional parts of 108 years of service, of any firefighter, omitting intervening years 109 and fractional parts of years when such firefighter may not have 110 been employed by the municipality or special fire control 111 district, subject to the following conditions: 112 (a) A No firefighter may not will receive credit for years 113 or fractional parts of years of service if he or she has 114 withdrawn his or her contributions to the fund for those years 115 or fractional parts of years of service, unless the firefighter 116 repays into the fund the amount he or she has withdrawn, plus 117 interest determined by the board. The member shall have at least 118 90 days after his or her reemployment to make repayment. 119 (b) A firefighter may voluntarily leave his or her 120 contributions in the fund for a period of 5 years after leaving 121 the employ of the fire department, pending the possibility of 122 being rehired by the same department, without losing credit for 123 the time he or she has participated actively as a firefighter. 124 If the firefighter is not reemployed as a firefighter, with the 125 same department, within 5 years, his or her contributions shall 126 be returned without interest. 127 (c) Credited service under this chapter shall be provided 128 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 6 of 36 3/25/2013 4:43:30 PM 576-02935-13 only for service as a firefighter, as defined in subsection (8), 129 or for military service and does not include credit for any 130 other type of service. A municipality may, by local ordinance, 131 or a special fire control district may, by resolution, may 132 provide for the purchase of credit for military service prior to 133 employment as well as for prior service as a firefighter for 134 some other employer as long as a firefighter is not entitled to 135 receive a benefit for such prior service as a firefighter. For 136 purposes of determining credit for prior service as a 137 firefighter, in addition to service as a firefighter in this 138 state, credit may be given for federal, other state, or county 139 service if the prior service is recognized by the Division of 140 State Fire Marshal as provided under chapter 633, or the 141 firefighter provides proof to the board of trustees that his or 142 her service is equivalent to the service required to meet the 143 definition of a firefighter under subsection (12) (8). 144 (8)(5) “Deferred Retirement Option Plan” or “DROP” means a 145 local law plan retirement option in which a firefighter may 146 elect to participate. A firefighter may retire for all purposes 147 of the plan and defer receipt of retirement benefits into a DROP 148 account while continuing employment with his or her employer. 149 However, a firefighter who enters the DROP and who is otherwise 150 eligible to participate may shall not thereby be precluded from 151 participating, or continuing to participate, in a supplemental 152 plan in existence on, or created after, March 12, 1999 the 153 effective date of this act. 154 (9) “Defined contribution plan” means the component of a 155 local law plan to which deposits are made to provide benefits 156 for firefighters, or for firefighters and police officers if 157 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 7 of 36 3/25/2013 4:43:30 PM 576-02935-13 both are included. Such component is an element of a local law 158 plan and exists in conjunction with the defined benefit 159 component that meets the required benefits and minimum standards 160 of this chapter. The retirement benefits of the defined 161 contribution plan shall be provided through individual member 162 accounts, in accordance with the applicable provisions of the 163 Internal Revenue Code and related regulations, and are limited 164 to the contributions made into each member’s account and the 165 actual accumulated earnings, net of expenses, earned on the 166 member’s account. 167 (10)(6) “Division” means the Division of Retirement of the 168 Department of Management Services. 169 (11)(7) “Enrolled actuary” means an actuary who is enrolled 170 under Subtitle C of Title III of the Employee Retirement Income 171 Security Act of 1974 and who is a member of the Society of 172 Actuaries or the American Academy of Actuaries. 173 (12)(8)(a) “Firefighter” means any person employed solely 174 by a constituted fire department of any municipality or special 175 fire control district who is certified as a firefighter as a 176 condition of employment in accordance with s. 633.35 and whose 177 duty it is to extinguish fires, to protect life, or to protect 178 property. The term includes all certified, supervisory, and 179 command personnel whose duties include, in whole or in part, the 180 supervision, training, guidance, and management responsibilities 181 of full-time firefighters, part-time firefighters, or auxiliary 182 firefighters but does not include part-time firefighters or 183 auxiliary firefighters. However, for purposes of this chapter 184 only, the term also includes public safety officers who are 185 responsible for performing both police and fire services, who 186 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 8 of 36 3/25/2013 4:43:30 PM 576-02935-13 are certified as police officers or firefighters, and who are 187 certified by their employers to the Chief Financial Officer as 188 participating in this chapter before October 1, 1979. Effective 189 October 1, 1979, public safety officers who have not been 190 certified as participating in this chapter are considered police 191 officers for retirement purposes and are eligible to participate 192 in chapter 185. Any plan may provide that the fire chief has an 193 option to participate, or not, in that plan. 194 (b) “Volunteer firefighter” means any person whose name is 195 carried on the active membership roll of a constituted volunteer 196 fire department or a combination of a paid and volunteer fire 197 department of any municipality or special fire control district 198 and whose duty it is to extinguish fires, to protect life, and 199 to protect property. Compensation for services rendered by a 200 volunteer firefighter does shall not disqualify him or her as a 201 volunteer. A person may shall not be disqualified as a volunteer 202 firefighter solely because he or she has other gainful 203 employment. Any person who volunteers assistance at a fire but 204 is not an active member of a department described herein is not 205 a volunteer firefighter within the meaning of this paragraph. 206 (13)(9) “Firefighters’ Pension Trust Fund” means a trust 207 fund, by whatever name known, as provided under s. 175.041, for 208 the purpose of assisting municipalities and special fire control 209 districts in establishing and maintaining a retirement plan for 210 firefighters. 211 (14)(10) “Local law municipality” is any municipality in 212 which there exists a local law plan exists. 213 (15)(11) “Local law plan” means a retirement defined 214 benefit pension plan, which includes both a defined benefit plan 215 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 9 of 36 3/25/2013 4:43:30 PM 576-02935-13 component and a defined contribution plan component, for 216 firefighters, or for firefighters or police officers if both are 217 where included, as described in s. 175.351, established by 218 municipal ordinance, special district resolution, or special act 219 of the Legislature, which enactment sets forth all plan 220 provisions. Local law plan provisions may vary from the 221 provisions of this chapter if the, provided that required 222 minimum benefits and minimum standards of this chapter are met. 223 However, any such variance must shall provide a greater benefit 224 for firefighters. Actuarial valuations of local law plans shall 225 be conducted by an enrolled actuary as provided in s. 226 175.261(2). 227 (16)(12) “Local law special fire control district” is any 228 special fire control district in which there exists a local law 229 plan exists. 230 (17) “Long-term funded ratio” or “funded ratio” means the 231 ratio of the actuarial value of assets of the plan to the 232 actuarial accrued liabilities of the plan, as reported in the 233 most recent actuarial valuation of the plan, deemed to be in 234 compliance with chapter 112 by the Department of Management 235 Services. 236 (18)(13) “Property insurance” means property insurance as 237 defined in s. 624.604 and covers real and personal property 238 within the corporate limits of a any municipality, or within the 239 boundaries of a any special fire control district, within the 240 state. “Multiple peril” means a combination or package policy 241 that includes both property and casualty coverage for a single 242 premium. 243 (19) “Required benefits” means the lesser of the minimum 244 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 10 of 36 3/25/2013 4:43:30 PM 576-02935-13 benefits set forth in this chapter and the base benefits of the 245 plan. For local law plans created after March 1, 2013, the 246 required benefits are the minimum benefits set forth in this 247 chapter. 248 (20)(14) “Retiree” or “retired firefighter” means a 249 firefighter who has entered retirement status. For the purposes 250 of a plan that includes a Deferred Retirement Option Plan 251 (DROP), a firefighter who enters the DROP is shall be considered 252 a retiree for all purposes of the plan. However, a firefighter 253 who enters the DROP and who is otherwise eligible to participate 254 may shall not thereby be precluded from participating, or 255 continuing to participate, in a supplemental plan in existence 256 on, or created after, March 12, 1999 the effective date of this 257 act. 258 (21)(15) “Retirement” means a firefighter’s separation from 259 city or fire district employment as a firefighter with immediate 260 eligibility for receipt of benefits under the plan. For purposes 261 of a plan that includes a Deferred Retirement Option Plan 262 (DROP), “retirement” means the date a firefighter enters the 263 DROP. 264 (22) “Special benefits” means benefits provided in a 265 defined contribution plan for firefighters. 266 (23)(16) “Special fire control district” means a special 267 district, as defined in s. 189.403(1), established for the 268 purposes of extinguishing fires, protecting life, and protecting 269 property within the incorporated or unincorporated portions of a 270 any county or combination of counties, or within any combination 271 of incorporated and unincorporated portions of a any county or 272 combination of counties. The term does not include any dependent 273 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 11 of 36 3/25/2013 4:43:30 PM 576-02935-13 or independent special district, as those terms are defined in 274 s. 189.403(2) and (3), respectively, the employees of which are 275 members of the Florida Retirement System pursuant to s. 276 121.051(1) or (2). 277 (24)(17) “Supplemental plan” means a plan to which deposits 278 are made to provide extra benefits for firefighters, or for 279 firefighters and police officers if both are where included 280 under this chapter. Such a plan is an element of a local law 281 plan and exists in conjunction with a defined benefit component 282 plan that meets the required minimum benefits and minimum 283 standards of this chapter. Any supplemental plan in existence on 284 March 1, 2013, shall be deemed to be a defined contribution plan 285 in compliance with s. 175.351(8). 286 (25)(18) “Supplemental plan municipality” means a any local 287 law municipality in which there existed a supplemental plan 288 existed, of any type or nature, as of December 1, 2000. 289 Section 3. Paragraph (b) of subsection (7) of section 290 175.071, Florida Statutes, is amended to read: 291 175.071 General powers and duties of board of trustees.—For 292 any municipality, special fire control district, chapter plan, 293 local law municipality, local law special fire control district, 294 or local law plan under this chapter: 295 (7) To assist the board in meeting its responsibilities 296 under this chapter, the board, if it so elects, may: 297 (b) Employ an independent enrolled actuary, as defined in 298 s. 175.032(7), at the pension fund’s expense. 299 300 If the board chooses to use the municipality’s or special 301 district’s legal counsel or actuary, or chooses to use any of 302 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 12 of 36 3/25/2013 4:43:30 PM 576-02935-13 the municipality’s or special district’s other professional, 303 technical, or other advisers, it must do so only under terms and 304 conditions acceptable to the board. 305 Section 4. Paragraphs (d) through (g) of subsection (1) of 306 section 175.091, Florida Statutes, are amended, and a new 307 paragraph (e) is added to that subsection, to read: 308 175.091 Creation and maintenance of fund.—For any 309 municipality, special fire control district, chapter plan, local 310 law municipality, local law special fire control district, or 311 local law plan under this chapter: 312 (1) The firefighters’ pension trust fund in each 313 municipality and in each special fire control district shall be 314 created and maintained in the following manner: 315 (d) By mandatory payment by the municipality or special 316 fire control district of a sum equal to the normal cost of and 317 the amount required to fund any actuarial deficiency shown by an 318 actuarial valuation as provided in part VII of chapter 112 after 319 taking into account the amounts described in paragraphs (b), 320 (c), (f), (g), and (h) and the amounts of the tax proceeds 321 described in paragraph (a) which must be used to fund defined 322 benefit plan benefits, except as otherwise excluded from 323 consideration in determining the mandatory payment. 324 (e) For local law plans, and in addition to the mandatory 325 payment specified in paragraph (d), by mandatory payment by the 326 municipality or special fire control district of the amount 327 specified in s. 175.351(3), if the long-term funded ratio of the 328 plan is less than 80 percent. 329 (f)(e) By all gifts, bequests, and devises when donated to 330 the fund. 331 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 13 of 36 3/25/2013 4:43:30 PM 576-02935-13 (g)(f) By all accretions to the fund by way of interest or 332 dividends on bank deposits, or otherwise. 333 (h)(g) By all other sources or income now or hereafter 334 authorized by law for the augmentation of such firefighters’ 335 pension trust fund. 336 337 Nothing in this section shall be construed to require 338 adjustment of member contribution rates in effect on the date 339 this act becomes a law, including rates that exceed 5 percent of 340 salary, provided that such rates are at least one-half of 1 341 percent of salary. 342 Section 5. Section 175.351, Florida Statutes, is amended to 343 read: 344 175.351 Municipalities and special fire control districts 345 that have having their own pension plans for firefighters.—For 346 any municipality, special fire control district, local law 347 municipality, local law special fire control district, or local 348 law plan under this chapter, In order for a municipality or 349 municipalities and special fire control district that has its 350 districts with their own pension plan plans for firefighters, or 351 for firefighters and police officers if both are included, to 352 participate in the distribution of the tax fund established 353 under pursuant to s. 175.101, a local law plan and its plan 354 sponsor plans must meet the required minimum benefits and 355 minimum standards set forth in this chapter. 356 (1) If a municipality has a pension plan for firefighters, 357 or a pension plan for firefighters and police officers if both 358 are included, which in the opinion of the division meets the 359 required minimum benefits and minimum standards set forth in 360 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 14 of 36 3/25/2013 4:43:30 PM 576-02935-13 this chapter, the board of trustees of the pension plan, must as 361 approved by a majority of firefighters of the municipality, may: 362 (a) place the income from the premium tax in s. 175.101 in 363 such pension plan for the sole and exclusive use of its 364 firefighters, or for firefighters and police officers if both 365 are included, where it shall become an integral part of that 366 pension plan and shall be used to fund benefits for firefighters 367 as follows: 368 (a) The base premium tax revenues must be used to fund base 369 benefits. 370 (b) Of the premium tax revenues received which are in 371 excess of the amount received for the 2012 calendar year, and 372 any accumulations of additional premium tax revenues that have 373 not been applied to fund extra benefits: 374 1. If the plan has a long-term funded ratio of less than 80 375 percent: 376 a. Fifty percent must be used as additional contributions 377 to pay the plan’s actuarial deficiency and may not be considered 378 in the determination of the mandatory payment described in s. 379 175.091(1)(d); 380 b. Twenty-five percent must be used to fund base benefits; 381 and 382 c. The remainder must be placed in a defined contribution 383 plan to fund special benefits. 384 2. If the plan has a long-term funded ratio of 80 percent 385 or greater: 386 a. Fifty percent must be used to fund base benefits; and 387 b. The remainder must be placed in a defined contribution 388 plan to fund special benefits. 389 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 15 of 36 3/25/2013 4:43:30 PM 576-02935-13 (c) Additional premium tax revenues not described in 390 paragraph (b) must be used to fund benefits that were not 391 included in the base benefits to pay extra benefits to the 392 firefighters included in that pension plan; or 393 (b) Place the income from the premium tax in s. 175.101 in 394 a separate supplemental plan to pay extra benefits to 395 firefighters, or to firefighters and police officers if 396 included, participating in such separate supplemental plan. 397 (2) Insurance premium tax revenues may not be used to fund 398 benefits provided in a defined benefit plan which were not 399 provided by the plan as of March 1, 2013; however, for a local 400 law plan created after March 1, 2013, up to 50 percent of the 401 insurance premium tax revenues may be used to fund defined 402 benefit plan component benefits and the remainder used to fund 403 defined contribution plan component benefits. 404 (3) If a plan offers benefits in excess of its required 405 benefits, such benefits may be reduced if the plan continues to 406 meet the required benefits of the plan and the minimum standards 407 set forth in this chapter. The amount of insurance premium tax 408 revenues previously used to fund benefits in excess of the 409 plan’s required benefits before the reduction must be used as 410 provided in subsection (1)(b). Twenty-five percent of the amount 411 of any mandatory contribution paid by the municipality or 412 special fire control district which was previously used to fund 413 benefits above the level of required benefits provided before 414 the reduction must be used as additional contributions as 415 specified in s. 175.091 to fund the plan’s actuarial deficiency. 416 (4)(2) The premium tax provided by this chapter shall in 417 all cases be used in its entirety to provide retirement extra 418 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 16 of 36 3/25/2013 4:43:30 PM 576-02935-13 benefits to firefighters, or to firefighters and police officers 419 if both are included. However, local law plans in effect on 420 October 1, 1998, must comply with the minimum benefit provisions 421 of this chapter only to the extent that additional premium tax 422 revenues become available to incrementally fund the cost of such 423 compliance as provided in s. 175.162(2)(a). If a plan is in 424 compliance with such minimum benefit provisions, as subsequent 425 additional premium tax revenues become available, they must be 426 used to provide extra benefits. Local law plans created by 427 special act before May 27, 1939, are deemed to comply with this 428 chapter. For the purpose of this chapter, the term: 429 (a) “Additional premium tax revenues” means revenues 430 received by a municipality or special fire control district 431 pursuant to s. 175.121 which exceed that amount received for 432 calendar year 1997. 433 (b) “Extra benefits” means benefits in addition to or 434 greater than those provided to general employees of the 435 municipality and in addition to those in existence for 436 firefighters on March 12, 1999. 437 (5)(3) A retirement plan or amendment to a retirement plan 438 may not be proposed for adoption unless the proposed plan or 439 amendment contains an actuarial estimate of the costs involved. 440 Such proposed plan or proposed plan change may not be adopted 441 without the approval of the municipality, special fire control 442 district, or, where permitted, the Legislature. Copies of the 443 proposed plan or proposed plan change and the actuarial impact 444 statement of the proposed plan or proposed plan change shall be 445 furnished to the division before the last public hearing 446 thereon. Such statement must also indicate whether the proposed 447 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 17 of 36 3/25/2013 4:43:30 PM 576-02935-13 plan or proposed plan change is in compliance with s. 14, Art. X 448 of the State Constitution and those provisions of part VII of 449 chapter 112 which are not expressly provided in this chapter. 450 Notwithstanding any other provision, only those local law plans 451 created by special act of legislation before May 27, 1939, are 452 deemed to meet the minimum benefits and minimum standards only 453 in this chapter. 454 (6)(4) Notwithstanding any other provision, with respect to 455 any supplemental plan municipality: 456 (a) A local law plan and a supplemental plan may continue 457 to use their definition of compensation or salary in existence 458 on March 12, 1999. 459 (b) Section 175.061(1)(b) does not apply, and a local law 460 plan and a supplemental plan shall continue to be administered 461 by a board or boards of trustees numbered, constituted, and 462 selected as the board or boards were numbered, constituted, and 463 selected on December 1, 2000. 464 (c) The election set forth in paragraph (1)(b) is deemed to 465 have been made. 466 (7)(5) The retirement plan setting forth the benefits and 467 the trust agreement, if any, covering the duties and 468 responsibilities of the trustees and the regulations of the 469 investment of funds must be in writing, and copies made 470 available to the participants and to the general public. 471 (8) In addition to the defined benefit component of the 472 local law plan, each plan sponsor must have a defined 473 contribution plan component within the local law plan by October 474 1, 2013, or upon the creation date of a new participating plan. 475 However, the plan sponsor of any plan established by special act 476 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 18 of 36 3/25/2013 4:43:30 PM 576-02935-13 of the Legislature has until July 1, 2014, to create a defined 477 contribution component within the plan. 478 (9) Notwithstanding any other provision of this chapter, a 479 municipality or special fire control district that has 480 implemented or proposed changes to a local law plan based on the 481 municipality’s or district’s reliance on an interpretation of 482 this chapter by the department on or after August 14, 2012, and 483 before March 1, 2013, may continue the implemented changes or 484 continue to implement proposed changes. Such reliance must be 485 evidenced by formal correspondence between the municipality or 486 district and the department which describes the specific changes 487 to the local law plan, with the initial correspondence from the 488 municipality or district dated prior to March 1, 2013. The 489 changes to the local law plan that are otherwise contrary to the 490 provisions of this chapter may continue in effect until the 491 earlier of October 1, 2016, or the effective date of a 492 collective bargaining agreement that is contrary to the changes 493 to the local law plan. 494 Section 6. Subsection (2) of section 185.01, Florida 495 Statutes, is amended to read: 496 185.01 Legislative declaration.— 497 (2) This chapter hereby establishes, for all municipal 498 pension plans now or hereinafter provided for under this 499 chapter, including chapter plans and local law plans, required 500 minimum benefits and minimum standards for the operation and 501 funding of such plans, hereinafter referred to as municipal 502 police officers’ retirement trust funds, which must be met as a 503 condition precedent to the plan or plan sponsor receiving a 504 distribution of insurance premium tax revenues under s. 185.10. 505 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 19 of 36 3/25/2013 4:43:30 PM 576-02935-13 The required minimum benefits and minimum standards for each 506 plan as set forth in this chapter may not be diminished by local 507 ordinance or by special act of the Legislature, or nor may the 508 minimum benefits or minimum standards be reduced or offset by 509 any other local, state, or federal plan that may include police 510 officers in its operation, except as provided under s. 112.65. 511 Section 7. Section 185.02, Florida Statutes, is amended to 512 read: 513 185.02 Definitions.—For any municipality, chapter plan, 514 local law municipality, or local law plan under this chapter, 515 the term following words and phrases as used in this chapter 516 shall have the following meanings, unless a different meaning is 517 plainly required by the context: 518 (1) “Additional premium tax revenues” means revenues 519 received by a municipality pursuant to s. 185.10 which exceed 520 base premium tax revenues. 521 (2)(1) “Average final compensation” means one-twelfth of 522 the average annual compensation of the 5 best years of the last 523 10 years of creditable service prior to retirement, termination, 524 or death. 525 (3) “Base benefits” means the level of benefits in 526 existence for police officers on March 12, 1999. 527 (4) “Base premium tax revenues” means revenues received by 528 a municipality pursuant to s. 185.10 equal to the amount of such 529 revenues received for calendar year 1997. 530 (5)(2) “Casualty insurance” means automobile public 531 liability and property damage insurance to be applied at the 532 place of residence of the owner, or if the subject is a 533 commercial vehicle, to be applied at the place of business of 534 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 20 of 36 3/25/2013 4:43:30 PM 576-02935-13 the owner; automobile collision insurance; fidelity bonds; 535 burglary and theft insurance; and plate glass insurance. 536 “Multiple peril” means a combination or package policy that 537 includes both property coverage and casualty coverage for a 538 single premium. 539 (6)(3) “Chapter plan” means a separate defined benefit 540 pension plan for police officers which incorporates by reference 541 the provisions of this chapter and has been adopted by the 542 governing body of a municipality as provided in s. 185.08. 543 Except as may be specifically authorized in this chapter, the 544 provisions of a chapter plan may not differ from the plan 545 provisions set forth in ss. 185.01-185.341 and 185.37-185.39. 546 Actuarial valuations of chapter plans shall be conducted by the 547 division as provided by s. 185.221(1)(b). 548 (7)(4) “Compensation” or “salary” means, for 549 noncollectively bargained service earned before July 1, 2011, or 550 for service earned under collective bargaining agreements in 551 place before July 1, 2011, the total cash remuneration including 552 “overtime” paid by the primary employer to a police officer for 553 services rendered, but not including any payments for extra duty 554 or special detail work performed on behalf of a second party 555 employer. A local law plan may limit the amount of overtime 556 payments which can be used for retirement benefit calculation 557 purposes; however, such overtime limit may not be less than 300 558 hours per officer per calendar year. For noncollectively 559 bargained service earned on or after July 1, 2011, or for 560 service earned under collective bargaining agreements entered 561 into on or after July 1, 2011, the term has the same meaning 562 except that when calculating retirement benefits, up to 300 563 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 21 of 36 3/25/2013 4:43:30 PM 576-02935-13 hours per year in overtime compensation may be included as 564 specified in the plan or collective bargaining agreement, but 565 payments for accrued unused sick or annual leave may not be 566 included. 567 (a) Any retirement trust fund or plan that meets the 568 requirements of this chapter does not, solely by virtue of this 569 subsection, reduce or diminish the monthly retirement income 570 otherwise payable to each police officer covered by the 571 retirement trust fund or plan. 572 (b) The member’s compensation or salary contributed as 573 employee-elective salary reductions or deferrals to any salary 574 reduction, deferred compensation, or tax-sheltered annuity 575 program authorized under the Internal Revenue Code shall be 576 deemed to be the compensation or salary the member would receive 577 if he or she were not participating in such program and shall be 578 treated as compensation for retirement purposes under this 579 chapter. 580 (c) For any person who first becomes a member in any plan 581 year beginning on or after January 1, 1996, compensation for 582 that plan year may not include any amounts in excess of the 583 Internal Revenue Code s. 401(a)(17) limitation, as amended by 584 the Omnibus Budget Reconciliation Act of 1993, which limitation 585 of $150,000 shall be adjusted as required by federal law for 586 qualified government plans and shall be further adjusted for 587 changes in the cost of living in the manner provided by Internal 588 Revenue Code s. 401(a)(17)(B). For any person who first became a 589 member before the first plan year beginning on or after January 590 1, 1996, the limitation on compensation may not be less than the 591 maximum compensation amount that was allowed to be taken into 592 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 22 of 36 3/25/2013 4:43:30 PM 576-02935-13 account under the plan as in effect on July 1, 1993, which 593 limitation shall be adjusted for changes in the cost of living 594 since 1989 in the manner provided by Internal Revenue Code s. 595 401(a)(17)(1991). 596 (8)(5) “Creditable service” or “credited service” means the 597 aggregate number of years of service and fractional parts of 598 years of service of any police officer, omitting intervening 599 years and fractional parts of years when such police officer may 600 not have been employed by the municipality subject to the 601 following conditions: 602 (a) A No police officer may not will receive credit for 603 years or fractional parts of years of service if he or she has 604 withdrawn his or her contributions to the fund for those years 605 or fractional parts of years of service, unless the police 606 officer repays into the fund the amount he or she has withdrawn, 607 plus interest as determined by the board. The member has shall 608 have at least 90 days after his or her reemployment to make 609 repayment. 610 (b) A police officer may voluntarily leave his or her 611 contributions in the fund for a period of 5 years after leaving 612 the employ of the police department, pending the possibility of 613 his or her being rehired by the same department, without losing 614 credit for the time he or she has participated actively as a 615 police officer. If he or she is not reemployed as a police 616 officer with the same department within 5 years, his or her 617 contributions shall be returned to him or her without interest. 618 (c) Credited service under this chapter shall be provided 619 only for service as a police officer, as defined in subsection 620 (11), or for military service and may not include credit for any 621 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 23 of 36 3/25/2013 4:43:30 PM 576-02935-13 other type of service. A municipality may, by local ordinance, 622 may provide for the purchase of credit for military service 623 occurring before employment as well as prior service as a police 624 officer for some other employer as long as the police officer is 625 not entitled to receive a benefit for such other prior service 626 as a police officer. For purposes of determining credit for 627 prior service, in addition to service as a police officer in 628 this state, credit may be given for federal, other state, or 629 county service as long as such service is recognized by the 630 Criminal Justice Standards and Training Commission within the 631 Department of Law Enforcement as provided under chapter 943 or 632 the police officer provides proof to the board of trustees that 633 such service is equivalent to the service required to meet the 634 definition of a police officer under subsection (16) (11). 635 (d) In determining the creditable service of a any police 636 officer, credit for up to 5 years of the time spent in the 637 military service of the Armed Forces of the United States shall 638 be added to the years of actual service, if: 639 1. The police officer is in the active employ of the 640 municipality before prior to such service and leaves a position, 641 other than a temporary position, for the purpose of voluntary or 642 involuntary service in the Armed Forces of the United States. 643 2. The police officer is entitled to reemployment under the 644 provisions of the Uniformed Services Employment and Reemployment 645 Rights Act. 646 3. The police officer returns to his or her employment as a 647 police officer of the municipality within 1 year after from the 648 date of his or her release from such active service. 649 (9)(6) “Deferred Retirement Option Plan” or “DROP” means a 650 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 24 of 36 3/25/2013 4:43:30 PM 576-02935-13 local law plan retirement option in which a police officer may 651 elect to participate. A police officer may retire for all 652 purposes of the plan and defer receipt of retirement benefits 653 into a DROP account while continuing employment with his or her 654 employer. However, a police officer who enters the DROP and who 655 is otherwise eligible to participate may shall not thereby be 656 precluded from participating, or continuing to participate, in a 657 supplemental plan in existence on, or created after, March 12, 658 1999 the effective date of this act. 659 (10) “Defined contribution plan” means the component of a 660 local law plan to which deposits are made to provide benefits 661 for police officers, or for police officers and firefighters if 662 both are included. Such component is an element of a local law 663 plan and exists in conjunction with the defined benefit 664 component that meets the required benefits and minimum standards 665 of this chapter. The retirement benefits of the defined 666 contribution plan shall be provided through individual member 667 accounts, in accordance with the applicable provisions of the 668 Internal Revenue Code and related regulations, and are limited 669 to the contributions made into each member’s account and the 670 actual accumulated earnings, net of expenses, earned on the 671 member’s account. 672 (11)(7) “Division” means the Division of Retirement of the 673 Department of Management Services. 674 (12)(8) “Enrolled actuary” means an actuary who is enrolled 675 under Subtitle C of Title III of the Employee Retirement Income 676 Security Act of 1974 and who is a member of the Society of 677 Actuaries or the American Academy of Actuaries. 678 (13)(9) “Local law municipality” is any municipality in 679 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 25 of 36 3/25/2013 4:43:30 PM 576-02935-13 which there exists a local law plan exists. 680 (14)(10) “Local law plan” means a retirement defined 681 benefit pension plan, which includes both a defined benefit plan 682 component and a defined contribution plan component, for police 683 officers, or for police officers and firefighters if both are, 684 where included, as described in s. 185.35, established by 685 municipal ordinance or special act of the Legislature, which 686 enactment sets forth all plan provisions. Local law plan 687 provisions may vary from the provisions of this chapter if the, 688 provided that required minimum benefits and minimum standards of 689 this chapter are met. However, any such variance must shall 690 provide a greater benefit for police officers. Actuarial 691 valuations of local law plans shall be conducted by an enrolled 692 actuary as provided in s. 185.221(2)(b). 693 (15) “Long-term funded ratio” or “funded ratio” means the 694 ratio of the actuarial value of assets of the plan to the 695 actuarial accrued liabilities of the plan, as reported in the 696 most recent actuarial valuation of the plan, deemed to be in 697 compliance with chapter 112 by the Department of Management 698 Services. 699 (16)(11) “Police officer” means any person who is elected, 700 appointed, or employed full time by a any municipality, who is 701 certified or required to be certified as a law enforcement 702 officer in compliance with s. 943.1395, who is vested with 703 authority to bear arms and make arrests, and whose primary 704 responsibility is the prevention and detection of crime or the 705 enforcement of the penal, criminal, traffic, or highway laws of 706 the state. The term This definition includes all certified 707 supervisory and command personnel whose duties include, in whole 708 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 26 of 36 3/25/2013 4:43:30 PM 576-02935-13 or in part, the supervision, training, guidance, and management 709 responsibilities of full-time law enforcement officers, part-710 time law enforcement officers, or auxiliary law enforcement 711 officers, but does not include part-time law enforcement 712 officers or auxiliary law enforcement officers as those terms 713 the same are defined in s. 943.10(6) and (8), respectively. For 714 the purposes of this chapter only, the term also includes 715 “police officer” also shall include a public safety officer who 716 is responsible for performing both police and fire services. Any 717 plan may provide that the police chief shall have an option to 718 participate, or not, in that plan. 719 (17)(12) “Police Officers’ Retirement Trust Fund” means a 720 trust fund, by whatever name known, as provided under s. 185.03 721 for the purpose of assisting municipalities in establishing and 722 maintaining a retirement plan for police officers. 723 (18) “Required benefits” means the lesser of the minimum 724 benefits set forth in this chapter and the base benefits of the 725 plan. For local law plans created after March 1, 2013, the 726 required benefits are the minimum benefits set forth in this 727 chapter. 728 (19)(13) “Retiree” or “retired police officer” means a 729 police officer who has entered retirement status. For the 730 purposes of a plan that includes a Deferred Retirement Option 731 Plan (DROP), a police officer who enters the DROP is shall be 732 considered a retiree for all purposes of the plan. However, a 733 police officer who enters the DROP and who is otherwise eligible 734 to participate may shall not thereby be precluded from 735 participating, or continuing to participate, in a supplemental 736 plan in existence on, or created after, March 12, 1999 the 737 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 27 of 36 3/25/2013 4:43:30 PM 576-02935-13 effective date of this act. 738 (20)(14) “Retirement” means a police officer’s separation 739 from city employment as a police officer with immediate 740 eligibility for receipt of benefits under the plan. For purposes 741 of a plan that includes a Deferred Retirement Option Plan 742 (DROP), “retirement” means the date a police officer enters the 743 DROP. 744 (21) “Special benefits” means benefits provided in a 745 defined contribution plan for police officers. 746 (22)(15) “Supplemental plan” means a plan to which deposits 747 of the premium tax moneys as provided in s. 185.08 are made to 748 provide extra benefits to police officers, or police officers 749 and firefighters if both are where included, under this chapter. 750 Such a plan is an element of a local law plan and exists in 751 conjunction with a defined benefit component plan that meets the 752 required minimum benefits and minimum standards of this chapter. 753 Any supplemental plan in existence on March 1, 2013, shall be 754 deemed to be defined contribution plan in compliance with s. 755 185.35(8). 756 (23)(16) “Supplemental plan municipality” means a any local 757 law municipality in which there existed a supplemental plan 758 existed as of December 1, 2000. 759 Section 8. Paragraph (b) of subsection (6) of section 760 185.06, Florida Statutes, is amended to read: 761 185.06 General powers and duties of board of trustees.—For 762 any municipality, chapter plan, local law municipality, or local 763 law plan under this chapter: 764 (6) To assist the board in meeting its responsibilities 765 under this chapter, the board, if it so elects, may: 766 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 28 of 36 3/25/2013 4:43:30 PM 576-02935-13 (b) Employ an independent enrolled actuary, as defined in 767 s. 185.02(8), at the pension fund’s expense. 768 769 If the board chooses to use the municipality’s or special 770 district’s legal counsel or actuary, or chooses to use any of 771 the municipality’s other professional, technical, or other 772 advisers, it must do so only under terms and conditions 773 acceptable to the board. 774 Section 9. Paragraphs (d) through (g) of subsection (1) of 775 section 185.07, Florida Statutes, are amended, and a new 776 paragraph (e) is added to that subsection, to read: 777 185.07 Creation and maintenance of fund.—For any 778 municipality, chapter plan, local law municipality, or local law 779 plan under this chapter: 780 (1) The municipal police officers’ retirement trust fund in 781 each municipality described in s. 185.03 shall be created and 782 maintained in the following manner: 783 (d) By payment by the municipality or other sources of a 784 sum equal to the normal cost and the amount required to fund any 785 actuarial deficiency shown by an actuarial valuation as provided 786 in part VII of chapter 112 after taking into account the amounts 787 described in paragraphs (b), (c), (f), (g), and (h) and the 788 amounts of the tax proceeds described in paragraph (a) which 789 must be used to fund defined benefit plan benefits, except as 790 otherwise excluded from consideration in determining the 791 mandatory payment. 792 (e) For local law plans, and in addition to the mandatory 793 payment described in paragraph (d), by mandatory payment by the 794 municipality of the amount specified in s. 185.35(3), if the 795 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 29 of 36 3/25/2013 4:43:30 PM 576-02935-13 long-term funded ratio of the plan is less than 80 percent. 796 (f)(e) By all gifts, bequests and devises when donated to 797 the fund. 798 (g)(f) By all accretions to the fund by way of interest or 799 dividends on bank deposits or otherwise. 800 (h)(g) By all other sources of income now or hereafter 801 authorized by law for the augmentation of such municipal police 802 officers’ retirement trust fund. 803 804 Nothing in this section shall be construed to require 805 adjustment of member contribution rates in effect on the date 806 this act becomes a law, including rates that exceed 5 percent of 807 salary, provided that such rates are at least one-half of 1 808 percent of salary. 809 Section 10. Section 185.35, Florida Statutes, is amended to 810 read: 811 185.35 Municipalities that have having their own retirement 812 pension plans for police officers.—For any municipality, chapter 813 plan, local law municipality, or local law plan under this 814 chapter, In order for a municipality that has municipalities 815 with its their own retirement plan pension plans for police 816 officers, or for police officers and firefighters if both are 817 included, to participate in the distribution of the tax fund 818 established under pursuant to s. 185.08, a local law plan and 819 its plan sponsor plans must meet the required minimum benefits 820 and minimum standards set forth in this chapter: 821 (1) If a municipality has a retirement pension plan for 822 police officers, or for police officers and firefighters if both 823 are included, which, in the opinion of the division, meets the 824 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 30 of 36 3/25/2013 4:43:30 PM 576-02935-13 required minimum benefits and minimum standards set forth in 825 this chapter, the board of trustees of the pension plan must, as 826 approved by a majority of police officers of the municipality, 827 may: 828 (a) place the income from the premium tax in s. 185.08 in 829 such pension plan for the sole and exclusive use of its police 830 officers, or its police officers and firefighters if included, 831 where it shall become an integral part of that pension plan and 832 shall be used to fund benefits for police officers as follows: 833 (a) The base premium tax revenues must be used to fund base 834 benefits. 835 (b) Of the premium tax revenues received which are in 836 excess of the amount received for the 2012 calendar year, and 837 any accumulations of additional premium tax revenues which have 838 not been applied to fund extra benefits: 839 1. If the plan has a long-term funded ratio of less than 80 840 percent: 841 a. Fifty percent must be used as additional contributions 842 to pay the plan’s actuarial deficiency and may not be considered 843 in the determination of the mandatory payment described in s. 844 185.07(1)(d); 845 b. Twenty-five percent must be used to fund base benefits; 846 and 847 c. The remainder must be placed in a defined contribution 848 plan to fund special benefits. 849 2. If the plan has a long-term funded ratio of 80 percent 850 or greater: 851 a. Fifty percent must be used to fund base benefits; and 852 b. The remainder must be placed in a defined contribution 853 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 31 of 36 3/25/2013 4:43:30 PM 576-02935-13 plan to fund special benefits. 854 (c) Additional premium tax revenues not described in 855 paragraph (b) must be used to fund benefits that were not 856 included in the base benefits pay extra benefits to the police 857 officers included in that pension plan; or 858 (b) May place the income from the premium tax in s. 185.08 859 in a separate supplemental plan to pay extra benefits to the 860 police officers, or police officers and firefighters if 861 included, participating in such separate supplemental plan. 862 (2) Insurance premium tax revenues may not be used to fund 863 benefits provided in a defined benefit plan which were not 864 provided by the plan as of March 1, 2013; however, for a local 865 law plan created after March 1, 2013, up to 50 percent of the 866 insurance premium tax revenues may be used to fund defined 867 benefit plan component benefits and the remainder used to fund 868 defined contribution plan component benefits. 869 (3) If a plan offers benefits in excess of its required 870 benefits, such benefits may be reduced if the plan continues to 871 meet the required benefits of the plan and the minimum standards 872 set forth in this chapter. The amount of insurance premium tax 873 revenues previously used to fund benefits in excess of the 874 plan’s required benefits before the reduction must be used as 875 provided in subsection (1)(b). Twenty-five percent of the amount 876 of any mandatory contribution paid by the municipality or 877 special fire control district which was previously used to fund 878 benefits above the level of required benefits provided before 879 the reduction must be used as additional contributions as 880 specified in s. 185.07 to fund the plan’s actuarial deficiency. 881 (4)(2) The premium tax provided by this chapter shall in 882 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 32 of 36 3/25/2013 4:43:30 PM 576-02935-13 all cases be used in its entirety to provide retirement extra 883 benefits to police officers, or to police officers and 884 firefighters if both are included. However, local law plans in 885 effect on October 1, 1998, must comply with the minimum benefit 886 provisions of this chapter only to the extent that additional 887 premium tax revenues become available to incrementally fund the 888 cost of such compliance as provided in s. 185.16(2). If a plan 889 is in compliance with such minimum benefit provisions, as 890 subsequent additional tax revenues become available, they shall 891 be used to provide extra benefits. Local law plans created by 892 special act before May 27, 1939, shall be deemed to comply with 893 this chapter. For the purpose of this chapter, the term: 894 (a) “Additional premium tax revenues” means revenues 895 received by a municipality pursuant to s. 185.10 which exceed 896 the amount received for calendar year 1997. 897 (b) “Extra benefits” means benefits in addition to or 898 greater than those provided to general employees of the 899 municipality and in addition to those in existence for police 900 officers on March 12, 1999. 901 (5)(3) A retirement plan or amendment to a retirement plan 902 may not be proposed for adoption unless the proposed plan or 903 amendment contains an actuarial estimate of the costs involved. 904 Such proposed plan or proposed plan change may not be adopted 905 without the approval of the municipality or, where permitted, 906 the Legislature. Copies of the proposed plan or proposed plan 907 change and the actuarial impact statement of the proposed plan 908 or proposed plan change shall be furnished to the division 909 before the last public hearing thereon. Such statement must also 910 indicate whether the proposed plan or proposed plan change is in 911 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 33 of 36 3/25/2013 4:43:30 PM 576-02935-13 compliance with s. 14, Art. X of the State Constitution and 912 those provisions of part VII of chapter 112 which are not 913 expressly provided in this chapter. Notwithstanding any other 914 provision, only those local law plans created by special act of 915 legislation before May 27, 1939, are deemed to meet the minimum 916 benefits and minimum standards only in this chapter. 917 (6)(4) Notwithstanding any other provision, with respect to 918 any supplemental plan municipality: 919 (a) Section 185.02(7)(a) 185.02(4)(a) does not apply, and a 920 local law plan and a supplemental plan may continue to use their 921 definition of compensation or salary in existence on March 12, 922 1999. 923 (b) A local law plan and a supplemental plan must continue 924 to be administered by a board or boards of trustees numbered, 925 constituted, and selected as the board or boards were numbered, 926 constituted, and selected on December 1, 2000. 927 (c) The election set forth in paragraph (1)(b) is deemed to 928 have been made. 929 (7)(5) The retirement plan setting forth the benefits and 930 the trust agreement, if any, covering the duties and 931 responsibilities of the trustees and the regulations of the 932 investment of funds must be in writing and copies made available 933 to the participants and to the general public. 934 (8) In addition to the defined benefit component of the 935 local law plan, each plan sponsor must have a defined 936 contribution plan component within the local law plan by October 937 1, 2013, or upon the creation date of a new participating plan. 938 However, the plan sponsor of any plan established by special act 939 of the Legislature has until July 1, 2014, to create a defined 940 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 34 of 36 3/25/2013 4:43:30 PM 576-02935-13 contribution component within the plan. 941 (9) Notwithstanding any other provision of this chapter, a 942 municipality that has implemented or proposed changes to a local 943 law plan based on the municipality’s reliance on an 944 interpretation of this chapter by the department on or after 945 August 14, 2012 and before March 1, 2013, may continue the 946 implemented changes or continue to implement proposed changes. 947 Such reliance must be evidenced by formal correspondence between 948 the municipality and the department which describes the specific 949 changes to the local law plan, with the initial correspondence 950 from the municipality dated prior to March 1, 2013. The changes 951 to the local law plan which are otherwise contrary to the 952 provisions of this chapter may continue in effect until the 953 earlier of October 1, 2016, or the effective date of a 954 collective bargaining agreement that is contrary to the changes 955 to the local law plan. 956 Section 11. The Legislature finds that a proper and 957 legitimate state purpose is served when employees and retirees 958 of the state and its political subdivisions, and the dependents, 959 survivors, and beneficiaries of such employees and retirees, are 960 extended the basic protections afforded by governmental 961 retirement systems that provide fair and adequate benefits and 962 that are managed, administered, and funded in an actuarially 963 sound manner as required by s. 14, Article X of the State 964 Constitution and part VII of chapter 112, Florida Statutes. 965 Therefore, the Legislature determines and declares that this act 966 fulfills an important state interest. 967 Section 12. This act shall take effect July 1, 2013. 968 969 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 35 of 36 3/25/2013 4:43:30 PM 576-02935-13 970 ================= T I T L E A M E N D M E N T ================ 971 And the title is amended as follows: 972 Delete everything before the enacting clause 973 and insert: 974 A bill to be entitled 975 An act relating to firefighter and police officer 976 pension plans; amending s. 175.021, F.S.; revising the 977 legislative declaration to require all plans to meet 978 the requirements of ch. 175, F.S., in order to receive 979 insurance premium tax revenues; amending s. 175.032, 980 F.S.; revising definitions to conform to changes made 981 by the act and adding new definitions; amending s. 982 175.071, F.S.; conforming a cross-reference; amending 983 s. 175.091, F.S.; revising existing payment provisions 984 and providing for an additional mandatory payment by 985 the municipality or special fire control district to 986 the firefighters’ pension trust fund; amending s. 987 175.351, F.S., relating to municipalities and special 988 fire control districts that have their own pension 989 plans and want to participate in the distribution of a 990 tax fund; revising criteria governing the use of 991 income from the premium tax; requiring plan sponsors 992 to have a defined contribution plan in place by a 993 certain date; authorizing a municipality to implement 994 certain changes to a local law plan which are contrary 995 to ch. 175, F.S., under certain time-limited 996 circumstances; amending s. 185.01, F.S.; revising the 997 legislative declaration to require all plans to meet 998 Florida Senate - 2013 COMMITTEE AMENDMENT Bill No. CS for SB 458 Ì326778]Î326778 Page 36 of 36 3/25/2013 4:43:30 PM 576-02935-13 the requirements of ch. 185, F.S., in order to receive 999 insurance premium tax revenues; amending s. 185.02, 1000 F.S.; revising definitions to conform to changes made 1001 by the act and adding new definitions; deleting a 1002 provision allowing a local law plan to limit the 1003 amount of overtime payments which can be used for 1004 retirement benefit calculations; amending s. 185.06, 1005 F.S.; conforming a cross-reference; amending s. 1006 185.07, F.S.; revising existing payment provisions and 1007 providing for an additional mandatory payment by the 1008 municipality to the police officers’ retirement trust 1009 fund; amending s. 185.35, F.S., relating to 1010 municipalities that have their own pension plans for 1011 police officers and want to participate in the 1012 distribution of a tax fund; revising criteria 1013 governing the use of income from the premium tax; 1014 requiring plan sponsors to have a defined contribution 1015 plan in place by a certain date; authorizing a 1016 municipality to implement certain changes to a local 1017 law plan which are contrary to ch. 185, F.S., under 1018 certain time-limited circumstances; providing a 1019 declaration of important state interest; providing an 1020 effective date. 1021 Pension Resource Centers Accounts Payable Check Register FOR: PALM BEACH GARDENS POLICE Check Number Date Payee and Description Amount 2467February 6, 2013Pension Resource Centers $2,638.52 Administration Fee- March 2013 2468February 6, 2013Thistle Asset Consulting Inc $4,812.00 Performance Monitoring thru 12/31/12 2469February 6, 2013Rhumbline Advisers $4,717.00 Investment Management Fee- 4th Qtr 2012 2470February 6, 2013Gabriel Roeder Smith and Company $2,137.00 Actuarial Services Rendered 12/31/12 2471February 6, 2013ICC Capital Management $25,334.05 Investment Management Fees- 4th Qtr 2012 2472February 6, 2013Perry & Jensen, LLC $475.95 Legal Services Rendered through 1/15/13 2473February 13, 2013Marc Glass $324.13 Travel Reimbursement for January 2013 Travel 2474March 1, 2013City of Palm Beach Gardens $13,621.62 Retiree Insurance 2475March 6, 2013Pension Resource Centers $2,575.00 Administration Fee- March 2013 2476March 6, 2013Cherry, Bekeart & Holland $14,500.00 Final Billing on 9/30/12 Audit 2477March 6, 2013Cherry, Bekeart & Holland $350.00 Final Billing on 9/30/12 Audit 2478March 6, 2013Gabriel Roeder Smith and Company $2,018.00 Actuarial Services Rendered 2/01/13 2479March 6, 2013Perry & Jensen, LLC $1,044.74 Legal Services Rendered through 2/15/13 2480April 1, 2013City of Palm Beach Gardens $13,650.70 Retiree Insurance 2481April 4, 2013Pension Resource Centers $2,583.97 Administration Fee- April 2013 2482April 4, 2013Gabriel Roeder Smith and Company $2,983.00 Actuarial Services Rendered 2/28/13 2483April 4, 2013Omni Orlando Resort at Championsgate $540.00 Registration 6/23/13 - 6/26/13 for Marc Glass 2484April 4, 2013FPPTA $500.00 June Conference Registration for Marc Glass 2485April 4, 2013Perry & Jensen, LLC $578.58 Legal Services Rendered through 3/15/13 2486April 4, 2013Florida State University, CAPD 250.00 Division of Retirement School Registration for Jay Spencer 2487April 4, 2013DoubleTree by Hilton Hotel Tallahassee $297.00 Hotel Registration for 5/19/13 - 5/22/13 for Jay Spencer 2488April 4, 2013VOID - Printing Error $0.00 $95,931.26 Chiar___________________________ Secretary___________________________ Date_______________________________ 1 Pa l m B e a c h G a r d e n s P o l i c e P e n s i o n F u n d April 23, 2013 Max Cann IB G - 8 6 1 3 2 Ta b l e o f C o n t e n t s 1. SS g A F i r m O v e r v i e w 2. Gl o b a l E T P L a n d s c a p e 3. SP D R S & P E m e r g i n g M a r k e t s E T F ( G M M ) 4. In s t i t u t i o n a l E T P T o o l k i t Ap p e n d i x A : SP D R I n s t i t u t i o n a l R e s o u r c e s Ap p e n d i x B : De l t a O n e V e h i c l e C o m p a r i s o n Ap p e n d i x C : St r u c t u r e d F u n d s C o m p a r i s o n Ap p e n d i x D : Im p o r t a n t D i s c l o s u r e s Ap p e n d i x E : Bi o g r a p h y IB G - 8 6 1 3 Th e m a t e r i a l c o n t a i n e d i n t h i s p r e s e n t a t i o n i s c u r r en t a s o f t h e p r e s e n t a t i o n d a t e , u n l e s s o t h e r w i s e i nd i c a t e d . SS g A F i r m O v e r v i e w GL S T N D - 0 6 3 1 4 A L e a d i n g P r o v i d e r o f F i n a n c i a l S e r v i c e s t o I n s t i t u ti o n a l I n v e s t o r s St a t e S t r e e t Gl o b a l A d v i s o r s A g l o b a l l e a d e r i n as s e t m a n a g e m e n t • Su b s i d i a r y o f S t a t e S t r e e t C o r p o r a t i o n , o n e o f t h e w or l d ' s l e a d i n g pr o v i d e r s o f f i n a n c i a l s e r v i c e s t o i n s t i t u t i o n a l i n v e s t o r s , w i t h a he r i t a g e d a t i n g b a c k o v e r t w o c e n t u r i e s • En t r u s t e d w i t h o v e r $ 2 . 0 t r i l l i o n * i n a s s e t s w o r l d w i d e • Cl i e n t s i n c l u d e g o v e r n m e n t a l e n t i t i e s , c o r p o r a t i o n s , e n d owments an d f o u n d a t i o n s , t h i r d p a r t y a s s e t g a t h e r e r s , m u l t i e m p lo y e r p l a n s , pe n s i o n f u n d s a n d s o v e r e i g n w e a l t h f u n d s • ET F i n d u s t r y p i o n e e r a n d l e a d e r s i n c e 1 9 9 3 w i t h $3 4 0 . 1 b i l l i o n * i n A U M SS g A i s a g l o b a l l e a d e r in a s s e t m a n a g e m e n t r e l i e d o n b y so p h i s t i c a t e d i n s t i t u t i o n s wo r l d w i d e f o r t h e i r in v e s t m e n t n e e d s St a t e S t r e e t Gl o b a l M a r k e t s A g l o b a l l e a d e r i n r e s e a r c h an d t r a d i n g St a t e S t r e e t Gl o b a l S e r v i c e s A g l o b a l l e a d e r i n as s e t s e r v i c i n g As o f D e c e m b e r 3 1 , 2 0 1 2 * T h i s A U M i n c l u d e s t h e a s s e t s o f t h e S P D R G o l d T r u st ( a p p r o x . $ 7 2 . 2 b i l l i o n a s o f D e c e m b e r 3 1 , 2 0 1 2 ) , f o r w h i c h S t a t e S t r e e t G l o b a l Ma r k e t s , L L C , a n a f f i l i a t e o f S t a t e S t r e e t G l o b a l A dv i s o r s , s e r v e s a s t h e m a r k e t i n g a g e n t . GL S T N D - 0 6 3 1 5 As o f D e c e m b e r 3 1 , 2 0 1 2 A G l o b a l P e r s p e c t i v e w i t h L o c a l E x p e r t i s e Ne w Y o r k Mu n i c h Pa r i s Zu r i c h Ho n g K o n g Si n g a p o r e Tokyo Lo n d o n Fr a n k f u r t At l a n t a Sa n F r a n c i s c o Br u s s e l s Du b a i Me l b o u r n e Mo n t r e a l Ch i c a g o To r o n t o Sydney Wi l t o n , C T Bo s t o n Ba n g a l o r e Am s t e r d a m Mi l a n Ge n e v a Du b l i n Ha n g z h o u Sh a n g h a i In v e s t m e n t C e n t e r Ma r k e t i n g / R e l a t i o n s h i p Ma n a g e m e n t O f f i c e Gl o b a l A l l i a n c e C o m p a n y GL S T N D - 0 6 3 1 • 27 l o c a l o f f i c e s , b r i n g i n g a g l o b a l p e r s p e c t i v e t o ma n a g i n g c l i e n t n e e d s • 24 h o u r g l o b a l t r a d i n g c a p a b i l i t y w i t h t r a d i n g d e s k s in Bo s t o n , L o n d o n , a n d H o n g K o n g • 10 i n v e s t m e n t c e n t e r s , p r o m o t i n g d i v e r s i t y of i d e a s • Ac q u i r e d B a n k o f I r e l a n d A s s e t M a n a g e m e n t in Q 1 2 0 1 1 6 90 SS g A c l i e n t s wi t h t w o o r mo r e s t r a t e g i e s * Pe r c e n t a g e o f n e w bu s i n e s s f r o m e x i s t i n g SS g A c l i e n t s * 10 0 0 1020304050607080 Ca s h 4 $3 6 7 . 1 B Eq u i t y $8 0 6 . 5 B Fi x e d I n c o m e $3 0 9 . 7 B So l u t i o n s ( I S G ) 3 $1 3 3 . 5 B ET F s 1 $3 4 0 . 1 B Al l O t h e r 2 $1 3 1 . 9 B $2 . 0 9 T r i l l i o n 1 in A s s e t s U n d e r M a n a g e m e n t * Ac t i v e , e n h a n c e d , f u n d a m e n t a l , p a s s i v e , p u r e a l p h a an d m u l t i - a s s e t c l a s s s o l u t i o n s SS g A — A T r u s t e d P a r t n e r * A s o f D e c e m b e r 3 1 , 2 0 1 2 1 Th i s A U M i n c l u d e s t h e a s s e t s o f t h e S P D R G o l d T r u s t ( a p p r o x . $ 7 2 . 2 b i l l i o n a s o f D e c e m b e r 3 1 , 2 0 1 2 ) , f or w h i c h S t a t e S t r e e t G l o b a l M a r k e t s , L L C , a n a f f i l ia t e o f S t a t e S t r e e t G l o b a l A d v i s o r s , s e r v e s a s t h e m a r k e t i n g a g e n t . 2 In c l u d e s A b s o l u t e R e t u r n , C o m m o d i t i e s , C u r r e n c y , C o mp a n y S t o c k , G l o b a l M u l t i S t r a t e g y , H e d g e F u n d o f F un d s , M a n a g e d F u t u r e s , P r i v a t e E q u i t y a n d R e a l E s t a te 3 As s e t s i n S o l u t i o n s a r e n o t c o u n t e d i n t h e u n d e r l y i ng a s s e t c l a s s 4 In c l u d e s s e c u r i t i e s l e n d i n g c o l l a t e r a l , c a s h , a n d m on e y m a r k e t 53 % 7 7 % GL S T N D - 0 6 3 1 7 A B r o a d R a n g e o f I n v e s t m e n t S o l u t i o n s a n d P r o d u c t s We o f f e r b r o a d - b a s e d m a r k e t e x p o s u r e i n h i g h l y s p e c ia l i z e d a c t i v e a n d p a s s i v e st r a t e g i e s a c r o s s t h e r i s k r e t u r n s p e c t r u m Eq u i t y Fi x e d I n c o m e Al t e r n a t i v e s Ca s h Cu r r e n c y Ac t i v e En h a n c e d In d e x e d Fu n d a m e n t a l Ma n a g e d V o l a t i l i t y Ac t i v e En h a n c e d In d e x e d Ac t i v e He d g e d In d e x e d Ac t i v e En h a n c e d Co m m o d i t i e s Re a l E s t a t e Pr i v a t e E q u i t y He d g e F u n d o f F u n d s Ab s o l u t e R e t u r n Gl o b a l M u l t i S t r a t e g y Ma n a g e d F u t u r e s ET F s Co r e , s e c t o r , i n d u s t r y , s t y l e , i n t e r n a t i o n a l a n d f i x e d in c o m e f u n d s GL S T N D - 0 6 3 1 As o f D e c e m b e r 3 1 , 2 0 1 2 Gl o b a l E T P L a n d s c a p e GL S T N D - 0 8 2 9 9 Gl o b a l E T P G r o w t h R a t e s B y R e g i o n ( 2 0 0 8 – 2 0 1 2 ) So u r c e : M a r k i t , S S g A E T F S t r a t e g y & C o n s u l t i n g , a s of D e c e m b e r 3 1 , 2 0 1 2 . M i d d l e E a s t & A f r i c a a s o f S e pt e m b e r 3 0 , 2 0 1 2 Mc K i n s e y & C o m p a n y , “ T h e S e c o n d A c t B e g i n s f o r E T F s ” +1 5 2 % No r t h A m e r i c a +1 4 5 % Eu r o p e +3 2 1 % Ja p a n +1 5 2 % La t i n A m e r i c a +5 6 0 % Mi d d l e E a s t & A f r i c a +2 6 3 % As i a - P a c i f i c (e x . J a p a n ) +1 6 0 % To t a l GL S T N D - 0 8 2 9 $5 5 8 $1 , 4 0 6 20 0 8 2 0 1 2 20 0 8 2 0 1 2 $1 5 0 $3 6 8 20 0 8 2 0 1 2 $4 9 $2 8 20 0 8 2 0 1 2 $1991 $7 6 6 20 0 8 2 0 1 2 $1 5 . 1 $6 20 0 8 2 0 1 2 $6 6 $1 0 20 0 8 2 0 1 2 $8 7 $2 4 10 Gl o b a l : 4 , 9 4 2 E T P s a n d $ 1 . 9 9 t r i l l i o n i n a s s e t s Th e A m e r i c a s E M E A A s i a P a c i f i c So u r c e : M a r k i t , S S g A E T F S t r a t e g y & C o n s u l t i n g , a s of D e c e m b e r 3 1 , 2 0 1 2 . M i d d l e E a s t a n d A f r i c a a s o f Se p t e m b e r 3 0 , 2 0 1 2 # o f ET P s ET P A s s e t s (U S $ B ) Ca n a d a 3 5 4 $ 5 6 . 7 US A 1 , 4 4 5 $ 1 , 3 4 9 . 4 La t i n A m e r i c a 3 5 $ 1 5 . 1 To t a l 1 , 8 3 4 $ 1 , 4 2 1 . 2 # o f E T P s ET P As s e t s (U S $ B ) Eu r o p e 2 , 2 7 5 $ 3 6 7 . 8 Mi d d l e E a s t an d A f r i c a 32 4 $ 6 6 . 1 To t a l 2 , 5 9 9 $ 4 3 3 . 9 # o f E T P s ETP Assets (US$ B) As i a e x - J a p a n 3 9 1 $ 8 7 . 4 Ja p a n 1 1 8 $ 4 9 . 0 To t a l 5 0 9 $ 1 3 6 . 4 Th e G l o b a l E T P M a r k e t R e p r e s e n t s m o r e t h a n $ 1 . 9 9 T r il l i o n i n A s s e t s GL S T N D - 0 8 2 9 11 $0 $2 0 0 , 0 0 0 $4 0 0 , 0 0 0 $6 0 0 , 0 0 0 $8 0 0 , 0 0 0 $1 , 0 0 0 , 0 0 0 $1 , 2 0 0 , 0 0 0 $1 , 4 0 0 , 0 0 0 20 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 Ye a r Assets ($ MIL) U S E q u i t y C o m m o d i t y C u r r e n c y F u n d a m e n t a l F i x e d I n c o m e G l o b a l / I n t e r n a t i o n a l S p e c i a l t y US E T F M a r k e t D i v e r s i f i c a t i o n So u r c e : B l o o m b e r g , L . P . , S S g A , a s o f D e c e m b e r 3 1 , 2 01 2 . D i v e r s i f i c a t i o n d o e s n o t e n s u r e a p r o f i t o r g u ar a n t e e a g a i n s t l o s s . In v e s t o r s h a v e a c c e s s t o a w i d e r a n g e o f E T F s a c r o s s v a r i o u s a s s e t c l a s s e s No v . 2 0 0 4 : L a u n c h o f t h e fi r s t c o m m o d i t y E T F Fi x e d I n c o m e E T F s re p r e s e n t 1 7 . 7 % o f ET F a s s e t s GL S T N D - 0 8 2 9 12 Fu t u r e E T P G r o w t h P o t e n t i a l i s H i g h “N o t s i n c e t h e a d v e n t o f i n d e x f u n d s , h e d g e f u n d s , o r p o s s i b l y t h e m u t u a l f u n d i t s e l f , ha s t h e a s s e t m a n a g e m e n t i n d u s t r y w i t n e s s e d a n i n n o va t i o n a s p r o f o u n d a s ex c h a n g e - t r a d e d f u n d s ” — M c K i n s e y & C o . S t u d y , Th e S e c o n d A c t B e g i n s f o r E T F s 1 . 5 1 . 8 2 . 3 2 . 9 3 . 7 4 . 7 1 . 5 1 . 7 2 . 0 2 . 3 2 . 7 3 . 1 0. 0 0 0. 5 0 1. 0 0 1. 5 0 2. 0 0 2. 5 0 3. 0 0 3. 5 0 4. 0 0 4. 5 0 5. 0 0 20 1 0 2 0 1 1 F 2 0 1 2 F 2 0 1 3 F 2 0 1 4 F 2 0 1 5 F H i g h C a s e Lo w C a s e 5–Year CAGR (Percent) ETP AUM1,2US $Trillion 16 . 7 26 . 7 1 In c l u d e s e s t i m a t e s f o r A m e r i c a s , E u r o p e , A s i a ( e x c l ud i n g J a p a n ) a n d a l l o t h e r r e g i o n s ( e . g . J a p a n , M i d ea s t , e t c . ) . 2 In c l u d e s a l l e x c h a n g e - t r a d e d p r o d u c t s ( e . g . E T F , E T N, E T C ) a n d b a s e l i n e s t e a d y - s t a t e g r o w t h ( n o s h o c k s t o s y s t e m ) * S o u r c e : M c K i n s e y a n a l y s i s , A u g u s t 2 0 1 1 GL S T N D - 0 8 2 9 13 St a t e S t r e e t G l o b a l A d v i s o r s F a m i l y o f S P D R E T F s • St a t e S t r e e t p i o n e e r e d t h e E T F m a r k e t i n 1 9 9 3 b y l a u nc h i n g t h e f i r s t U S l i s t e d E T F • SS g A i s t h e 2 n d l a r g e s t g l o b a l m a n a g e r o f E T F s w i t h $ 3 29 b i l l i o n * i n U S E T F a s s e t s a n d $ 3 4 7 b i l l i o n * in t o t a l g l o b a l E T F a s s e t s • SP D R E T F s r e p r e s e n t 1 7 4 g l o b a l o f f e r i n g s i n a v a r i e t y of a s s e t c l a s s e s i n c l u d i n g U S e q u i t y , in t e r n a t i o n a l e q u i t y , c o m m o d i t i e s , f i x e d i n c o m e a n d i n te r n a t i o n a l f i x e d i n c o m e Se c t o r Assets (US $M) Si z e $144,891 Co m m o d i t y 72,633 Se c t o r 61,731 Fi x e d I n c o m e 26,694 Di v i d e n d / F u n d a m e n t a l 1 0 , 9 3 7 In t e r n a t i o n a l 9,976 Gl o b a l 1,281 St y l e 718 Br o a d 430 Sp e c i a l t y 513 Gr a n d T o t a l $329,804* $3 4 7 B i l l i o n * i n G l o b a l E T F A s s e t s U n d e r M a n a g e m e n t So u r c e : S S g A G l o b a l E T F S t r a t e g y & C o n s u l t i n g , a s o f D e c e m b e r 3 1 , 2 0 1 2 * T h i s A U M i n c l u d e s t h e a s s e t s o f t h e S P D R G o l d T r u st ( a p p r o x . $ 7 2 . 6 b i l l i o n a s o f 1 2 / 3 1 / 2 0 1 2 ) , f o r w h ic h S t a t e S t r e e t G l o b a l M a r k e t s , L L C , a n a f f i l i a t e o f S t a t e S t r e e t Gl o b a l A d v i s o r s , s e r v e s a s t h e m a r k e t i n g a g e n t . T h e se f i g u r e s a l s o i n c l u d e t h e A U M o f S P D R ® S& P ® Mi d C a p 4 0 0 E T F ( a p p r o x . $ 1 0 . 6 b i l l i o n a s o f D e c e m b e r 3 1 , 2 0 1 2 ) Gl o b a l E T F A s s e t s U n d e r M a n a g e m e n t St y l e $ 7 1 8 M Gl o b a l $ 1 , 2 8 1 M Br o a d $ 4 3 0 M Sp e c i a l t y $ 5 1 3 M Si z e $1 4 4 , 8 9 1 M Fi x e d I n c o m e $2 6 , 6 9 4 M Co m m o d i t y $7 2 , 6 3 3 M Se c t o r $6 1 , 7 3 1 M In t e r n a t i o n a l $9 , 9 7 6 M Di v i d e n d / F u n d a m e n t a l $1 0 , 9 3 7 M SP D R E x c h a n g e T r a d e d F u n d s — G l o b a l F a m i l y o f S P D R E TF s GL S T N D - 0 8 2 9 SP D R S & P E m e r g i n g M a r k e t s E T F ( G M M ) 15 Em e r g i n g M a r k e t s E T F L a n d s c a p e Da t a a s o f D e c e m b e r 3 1 , 2 0 1 2 So u r c e : M o r n i n g s t a r 19 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 Br o a d N / A N / A N / A N / A 2 0 1 , 0 8 0 3 , 9 3 2 1 1 , 0 9 9 1 8 , 2 0 0 3 7 , 5 0 7 2 5 , 9 9 5 6 4 , 0 2 9 1 0 1 , 6 9 1 8 0 , 7 5 8 1 2 1 , 5 8 1 Co u n t r y 1 5 5 2 6 1 2 9 1 4 4 1 5 0 5 1 , 3 4 9 2 , 9 8 7 6 , 9 8 9 1 6 , 1 3 6 2 8 , 3 3 1 1 5 , 4 4 0 3 8 , 2 2 3 4 6 , 5 6 6 3 1 , 1 3 7 3 9 , , 9 2 6 De b t N / A N / A N / A N / A N / A N / A N / A N / A N / A 4 6 2 1 6 1 , 5 8 6 3 , 8 4 1 7,026 14,148 Re g i o n a l N / A N / A N / A 7 9 6 1 2 2 4 1 , 2 2 4 1 , 5 8 0 3 , 5 2 3 1 , 4 9 9 4 , 3 9 6 5 , 0 5 0 4 , 2 0 7 4 , 3 6 1 To t a l 1 5 5 2 6 1 2 9 1 4 4 8 5 3 4 2 , 4 9 0 7 , 1 4 3 1 9 , 3 1 2 3 5 , 9 1 6 6 9 , 4 0 7 4 3 , 15 0 1 0 8 , 2 3 4 1 5 7 , 1 4 8 1 2 3 , 3 8 9 1 8 0 , 0 1 7 • As o f D e c e m b e r 3 1 , 2 0 1 2 t h e r e w e r e 1 6 7 E m e r g i n g M a r k e t E T F s w i t h $ 1 8 0 B i n A U M IB G - 8 5 7 6 3 3 6 7 8 10 12 13 14 35 46 73 10 9 12 7 167 020406080100120140160180 0 20 0 0 0 40 0 0 0 60 0 0 0 80 0 0 0 10 0 0 0 0 12 0 0 0 0 14 0 0 0 0 16 0 0 0 0 18 0 0 0 0 20 0 0 0 0 # of Products Assets $M 16 Em e r g i n g M a r k e t s E T F F l o w s 19 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 Br o a d N / A N / A N / A N / A ( 0 ) 9 0 7 2 , 2 9 3 5 , 1 2 8 3 , 4 2 0 1 2 , 3 9 8 8 , 4 22 1 6 , 0 2 7 2 5 , 2 6 1 2 , 8 6 0 2 5 , 7 3 1 Co u n t r y 1 1 2 ( 4 ) 3 5 1 3 9 2 6 0 5 0 7 1 , 2 9 6 3 , 0 5 3 5 , 2 7 5 5 , 2 4 8 3 , 0 9 3 8 , 2 9 8 4 , 3 5 0 ( 2 , 7 8 7 ) 4 , 9 0 7 De b t N / A N / A N / A N / A N / A N / A N / A N / A N / A 2 0 2 0 1 1 , 2 5 6 2 , 0 3 3 3 ,3205,947 Re g i o n a l N / A N / A N / A ( 0 ) 5 4 0 1 2 6 7 7 1 ( 8 2 ) 9 5 4 ( 2 0 1 ) 1 , 2 9 1 2 0 0 ( 2 , 4 2 3 ) ( 3 2 0 ) To t a l 1 1 2 ( 4 ) 3 5 1 3 9 2 6 5 1 , 4 5 4 3 , 7 1 5 8 , 9 5 2 8 , 6 1 3 1 8 , 6 2 0 1 1 , 5 1 5 26 , 8 7 2 3 1 , 8 4 4 9 6 3 3 6 , 2 6 5 Da t a a s o f D e c e m b e r 3 1 , 2 0 1 2 So u r c e : M o r n i n g s t a r • Fl o w s i n c r e a s e d s i g n i f i c a n t l y i n 2 0 1 2 w i t h a l l t i m e h i g h s f o r E M B r o a d a n d E M D e b t • EM D e b t h a s r i s e n e v e r y y e a r s i n c e i t w a s f i r s t m a d e a v a i la b l e t o i n v e s t o r s IB G - 8 5 7 6 -5 0 0 0 0 50 0 0 10 0 0 0 15 0 0 0 20 0 0 0 25 0 0 0 30 0 0 0 Estimated Net Flows, $M 17 Pr o d u c t D e t a i l s So u r c e : s p d r s . c o m , a s o f A p r i l 1 5 , 2 0 1 3 SP D R S & P E m e r g i n g M a r k e t s E T F ( G M M ) • AU M — $ 2 2 1 . 5 M • In c e p t i o n D a t e — 0 3 / 1 9 / 2 0 0 7 • Ex p e n s e R a t i o — 5 9 b p s • Me t h o d o l o g y – S e e k s t o t r a c k t h e i n v e s t m e n t p e r f o r m a n c e o f t h e S &P ® Em e r g i n g B M I I n d e x – T h e S & P ® Em e r g i n g B M I I n d e x i s a m a r k e t c a p i t a l i z a t i o n w e i g h te d i n d e x c o n s i s t i n g o f c o m p a n i e s i n t h e S & P G l o b a l B M I I n d e x t h a t a r e do m i c i l e d i n e m e r g i n g m a r k e t s w i t h a f l o a t - a d j u s t e d m a r k e t c a p i t a l i z a t i o n o f a t l e a s t $ 1 0 0 M a n d a m i n i mu m a n n u a l t r a d i n g l i q u i d i t y o f $ 5 0 M – T h e E m e r g i n g I n d e x i s “ f l o a t a d j u s t e d ” , m e a n i n g t h at o n l y t h o s e s h a r e s p u b l i c l y a v a i l a b l e t o i n v e s t o r s a r e i n c l u d e d i n t h e E m e r g i n g In d e x c a l c u l a t i o n • Le g a l S t r u c t u r e – O p e n E n d e d F u n d u n d e r I n v e s t m e n t C o m p a n y A c t o f 1 9 40 • Nu m b e r o f S e c u r i t i e s i n I n d e x – 2 , 4 9 1 • Nu m b e r o f S e c u r i t i e s i n E T F – 7 4 7 IB G -8 5 8 8 18 Ex p o s u r e A n a l y s i s SP D R S & P E m e r g i n g M a r k e t s E T F ( G M M ) So u r c e : F a c t s e t , a s o f D e c e m b e r 3 1 , 2 0 1 2 . Z e p h y r S t yl e A d v i s o r , a s o f D e c e m b e r 3 1 , 2 0 1 2 Se c t o r A l l o c a t i o n Ma r k e t C a p A l l o c a t i o n Co u n t r y A l l o c a t i o n s MC Bin 1: > 10000.0 59.34% MC B i n 2 : 2 0 0 0 . 0 – 1 0 0 0 0 . 0 24 . 3 6 % MC B i n 1 : > 1 0 0 0 0 . 0 12 . 8 4 % Te l e c o m m u n i c a t i o n S e r v i c e s 7. 9 6 % Ma t e r i a l s 9. 8 1 % In f o r m a t i o n T e c h n o l o g y 11 . 0 2 % In d u s t r i a l s 6. 4 6 % He a l t h C a r e 1. 6 3 % Fi n a n c i a l s 24 . 6 9 % En e r g y 12 . 7 2 % Co n s u m e r S t a p l e s 9. 6 3 % Co n s u m e r D i s c r e t i o n a r y 8. 5 5 % Ut i l i t i e s 3. 1 3 % Ta i w a n 13 . 0 1 % Br a z i l 13 . 3 6 % So u t h A f r i c a 8. 4 6 % In d i a 7. 9 2 % Ru s s i a 7. 2 6 % Ch i n a 13 . 8 7 % Me x i c o 6. 6 5 % Ho n g K o n g 5. 5 7 % In d o n e s i a 3. 6 2 % Ma l a y s i a 3. 4 1 % Ch i l e 2. 3 8 % Th a i l a n d 2. 9 4 % Tu r k e y 2. 2 3 % Ph i l i p p i n e s 1. 3 8 % Mo r o c c o 0 . 3 4 % Hu n g a r y 0 . 4 0 % Cz e c h R e p u b l i c 0 . 4 2 % Eg y p t 0 . 4 7 % Co l o m b i a 0 . 7 6 % Pe r u 0 . 8 1 % Po l a n d . 9 0 % IB G - 8 5 8 8 19 To t a l C o s t So u r c e : s p d r s . c o m , a s o f M a r c h 3 1 , 2 0 1 3 Ar c a v i s i o n , f r o m J a n u a r y 1 , 2 0 1 3 t o M a r c h 3 1 , 2 0 1 3 To w e r s W a t s o n , E x c h a n g e T r a d e d F u n d s f o r I n s t i t u t i o na l I n v e s t o r s , N o v e m b e r 2 0 1 1 Co s t ( b p s ) SP D R S & P E m e r g i n g M a r k e t s E T F ( G M M ) Tr a c k i n g — I n c l u s i v e o f E x p e n s e R a t i o ( 5 y r ) 4 Sp r e a d — R o u n d T r i p 20 Co m m i s s i o n s 10 To t a l C o s t 34 Li q u i d i t y ( $ ) 2 0 1 3 Q 1 SP D R S & P E m e r g i n g M a r k e t s E T F ( G M M ) Av e r a g e V o l u m e $2 , 5 8 2 , 0 1 2 . 7 2 Av e r a g e N o t i o n a l S i z e O f f e r e d a t B i d / A s k $8 4 , 3 7 5 . 0 0 Pe r f o r m a n c e ( M K T ) 1 y e a r 3 y e a r s 5 y e a r s S i n c e I n c e p t i o n SP D R S & P E m e r g i n g M a r k e t s ET F ( G M M ) 0. 8 9 % 2 . 5 7 % 1 . 1 9 % 5 . 1 7 % IB G - 8 5 8 8 In s t i t u t i o n a l E T P T o o l k i t GL S T N D - 0 8 2 9 21 ET F s i n t h e I n s t i t u t i o n a l P o r t f o l i o • ET F s b e c o m i n g a m o r e s t r a t e g i c s o l u t i o n – 1 4 % o f P e n s i o n s , E n d o w m e n t s & F o u n d a t i o n s n o w r e p o r t u si n g E T F s * – 5 1 % o f c l i e n t s i n d i c a t i n g t h e y p l a n t o h o l d t h e i r E T F p o s i t i o n f o r o v e r 1 y e a r * – 4 0 % o f i n s t i t u t i o n s t h a t r e p o r t u s i n g E T F s e x p e c t t h e i r u s a g e o f E T F s t o i n c r e a s e o v e r t h e n e x t 1 2 m o n t h s * • Th e E T F m a r k e t c o n t i n u e s t o e x p a n d – T h e r e a r e n o w 1 6 8 U S l i s t e d E T F s o v e r $ 1 B i l l i o n i n to t a l A U M * * – I n 2 0 1 2 , U S l i s t e d E T F s r e p r e s e n t e d 2 6 . 7 % o f a l l U S e qu i t y d o l l a r v o l u m e * * * S o u r c e : G r e e n w i c h A s s o c i a t e s , I n s t i t u t i o n s F i n d N ew , S t r a t e g i c U s e s f o r E T F s , M a y 2 0 1 2 ** S o u r c e : S S g A G l o b a l S t r a t e g y & C o n s u l t i n g Pa s t p e r f o r m a n c e i s n o t a g u a r a n t e e o f f u t u r e r e s u l ts . In s t i t u t i o n s a r e i n c r e a s i n g l y u t i l i z i n g E T F s a s p o r tf o l i o m a n a g e m e n t t o o l s GL S T N D - 0 8 2 9 22 Wh y I n s t i t u t i o n s U s e E T F s Is s u e s Ch a l l e n g e P o t e n t i a l E T F S o l u t i o n Li q u i d i t y • Ma n y i n s t i t u t i o n s m i s m a n a g e d l i q u i d i t y ri s k i n t h e r e c e n t m a r k e t d o w n t u r n • ET F s o f f e r i n t r a d a y l i q u i d i t y a c r o s s a wi d e r a n g e o f a s s e t c l a s s e s Tr a n s p a r e n c y • So m e i n v e s t o r s a r e n o t f u l l y a w a r e of t h e e x t e n t o f u n d e r l y i n g r i s k i n th e i r p o r t f o l i o s • ET F h o l d i n g s a n d c h a r a c t e r i s t i c s ar e p u b l i s h e d d a i l y o n t h e E T F pr o v i d e r ’ s w e b s i t e Co u n t e r p a r t y R i s k • Gi v e n t h e r e c e n t m a r k e t t u r m o i l , in s t i t u t i o n s a r e c l o s e l y m o n i t o r i n g t h e i r co u n t e r p a r t y r i s k • ET F s f o r t h e m o s t p a r t a r e s t r u c t u r e d a s 19 4 0 A c t M u t u a l F u n d s a n d t h e r e f o r e do n o t i n c o r p o r a t e c o u n t e r p a r t y r i s k Ea s e o f I m p l e m e n t a t i o n • In v e s t o r s o f t e n s t r u g g l e t o i m p l e m e n t id e a s q u i c k l y a n d e f f i c i e n t l y • ET F s t r a d e l i k e s t o c k s a n d t h e r e f o r e d o no t r e q u i r e a c o n t r a c t t o i n v e s t ET F s h e l p i n s t i t u t i o n s a d d r e s s v a r i o u s i s s u e s GL S T N D - 0 8 2 9 23 Ho w E T F s W o r k : C r e a t i o n / R e d e m p t i o n P r o c e s s Bu y e r s Se l l e r s Pr i m a r y M a r k e t Se c o n d a r y M a r k e t Un d e r l y i n g S e c u r i t i e s ET F S h a r e s St o c k E x c h a n g e ET F S h a r e s (I n - k i n d t r a n s f e r ) Au t h o r i z e d P a r t i c i p a n t ET F l i q u i d i t y i s p r i m a r i l y d r i v e n b y t h e l i q u i d i t y of t h e u n d e r l y i n g s e c u r i t i e s ET F P r o v i d e r GL S T N D - 0 8 2 9 24 Ho w I n s t i t u t i o n s B u y a n d S e l l E T F s • Se c o n d a r y M a r k e t – B u y e r s a n d s e l l e r s a r e m a t c h e d t h r o u g h a n e x c h a n g e – T h e s e c o n d a r y m a r k e t m a y b e a l i m i t e d p o r t i o n o f a n ET F ’ s o v e r a l l l i q u i d i t y • Li q u i d i t y P r o v i d e r s – L i q u i d i t y p r o v i d e r s a r e a b l e t o p r o v i d e g r e a t e r l i q ui d i t y t h a n t h e s e c o n d a r y m a r k e t – L i q u i d i t y p r o v i d e r s c a n t r a n s a c t i n t h e u n d e r l y i n g s e c u r it i e s a s w e l l a s o t h e r o f f s e t t i n g h e d g e s s u c h a s fu t u r e s , o p t i o n s , h i g h l y c o r r e l a t e d E T F s , e t c • Cr e a t i o n / R e d e m p t i o n – A u t h o r i z e d P a r t i c i p a n t s c a n a l s o c r e a t e o r r e d e e m s h a r e s – A P s d e l i v e r t h e c o r r e s p o n d i n g u n d e r l y i n g s e c u r i t i e s i n k in d i n e x c h a n g e f o r E T F s h a r e s – C l i e n t r e c e i v e s N A V p l u s a n y a s s o c i a t e d c o s t s i n c l u d i n g s p r e a d o f u n d e r l y i n g s e c u r i t i e s , f i x e d c r e a t i o n co s t w i t h E T F s p o n s o r , e t c . So u r c e : S S g A E T F G l o b a l C a p i t a l M a r k e t s G r o u p Th e m a j o r i t y o f E T F t r a d e s t a k e p l a c e i n t h e s e c o n d ar y m a r k e t t h r o u g h t h e e x c h a n g e . Fo r l a r g e t r a d e s , i n s t i t u t i o n s c a n a c c e s s d e e p e r l i qu i d i t y t h r o u g h l i q u i d i t y p r o v i d e r s . GL S T N D - 0 8 2 9 25 An a t o m y o f a n E T P T r a d e — S P D R S & P E m e r g i n g M a r k e t s Sm a l l C a p ( E W X ) So u r c e : S P D R E T F G l o b a l C a p i t a l M a r k e t s G r o u p * S o u r c e : A r c a v i s i o n ** S o u r c e : B l o o m b e r g Se p t e m b e r 9 , 2 0 1 0 Vo l u m e 2 , 7 8 3 , 4 4 3 $ V o l u m e $ 1 4 4 , 6 2 7 , 6 9 8 VW A P $ 5 1 . 9 6 Sp r e a d $ . 0 5 Sp r e a d 0 . 0 9 % Bi d S i z e 3 1 2 As k S i z e 3 , 8 5 7 Av e r a g e S i z e 2 , 0 8 4 EW X T r a d i n g S c r e e n S h o t f r o m S e p t e m b e r 9 , 2 0 1 0 * * • Av e r a g e D a i l y V o l u m e ( 3 m o n t h ) p r i o r t o S e p t e m b e r 9 , 2 0 1 0 w a s 1 3 3 , 7 0 5 * • On S e p t e m b e r 9 , 2 0 1 0 E W X t r a d e d o v e r 2 . 7 M s h a r e s * • 20 3 , 1 7 4 s h a r e b l o c k t r a d e @ 5 2 . 0 3 , u p $ 0 . 0 1 f r o m i t s p r ev i o u s t r a d e * * GL S T N D -0 8 2 9 26 Ho w I n s t i t u t i o n s U s e E T F s Ap p l i c a t i o n O b j e c t i v e Po t e n t i a l E T F S o l u t i o n Ca s h E q u i t i z a t i o n Re m a i n f u l l y i n v e s t e d w h i l e m a i n t a i n i n g l i q u i d i t y E T F s a r e a n a t t r a c t i v e a l t e r n a t i v e s o l u t i o n t o f u t u r e s d u e t o their tr a n s p a r e n c y , l a c k o f d o c u m e n t a t i o n a n d r o l l s l i p p a g e Ta c t i c a l A d j u s t m e n t s Ov e r o r u n d e r w e i g h t c e r t a i n m a r k e t s e g m e n t s b a s e d o n s h o r t te r m o u t l o o k ET F s r e p r e s e n t v i r t u a l l y e v e r y a s s e t c l a s s a n d o f f e r e f f i c i e n t ve h i c l e s f o r i m p l e m e n t i n g a t a c t i c a l i d e a Tr a n s i t i o n s Ma i n t a i n m a r k e t e x p o s u r e w h i l e s e a r c h i n g f o r a ne w m a n a g e r In v e s t t h e p r o c e e d s o f a m a n a g e r l i q u i d a t i o n i n a n E T F which tr a c k s t h e a p p r o p r i a t e b e n c h m a r k u n t i l n e w m a n a g e r h a s be e n s e l e c t e d Re b a l a n c i n g In c r e a s e t h e s p e e d a n d e f f i c i e n c y o f r e b a l a n c i n g a c r o s s t h e as s e t a l l o c a t i o n ET F s c a n m a k e r e b a l a n c i n g m o r e e f f i c i e n t d u e t o th e i r i n t r a d a y l i q u i d i t y t h a n m o v i n g a s s e t s f r o m i l l i q u id managers As s e t C l a s s E x p o s u r e Es t a b l i s h e x p o s u r e t o a d i f f i c u l t t o r e a c h ma r k e t s e g m e n t Th e r e a r e a v a r i e t y o f E T F s w h i c h p r o v i d e p o t e n t i a l e x p osure to di f f i c u l t t o r e a c h a s s e t c l a s s e s Li q u i d i t y M a n a g e m e n t In c r e a s e l i q u i d i t y i n o v e r a l l a s s e t a l l o c a t i o n w i t h o u t ch a n g i n g a l l o c a t i o n Us e E T F s f o r a g i v e n p e r c e n t a g e o f e a c h as s e t c l a s s t o p r o v i d e a l i q u i d i t y b u f f e r a c r o s s t h e a s s e t a l l ocation Po r t f o l i o C o m p l e t i o n Fi l l a n y a s s e t a l l o c a t i o n h o l e s w i t h o u t e n g a g i n g a n e w in v e s t m e n t m a n a g e r Us e a n E T F t o g a i n p o t e n t i a l e x p o s u r e t o a n a s s e t c l a s s t h at is un d e r r e p r e s e n t e d i n t h e a s s e t a l l o c a t i o n Fi x e d I n c o m e D u r a t i o n a n d Cr e d i t A d j u s t m e n t s Tw e a k d u r a t i o n a n d c r e d i t e x p o s u r e t o m e e t sp e c i f i e d t a r g e t s Fi x e d I n c o m e E T F s p r o v i d e a n e f f i c i e n t m e a n s t o a d j u s t d u ration an d c r e d i t e x p o s u r e Ta x a b l e I n s t i t u t i o n a l P l a n s Im p l e m e n t d e s i r e d a s s e t a l l o c a t i o n r e g a r d l e s s o f pl a n s i z e Im p l e m e n t a n a s s e t a l l o c a t i o n e f f i c i e n t l y u s i n g E T F s . A d v a ntages in c l u d e n o m i n i m u m f e e s a n d s i m p l i f i e d r e b a l a n c i n g . GL S T N D - 0 8 2 9 27 Po r t f o l i o C o m p l e t i o n • Ba c k g r o u n d – H i g h l e v e l o f i n t e r n a l m a n a g e m e n t – E T F s p r o v i d e d a u n i q u e s o l u t i o n t h a t m e t t h e i r m o d e l o f m a n a g i n g a s s e t s – C o n c e p t o f f i l l i n g a l l o c a t i o n h o l e s u s i n g E T P s a n d l e n d in g t h e s h a r e s t o o f f s e t c o s t s r e s o n a t e d • ET P U t i l i z e d – S P D R S & P E m e r g i n g M a r k e t s S m a l l C a p E T F ( E W X ) • W h y w a s t h e E T P a n e f f i c i e n t s o l u t i o n ? – A b i l i t y t o m a i n t a i n a s s e t c o n t r o l i n l i n e w i t h t h e i r in t e r n a l m a n a g e m e n t s t r u c t u r e – L e n d a b i l i t y o f t h e E T F s h a r e s t o h e l p d e f r a y c o s t o f o wn e r s h i p – E W X p r o v i d e d e x p o s u r e w h i c h w a s h i g h l y c o r r e l a t e d t o t he c l i e n t ’ s u n d e r l y i n g b e n c h m a r k GL S T N D - 0 8 2 9 28 Li q u i d i t y M a n a g e m e n t • Ba c k g r o u n d – F o l l o w i n g t h e i l l i q u i d i t y o f t h e m a r k e t i n 2 0 0 8 , c l ie n t d e c i d e d t o e n h a n c e t h e i r l i q u i d i t y p r o f i l e – U t i l i z e E T F s f o r 2 % – 5 % o f e a c h a s s e t c l a s s – B a s e d o n t h e i r e x p e r i e n c e w i t h E T P s f o r t h i s p u r p o s e , h av e n o w b e g u n t o u t i l i z e E T P s e l s e w h e r e • ET P U t i l i z e d – V a r i e t y o f S P D R E T F s i n c l u d i n g S P D R S & P 5 0 0 ( S P Y ) a n d S e c t o r S P D R s • W h y w e r e t h e E T P s a n e f f i c i e n t s o l u t i o n ? – I n t r a d a y l i q u i d i t y – N o a d v a n c e d n o t i c e r e q u i r e d t o r a i s e c a p i t a l – A b i l i t y t o l e n d E T F s h a r e s t o h e l p o f f s e t c o s t s o f o w n e r sh i p GL S T N D - 0 8 2 9 29 Ta c t i c a l A s s e t A l l o c a t i o n • Ba c k g r o u n d – U t i l i z e E T P s t o m a n a g e t h e i r p u b l i c e q u i t y e x p o s u r e – O v e r w e i g h t / u n d e r w e i g h t i n d i v i d u a l c o u n t r y E T P s t o t r y a n d a d d v a l u e o v e r M S C I E M I n d e x – L o o k i n g f o r a b e t t e r C h i n a E T P w i t h a h i g h e r c o r r e l at i o n t o t h e i r u n d e r l y i n g i n d e x , M S C I C h i n a • ET P U t i l i z e d – S P D R S & P C h i n a E T F ( G X C ) • W h y w a s t h e E T P a n e f f i c i e n t s o l u t i o n ? – A b i l i t y t o t a c t i c a l l y s h i f t q u i c k l y – L e n d a b i l i t y o f t h e i r E T F s h a r e s t o h e l p o f f s e t c o s t s a n d i n s o m e c a s e s a d d a l p h a – G X C i s m o r e h i g h l y c o r r e l a t e d t o t h e M S C I C h i n a I n d e x t h a n t h e i r p r e v i o u s v e h i c l e , i S h a r e s C h i n a GL S T N D - 0 8 2 9 30 Tr a n s i t i o n M a n a g e m e n t / I n t e r i m B e t a • Ba c k g r o u n d – C l i e n t l o o k i n g t o e s t a b l i s h l o n g t e r m U S H i g h Y i e l d Co r p o r a t e B o n d e x p o s u r e – A c c o u n t s e t u p t i m e u n c l e a r d u e t o c o n t r a c t n e g o t i a t i o n s – L o o k i n g f o r i m m e d i a t e e x p o s u r e i n a d v a n c e o f t h e i n s t it u t i o n a l a c c o u n t b e i n g s e t u p • ET P U t i l i z e d – S P D R B a r c l a y s H i g h Y i e l d B o n d E T F ( J N K ) • W h y w a s t h e E T P a n e f f i c i e n t s o l u t i o n ? – L i q u i d i t y o f t h e E T F f o r a n o t h e r w i s e i l l i q u i d a s s e t cl a s s – S a m e p o r t f o l i o m a n a g e r f o r t h e E T F a s w e l l a s t h e e v en t u a l i n s t i t u t i o n a l a c c o u n t – A b i l i t y t o e f f i c i e n t l y t r a n s i t i o n t h e p h y s i c a l h o l d i n g s o f t h e E T F i n t o t h e n e w l y e s t a b l i s h e d a c c o u n t GL S T N D - 0 8 2 9 Ap p e n d i x A : S P D R I n s t i t u t i o n a l R e s o u r c e s GL S T N D - 0 8 2 9 32 Ev a l u a t i n g a n E x c h a n g e T r a d e d P r o d u c t GL S T N D - 0 8 2 9 • Me t h o d o l o g y • Co n c e n t r a t i o n s • Hi s t o r y • In v e s t m e n t A p p r o a c h • Po r t f o l i o M a n a g e m e n t T e a m • Le g a l S t r u c t u r e • Ex p e n s e R a t i o • Tr a c k i n g E r r o r • Bi d - A s k S p r e a d s • Li q u i d i t y D e p t h & S o u r c e s • Le n d i n g R e v e n u e • ET P E x p e r i e n c e & Co m m i t m e n t • Re s e a r c h , D a t a & Ed u c a t i o n a l S u p p o r t • Tr a d i n g S u p p o r t 33 SP D R I n s t i t u t i o n a l E T F R e s o u r c e s GL S T N D - 0 8 2 9 Ap p e n d i x B : D e l t a O n e V e h i c l e C o m p a r i s o n GL S T N D - 0 8 2 9 35 In s t i t u t i o n a l T o o l s f o r B e t a E x p o s u r e So u r c e : C r e d i t S u i s s e , E T F W o r k s h o p : F l o w F a c t s & t he F u t u r e , J a n u a r y , 2 0 1 0 , p g . 4 Th e r e a r e a n u m b e r o f r i s k s a s s o c i a t e d w i t h f u t u r e s i n v e s t i n g i n c l u d i n g b u t n o t l i m i t e d t o c o u n t e r p a r t y c r e d i t r i s k , c u r r e n c y r i s k , d e r i v a t i v e s r i s k , f o r e ig n i s s u e r e x p o s u r e r i s k , s e c t o r c o n c e n t r a t i o n r i s k , l e v e r a g i n g a n d l i q u i d i t y r i s k s . T h e u s e o f l e v e r a ge, as pa r t o f t h e i n v e s t m e n t p r o c e s s , c a n m u l t i p l y m a r k e t m o v e m e n t s i n t o g r e a t e r c h a n g e s i n a n i n v e s t m e n t v a lu e , t h u s r e s u l t i n g i n i n c r e a s e d v o l a t i l i t y o f r e t u rn s . An y n o n - r e g i s t e r e d c o m m i n g l e d f u n d o r c o m m o n t r u s t fu n d m a y u s e o v e r - t h e - c o u n t e r s w a p s , d e r i v a t i v e s o r a s y n t h e t i c i n s t r u m e n t ( c o l l e c t i v e l y " D e r i v a t i v e s " ) t o i n c r e a s e o r d e c r e a s e e x p o s u r e i n a p a r t i c u l a r ma r k e t , a s s e t c l a s s o r s e c t o r t o e f f e c t u a t e t h e fu n d ' s s t r a t e g y . D e r i v a t i v e s a g r e e m e n t s a r e p r i v a t el y n e g o t i a t e d a g r e e m e n t s b e t w e e n t h e f u n d a n d t h e co u n t e r p a r t y , r a t h e r t h a n a n e x c h a n g e , a n d t h e r e f o r e D e r i v a t i v e s c a r r y r i s k s r e l a t e d t o c o u n t e r p a r t y c re d i t w o r t h i n e s s , s e t t l e m e n t d e f a u l t a n d m a r k e t co n d i t i o n s . D e r i v a t i v e s a g r e e m e n t s c a n r e q u i r e t h a t t h e f u n d p o s t c o l l a t e r a l t o t h e c o u n t e r p a r t y c o n s i st e n t w i t h t h e m a r k - t o - m a r k e t p r i c e o f t h e D e r i v a t i ve . S S g A m a k e s n o r e p r e s e n t a t i o n s o r a s s u r a n c e s t h at t h e D e r i v a t i v e w i l l p e r f o r m a s i n t e n d e d . ET F s t r a d e l i k e s t o c k s , a r e s u b j e c t t o i n v e s t m e n t r is k , f l u c t u a t e i n m a r k e t v a l u e a n d m a y t r a d e a t p r i ce s a b o v e o r b e l o w t h e E T F s n e t a s s e t v a l u e . Br o k e r a g e c o m m i s s i o n s a n d E T F e x p e n s e s w i l l r e d u c e re t u r n s . Ty p e o f S e c u r i t y A d v a n t a g e s C o n s i d e r a t i o n s T r a d e C h a r a ct e r i s t i c s Fu t u r e s • Le v e r a g e • Li q u i d i t y ( c e r t a i n be n c h m a r k s ) • Lo w c o m m i s s i o n • Ro l l r i s k • Li m i t e d E x p o s u r e • Sh o r t - t e r m • Po p u l a r b e n c h m a r k ET F s • Va r i e t y o f o f f e r i n g s • Li q u i d i t y • Ea s e o f u s e • Le n d a b i l i t y • Ex p e n s e F e e s • Tr a c k i n g E r r o r • Lo n g e r - t e r m • Mo r e s p e c i f i c e x p o s u r e Sw a p s • Cu s t o m i z a t i o n • Co n f i d e n t i a l i t y • Le v e r a g e • Lo w e r f u n d i n g c o s t s • OT C • Co u n t e r p a r t y r i s k • Lo w t u r n o v e r • Cu s t o m i z e d e x p o s u r e De l t a O n e P r o d u c t C o m p a r i s o n : F u t u r e s , E T F s , an d S w a p s GL S T N D - 0 8 2 9 Ap p e n d i x C : S t r u c t u r e d F u n d s C o m p a r i s o n GL S T N D - 0 8 2 9 37 St r u c t u r e d F u n d s C o m p a r i s o n St r u c t u r e d F u n d s Ex c h a n g e T r a d e d F u n d s ( E T F s ) Ex c h a n g e T r a d e d C o m m o d i t i e s ( E T C s ) Ex c h a n g e T r a d e d N o t e s ( E T N s ) a n d Cu r r e n c y E T F s ( E T C s ) Fu l l Re p l i c a t i o n Re p r e s e n t a t i v e Sa m p l i n g Sy n t h e t i c Re p l i c a t i o n C o m m o d i t y T r u s t s Fu t u r e s B a s e d Co m m o d i t y E T C s De s c r i p t i o n Al l o f t h e i n d e x ’ s se c u r i t i e s a r e pu r c h a s e d i n t h e i r re s p e c t i v e w e i g h t s A s u b s e t o f p h y s i c a l se c u r i t i e s t h a t c l o s e l y re s e m b l e s t h e i n d e x Re p r e s e n t a d e r i v a t i v e co n t r a c t w i t h a b a n k o r ot h e r c o u n t e r p a r t y Ph y s i c a l c o m m o d i t i e s he l d b y m o s t T r u s t s Tr a c k c o m m o d i t y i n d i c e s o f f u t u r e s co n t r a c t s o n p h y s i c a l c o m m o d i t i e s Pr o v i d e r e t u r n s i n d e x e d t o v a r i o u s ma r k e t b e n c h m a r k s Ow n e r s h i p Sh a r e s r e p r e s e n t fr a c t i o n a l o w n e r s h i p o f as s e t s h e l d Sh a r e s r e p r e s e n t fr a c t i o n a l o w n e r s h i p o f as s e t s h e l d A t o t a l r e t u r n s w a p c o n t r a c t th a t r e p r e s e n t s t h e c o n t r a c t u a l ri g h t p l u s c o l l a t e r a l o r o t h e r as s e t s t o p r o v i d e r e t u r n s o f t h e un d e r l y i n g i n d e x Sh a r e s r e p r e s e n t fr a c t i o n a l o w n e r s h i p of a s s e t s h e l d As s e t b a c k e d b o n d s , fu l l y c o l l a t e r a l i s e d Se n i o r , u n s e c u r e d , u n s u b o r d i n a t e d de b t , i s s u e d b y a n u n d e r l y i n g b a n k Re g u l a t o r y St r u c t u r e Op e n E n d e d F u n d u n d e r I n v e s t m e n t C o m p a n y A c t o f 1 9 4 0 , U CI T S S t r u c t u r e o r ot h e r l o c a l r e g u l a t e d s t r u c t u r e Gr a n t o r T r u s t s u n d e r Se c u r i t i e s A c t i o n of 1 9 3 3 Op e n E n d e d C o m m o d i t y F u n d s un d e r S e c u r i t i e s E x c h a n g e A c t o f 19 3 4 o r o f f s h o r e l e g a l s t r u c t u r e (e . g . , C a y m a n , M a u r i t i u s , V i r g i n Is l a n d s t r u c t u r e s ) De b t o b l i g a t i o n s r e g i s t e r e d u n d e r t h e Se c u r i t i e s A c t o f 1 9 3 3 o f f s h o r e l e g a l st r u c t u r e ( e . g . , C a y m a n , M a u r i t i u s , Vi r g i n I s l a n d s t r u c t u r e s ) Be n e f i t s • Cl o s e l y t r a c k s t h e re t u r n o f t h e i n d e x • Tr a n s p a r e n t • Cl a r i t y o f o w n e r s h i p • Re d u c e s o p e r a t i n g co s t a n d c a p i t a l ne c e s s a r y f r o m n o t ow n i n g e v e r y s e c u r i t y in t h e i n d e x • Tr a n s p a r e n t • Cl a r i t y o f o w n e r s h i p • Pr o v i d e l o w e r c o s t of o p e r a t i o n • Ma y o f f e r a c c e s s t o a s s e t s th a t c a n n o t b e fu l l y r e p l i c a t e d Ty p i c a l l y b a c k e d b y ph y s i c a l c o m m o d i t y . Av o i d t h e r i s k a n d co s t o f h o l d i n g ph y s i c a l c o m m o d i t i e s • ET C s t r a c k c o m m o d i t i e s – n o t co m m o d i t y c o u n t r i e s – a n d en a b l e i n v e s t o r s t o g a i n ex p o s u r e t o c o m m o d i t i e s w i t h o u t tr a d i n g f u t u r e s o r t a k i n g ph y s i c a l d e l i v e r y • Wi d e p r o d u c t c h o i c e Of f e r e a s y a c c e s s t o h a r d - t o - r e a c h as s e t s s u c h a s c u r r e n c i e s a n d co u n t r i e s t h a t i m p o s e l i m i t s o n fo r e i g n i n v e s t m e n t Li m i t a t i o n s • Ca n h a v e h i g h e r co s t s d u e t o tr a d i n g c o s t s • No t a l l a s s e t c l a s s e s ca n b e c o v e r e d • Se c u r i t i e s m a y f a i l t o tr a c k t h e i n d e x re s u l t i n g i n tr a c k i n g e r r o r • No t a l l a s s e t c l a s s e s ca n b e c o v e r e d • Ri s k o f r e h y p o t h e t i c a t i o n o f co l l a t e r a l i s e d a s s e t s • Cr e d i t r i s k • Co u n t e r p a r t y r i s k • Re d u c e d t r a n s p a r e n c y (u n c e r t a i n t y o f h o l d i n g s ) No r m a l l y c a n n o t di r e c t l y r e d e e m sh a r e s f o r u n d e r l y i n g bu l l i o n o r pr e c i o u s m e t a l s Ty p i c a l h i g h t r a c k i n g e r r o r d u e t t o co n t a n g o a n d b a c k w a r d a t i o n re l a t e d t o f u t u r e s , l e a d i n g t o l o s s e s fr o m r o l l i n g f u t u r e s c o n t r a c t s i n co n t a g o e d m a r k e t s a n d g a i n s i n ba c k w a r d a t e d m a r k e t s • No t s e c u r e d d e b t ; t h e r e i s n o pr i n c i p a l p r o t e c t i o n • ET N s d o n o p a y i n t e r e s t a n d t h e is s u e r i s s u b j e c t t o d e f a u l t r i s k • Cr e d i t r a t i n g r i s k So u r c e : S S g A a s o f D e c e m b e r 2 0 1 2 . U p d a t e d a n n u a l l y . GL S T N D - 0 8 2 9 Ap p e n d i x D : I m p o r t a n t D i s c l o s u r e s GL S T N D - 0 8 2 9 39 Im p o r t a n t D i s c l o s u r e s FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y . N o t f o r u s e w it h t h e p u b l i c . Im p o r t a n t R i s k I n f o r m a t i o n : ET F s t r a d e l i k e s t o c k s , a r e s u b j e c t t o i n v e s t m e n t r is k , f l u c t u a t e i n m a r k e t v a l u e a n d m a y t r a d e a t p r i ce s a b o v e o r b e l o w t h e E T F s n e t a s s e t v a l u e . Br o k e r a g e c o m m i s s i o n s a n d E T F e x p e n s e s w i l l r e d u c e re t u r n s . Fr e q u e n t t r a d i n g o f E T F s c o u l d s i g n i f i c a n t l y i n c r e a se c o m m i s s i o n s a n d o t h e r c o s t s s u c h t h a t t h e y m a y o ff s e t a n y s a v i n g s f r o m l o w f e e s o r c o s t s . Di v e r s i f i c a t i o n d o e s n o t e n s u r e a p r o f i t o r g u a r a n t ee a g a i n s t l o s s . Pa s t p e r f o r m a n c e i s n o g u a r a n t e e o f f u t u r e r e s u l t s . W h i l e t h e s h a r e s o f E T F s a r e t r a d a b l e o n s e c o n d a r y m a r k e t s , t h e y m a y n o t r e a d i l y t r a d e i n a l l m a r k e t co n d i t i o n s a n d m a y t r a d e a t s i g n i f i c a n t d i s c o u n t s i n p e r i o d s o f m a r k e t s t r e s s . Ri s k a s s o c i a t e d w i t h e q u i t y i n v e s t i n g i n c l u d e s t o c k v a l u e s w h i c h m a y f l u c t u a t e i n r e s p o n s e t o t h e a c t i vi t i e s o f i n d i v i d u a l c o m p a n i e s a n d g e n e r a l m a r k e t a nd ec o n o m i c c o n d i t i o n s . Al t h o u g h b o n d s g e n e r a l l y p r e s e n t l e s s s h o r t - t e r m r i sk a n d v o l a t i l i t y r i s k t h a n s t o c k s , b o n d s c o n t a i n i nt e r e s t r a t e r i s k s ; t h e r i s k o f i s s u e r d e f a u l t ; i s s uer credit ri s k ; l i q u i d i t y r i s k ; a n d i n f l a t i o n r i s k . T h i s e f f e ct i s u s u a l l y p r o n o u n c e d f o r l o n g e r - t e r m s e c u r i t i e s . A n y f i x e d i n c o m e s e c u r i t y s o l d o r r e d e e m e d p r i o r to ma t u r i t y m a y b e s u b j e c t t o a s u b s t a n t i a l g a i n o r l o ss . Th e v i e w s e x p r e s s e d a r e t h e c u r r e n t v i e w s o f t h e S t at e S t r e e t G l o b a l A d v i s o r s I n t e r m e d i a r y B u s i n e s s G r ou p t h r o u g h t h e p e r i o d o f De c e m b e r 3 1 , 2 0 1 2 o n l y a n d a r e s u b j e c t t o c h a n g e b a se d o n m a r k e t a n d o t h e r c o n d i t i o n s . T h e s e v i e w s s h o ul d n o t b e r e l i e d u p o n a s i n v e s t m e n t a d v i c e , as s e c u r i t i e s r e c o m m e n d a t i o n s , o r a s a n i n d i c a t i o n of t r a d i n g i n t e n t o n b e h a l f o f a n y S t a t e S t r e e t i n v es t m e n t p r o d u c t . I t d o e s n o t t a k e i n t o a c c o u n t a n y in v e s t o r ’ s p a r t i c u l a r i n v e s t m e n t o b j e c t i v e s , s t r a t e gi e s , t a x s t a t u s o r i n v e s t m e n t h o r i z o n . W e e n c o u r a g e y o u t o c o n s u l t y o u r t a x o r f i n a n c i a l a d v i s o r . In d i v i d u a l s e c u r i t i e s m e n t i o n e d a r e f o r i l l u s t r a t i v e p u r p o s e s o n l y a n d m a y n o t b e r e l i e d u p o n a s i n v e s tm e n t a d v i c e o r a s a n i n d i c a t i o n o f t r a d i n g i n t e n t on be h a l f o f a n y S t a t e S t r e e t p r o d u c t . Al l i n f o r m a t i o n h a s b e e n o b t a i n e d f r o m s o u r c e s b e l i ev e d t o b e r e l i a b l e , b u t i t s a c c u r a c y i s n o t g u a r a n te e d . T h e t r a d e m a r k s a n d s e r v i c e m a r k s r e f e r e n c e d he r e i n a r e t h e p r o p e r t y o f t h e i r r e s p e c t i v e o w n e r s . T h i r d p a r t y d a t a p r o v i d e r s m a k e n o w a r r a n t i e s o r r ep r e s e n t a t i o n s o f a n y k i n d r e l a t i n g t o t h e a c c u r a c y , co m p l e t e n e s s o r t i m e l i n e s s o f t h e d a t a a n d h a v e n o li a b i l i t y f o r d a m a g e s o f a n y k i n d r e l a t i n g t o t h e u se o f s u c h d a t a . SP D R i s a r e g i s t e r e d t r a d e m a r k o f S t a n d a r d & P o o r F in a n c i a l S e r v i c e s L L C ( " S & P " ) a n d h a s b e e n l i c e n s e d f o r u s e b y S t a t e S t r e e t C o r p o r a t i o n . No f i n a n c i a l p r o d u c t o f f e r e d b y S t a t e S t r e e t C o r p o r at i o n o r i t s a f f i l i a t e s i s s p o n s o r e d , e n d o r s e d , s o l d o r p r o m o t e d b y S & P o r i t s A f f i l i a t e s , a n d S & P a n d its af f i l i a t e s m a k e n o r e p r e s e n t a t i o n , w a r r a n t y o r c o n d it i o n r e g a r d i n g t h e a d v i s a b i l i t y o f b u y i n g , s e l l i n g o r h o l d i n g u n i t s / s h a r e s i n s u c h p r o d u c t s . Fu r t h e r l i m i t a t i o n s a n d i m p o r t a n t i n f o r m a t i o n t h a t co u l d a f f e c t i n v e s t o r s ' r i g h t s a r e d e s c r i b e d i n t h e p r o s p e c t u s f o r t h e a p p l i c a b l e p r o d u c t . Th i s m a t e r i a l o r a n y p o r t i o n t h e r e o f m a y n o t b e r e p ri n t e d o r r e d i s t r i b u t e d w i t h o u t t h e w r i t t e n c o n s e n t o f S S g A . Im p o r t a n t d i s c l o s u r e s c o n t i n u e d o n n e x t p a g e GL S T N D - 0 8 2 9 40 Im p o r t a n t D i s c l o s u r e s ( C o n t i n u e d ) SS g A ® Fu n d s i s a s e r v i c e m a r k o f S t a t e S t r e e t C o r p o r a t i o n . In v e s t i n g i n f u t u r e s i s h i g h l y r i s k y . F u t u r e s p o s i t io n s a r e c o n s i d e r e d h i g h l y l e v e r a g e d b e c a u s e t h e i n it i a l m a r g i n s a r e s i g n i f i c a n t l y s m a l l e r t h a n t h e c a sh va l u e o f t h e c o n t r a c t s . T h e s m a l l e r t h e v a l u e o f t h e m a r g i n i n c o m p a r i s o n t o t h e c a s h v a l u e o f t h e f u t ur e s c o n t r a c t , t h e h i g h e r t h e l e v e r a g e . T h e r e a r e a nu m b e r o f r i s k s a s s o c i a t e d w i t h f u t u r e s i n v e s t i n g i nc l u d i n g b u t n o t l i m i t e d t o c o u n t e r p a r t y c r e d i t r i s k, c u r r e n c y r i s k , d e r i v a t i v e s r i s k , f o r e i g n i s s u e r exposure ri s k , s e c t o r c o n c e n t r a t i o n r i s k , l e v e r a g i n g a n d l i q ui d i t y r i s k s . In v e s t i n g i n f o r e i g n d o m i c i l e d s e c u r i t i e s m a y i n v o l ve r i s k o f c a p i t a l l o s s f r o m u n f a v o r a b l e f l u c t u a t i o n i n c u r r e n c y v a l u e s , w i t h h o l d i n g t a x e s , f r o m d i f f e rences in g e n e r a l l y a c c e p t e d a c c o u n t i n g p r i n c i p l e s o r f r o m e c o n o m i c o r p o l i t i c a l i n s t a b i l i t y i n o t h e r n a t i o n s . In v e s t m e n t s i n e m e r g i n g o r d e v e l o p i n g m a r k e t s m a y b e m o r e v o l a t i l e a n d l e s s l i q u i d t h a n i n v e s t i n g i n d ev e l o p e d m a r k e t s a n d m a y i n v o l v e e x p o s u r e t o ec o n o m i c s t r u c t u r e s t h a t a r e g e n e r a l l y l e s s d i v e r s e a n d m a t u r e a n d t o p o l i t i c a l s y s t e m s w h i c h h a v e l e s s s t a b i l i t y t h a n t h o s e o f m o r e d e v e l o p e d c o u n t r i e s . Di s t r i b u t o r : S t a t e S t r e e t G l o b a l M a r k e t s , L L C , m e m b er F I N R A , S I P C , a w h o l l y o w n e d s u b s i d i a r y o f S t a t e St r e e t C o r p o r a t i o n . R e f e r e n c e s t o S t a t e S t r e e t ma y i n c l u d e S t a t e S t r e e t C o r p o r a t i o n a n d i t s a f f i l i at e s . C e r t a i n S t a t e S t r e e t a f f i l i a t e s p r o v i d e s e r v i ce s a n d r e c e i v e f e e s f r o m t h e S P D R E T F s . A L P S Di s t r i b u t o r s , I n c . , a r e g i s t e r e d b r o k e r - d e a l e r , i s di s t r i b u t o r f o r S P D R s h a r e s , M i d C a p S P D R s a n d D o w J on e s I n d u s t r i a l A v e r a g e , a l l u n i t i n v e s t m e n t t r u s t s an d S e l e c t S e c t o r S P D R s . Be f o r e i n v e s t i n g i n a n y S P D R E T F s , c o n s i d e r t h e f u n ds i n v e s t m e n t o b j e c t i v e s , r i s k s , c h a r g e s a n d e x p e n s es . T o o b t a i n a p r o s p e c t u s o r su m m a r y p r o s p e c t u s w h i c h c o n t a i n s t h i s a n d o t h e r i n fo r m a t i o n , c a l l 1 - 8 6 6 - 7 8 7 - 2 2 5 7 o r v i s i t w w w . s p d r s . c om . R e a d i t c a r e f u l l y . Ex p . D a t e : 3 / 3 1 / 1 4 GL S T N D - 0 8 2 9 GL S T N D - 0 8 2 9 Ap p e n d i x E : B i o g r a p h y DC - 0 7 2 6 42 Ma x C a n n Ma x i s a P r i n c i p a l o f S t a t e S t r e e t G l o b a l A d v i s o r s an d a n I n s t i t u t i o n a l E T F Sp e c i a l i s t w i t h t h e E T F S t r a t e g y & C o n s u l t i n g G r o u p . H e i s r e s p o n s i b l e f o r de v e l o p i n g r e l a t i o n s h i p s w i t h a n d p r o v i d i n g o n g o i n g s u p p o r t t o i n s t i t u t i o n a l in v e s t o r s t h r o u g h o u t t h e U n i t e d S t a t e s i n c l u d i n g p e ns i o n f u n d s , en d o w m e n t s , f o u n d a t i o n s , i n s u r a n c e c o m p a n i e s & i n v e st m e n t c o n s u l t a n t s . Be f o r e j o i n i n g t h e E T F b u s i n e s s M a x w o r k e d w i t h t h e F i x e d I n c o m e P r o d u c t En g i n e e r i n g t e a m , G l o b a l P r o d u c t D e v e l o p m e n t i n H o n g K o n g , a n d S a l e s an d C o n s u l t a n t R e l a t i o n s t e a m s . Pr i o r t o j o i n i n g S S g A , M a x w o r k e d w i t h S t a t e S t r e e t A s s o c i a t e s a s a c u r r e n c y an a l y s t a n d s p e n t 5 y e a r s a s a m a n a g e r i n f i n a n c i a l s e r v i c e s c o n s u l t i n g , fo c u s i n g o n c o m m e r c i a l l e n d i n g c l i e n t s . Ma x h o l d s a B S a n d M S i n E n g i n e e r i n g f r o m C o r n e l l U ni v e r s i t y a s w e l l a s a n MB A f r o m t h e J o h n s o n S c h o o l o f M a n a g e m e n t a t C o r n e l l U n i v e r s i t y . H e a l s o ho l d s F I N R A S e r i e s 7 a n d 6 3 l i c e n s e s . Bi o g r a p h y DC - 0 7 2 6 Minutes 1-31-13.doc Page 1 of 6 City of Palm Beach Gardens Police Officers’ Pension Fund Minutes of the Meeting Held January 31, 2013 The regular meeting of the Board of Trustees of the City of Palm Beach Gardens Police Officers’ Pension Fund was called to order at 9:05 AM by Jay Spencer in the Council Chambers at the Palm Beach Gardens City Hall at 10500 North Military Trail, Palm Beach Gardens, Florida. TRUSTEES PRESENT OTHERS PRESENT Jay Spencer, Chairman Audrey Ross (Resource Centers) David Pierson, Secretary Bonni Jensen (Law Offices of Perry & Jensen) Brad Seidensticker, Trustee Donna Kramer (PBG Clerk’s Office) Greg Mull, Trustee Denise D’Entremont (RhumbLine Advisors) John McCann (Thistle Asset Consulting) Jonathan Davidson (KTMC) Jim Burdick (Cherry Bekeart) CLASS ACTION REPORT Kessler, Topaz, Meltzer & Check (KTMC) – Presented by Jonathan Davidson Mr. Davidson introduced himself and stated that he was here today because a settlement has been reached Medtronic, Inc. and the fund should be receiving a check for this shortly (the amount is still unknown at this time). He also reviewed the quarterly litigation report that his firm provides and commented that there is another class action lawsuit that is currently pending. Mr. Davidson discussed the filing process and explained that they have access to the Plans transaction history so that way they are able to review all trades. He noted that the plan does have online access as well, if any of the Trustees are interested. He continued to explain that if they do find a trade that was not valid, then his firm will start the class action filing process and will actually file all the forms on behalf of the fund. Mr. Davidson explained that the Plan’s Custodian, Salem Trust also provides this type of service to the board and therefore there could be duplicate documents being filed, which could ultimately have a negative impact on the Plan. Ms. Jensen reminded the Trustees that a couple of months ago Salem Trust issued a letter to the board stating that they were going to start charging for the class action services that they provide. Shortly after that letter was issued, Salem Trust sent out another letter redacting the first one. The second letter stated that since it was currently in their contract to provide these services for the boards and they will continue to do so for now, but Salem Trust may come back at a later date and revisit their contract. With that said, Mr. Davidson stated that he would like the boards permission to keep on filing the class actions on behalf of the fund, but to also direct Salem Trust to stop filing so that there is no negative impact on the fund for multiple class action filings. Lastly Mr. Davidson reminded the board that the service his firm provides is free of charge. The Trustees discussed and commented that they understood that both parties did not need to be filing on behalf of the fund. MOTION: Mr. Seidensticker made a motion to allow KTMC to continue performing the class action services that they are currently providing on behalf of the fund, and to also authorize the Chair to execute the direction letter to Salem Trust to notify them to Minutes 1-31-13.doc Page 2 of 6 cease the class action filing services that they are currently providing. SECOND: Mr. Pierson seconded the motion. CARRIED: The motion carried unanimously 4-0. PRESENTATION OF THE SEPTEMBER 30, 2012 AUDITED FINANCIAL STATEMENTS Cherry Bekaert – Presented by Jim Burdick Mr. Burdick welcomed himself back and stated that it was a clean audit for the fiscal year ending September 30, 2012. He also noted that there were no significant changes from last year to this year. Mr. Burdick reported on the required communications under GASB and noted that an unqualified opinion was issued, which is the highest level that can be issued. He reviewed the internal controls and commented that there were no material weaknesses, deficiencies, or no reportable noncompliances that were found while performing the audit. Mr. Burdick did note that there are new GASB requirements that will change the disclosure of the financial statements, but this change is not effective until September 30, 2014. Also he noted that the plan still does need to sign the audit representation letter before the final audit is released. The representation letter is currently being reviewed by Mr. Burdick’s partner, and then it will be sent over to the Administrator to be executed by the Chair. Mr. Burdick commented that the letter will not change any of the numbers or assets being reported here today. Mr. Burdick reviewed and compared the Plan’s assets from 2011 to 2012. The net assets did increase in 2012 to $55,261,152 from $44,279,384 in 2011. Although the City’s contributions did decrease from $3,885,572 in 2011 to $3,785,539 in 2012, as well as the employees’ contributions decreased to $559,305 in 2012 (from $690,226 in 2011). Therefore Mr. Burdick reported that the plan had a net increase this year of $10,981,768, which is up from last year at $2,875,532. Lastly he reviewed the benefit payments which increased this year, and the administrative expenses which decreased. MOTION: Mr. Mull made a motion to approve the September 30, 2012 Audited Financial statements as presented by the Plan’s Auditor. SECOND: Mr. Seidensticker seconded the motion. CARRIED: The motion carried unanimously 4-0. INVESTMENT MANAGER REPORT RhumbLine Advisors – Presented by Denise D’Entremont Ms. D’Entroment commented that it has been a couple of years since she has been here to visit the board, but welcomed herself back. Mr. McCann asked her to explain how the index funds are actually beating the index. Ms. D’Entremont stated that they don’t trade every day which decreases their turnover and saves cost. She also noted that it also has to do with the timing of when they put the money into the market place to be invested. She explained their investment process and noted that all new contributions are isolated into a separate investment account and are invested the day that they receive the money. Ms. D’Entremont reported that they only trade when there are contributions or withdrawals to the fund, or when dividends build up in the account. Therefore trading only takes place about once a month. Minutes 1-31-13.doc Page 3 of 6 Ms. D’Entremont reviewed each accounts performance. The S&P 500 made 15.96% for the fiscal year ending September 30, 2012, but for the last quarter they were down -0.36% versus the benchmark at -0.38%. Since inception the fund has been up 1.91% each year versus the benchmark at 1.77%. The S&P 600 has performed very well and is 2.22% for the quarter ending December 31, 2012. Since inception this fund has outperformed by 8.24% versus the benchmark at 8.19%. Lastly the S&P 400 is also outperforming the year and since inception at 3.57% and 10.37% respectively. Ms. D’Entremont announced that altogether this plan has $10M since inception, which is almost double their initial investment. She also noted that the fee for all 3 accounts combined together is less than 10 basis points, which is a huge discount. Lastly Ms. D’Entremont reported that RhumbLine also has a fixed income product, which currently has about $3M in assets. She noted that the fixed income product has been around since 2005 and the return since then is 5.67%. Also RhumbLine just recently funded an emerging market product, but this is a custom fund for 1 client, although they eventually hope to open more funds down the road. INVESTMENT CONSULTANT REPORT Thistle Asset Consulting – Presented by John McCann Mr. McCann reviewed the Callen periodic table of investment returns worksheet for 2012. He noted that it is a mirror image of last years table and that the emerging markets will more than likely be at the bottom of the chart this year. Mr. McCann commented that this is why he would like the board to consider moving into emerging markets at this time. The fund’s risk may increase, but it will add value to the fund and it will also diversify the portfolio some more. Mr. McCann stated that he will bring back more detailed information on emerging markets to the next meeting. The Trustees concurred. Mr. McCann reviewed the report for the quarter ending December 31, 2012 and stated that it was a great quarter for International. He reviewed the Plan’s compliance checklist and noted that the total fund is trailing for the 3 year period. As of December 31, 2012 there was $54.7M in assets, which was a gain of $668K during the quarter. Mr. McCann reviewed the asset allocation and commented that the fund will add another $1.5M to American Realty on April 1, 2013, which will more the real estate allocation up to 5%. For the quarter the total fund outperformed the benchmark net of fees at 1.23% versus 0.98%, but for the year they are slightly behind the benchmark net of fees at 11.89% versus 12.14%. Lastly he reviewed the risk versus reward chart and reported that the plan is currently taking a little more risk then in the past, but is still getting an average return. Therefore that is why the board would want to explore into diversifying their portfolio some more. ATTORNEY REPORT Law Offices of Perry & Jensen - Presented by Bonni Jensen Ms. Jensen reviewed the American Realty agreement regarding the board’s $1.5M commitment on April 1, 2013. She noted that these funds would be coming from the ICC Capital portfolio. MOTION: Mr. Seidensticker made a motion to approve the American Realty agreement regarding the board’s $1.5M commitment on April 1, 2013. SECOND: Mr. Pierson seconded the motion. Minutes 1-31-13.doc Page 4 of 6 CARRIED: The motion carried unanimously 4-0. Ms. Jensen noted that the IRS mileage reimbursement rate increased to $0.565 effective January 1, 2013. Ms. Jensen explained that she received a letter from the City asking the board’s permission to use the GRS valuation data to review some benefits. She stated that the City wants to use the information that is provided to GRS from the City and Administrator for their own studies. Mr. Owens briefly explained the options that the City is looking to explore and also explained why it would be easier to use the pre- existing data. He also noted that the City will pay for any cost that this request may incur. The Trustees discussed and stated that they did not foresee a problem with the City using the data information that is sent to GRS on an annual basis for Valuation purposes, as this information is all considered public records anyways. Ms. Jensen reviewed the current DROP distribution policy. Currently the policy allows for distributions to take place on a quarterly basis and the Trustees would like to change the open enrollment period to a monthly basis. The Board discussed and Mrs. Ross noted that if they were to move forward with the change, all applications would need to be by the 15th of each month for a distribution on the following 1st business day of the month. Also the Trustees stated that any distribution over $35K must be approved by the board of Trustees prior to a payment being issued. MOTION: Mr. Pierson made a motion to authorize the Plan’s Attorney to revise the DROP Distribution policy to allow distributions to take place on a monthly basis, and to also include the guidelines stated above. SECOND: Mr. Seidensticker seconded the motion. CARRIED: The motion carried unanimously 4-0. Ms. Jensen briefly spoke about Senate Bill 458 which is currently in the Legislative session right now. She reviewed some of the things that this bill would change, such as: it would add a floor to the City’s contribution rate and it would guide the pension plans on how to distribute the premium tax monies. Ms. Jensen commented that she will send out a memo regarding the changes once the bills have been passed. ADMINISTRATOR REPORT Resource Centers – Presented by Audrey Ross Ms. Ross presented the board with the Salem Trust class action report for the quarter ending December 31, 2012. She noted that there were no new class actions filed on behalf of the fund and there were no new settlements received in during the quarter either. MOTION: Mr. Seidensticker made a motion to pay out the non-duty death benefit to the Estate of Mr. Thomas Juric. SECOND: Mr. Pierson seconded the motion. CARRIED: The motion carried unanimously 5-0. Ms. Ross explained that the Plan’s local checking account is held at BB&T, formally Bank Atlantic. She stated that BB&T has slightly different rules from Bank Atlantic in regards to benefit payments falling on a holiday or a weekend. Therefore the board needs to give direction regarding when a benefit should be paid if the first of the Minutes 1-31-13.doc Page 5 of 6 month falls on a weekend or holiday. Does the board want the payment to be issued on the last business day of the prior month if the first falls on a weekend or a holiday, or should the payment be issued on the first business day of that current month (for example: if January 1st falls on a Saturday, should the payments be issued Friday December 31, or should they be issued Monday January 3)? The Trustees discussed and noted that during the holidays there could be a longer hold up (other than just the weekend), so they rather their retirees get paid sooner rather than later. MOTION: Mr. Seidensticker made a motion to authorize the pension department and BB&T to issue pension payments on the last business day of the prior month if the first of the month falls on a weekend or holiday. SECOND: Mr. Pierson seconded the motion. CARRIED: The motion carried unanimously 4-0. Ms. Ross noted that she had to get the Salem Trust authorized signors form updated today because Salem Trust requires an update every 3 years. MINUTES MOTION: Mr. Pierson made a motion to approve the minutes from the November 28, 2013 regular meeting. SECOND: Mr. Seidensticker seconded the motion. CARRIED: The motion carried unanimously 4-0. *Ms. Ross noted that Mr. Spencer abstained from a benefit approval vote last meeting due to his own benefit approval being presented. She noted that he did fill out the required Form 8b following the meeting and that form is attached to the original signed copy of the minutes on file. DISBURSEMENTS APPROVALS MOTION: Mr. Seidensticker made a motion to approve the disbursements. SECOND: Mr. Pierson seconded the motion. CARRIED: The motion carried unanimously 4-0. BENEFIT APPROVALS MOTION: Mr. Seidensticker made a motion to approve the applications to enter the DROP for Avrham Tawil and Eleanora Lovejoy, the application to exit the DROP for Jules Barone, the applications for distribuions from DROP accounts for Wayne Sidey, Ronald Council, and George Betscha, and the application for a refund of contributions for Curtis Riddick. SECOND: Mr. Pierson seconded the motion. CARRIED: The motion carried unanimously 4-0. Minutes 1-31-13.doc Page 6 of 6 FINANCIAL STATEMENTS The board reviewed and discussed the financial statements that were provided through December 2012. The board received and filed the financial statements through December 2012. OTHER BUSINESS Ms. Ross stated that GRS will start working on the analysis that the board requested once the 9/30/2012 Valuation is completed so that they can use current numbers. PUBLIC COMMENTS N/A AJOURN There being no further business, the Trustees officially adjourned the meeting at 11:41 AM. The next meeting is scheduled for Tuesday April 23, 2013 at 9AM. Respectfully submitted, _____________________________ DAVID PIERSON, Secretary PAGE Market Snapshot 1 Index Comparisons 2 Compliance Report 3 Total Portfolio Pie Chart 4 Manager Pie Chart 5 Asset Allocation Table 6 Gain/Loss Table 7 Total Ranks Table 8 Manager Ranks 9 Scatterplot Graphs: Total Fund Graph 11 Rhumbline Equities Graph 12 ICC Fixed income Graph 13 Beta Graph 14 Alpha Graph 15 Beta/Alpha Table 16 Batting Average Graph 17 Batting Average/R-Squared Table 18 Other Managers' Page 19 Palm Beach Gardens Police Pension Fund Executive Summary Report Table of Contents SECTION Page 2 Index Comparison March 31, 2013 -10.00 0.00 10.00 20.00 3 Months Last 12 Months Last 3 Years (Annualized) Re t u r n ( % ) Barclays Gov/Credit Bond Barclays Gov/Credit-Intermediate S&P 500 Russell 1000 Growth Russell 1000 Value Russell 2000 Growth Russell 2000 Value Russell 3000 MSCI EAFE 13.21% R2000G -0.16% BCGC 18.77% R1000V 4.64% BCIGC 14.75% R2000G 3.04% BCIGC 1. 2. 3. 1. 2. 3. 4. 5. 6. 1. 2. 3. 4. 5. 6. Page 3 Is the minimum quality rating of the domestic bond investments BBB from Standard & Poor's or BAA from Moody's? Did the fixed income return, over the trailing 5-year period, rank in the top 40% of the Mobius Broad Fixed Income Universe? [68th] Did the total return of the fund over the trailing 3-year period equal or exceed 7.5% (actuarial assumption rate of return)? [9.64 vs. 7.50] TOTAL FIXED INCOME Did the fixed income return, over the trailing 3-year period, exceed the 89% BCGC and 11% Non-US World Gov't Bond? [5.59 vs. 5.32] Is the amount invested in any single security less than or equal to 5% of the market value of the total equity portfolio? Is the amount invested in any single industry less than or equal to 20% of the market value of the total equity portfolio? Did the fixed income return, over the trailing 5-year period, exceed the BCGC? [4.87 vs. 5.15] Did the fixed income return, over the trailing 3-year period, rank in the top 40% of the Mobius Broad Fixed Income Universe? [59th] Is the amount invested in any single security (with exception of U.S. Government and its agencies) less than or equal to 5% of the market value of the total fixed income portfolio? Palm Beach Gardens Police Pension Fund Compliance Report March 31, 2013 YES NO Did the equity return, over the trailing 3-year period, exceed the 38.4% S&P 500, 15.4% S&P 400, 15.4% S&P 600, 15.4% R1000G index and 15.4% EAFE? [12.43 vs. 12.45] Did the equity return, over the trailing 5-year period, exceed the 38.4% S&P 500, 15.4% S&P 400, 15.4% S&P 600, 15.4% R1000G index and 15.4% EAFE? [6.95 vs. 6.32] Did the equity return, over the trailing 3-year period, rank in the top 40% of the Mobius 38.4% Broad Large Cap, 15.4% Mid Cap, 15.4% Small Cap, 15.4% Broad Large Cap Growth and 15.4% International Universe? [7th] Did the equity return, over the trailing 5-year period, rank in the top 40% of the Mobius 38.4% Broad Large Cap, 15.4% Mid Cap, 15.4% Small Cap, 15.4% Broad Large Cap Growth and 15.4% International Universe? [5th] TOTAL FUND Did the total return, over the trailing 3-year period, exceed the policy, which is comprised of 25% S&P500, 10% S&P400, 10% S&P600, 10% R1000G, 10% EAFE, 29% BCGC , 4% Non US $ World Gov. Bond & 2% RE? [9.64 vs. 10.27] TOTAL EQUITY Did the total return, over the trailing 3-year period, rank in the top 40% of the Universe comprised of 25% Mobius Broad Large Core, 10% Mid Cap, 10% Small Cap, 10% Broad Large Cap Growth, 10% International Equity, 29% Broad Fixed, 4% International Fixed Income & 2% NCREIF? [52nd] 1. No 2. No 3. Yes - Mike Mara, a member of the QSG team left in February 2013 to pursue other career opportunities. 4. No 5. No 6. No 7. No 8. No 9. 0.00% 10. No 11. Steven Stack, CRCP - Chief Compliance Officer ICC Capital Management, Inc. Page 3a Manager Compliance Questionnaire March 31, 2013 Have there been any changes in your organization? Have you undergone any change in ownership or control? Are you invested in any unhedged and/or levereged derivatives? What percentage of equity is international? The manager must immediately notify the Board and the Consultant when the international exposure reaches ten percent (10%). An explanation will be needed as to why the manager is changing their discipline. (This does not apply to managers that are 100% international equity and to those that have been previously given permission by the board and the consultant) Are you invested in any companies on the SBA's website? (Please review list of scrutinized companies on the following website: http://www.sbafla.com/fsb/Home/ProtectingFloridasInvestmentAct/tabid/751/Default.aspx Name of person completing this form (please include company name)? Have there been any changes in your investment philosophy? Have there been any changes in your staff of investment professionals? Have you lost a substantial amount of business (amount of percentage of assets under management)? Have you gained a substantial amount of business (amount of percentage of assets under management)? Have there been any new investigations begun by any state or federal government or their agencies, or any charges filed, with regard to any division or unit of your company, and in particular anyone who directly or indirectly performs services for this client? Please provide details (if there is any doubt, please err on the side of providing too much information). For managers, with fixed income portfolios that we monitor, are you currently invested in commercial mortgage backed securities (CMBS)? (If yes, please give % of fixed portfolio) Page 4 Palm Beach Gardens Police Pension Fund Total Assets March 31, 2013 Equities 66% Fixed Income 28% Real Estate 2% Cash 4% Equities Fixed Income Real Estate Cash Page 5 Palm Beach Gardens Police Pension Fund Total Assets March 31, 2013 Rhumbline S&P500 25% Rhumbline S&P400 11% Rhumbline S&P600 11% Intl. Equity 7% ICC Lg. Growth 12% Intl. Bonds 2% ICC Fixed 30% American Realty 2% Rhumbline S&P500 Rhumbline S&P400 Rhumbline S&P600 Intl. Equity ICC Lg. Growth Intl. Bonds ICC Fixed American Realty Manager Equities Fixed Income Real Estate Cash Total % of Total Rhumbline S&P500 $15,099,000 $0 $0 $0 $15,099,000 25.4% 25.0% Rhumbline S&P400 $6,466,000 $0 $0 $0 $6,466,000 10.9% 10.0% Rhumbline S&P600 $6,345,000 $0 $0 $0 $6,345,000 10.7% 10.0% Intl. Equity $4,099,000 $0 $0 $0 $4,099,000 6.9% 10.0% ICC Lg. Growth $6,929,000 $0 $0 $0 $6,929,000 11.7% 10.0% Intl. Bonds $0 $1,555,000 $0 $0 $1,555,000 2.6% 4.0% ICC Fixed $0 $15,226,000 $0 $2,563,000 $17,789,000 30.0% 29.0% $0 $0 $1,054,000 $0 $1,054,000 1.8% 2.0% Total $38,938,000 $16,781,000 $1,054,000 $2,563,000 $59,336,000 100.0% 100.0% % of Total 65.6%28.3%1.8%4.3%100.0% Target %65.0%33.0%2.0%0.0%100.0% Page 6 Palm Beach Gardens Police Pension Fund Performance Evaluation Summary March 31, 2013 American Realty Portfolio Last Qtr. MV Net Flows Inv G(L)This Qtr. MV Total Fund $55,255,000 $211,000 $3,870,000 $59,336,000 Total Equities $34,893,000 $146,000 $3,898,000 $38,937,000 ICC Large Growth $5,942,000 $135,000 $851,000 $6,929,000 Rhumbline S&P 500 $13,655,000 $0 $1,444,000 $15,099,000 Rhumbline S&P 400 $5,701,000 $0 $765,000 $6,466,000 Rhumbline S&P 600 $5,677,000 $0 $668,000 $6,345,000 Intlernational Equity $3,919,000 $0 $181,000 $4,099,000 Intlernational Bonds $1,573,000 $0 -$18,000 $1,555,000 ICC Fixed Income $15,561,000 -$318,000 -$17,000 $15,226,000 Real Estate $1,043,000 -$12,000 $23,000 $1,054,000 Page 7 Palm Beach Gardens Police Pension Fund Performance Evaluation Summary March 31, 2013 Current Fiscal Year Quarter FYTD One Year Three Years Five Years 2012 2011 2010 2009 2008 Return 6.98%8.31%10.60%9.64%6.68%18.63%0.22%10.09%5.62%-13.73% Ranking (*)23 50 47 52 13 87 36 40 6 29 Policy Return (**)6.51%7.61%10.39%10.27%6.48%19.60%1.76%10.82%1.64%-12.83% Policy Ranking (*)52 74 53 28 17 71 6 30 53 17 Return 11.18%13.29%14.87%12.43%6.95% 28.59%-2.62%12.36%-1.00%-23.28% Ranking (***)5 11 11 7 5 9 49 16 18 75 Policy Ranking (***)24 41 24 7 15 22 8 32 70 31 Return -0.30%-0.26%4.13%5.59%4.87%5.83%4.78%7.63%11.10%0.54% Ranking (Broad Fixed)93 92 67 59 68 71 14 45 53 28 Policy Return (89% BCAB and 11% Non-US World Gov't Bond)-0.53%-0.60%3.11%5.32%5.15%4.98%5.21%7.79%11.19%3.85% Policy Ranking (Broad Fixed)100 98 78 65 62 76 10 44 53 13 Page 8 Red indicates bottom 40% of universe 11.44%12.45% *** 38.4% Broad Large Cap Core, 15.4% Mid Cap, 15.4% Small Cap, 15.4% Broad Large Cap Growth, 15.4% International TOTAL FIXED INCOME(Net of Fees)[Inception 3-31-1994](International Fixed Inception 9-30-2010) Gold indicates equal to or beat the index, or in upper 40% of universe 10.23%11.93%-0.50% * 25% Broad Large Cap Core, 10% Mid Cap, 10% Small Cap, 10% Broad Large Growth, 10% International, 4% Intl. Bond, 29% Broad Fixed & 2% RE ** 25% S&P500, 10% S&P400, 10% S&P600, 10% R1000G, 10% EAFE, 4% Intl. Bond, 29% BCAB & 2% NCREIF -4.36% Policy Return (38.4%S&P500, 15.4%S&P400, 15.4%S&P600, 15.4% R1000G, 15.4% EAFE)6.32%27.80% Palm Beach Gardens Police Pension Fund Performance Evaluation Summary March 31, 2013 14.01%-21.04% TOTAL FUND (Net of Fees)[Inception 3-31-1992] TOTAL EQUITIES(Net of Fees)[Inception 6-30-2000] Current Fiscal Year Quarter FYTD One Year Three Years Five Years 2012 2011 2010 2009 2008 10.57%10.17%13.93%12.68%5.96%30.17%1.19%10.21%-6.49%-21.72% Ranking (Br.Large Cap Core)40 50 36 19 35 21 20 29 55 36 10.61%10.19%13.96%12.67%5.81%30.20%1.15%10.16%-6.91%-21.98% Policy Ranking (Br.Large Cap Core)38 50 35 19 40 20 20 30 62 40 13.42%17.47%17.73%15.26%10.01%28.90%-1.17%17.77%-2.77%-16.54% 26 32 29 10 8 28 26 12 100 9 13.45%17.55%17.83%15.12%9.85%28.54%-1.28%17.78%-3.10%-16.68% 25 30 28 10 9 30 27 12 100 9 11.77%14.25%16.04%15.16%9.16%33.27%0.21%14.14%-10.54%-13.64% Ranking (Broad Small Cap)65 70 51 28 45 18 26 37 86 22 11.81%14.29%16.14%15.18%9.19%33.35%0.21%14.21%-10.61%-13.83% Policy Ranking (Broad Small Cap)64 69 49 27 44 18 26 36 86 23 14.37%17.42%16.64%11.90%9.56%27.52%-6.48%14.62%15.30%-30.79% Ranking (Broad Large Cap Growth)1 1 1 44 9 55 94 8 1 100 9.54%8.10%10.09%13.06%7.30%29.18%3.78%12.65%-1.85%-20.88% 34 54 46 20 22 40 14 20 35 32 4.62%11.37%10.80%6.51%0.94%19.38%-11.11%9.09%2.30%-29.10% 29 32 33 25 25 20 50 32 48 36 5.23%12.18%11.79%5.49%-0.40%14.33%-8.94%3.71%3.79%-30.12% 22 20 23 38 45 68 25 65 39 45 Page 9 Return Policy (R1000G) Policy (S&P 600) Ranking (Broad Mid Cap) ICC LARGE CAP GROWTH EQUITY PORTFOLIO(Inception 9-30-2007) Return Policy Ranking (Broad Mid Cap) INTERNATIONAL EQUITY(Inception 9-30-2006) Return Ranking (International Equity) Policy (MSCI EAFE) Return Gold indicates equal to or beat the index, or in upper 40% of universe Policy (S&P 400) Red indicates bottom 40% of universe Policy Ranking (Broad Large Cap Growth) Policy Ranking (International Equity) Return Palm Beach Gardens Police Pension Fund Performance Evaluation Summary March 31, 2013 RHUMBLINE S&P 500 EQUITY PORTFOLIO(Inception 6-30-2000) RHUMBLINE S&P 400 EQUITY PORTFOLIO(Inception 12-31-2002) Policy(S&P500) RHUMBLINE S&P 600 EQUITY PORTFOLIO(Inception 10-31-2003) Current Fiscal Year Quarter FYTD One Year Three Years Five Years 2012 2011 2010 2009 2008 -0.12%-0.15%4.36%6.02%5.45%6.07%5.66%8.10%11.96%1.22% Ranking (Broad Fixed)85 89 64 49 53 69 8 42 46 25 -0.12%0.09%3.77%5.53%5.48%5.16%5.29%8.17%10.56%3.66% Policy Ranking (Broad Fixed)85 82 71 60 52 75 9 41 57 13 Two Years -1.15%0.57%6.10%4.24%n/a 7.89%0.33%n/a n/a n/a -3.83%-6.09%-2.17%0.84%n/a 3.46%4.14%n/a n/a n/a 2.22%4.49%n/a n/a n/a n/a n/a n/a n/a n/a 2.00%4.59%n/a n/a n/a n/a n/a n/a n/a n/a Page 10 INTERNATIONAL FIXED INCOME PORTFOLIO(Inception 9-30-2010) Return Policy (Non-US World Bond) Gold indicates equal to or beat the index, or in upper 40% of universe Red indicates bottom 40% of universe AMERICAN REALTY PORTFOLIO(Inception 6-30-2012) Return Policy (NCREIF) Palm Beach Gardens Police Pension Fund Performance Evaluation Summary March 31, 2013 ICC FIXED INCOME PORTFOLIO(Inception 3-31-1994) Return Policy(BCAB) March 31, 2013 EXPLANATION OF RISK/REWARD SCATTERPLOT GRAPHS The crossing lines represent the 5-year return (horizontal line) and 5-year standard deviation or volatility or risk (vertical line) of the index against which the Fund is being measured. Each point represents the Fund's 5-year return (vertically) and standard deviation or volatility (horizontally), relative to the index. If a point is in the southwest quadrant, for example, the 5 -year return of the Fund has been less than (below) the index line, and the 5 -year standard deviation (volatility) has also been less than (to the left of) the index line. There are four points, one for each of the last four quarters. The earliest one is the smallest and the quarter just ended being the largest. Each point shows the 5-year relative position of the Fund versus the index for that quarter. The movement of the points shows the trend, or direction, over time. As noted in the graph, the best place to be is the northwest quadrant (less risk and a higher return); the worst place to be is the southeast quadrant (more risk and a lower return). Page 11 Palm Beach Gardens Police Pension Fund Total Fund Trailing 5-Years March 31, 2013 (versus 25% S&P500, 10% S&P400, 10% S&P600, 10% R1000G, 10% EAFE, 4% Non-US World Bond, 29% BCGC, 2% RE) -3 0 3 -3 0 3 Di f f e r e n c e i n R e t u r n s ( M a n a g e r - In d e x ) Risk (Difference in Standard Deviations) 3/31/2013 12/31/2012 9/30/2012 6/30/2012 Good Aggressive Conservative Bad Page 12 Palm Beach Gardens Police Pension Fund Total Equity Trailing 5-Years March 31, 2013 (versus 38.4% S&P 500, 15.4% S&P 400, 15.4% S&P 600, 15.4% R1000G & 15.4% Intl. ) -3 0 3 -3 0 3 Di f f e r e n c e i n R e t u r n s ( M a n a g e r - In d e x ) Risk (Difference in Standard Deviations) 3/31/2013 12/31/2012 9/30/2012 6/30/2012 Good Aggressive Conservative Bad Page 13 Palm Beach Gardens Police Pension Fund Total Fixed Income 5-Year Trailing March 31, 2013 (versus 89% BCGC, 11% Non-US World Gov't Bond) -3 0 3 -3 0 3 Di f f e r e n c e i n R e t u r n s ( M a n a g e r - In d e x ) Risk (Difference in Standard Deviations) 3/31/2013 12/31/2012 9/30/2012 6/30/2012 Good Aggressive Conservative Bad 15451000 15451000 123518000 123518000 264000 264000 139233000 Page 14 Palm Beach Gardens Police Pension Fund Beta: Trailing 5-Year Risk (or Inception if Less) March 31, 2013 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 1.10 1.20 Mar-13 Dec-12 Sep-12 Jun-12 Total Fund Large Cap Mid Cap Small Cap Total Fixed International Large Growth Page 15 Palm Beach Gardens Police Pension Fund Alpha: Trailing 5-Year Reward (or Inception if Less) March 31, 2013 -2.0% -1.0% 0.0% 1.0% 2.0% Mar-13 Dec-12 Sep-12 Jun-12 TOTAL FUND & INDIVIDUAL MANAGERS Total Fund Large Cap Mid Cap Small Cap Total Fixed International Large Growth Mar-13 Dec-12 Sep-12 Jun-12 Total Fund 0.88 0.88 0.88 0.77 Managers, Fixed Income Total Fixed 0.88 0.88 0.88 0.87 Managers, Equities Large Cap 0.99 0.99 0.99 0.99 Mid Cap 0.99 0.99 0.99 0.99 Small Cap 0.99 0.99 0.99 0.99 International 0.41 0.40 0.39 0.40 Large Growth 1.10 1.09 1.10 1.10 Real Estate NCREIF 0.00 0.00 0.00 Total Fund 0.99%0.66%0.41%0.77% Managers, Fixed Income Total Fixed 0.36%0.15%0.15%-0.01% Managers, Equities Large Cap 0.19%0.17%0.18%0.22% Mid Cap 0.21%0.18%0.21%0.22% Small Cap 0.04%0.08%0.06%0.06% International 1.11%-0.54%-1.56%-1.67% Large Growth 1.51%0.53%-1.82%-1.62% Real Estate NCREIF 0.00%0.00%0.00% Page 16 S&P400 * 25% S&P 500, 10% S&P400, 10% S&P600, 10% R1000G, 10% EAFE, 4% Non-US World Gov't Bond, 29% BCAB, 2% RE S&P600 EAFE R1000G Policy S&P500 S&P600 EAFE S&P400 BCAB R1000G BCAB S&P500 * ALPHA Palm Beach Gardens Police Pension Fund Alpha & Beta: 5-Years Trailing (or Inception if Less) March 31, 2013 Current BETA * Page 17 Palm Beach Gardens Police Pension Fund Batting Average: 5-Years Trailing (or Inception if Less) March 31, 2013 0 10 20 30 40 50 60 70 80 90 100 Mar-13 Dec-12 Sep-12 Jun-12 TOTAL FUND & INDIVIDUAL MANAGERS Total Fund Large Cap Mid Cap Small Cap Total Fixed International Large Growth Mar-13 Dec-12 Sep-12 Jun-12 Total Fund 35.00 35.00 30.00 35.00 Managers, Fixed Income Total Fixed 55.00 50.00 45.00 40.00 Managers, Equities Large Cap 60.00 65.00 65.00 70.00 Mid Cap 60.00 65.00 70.00 75.00 Small Cap 35.00 40.00 45.00 50.00 International 55.00 55.00 55.00 60.00 Large Growth 55.00 50.00 45.00 47.37 Real Estate NCREIF 33.33 0.00 0.00 Total Fund 0.98 0.98 0.98 0.96 Managers, Fixed Income Total Fixed 0.74 0.73 0.74 0.74 Managers, Equities Large Cap 1.00 1.00 1.00 1.00 Mid Cap 1.00 1.00 1.00 1.00 Small Cap 1.00 1.00 1.00 1.00 International 0.28 0.26 0.26 0.26 Large Growth 0.92 0.91 0.91 0.91 Real Estate NCREIF 0.00 0.00 0.00 Page 18 BCAB BCAB * S&P600 R1000G R-SQUARED S&P500 S&P400 * 25% S&P 500, 10% S&P400, 10% S&P600, 10% R1000G, 10% EAFE, 4% Non-US World Gov't Bond, 29% BCAB, 2% RE S&P600 EAFE R1000G March 31, 2013 EAFE Palm Beach Gardens Police Pension Fund Batting Average: 5-Years Trailing (or Inception if Less) BATTING AVERAGE S&P500 S&P400 Current Policy * Qtr YTD 1Yr 3Yr 5Yr 10Yr Advanced Investment Partners - Large Cap - Gross Size 12.00 10.90 15.38 12.90 7.24 9.41 Atlanta Capital Management Co., LLC - High Quality Growth Plus - Gross Size 8.62 8.51 8.72 11.77 6.29 8.61 ICC Capital Management, Inc - Core Value - Gross Size 12.01 16.69 16.43 9.47 4.38 9.52 Logan Capital Management - Large Core 60/40 - Gross Size 8.05 6.93 7.41 16.09 9.02 10.82 Madison Investment Advisors, Inc. - Large Cap Equity (Instl) - Gross Size 11.08 12.71 16.29 11.27 6.99 8.28 Rhumbline Advisers Corporation - Russell 1000 Index Fund - Gross Size 10.94 11.05 14.38 12.47 6.11 8.94 Robeco Investment Management, Inc. - WPG Disc Equity Large Cap - Gross Size 10.16 11.11 13.75 12.26 5.50 8.91 South Texas Money Management - Large Cap Core - Gross Size 7.12 8.66 10.24 9.27 3.78 8.27 Valley Forge Asset Management - Large Cap Core - Gross Size 8.97 5.10 11.73 11.38 5.39 9.71 Russell 1000 10.96 11.10 14.43 12.93 6.15 8.97 S&P 500 10.61 10.19 13.96 12.67 5.81 8.53 Dana Investment Management - Large Growth - Gross Size 9.54 7.41 9.81 12.37 6.30 10.68 Denver Investment Advisors, LLC - Growth - Gross Size 7.95 5.43 6.59 11.97 5.93 9.57 Garcia Hamilton & Associates - Quality Growth - Gross Size 7.57 5.00 5.79 11.53 5.84 7.28 ICC Capital Management, Inc - Large Cap Growth Equity - Gross Size 12.17 15.17 14.47 10.85 9.42 9.73 Logan Capital Management - Large Cap Growth - Gross Size 8.63 9.90 5.46 11.79 5.69 10.22 Montag & Caldwell, Inc. - Large Cap Growth - Gross Size 10.48 8.81 13.72 11.53 7.19 8.50 Polen Capital Management - Large Cap Growth - Gross Size 6.34 5.17 2.84 13.56 10.56 9.95 Rhumbline Advisers Corporation - Russell 1000 Growth Index Fund - Gross Size 9.50 8.05 10.04 13.05 7.35 8.67 Sawgrass Asset Management, LLC - Large Cap Growth Equity - Gross Size 11.85 10.16 13.30 14.20 7.27 8.83 Silvant Capital - Select LCG Stock - Grosss Size 6.03 2.38 0.94 8.42 4.30 8.05 Russell 1000 Growth 9.54 8.10 10.09 13.06 7.30 8.62 S&P 500/Citigroup Growth 9.33 7.10 11.61 13.31 7.48 8.15 Rhumbline Large Cap(FYE)10.57 10.17 13.93 12.68 5.96 8.64 Rhumbline Mid Cap(FYE)13.42 17.47 17.73 15.26 10.01 12.55 Rhumbline Small Cap(FYE)11.77 14.25 16.04 15.16 9.16 n/a International Equity(FYE)4.62 11.37 10.80 6.51 0.94 n/a ICC Large Growth(FYE)14.37 17.42 16.64 11.90 9.56 n/a Page 19 Performance of Other Managers March 31, 2013 CORE EQUITY GROWTH EQUITY Qtr YTD 1Yr 3Yr 5Yr 10Yr BRC Investment Management Large Cap Value - Gross Size 11.78 14.32 17.68 14.29 7.90 12.20 Buckhead Capital Management - Value Equity - Low P/E - Gross Size 10.62 9.85 11.88 9.30 5.26 8.48 Ceredex Value Ad Large Cap Value 11.05 14.29 16.96 12.91 7.64 10.90 Eagle Asset Management - Value - Institutional - Gross Size 12.88 14.20 14.07 9.80 4.95 9.61 ICC Capital Management, Inc - Core Value - Gross Size 12.01 16.69 16.43 9.47 4.38 9.52 Missouri Valley Partners - Large Cap Value - Gross Size 10.96 11.78 14.56 11.34 3.57 7.95 Rhumbline Advisers Corporation - Russell 1000 Value Index Fund - Gross Size 12.24 13.94 18.69 12.72 4.97 9.23 The Boston Company Asset Mgmt., LLC - US Large Cap Value Equity Management 12.30 16.55 19.06 11.31 5.27 11.39 RBC Global Asset Management, Inc. - Large Cap Value - Gross Size 10.96 12.95 17.34 12.02 5.05 10.45 RNC Genter Capital - Dividend Income Equity - Gross Size 9.69 9.64 13.52 13.39 7.70 Westwood Management Corporation - LargeCap Equity - Gross Size 10.16 12.62 14.91 11.15 4.06 10.30 Russell 1000 Value 12.31 14.02 18.77 12.74 4.85 9.18 S&P 500/Citigroup Value 11.97 13.81 16.64 12.12 4.07 8.84 Amalgamated Bank - LongView 400 MidCap Index Fund - Gross Size 13.41 17.55 17.82 15.10 9.83 12.42 Batterymarch Financial Mgmt., Inc. - US Mid Cap Russell - Gross Size 13.91 16.58 18.05 14.96 7.50 12.23 Chicago Equity Partners, LLC - Mid Cap Core Equity - Gross Size 13.86 18.53 19.00 17.82 10.04 11.80 Rhumbline Advisers Corporation - S&P 400 Index Fund - Gross Size 13.43 17.48 17.72 15.15 9.08 12.07 Robeco Investment Management, Inc. - BPAM Mid Cap Value Equity - Gross Size 12.77 18.02 18.86 16.37 12.70 15.08 Russell Midcap 12.96 16.21 17.30 14.62 8.37 12.27 S&P Midcap 400 13.45 17.55 17.83 15.12 9.85 12.45 Advanced Investment Partners 14.23 21.19 25.36 19.40 11.65 13.84 AtlantaCapital Management - High Quality SMID - Gross Size 13.65 17.91 18.22 18.01 13.24 Eagle Asset Management - SMID Core - Institutional - Gross Size 12.53 15.53 16.54 14.91 8.29 12.48 Kayne AndersonRudnick - SMID Core - Gross Size 11.24 13.48 10.73 13.63 10.99 9.80 Westwood Management Corporation - SMID Cap Equity - Gross Size 12.99 17.64 16.54 14.97 11.27 16.85 Russell 2500 12.85 16.35 17.73 14.59 9.02 12.30 Rhumbline Large Cap(FYE)10.57 10.17 13.93 12.68 5.96 8.64 Rhumbline Mid Cap(FYE)13.42 17.47 17.73 15.26 10.01 12.55 Rhumbline Small Cap(FYE)11.77 14.25 16.04 15.16 9.16 n/a International Equity(FYE)4.62 11.37 10.80 6.51 0.94 n/a ICC Large Growth(FYE)14.37 17.42 16.64 11.90 9.56 n/a Page 20 Performance of Other Managers March 31, 2013 VALUE EQUITY MID-CAP EQUITY SMID-CAP EQUITY Qtr YTD 1Yr 3Yr 5Yr 10Yr Advanced Investment Partners - AllCap - Gross Size 11.45 11.40 16.78 14.51 7.88 9.02 BuckheadCaptial Management - All Cap - Gross Size 10.39 10.11 11.51 9.75 3.58 10.27 Chartwell Investment Partners - Premium Yield Equity - Gross Size 10.76 10.66 15.13 14.11 6.48 9.12 Diamond Hill Capital Management, Inc. - Diamond Hill Select Equity - Gross Size 14.93 17.09 16.53 11.16 6.39 13.68 HGK Asset Management - All Cap - Gross Size 10.93 12.25 14.21 11.49 5.11 ICC Capital Management, Inc - Multi-Cap Eq. - Gross Size 9.70 11.95 9.36 8.05 8.10 14.08 Intrepid Capital Management, Inc. - Intrepid Multi-Cap Equity - Gross Size 7.72 9.17 10.43 11.12 9.93 11.06 Oak Ridge Investments, LLC - All-Cap - Gross Size 10.64 9.13 6.70 12.07 6.32 9.76 Russell 3000 11.07 11.35 14.56 12.97 6.32 9.15 Dow Jones Wilshire 5000 (Full Cap)10.91 11.03 14.17 12.84 6.28 9.32 Atlanta Capital Management Co., LLC - High Quality Small Cap - Gross Size 11.81 14.42 15.43 17.59 13.43 14.42 BuckheadCaptial Management - Small Cap Value - Gross Size 11.33 17.99 11.60 9.75 7.23 12.25 Ceredex - Value Ad Small Cap Value - Gross Size 12.02 18.95 18.56 15.38 11.55 15.51 DePrince, Race, Zollo, Inc. - Small Cap Value - Gross Size 10.00 15.88 18.46 12.46 10.31 13.47 Eagle Asset Management - Small Cap Core - Institutional - Gross Size 12.53 15.01 16.44 15.26 8.01 12.31 GW Capital, Inc. - Small Cap Value Equity - Gross Size 15.29 22.06 28.04 15.81 8.78 17.40 Intrepid Capital Management, Inc. - Intrepid Small Cap - Gross Size 4.91 6.31 8.61 10.96 13.39 12.65 Kayne Anderson Rudnick Invst. - Small Cap - Gross Size 10.07 12.03 11.32 17.65 12.67 13.67 Missouri Valley Partners 13.57 17.32 18.83 19.60 13.70 13.03 Rhumbline Advisers Corporation - S&P 600 Index Fund - Gross Size 11.77 14.24 16.03 15.12 9.14 Sawgrass Asset Management, LLC - Small Cap Growth Equity - Gross Size 13.73 13.09 8.34 16.06 5.35 7.61 Silvant Capital - Small Cap Growth - Gross Size 11.53 12.53 15.50 15.21 9.02 11.58 Russell 2000 12.39 14.48 16.30 13.45 8.24 11.52 S&P SmallCap 600 11.81 14.29 16.14 15.18 9.19 12.36 American Realty Advisors - Core Equity Real Estate-Sep. Accts. - Gross Size 2.50 11.27 13.14 12.50 -1.15 Cornerstone Real Estate Advisors, Inc. - US REIT TR - Gross Size 2.80 17.49 13.53 18.59 6.97 14.31 Intercontinental - US REIF - Gross Size 6.30 15.31 15.59 12.23 -1.07 JPMorgan Asset Management - Strategic Property Fund - Gross Size 2.78 12.12 14.02 14.07 0.04 7.79 Principal Global - Real Estate Core - Gross Size 2.19 12.75 14.69 15.54 -1.29 6.47 Dow Jones Wilshire REIT Index 2.48 2.48 17.59 18.21 5.26 11.58 NCREIF Property Index 2.54 2.54 12.39 12.63 2.13 8.44 Altrinsic Global Advisors - International Equity - Gross Size 6.01 10.15 9.29 5.27 2.70 10.94 DePrince, Race, Zollo, Inc. - International Equity - Gross Size 1.14 11.12 9.51 2.81 1.75 10.88 Harding Loevner - International Equity - Gross Size 2.93 9.24 10.67 8.97 4.42 12.43 Harding Loevner - Emerging Mkts. Equity - Gross Size 0.19 6.29 6.95 7.35 2.77 18.87 ICC Capital Management, Inc - International ADR Equity - Gross Size 5.40 11.72 9.78 6.38 2.72 9.28 INVESCO - International EM Equity - Gross Size -3.96 -0.03 -5.28 -1.03 -0.69 OFI Institutional Asset Mgmt. - Emerging Mkts.Equity - Gross Size 0.30 5.24 6.60 8.05 6.95 The Boston Company Asset Mgmt., LLC - International Core Equity Management 5.26 12.22 14.05 7.61 -1.03 10.53 Thornburg Investment Mgmt. - International Equity - Gross Size 2.76 8.50 7.79 5.95 1.14 13.26 WHV - WHV International Equity - Gross Size 3.98 8.13 8.54 5.17 0.21 15.73 WHV - WHV Emerging Mkts. Equity - Gross Size -1.47 2.49 -1.49 3.74 MSCI EAFE 5.23 12.18 11.79 5.49 -0.40 10.19 MSCI EMERGING MARKETS -1.57 3.95 2.30 3.59 1.39 17.41 Rhumbline Large Cap(FYE)10.57 10.17 13.93 12.68 5.96 8.64 Rhumbline Mid Cap(FYE)13.42 17.47 17.73 15.26 10.01 12.55 Rhumbline Small Cap(FYE)11.77 14.25 16.04 15.16 9.16 n/a International Equity(FYE)4.62 11.37 10.80 6.51 0.94 n/a ICC Large Growth(FYE)14.37 17.42 16.64 11.90 9.56 n/a Page 21 Performance of Other Managers March 31, 2013 ALL CAP EQUITY SMALL CAP EQUITY REAL ESTATE (12/31/2012) INTERNATIONAL EQUITY Qtr YTD 1Yr 3Yr 5Yr 10Yr Atlanta Capital Management Co., LLC - High Quality Broad Market - Gross Size -0.07 -0.07 3.21 4.89 4.76 4.87 Denver Investment Advisors - Core Bond Gov't/Corp. - Gross Size 0.12 0.32 4.87 6.29 5.93 5.65 Eagle Asset Management - Core Fixed Institutional - Gross Size -0.12 0.18 4.23 5.88 5.86 5.24 Garcia Hamilton & Associates - Fixed Aggregate - Gross Size 0.70 1.88 8.06 7.43 7.93 6.64 ICC Capital Management, Inc - Core Fixed Income - Gross Size -0.12 0.05 4.33 5.92 5.24 4.67 Integrity Fixed Income Mgmt, LLC - Core Fixed Income - Gross Size 0.43 0.90 4.94 6.34 6.65 Montage & Caldwell Inc. - Core Fixed Income - Gross Size 0.05 0.09 2.81 4.47 4.87 5.04 Sawgrass Asset Management, LLC - Core Fixed Income - Gross Size 0.17 0.66 4.64 5.88 6.19 5.45 RBC Global Asset Management, Inc. - Broad Market Core - Gross Size 0.07 0.31 4.32 6.11 5.59 4.89 Seix Advisors - Core Fixed Income - Gross Size -0.02 0.17 3.99 6.11 6.57 5.71 Wedge Capital Management - Core Fixed Income - Gross Size 0.56 1.06 4.84 6.15 6.53 5.68 Barclays Aggregate Bond -0.12 0.09 3.77 5.52 5.47 5.03 Barclays Gov/Credit Bond -0.16 0.21 4.56 6.10 5.50 5.06 Barclays High Yield US Corporate Bond 2.89 6.28 13.13 11.24 11.65 10.13 Buckhead Capital Management - Intermediate Fixed - Gross Size 0.24 0.66 3.72 4.52 5.03 Denver Investment Advisors - Intermediate Fixed - Gross Size 0.38 0.78 4.34 5.58 5.42 5.27 Eagle Asset Management - Institutional Conservative - Gross Size 0.22 0.51 3.63 5.15 5.41 4.86 Garcia Hamilton & Associates - Intermediate Fixed Income - Gross Size 0.75 1.76 6.95 6.37 6.89 5.87 Missouri Valley Partners - Intermediate Government/Credit Fixed Income - Gross Size 0.32 0.50 3.56 4.98 5.27 5.02 RBC Global Asset Management, Inc. - Intermediate Core - Gross Size 0.33 0.76 3.92 5.25 4.59 4.16 Sawgrass Asset Management, LLC - Intermediate Fixed Income - Gross Size 0.29 0.71 3.97 4.88 8.09 4.71 Seix Advisors - Intermediate Fixed Income - Gross Size 0.26 0.55 3.49 4.88 5.60 5.16 Sit Investment Associates, Inc. - Intermediate Govt/Corp - Gross Size 0.53 1.18 4.81 6.29 6.90 5.62 Barclays Intermediate Aggregate 0.15 0.33 3.04 4.64 4.93 4.69 Barclays Gov/Credit-Intermediate 0.26 0.61 3.53 4.75 4.61 4.49 Brandywine Global - International Fixed Invst. Grade - Gross Size -0.48 2.32 8.18 8.22 6.78 7.92 Federated Investors - Non-US Fixed Income Unhedged - Gross Size -4.88 -6.93 -2.66 3.12 2.57 5.64 PIMCO - Non US Fixed Income Unhedged - Gross Size -3.77 -5.62 2.29 7.89 5.83 7.58 Wells Capital Mgmt. - Global Fixed Income Ex-US - Gross Size -2.65 -2.43 3.47 5.28 5.22 7.56 Citigroup World Government Ex-US -3.83 -6.09 -2.17 3.33 2.28 5.58 International Bonds(FYE)-1.15 0.57 6.10 n/a n/a n/a ICC Fixed Income(FYE)-0.12 -0.15 4.36 6.02 5.45 4.77 American Realty(FYE)2.22 4.49 n/a n/a n/a n/a Page 22 INTERMEDIATE FIXED INCOME INTERNATIONAL FIXED INCOME Performance of Other Managers March 31, 2013 CORE FIXED INCOME CITY OF PALM BEACH GARDENS POLICE OFFICERS’ PENSION FUND ACTUARIAL VALUATION REPORT AS OF OCTOBER 1, 2012 ANNUAL EMPLOYER CONTRIBUTION FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2014 TABLE OF CONTENTS Section Title Page A Discussion of Valuation Results 1. Discussion of Valuation Results 1 2. Chapter Revenue 5 B Valuation Results 1. Participant Data 6 2. Annual Required Contribution 7 3. Actuarial Value of Benefits and Assets 8 4. Calculation of Employer Normal Cost 9 5. Liquidation of Unfunded Actuarial Accrued Liability 10 6. Actuarial Gains and Losses 12 7. Recent History of Required and Actual Contributions 16 8. Actuarial Assumptions and Cost Method 17 9. Glossary of Terms 21 C Pension Fund Information 1. Statement of Plan Assets at Market Value 24 2. Reconciliation of Plan Assets 25 3. Reconciliation of DROP Accounts 26 4. Calculation of Actuarial Value of Assets 27 5. Investment Rate of Return 28 D Financial Accounting Information 1. FASB No. 35 29 2. GASB No. 25 30 3. GASB No. 27 32 E Miscellaneous Information 1. Reconciliation of Membership Data 34 2. Active Participant Distribution 35 3. Inactive Participant Distribution 36 F Summary of Plan Provisions 37 SECTION A DISCUSSION OF VALUATION RESULTS 1 DISCUSSION OF VALUATION RESULTS Comparison of Required Employer Contributions A comparison of the required employer contribution developed in this year's actuarial valuation and the previous valuation is as follows. Required Employer/State Contribution$3,125,279$3,113,406$11,873 As % of Covered Payroll60.62%51.80%8.82% Allowable Credit for State Contribution$412,644*$412,644*$0 As % of Covered Payroll8.00%6.87%1.13% Required Employer Contribution$2,712,635$2,700,762$11,873 As % of Covered Payroll52.62%44.93%7.69% For FYE 9/30/2014For FYE 9/30/2013 Based on 10/1/2011 Based on 10/1/2012 ValuationValuation(Decrease) Increase * Reflects that the additional premium tax revenues ($209,716) are not sufficient to fund the Chapter minimum benefits, and therefore can be utilized to help meet the City’s contribution requirement. The required employer contribution has been adjusted for interest on the basis that contributions are made in equal payments at the end of each quarter. The contribution has also been computed under the assumption that the amount to be received from the State on behalf of police officers in 2014 will be the same as the base amount of $412,644. If the actual payment from the State falls below this amount, then the City must increase its contribution by the difference. Actual employer and allowable State contributions during the year ending September 30, 2012 were $3,785,539 and $412,644, respectively, for a total of $4,198,183. The annual required contribution was $4,198,183. 2 Revisions in Benefits Under Ordinance 24, 2012, adopted on September 13, 2012, the following changes were made:  The benefit multiplier was lowered from 3.50% to 2.75% per year of service for service accrued after September 13, 2012. This change did not apply to members who were eligible for normal retirement as of September 13, 2012.  The total maximum benefit that may be accrued under the Plan was reduced from 100% to 75% of Average Final Compensation. However, any member who had accrued a greater percentage as of September 13, 2012 retains that percentage but will not accrue an increased percentage. This change did not apply to members who are eligible for normal retirement as of September 13, 2012.  Compensation was changed from total W-2 earnings to base pay excluding all other pay. However, compensation for pension purposes after September 13, 2012 will not be less than the compensation on the day before September 13, 2012 under the previous definition.  The amount of unused leave pay included in compensation is limited to the dollar amount accrued on September 13, 2012.  The normal retirement date was changed to age 59 with 10 years of service from the earlier of age 52 with 10 years of service or 20 years of service regardless of age. This change did not apply to members who had at least ten years of service as of September 13, 2012.  The COLA provided by actuarial gains was eliminated. Since this plan provision is not pre-funded, this change had no impact on the required contribution.  These revisions were recognized in an Actuarial Impact Statement dated August 15, 2012. Revisions in Actuarial Assumptions or Methods The investment return assumption was lowered from 7.4% to 7.3%. This rate will continue to be lowered by 0.1% each year until 6.5% is reached. There have been no other changes in assumptions or methods since the prior valuation. Actuarial Experience There was a net actuarial gain of $751,599 for the year, which means that actual experience was 3 more favorable than expected. The gain is primarily due to lower than expected salary increases. Actual average salary increases were 0.4% versus assumed salary increases of 7.5%. The gain was partially offset by losses due to recognized investment return below the assumed rate of 7.4% and more retirements (DROP entries) than expected. The investment return was 18.0% based on market value of assets and 7.0% based on actuarial value of assets. The net actuarial gain has decreased the required employer contribution by 1.68% of covered payroll. Funded Ratio This year’s funded ratio is 69.1% compared to 66.4% last year (after reflecting Ordinance 24, 2012). The funded ratio was 69.9% before the change in the investment return assumption. The ratio is equal to the actuarial value of assets divided by the actuarial accrued (past service) liability. Analysis of Change in Employer Contribution The components of change in the employer contribution rate are as follows: Contribution rate last year44.93% Change in assumptions1.96 Payment on unfunded liability9.44* Experience (gain)/loss(1.68) Change in Normal Cost Rate(1.45) Change in administrative expense0.55 Change in State revenue(1.13) Contribution rate this year52.62 * The payroll growth assumption was lowered to 0% from 1.55% (as of the Actuarial Impact Statement) for purposes of amortizing the UAAL due to the 10-year payroll growth cap required by Florida Statutes. Variability of Future Contribution Rates The Actuarial Cost Method used to determine the contribution rate is intended to produce contribution rates which are generally level as a percent of payroll. Even so, when experience differs from the assumptions, as it often does, the employer’s contribution rate can vary significantly from year- to-year. Over time, if the year-to-year gains and losses offset each other, the contribution rate would be expected to return to the current level, but this does not always happen. The Actuarial Value of Assets exceeds the Market Value of Assets by $714,862 as of the 4 valuation date (see Section C). This difference will be gradually recognized in the absence of offsetting gains. In turn, the computed employer contribution rate will increase by approximately 1.6% of covered payroll. Another area of variability has to do with the annual payment on the unfunded accrued liability (UAL). For general employees, this payment is computed as a level percent of covered payroll under the assumption that covered payroll will rise by 5% per year. According to Chapter 112, Florida Statutes, this payroll growth assumption may not exceed the average growth over the last ten years, which was (1.26%) during the ten-year period ending September 30, 2012. Therefore, the UAL is being amortized as a level dollar amount this year. This adjustment increased the required employer contribution rate by 4.72% of covered payroll. Relationship to Market Value If Market Value had been the basis for the valuation, the City contribution rate would have been 54.20% and the funded ratio would have been 68.1%. The market value-based funded ratio was 58.7% last year. In the absence of other gains and losses, the City contribution rate should increase to that level over the next few years. Conclusion The remainder of this Report includes detailed actuarial valuation results, financial information, miscellaneous information and statistics, and a summary of plan provisions. 5 CHAPTER REVENUE Increments in Chapter revenue over that received in 1998 must first be used to fund the cost of compliance with minimum benefits. Once minimums are met, any subsequent additional Chapter revenue must be used to provide extra benefits. As of the valuation date, there are no minimum benefit requirements outstanding. 1.Base Amount Previous Plan Year$412,644 2.Amount Received for Previous Plan Year445,534 3.Benefit Improvements Made in Previous Plan Year0 4.Excess Funds for Previous Plan Year: (2) - (1) - (3)32,890 5.Accumulated Excess at Beginning of Previous Year505,662 6.Prior Excess Used in Previous Plan Year0 7.Accumulated Excess as of Valuation Date (Available for Benefit Improvements): (4) + (5) - (6)538,552 8.Base Amount This Plan Year: (1) + (3)412,644 Actuarial Confirmation of the Use of State Chapter Money The Accumulated Excess shown in line 7 is being held in reserve to pay for additional benefits. The reserve is subtracted from Plan assets (see Section C of this Report). The Base Amount in line 8 is the maximum amount the employer may take as a credit against its required contribution; however, in no event may the employer take credit for more than the actual amount of Chapter revenue received. SECTION B VALUATION RESULTS 6 ACTIVE MEMBERS Number7484 Covered Annual Payroll$4,910,023$5,724,225 Average Annual Payroll$66,352$68,146 Average Age40.240.1 Average Past Service10.710.5 Average Age at Hire29.529.6 RETIREES, BENEFICIARIES & DROP** Number5446 Annual Benefits$3,934,797$3,350,377 Average Annual Benefit$72,867$72,834 Average Age54.854.9 DISABILITY RETIREES Number1010 Annual Benefits$272,822$272,822 Average Annual Benefit$27,282$27,282 Average Age56.255.2 TERMINATED VESTED MEMBERS Number11 Annual Benefits$49,452$49,452 Average Annual Benefit$49,452$49,452 Average Age41.040.0 * From August 15, 2012 Actuarial Impact Statement ** Does not include deferred supplemental benefits for DROP members PARTICIPANT DATA October 1, 2012October 1, 2011* 7 A.Valuation DateOctober 1, 2012October 1, 2012 B.ARC to Be Paid During Fiscal Year Ending9/30/20149/30/20149/30/2013 C.Assumed Dates of Employer ContributionsQuarterlyQuarterlyQuarterly D.Annual Payment to Amortize Unfunded Actuarial Liability$1,905,316$1,836,445$1,716,176 E.Employer Normal Cost944,743919,8391,121,518 F.ARC if Paid on the Valuation Date: D+E2,850,0592,756,2842,837,694 G.ARC Adjusted for Frequency of Payments2,976,6302,880,3172,965,390 H.ARC as % of Covered Payroll60.62%58.66%51.80% I.Assumed Rate of Increase in Covered Payroll to Contribution Year5.00%5.00%5.00% J.Covered Payroll for Contribution Year5,155,5245,155,5246,010,436 K.ARC for Contribution Year: H x J3,125,2793,024,2303,113,406 L.Allowable Credit for State Revenue in Contribution Year412,644**412,644**412,644** M.Required Employer Contribution (REC) in Contribution Year2,712,6352,611,5862,700,762 N.REC as % of Covered Payroll in Contribution Year: M ÷ J52.62%50.66%44.93% ANNUAL REQUIRED CONTRIBUTION (ARC) After ChangeBefore Change October 1, 2011* * From August 15, 2012 Actuarial Impact Statement ** Reflects that the additional premium tax revenues ($209,716) are not sufficient to fund the minimum Chapter benefits, and therefore can be utilized to help meet the City’s contribution requirement. 8 A.Valuation DateOctober 1, 2012October 1, 2012October 1, 2011* B.Actuarial Present Value of All Projected Benefits for 1.Active Members a. Service Retirement Benefits$ 26,846,938$ 26,336,103$ 32,085,576 b. Vesting Benefits1,217,271 1,190,274 1,341,710 c. Disability Benefits4,133,242 4,059,680 4,584,137 d. Preretirement Death Benefits457,605 449,367 514,978 e. Return of Member Contributions14,349 14,325 19,655 f. Total32,669,405 32,049,749 38,546,056 2.Inactive Members a. Service Retirees & Beneficiaries48,572,874 48,096,901 41,515,012 b. Disability Retirees2,920,636 2,897,000 2,944,145 c. Terminated Vested Members279,574 274,042 254,908 d. Total51,773,084 51,267,943 44,714,065 3. Total for All Members84,442,48983,317,69283,260,121 C.Actuarial Accrued (Past Service) Liability per GASB No. 2572,156,731 71,364,212 68,822,738 D.Actuarial Value of Accumulated Plan Benefits per FASB No. 35 1.Based on Plan's Interest Rate70,152,68469,362,72266,770,064 2. Based on FRS Interest Rate66,716,73066,716,73064,157,459 E.Plan Assets 1.Market Value49,144,43649,144,43640,379,486 2. Actuarial Value49,859,29849,859,29845,709,740 F.Unfunded Actuarial Accrued Liabilit y: C - E222,297,43321,504,91423,112,998 G.Actuarial Present Value of Projected Covered Payroll52,548,80952,180,29859,908,329 H.Actuarial Present Value of Projected Member Contributions4,519,1974,487,5065,152,116 ACTUARIAL VALUE OF BENEFITS AND ASSETS Before ChangeAfter Change * From August 15, 2012 Actuarial Impact Statement 9 CALCULATION OF EMPLOYER NORMAL COST A.Valuation DateOctober 1, 2012 After ChangeBefore Change B.Normal Cost for 1.Service Retirement Benefits$887,980 $868,490 $1,088,926 2.Vesting Benefits89,091 87,290 102,624 3.Disability Benefits230,964 227,642 267,504 4.Preretirement Death Benefits25,544 25,191 29,213 5.Return of Member Contributions9,859 9,921 11,493 6.Total for Future Benefits1,243,438 1,218,534 1,499,760 7.Assumed Amount for Administrative Expenses123,567 123,567 114,041 8.Total Normal Cost1,367,005 1,342,101 1,613,801 9.Total as a % of Covered Payroll27.84%27.33%28.19% C.Expected Member Contribution422,262 422,262 492,283 D.Employer Normal Cost: B8-C 944,743 919,839 1,121,518 E.Employer Normal Cost as a % of Covered Payroll19.24%18.73%19.59% October 1, 2011*October 1, 2012 * From August 15, 2012 Actuarial Impact Statement 10 LIQUIDATION OF THE UNFUNDED ACTUARIAL ACCRUED LIABILITY A. UAAL Amoritzation Period and Payments Amortization PeriodYears Years(Years)Amount Remaining AmountAfter ChangeBefore Change 7/1/1986304,147$ 41,119$ 310$ 310$ 10/1/199130(1,504)9(816)(118)(119) 10/1/199130286,2239154,85822,43522,509 10/1/199230122,6111071,8489,6669,702 10/1/199330(194,444)11(122,977)(15,513)(15,576) 10/1/199530796,97513687,17177,93578,300 10/1/199630(189,977)14(178,549)(19,371)(19,468) 10/1/2000303,639,273184,132,031391,159393,586 10/1/200530975,210231,094,83492,85093,546 10/1/2005305,273,728235,920,631502,115505,876 10/1/20063012,571,5152413,749,6551,146,8401,155,693 10/1/200715(251,668)10(208,704)(28,078)(28,181) 10/1/2008153,319,494112,881,261363,465364,923 10/1/200915(137,951)12(122,301)(14,581)(14,644) 10/1/201015348,98113318,26936,09636,265 10/1/201115(718,288)14(668,480)(72,524)(72,887) 10/1/201115847,05414788,31785,52585,954 10/1/201115(6,706,717)14(6,241,654)(677,162)(680,556) 10/1/201215(751,599)15(751,599)(78,371)(78,788) 10/1/201215792,519 15792,519 82,638 N/A 20,025,582$ 22,297,433$ 1,905,316$ 1,836,445$ Original UAALCurrent UAAL Payment 11 B. Amortization Schedule The UAAL is being amortized as a level percent of payroll. The expected amortization schedule is as follows: 2012$22,297,433 201321,880,740 201421,433,630 201520,953,881 201620,439,110 201719,887,093 202216,484,349 202712,779,647 20325,806,306 20360 YearExpected UAAL Amortization Schedule 12 ACTUARIAL GAINS AND LOSSES The assumptions used to anticipate mortality, employment turnover, investment income, expenses, salary increases, and other factors have been based on long range trends and expectations. Actual experience can vary from these expectations. The variance is measured by the gain and loss for the period involved. If significant long term experience reveals consistent deviation from what has been expected and that deviation is expected to continue, the assumptions should be modified. The net actuarial gain (loss) for the past year is computed as follows: 1.Last Year's UAAL$23,112,998 2.Last Year's Employer Normal Cost1,613,801 3.Last Year's Contributions4,198,183 4. Interest at the Assumed Rate on: a.1 and 2 for one year1,829,783 b.3 from dates paid101,886 c. a - b1,727,897 5.This Year's Expected UAAL Prior to Revision: 1 + 2 - 3 + 4c22,256,513 6.Change in UAAL Due to Plan Amendments and/or Changes in Actuarial Assumptions792,519 7.This Year's Expected UAAL: 5 + 623,049,032 8.This Year's Actual UAAL22,297,433 9.Net Actuarial Gain (Loss): 7 - 8751,599 10.Gain (Loss) Due to Investments(178,716) 11.Gain (Loss) from Other Sources930,315 13 Experience gains/losses for the past few years are as follows: Year Ending September 30 Gain (Loss) 1996$(284,232) 1997(994,552) 1998(674,477) 1999(424,754) 200068,592 2001(435,534) 2002(2,162,823) 2003(949,324) 2004(246,347) 2005(1,006,694) 2006(1,517,294) 2007251,668 2008(3,319,494) 2009137,951 2010(348,981) 2011718,288 2012751,599 14 The fund earnings and salary increase assumptions have considerable impact on the cost of the Plan so it is important that they are in line with the actual experience. The following table shows the actual fund earnings and salary increase rates compared to the assumed rates for the last few years: Year Ending 9/30/19909.1%8.0%9.1%6.5% 9/30/19918.68.09.56.5 9/30/19928.28.010.96.5 9/30/19938.88.014.16.5 9/30/19942.48.00.66.5 9/30/199518.28.012.86.5 9/30/19965.28.03.66.5 9/30/199710.38.011.5*6.5 9/30/19989.28.010.06.5 9/30/19999.68.08.46.5 9/30/20009.08.05.96.5 9/30/20016.38.51.16.0 9/30/2002(1.6)8.511.86.0 9/30/20033.78.57.46.0 9/30/20043.98.516.46.0 9/30/20054.88.53.66.0 9/30/20066.58.59.76.0 9/30/20078.17.58.87.5 9/30/20083.67.513.87.5 9/30/20094.47.51.07.5 9/30/20105.67.57.77.5 9/30/20114.67.5(1.9)7.5 9/30/20127.07.40.47.5 Average for Years Shown6.7N/A7.6N/A Salary IncreasesInvestment Return ActualAssumedActualAssumed * Actual raises during the year were less than 10.0%. However, there was a problem of underreporting of compensation in the previous year that resulted in the 11.5% average increase. The actual investment return rates shown above are based on the actuarial value of assets. The actual salary increase rates shown above are the increases received by those active members who were included in the actuarial valuations both at the beginning and the end of each year. 15 Active Members YearVestedOtherEnd of EndedAEAEAEAEAAAEYear 9/30/20021052400001232 90 9/30/20031493510001453 95 9/30/20041072610001343 98 9/30/20051142800000223 105 9/30/2006751901000443 107 9/30/2007553601001123 107 9/30/2008233501000003 106 9/30/2009576801001013 104 9/30/201031411501001233 93 9/30/201141311201000222 84 9/30/20122128100100332 74 9/30/20130002 11 Yr Totals *7384525926106232930 * Totals are through current Plan Year only. Service & Disability Actual (A) Compared to Expected (E) Decrements Among Active Employees Number Added Terminations Totals DuringDROP YearRetirementRetirementDeath Am o u n t A m o u n t A m o u n t E m p l o y e r S t a t e T o t a l 10 / 1 / 1 9 9 3 9 / 3 0 / 1 9 9 4 $ 2 4 2 , 0 8 3 8 . 3 6 % $ 1 3 5 , 1 5 3 4 . 6 7 % $ 1 0 6 , 9 3 0 3 . 6 9 % $ 1 1 7 , 3 8 1 $ 1 5 1 , 3 2 4 $ 2 6 8 , 7 0 5 10 / 1 / 1 9 9 4 9 / 3 0 / 1 9 9 5 2 4 4 , 3 1 7 7 . 7 6 1 4 8 , 0 7 2 4 . 7 0 9 6 , 2 4 5 3 . 0 6 9 6 , 2 4 5 1 6 2 , 2 4 7 2 5 8 , 4 9 2 10 / 1 / 1 9 9 5 9 / 3 0 / 1 9 9 6 4 0 4 , 8 5 6 1 2 . 0 2 1 6 2 , 2 4 7 4 . 8 2 2 4 2 , 6 0 9 7 . 2 0 2 4 2 , 6 0 9 1 9 5 , 5 9 7 4 3 8 , 2 0 6 10 / 1 / 1 9 9 6 9 / 3 0 / 1 9 9 7 4 3 8 , 0 7 4 1 2 . 2 4 1 9 5 , 5 9 7 5 . 4 7 2 4 2 , 4 7 7 6 . 7 8 2 4 2 , 4 7 7 2 2 7 , 1 0 6 4 6 9 , 5 8 3 10 / 1 / 1 9 9 7 9 / 3 0 / 1 9 9 8 5 9 2 , 5 2 2 1 5 . 3 0 2 2 7 , 1 0 6 5 . 8 6 3 6 5 , 4 1 6 9 . 4 4 3 6 5 , 4 1 6 2 3 5 , 8 1 9 6 0 1 , 2 3 5 10 / 1 / 1 9 9 8 9 / 3 0 / 1 9 9 9 7 6 0 , 1 4 2 1 6 . 9 8 2 3 5 , 8 1 9 5 . 2 7 5 2 4 , 3 2 3 1 1 . 7 1 5 2 4 , 3 2 3 2 3 6 , 6 3 6 7 6 0 , 9 5 9 10 / 1 / 1 9 9 9 9 / 3 0 / 2 0 0 0 8 5 3 , 7 9 0 1 8 . 0 9 2 3 5 , 8 1 9 5 . 0 0 6 1 7 , 9 7 1 1 3 . 0 9 6 3 8 , 0 1 7 2 1 5 , 7 7 3 8 5 3 , 7 9 0 10 / 1 / 2 0 0 0 9 / 3 0 / 2 0 0 1 9 3 5 , 2 7 3 1 8 . 1 4 2 1 5 , 7 7 3 4 . 1 8 7 1 9 , 5 0 0 1 3 . 9 5 7 1 9 , 5 0 0 2 2 5 , 8 9 2 9 4 5 , 3 9 2 10 / 1 / 2 0 0 1 9 / 3 0 / 2 0 0 2 1 , 0 0 5 , 6 6 2 2 0 . 4 9 2 2 5 , 8 9 2 4 . 6 0 7 7 9 , 7 7 0 1 5 . 8 9 7 7 9 , 7 7 0 2 3 5 , 8 1 8 1 , 0 1 5 , 5 8 8 10 / 1 / 2 0 0 2 9 / 3 0 / 2 0 0 3 1 , 4 2 5 , 3 2 8 2 5 . 5 8 2 3 5 , 8 1 8 4 . 2 3 1 , 1 8 9 , 5 1 0 2 1 . 3 5 1 , 1 8 9 , 5 1 0 2 3 5 , 8 1 8 1 , 4 2 5 , 3 2 8 10 / 1 / 2 0 0 2 9 / 3 0 / 2 0 0 4 1 , 4 7 5 , 3 4 0 2 5 . 5 8 2 3 5 , 8 1 8 4 . 0 9 1 , 2 3 9 , 5 2 2 2 1 . 4 9 1 , 2 3 9 , 5 2 2 2 3 5 , 8 1 8 1 , 4 7 5 , 3 4 0 10 / 1 / 2 0 0 3 9 / 3 0 / 2 0 0 5 1 , 7 0 4 , 0 4 1 2 7 . 4 9 2 3 5 , 8 1 8 3 . 8 0 1 , 4 6 8 , 2 2 3 2 3 . 6 9 1 , 4 6 8 , 2 2 3 2 3 5 , 8 1 8 1 , 7 0 4 , 0 4 1 10 / 1 / 2 0 0 4 9 / 3 0 / 2 0 0 6 1 , 9 3 1 , 0 5 4 2 7 . 6 2 2 3 5 , 8 1 8 3 . 3 7 1 , 6 9 5 , 2 3 6 2 4 . 2 5 1 , 6 9 5 , 2 3 6 4 1 2 , 6 4 4 2 , 1 0 7 , 8 8 0 10 / 1 / 2 0 0 5 9 / 3 0 / 2 0 0 7 3 , 1 7 6 , 7 9 1 4 1 . 8 6 4 1 2 , 6 4 4 5 . 4 4 2 , 7 6 4 , 1 4 7 3 6 . 4 2 2 , 7 6 4 , 1 4 7 4 1 2 , 6 4 4 3 , 1 7 6 , 7 9 1 10 / 1 / 2 0 0 6 9 / 3 0 / 2 0 0 8 3 , 5 5 6 , 5 4 8 4 0 . 7 0 4 1 2 , 6 4 4 4 . 7 2 3 , 1 4 3 , 9 0 4 3 5 . 9 8 3 , 1 4 3 , 9 0 4 4 1 2 , 6 4 4 3 , 5 5 6 , 5 4 8 10 / 1 / 2 0 0 7 9 / 3 0 / 2 0 0 9 3 , 7 6 2 , 3 2 3 4 0 . 1 9 4 1 2 , 6 4 4 4 . 4 1 3 , 3 4 9 , 6 7 9 3 5 . 7 8 3 , 3 4 9 , 6 7 9 4 1 2 , 6 4 4 3 , 7 6 2 , 3 2 3 10 / 1 / 2 0 0 8 9 / 3 0 / 2 0 1 0 4 , 3 6 8 , 6 1 2 4 2 . 2 7 4 1 2 , 6 4 4 3 . 9 9 3 , 9 5 5 , 9 6 8 3 8 . 2 8 3 , 9 5 5 , 9 6 8 4 1 2 , 6 4 4 4 , 3 6 8 , 6 1 2 10 / 1 / 2 0 0 9 9 / 3 0 / 2 0 1 1 4 , 2 9 8 , 2 1 6 4 4 . 0 6 4 1 2 , 6 4 4 4 . 2 3 3 , 8 8 5 , 5 7 2 3 9 . 8 3 3 , 8 8 5 , 5 7 2 4 1 2 , 6 4 4 4 , 2 9 8 , 2 1 6 10 / 1 / 2 0 1 0 9 / 3 0 / 2 0 1 2 4 , 1 9 8 , 1 8 3 4 7 . 0 4 4 1 2 , 6 4 4 4 . 6 2 3 , 7 8 5 , 5 3 9 4 2 . 4 2 3 , 7 8 5 , 5 3 9 4 1 2 , 6 4 4 4 , 1 9 8 , 1 8 3 10 / 1 / 2 0 1 1 9 / 3 0 / 2 0 1 3 3 , 1 1 3 , 4 0 6 5 1 . 8 0 4 1 2 , 6 4 4 6 . 8 7 2 , 7 0 0 , 7 6 2 4 4 . 9 3 - - - - - - - - - 10 / 1 / 2 0 1 2 9 / 3 0 / 2 0 1 4 3 , 1 2 5 , 2 7 9 6 0 . 6 2 4 1 2 , 6 4 4 8 . 0 0 2 , 7 1 2 , 6 3 5 5 2 . 6 2 - - - - - - - - - Re q u i r e d C o n t r i b u t i o n s RE C E N T H I S T O R Y O F R E Q U I R E D A N D A C T U A L C O N T R I B U T I O N S E n d o f Ye a r T o Wh i c h Va l u a t i o n A p p l i e s Ac t u a l C o n t r i b u t i o n s Va l u a t i o n Da t e % o f P a y r o l l Ne t E m p l o y e r % o f P a y r o l l Es t i m a t e d S t a t e % o f Pa y r o l l Em p l o y e r & S t a t e 16 17 ACTUARIAL ASSUMPTIONS AND COST METHOD Valuation Methods Actuarial Cost Method - Normal cost and the allocation of benefit values between service rendered before and after the valuation date were determined using an Individual Entry-Age Actuarial Cost Method having the following characteristics: (i) the annual normal cost for each individual active member, payable from the date of employment to the date of retirement, is sufficient to accumulate the value of the member’s benefit at the time of retirement; (ii) each annual normal cost is a constant percentage of the member’s year by year projected covered pay. Actuarial gains/(losses), as they occur, reduce (increase) the Unfunded Actuarial Accrued Liability. Financing of Unfunded Actuarial Accrued Liabilities - Unfunded Actuarial Accrued Liabilities (full funding credit if assets exceed liabilities) were amortized by level (principal & interest combined) percent-of-payroll contributions over a reasonable period of future years. Actuarial Value of Assets - The Actuarial Value of Assets phase in the difference between the expected actuarial value and actual market value of assets at the rate of 20% per year. The Actuarial Value of Assets will be further adjusted to the extent necessary to fall within the corridor whose lower limit is 80% of the Market Value of plan assets and whose upper limit is 120% of the Market Value of plan assets. During periods when investment performance exceeds the assumed rate, Actuarial Value of Assets will tend to be less than Market Value. During periods when investment performance is less than assumed rate, Actuarial Value of Assets will tend to be greater than Market Value. Valuation Assumptions The actuarial assumptions used in the valuation are shown in this Section. Economic Assumptions The investment return rate assumed in the valuation is 7.3% per year, compounded annually (net after investment expenses). This assumption is being lowered by 0.1% each year until 6.5% is reached. The Wage Inflation Rate assumed in this valuation was 3% per year. The Wage Inflation Rate is defined to be the portion of total pay increases for an individual that are due to macro-economic forces including productivity, price inflation, and labor market conditions. The wage inflation rate does not include pay changes related to individual merit and seniority effects. The assumed real rate of return over wage inflation is defined to be the portion of total investment return that is more than the assumed wage inflation rate. Considering other economic assumptions, the 7.3% investment return rate translates to an assumed real rate of return over wage inflation of 4.3%. 18 The rate of salary increase used for individual members is 7.5% per year. Part of the assumption is for merit and/or seniority increase, and 3% recognizes wage inflation, including price inflation, productivity increases, and other macroeconomic forces. This assumption is used to project a member’s current salary to the salaries upon which benefits will be based. For purposes of financing the unfunded liabilities, total payroll is assumed to grow at 5% per year. According to Chapter 112, Florida Statutes, this payroll growth assumption may not exceed the average growth over the last ten years which was (1.26%). Therefore, unfunded liabilities are being amortized this year as a level dollar amount, with no assumed payroll growth. Demographic Assumptions The mortality table was the RP-2000 Combined Healthy Participant Mortality Tables for males and females. The provision for future mortality improvements is being made by using Scale AA after 2000. Sample Attained Ages (in 2012)MenWomenMenWomen 500.17%0.14%34.0835.52 550.290.2528.9630.57 600.560.4824.0425.79 651.080.9119.4521.31 701.851.5815.2817.20 753.192.5511.5313.48 805.714.228.3510.19 Probability of Future Life Dying Next YearExpectancy (years) This assumption is used to measure the probabilities of each benefit payment being made after retirement. For active members, the probabilities of dying before retirement were based upon the same mortality table as members dying after retirement (75% of deaths are assumed to be service-connected). For disabled retirees, the regular mortality tables are set forward 5 years in ages to reflect impaired longevity. 19 The rates of retirement used to measure the probability of eligible members who were not affected by the change in normal retirement eligibility (who had at least 10 years of service as of the change date) retiring during the next year are as follows: Age 42 - 45464748495051525354555657585960 10 0.0%0.0%0.0%0.0%0.0%2.5%2.5%20.0%20.0%20.0%55.0%65.0%65.0%65.0%65.0%100.0% 11 0.0%0.0%0.0%0.0%0.0%2.5%2.5%10.0%10.0%10.0%47.5%57.5%60.0%60.0%60.0%100.0% 12 0.0%0.0%0.0%0.0%0.0%2.5%2.5%10.0%10.0%10.0%47.5%57.5%60.0%60.0%60.0%100.0% 13 0.0%0.0%0.0%0.0%0.0%2.5%2.5%10.0%10.0%10.0%47.5%57.5%60.0%60.0%60.0%100.0% 14 0.0%0.0%0.0%0.0%0.0%2.5%2.5%10.0%10.0%10.0%47.5%57.5%60.0%60.0%60.0%100.0% 15 0.0%0.0%0.0%0.0%0.0%2.5%2.5%10.0%10.0%10.0%47.5%57.5%60.0%60.0%60.0%100.0% 16 0.0%0.0%0.0%0.0%0.0%2.5%2.5%10.0%10.0%10.0%47.5%57.5%60.0%60.0%60.0%100.0% 17 0.0%0.0%0.0%0.0%0.0%2.5%2.5%10.0%10.0%10.0%47.5%57.5%60.0%60.0%60.0%100.0% 18 0.0%0.0%0.0%0.0%0.0%2.5%2.5%10.0%10.0%10.0%47.5%57.5%60.0%60.0%60.0%100.0% 19 0.0%0.0%0.0%0.0%0.0%2.5%2.5%10.0%10.0%10.0%47.5%57.5%60.0%60.0%60.0%100.0% 20 20.0%22.5%22.5%22.5%22.5%25.0%27.5%30.0%40.0%45.0%70.0%80.0%80.0%80.0%80.0%100.0% 21 5.0%5.0%5.0%10.0%10.0%12.5%12.5%12.5%15.0%15.0%47.5%65.0%65.0%65.0%65.0%100.0% 22 5.0%5.0%5.0%10.0%10.0%12.5%12.5%12.5%15.0%15.0%47.5%65.0%65.0%65.0%65.0%100.0% 23 5.0%5.0%5.0%10.0%10.0%15.0%15.0%15.0%15.0%15.0%47.5%65.0%65.0%65.0%65.0%100.0% 24 5.0%5.0%5.0%10.0%10.0%15.0%15.0%15.0%15.0%15.0%47.5%65.0%65.0%65.0%65.0%100.0% 25 100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0% S e r v i c e The probability of normal retirement for members affected by the change in normal retirement eligibility (to age 59 with 10 years of service) is 100% when first eligible. The probability of early retirement for these members is 2.5% for each year eligible. Rates of separation from active membership were as shown below (rates do not apply to members eligible to retire and do not include separation on account of death or disability). This assumption measures the probabilities of members remaining in employment. Sample Ages 206.0% 255.7 305.0 353.8 402.6 451.6 500.8 550.3 % of Active Members Separating Within Next Year Rates of disability among active members (75% of disabilities are assumed to be service-connected). Sample Ages 200.21% 250.23 300.27 350.35 400.45 450.77 501.50 552.32 % Becoming Disabled within Next Year 20 Miscellaneous and Technical Assumptions Administrative & Investment Expenses The investment return assumption is intended to be the return net of investment expenses. Annual administrative expenses are assumed to be equal to the average of the prior two years’ expenses. Assumed administrative expenses are added to the Normal Cost. Benefit Service Exact fractional service is used to determine the amount of benefit payable. Decrement Operation Disability and mortality decrements operate during retirement eligibility. Decrement Timing Decrements of all types are assumed to occur at the beginning of the year. Eligibility Testing Eligibility for benefits is determined based upon the age nearest birthday and service nearest whole year on the date the decrement is assumed to occur. Forfeitures For vested separations from service, it is assumed that 0% of members separating will withdraw their contributions and forfeit an employer financed benefit. It was further assumed that the liability at termination is the greater of the vested deferred benefit (if any) or the member’s accumulated contributions. Incidence of Contributions Employer contributions are assumed to be made in equal installments at the end of each quarter. Member contributions are assumed to be received continuously throughout the year based upon the computed percent of payroll shown in this report, and the actual payroll payable at the time contributions are made. Liability Load Projected normal and early retirement benefits are loaded based on the dollar amount of each active member’s frozen accrued leave as of September 13, 2012 to allow for the inclusion of unused sick and vacation pay (frozen as of September 13, 2012) in final average earnings. Marriage Assumption 100% of males and 100% of females are assumed to be married for purposes of death-in-service benefits. Male spouses are assumed to be three years older than female spouses for active member valuation purposes. Normal Form of Benefit A 10-year certain and life annuity is the normal form of benefit. Pay Increase Timing Middle of fiscal year. This is equivalent to assuming that reported pays represent amounts paid to members during the year ended on the valuation date. Service Credit Accruals It is assumed that members accrue one year of service credit per year. 21 GLOSSARY Actuarial Accrued Liability (AAL) The difference between the Actuarial Present Value of Future Benefits, and the Actuarial Present Value of Future Normal Costs. Actuarial Assumptions Assumptions about future plan experience that affect costs or liabilities, such as: mortality, withdrawal, disablement, and retirement; future increases in salary; future rates of investment earnings; future investment and administrative expenses; characteristics of members not specified in the data, such as marital status; characteristics of future members; future elections made by members; and other items. Actuarial Cost Method A procedure for allocating the Actuarial Present Value of Future Benefits between the Actuarial Present Value of Future Normal Costs and the Actuarial Accrued Liability. Actuarial Equivalent Of equal Actuarial Present Value, determined as of a given date and based on a given set of Actuarial Assumptions. Actuarial Present Value (APV) The amount of funds required to provide a payment or series of payments in the future. It is determined by discounting the future payments with an assumed interest rate and with the assumed probability each payment will be made. Actuarial Present Value of Future Benefits (APVFB) The Actuarial Present Value of amounts which are expected to be paid at various future times to active members, retired members, beneficiaries receiving benefits, and inactive, nonretired members entitled to either a refund or a future retirement benefit. Expressed another way, it is the value that would have to be invested on the valuation date so that the amount invested plus investment earnings would provide sufficient assets to pay all projected benefits and expenses when due. Actuarial Valuation The determination, as of a valuation date, of the Normal Cost, Actuarial Accrued Liability, Actuarial Value of Assets, and related Actuarial Present Values for a plan. An Actuarial Valuation for a governmental retirement system typically also includes calculations of items needed for compliance with GASB No. 25, such as the Funded Ratio and the Annual Required Contribution (ARC). Actuarial Value of Assets The value of the assets as of a given date, used by the actuary for valuation purposes. This may be the market or fair value of plan assets or a smoothed value in order to reduce the year-to-year volatility of calculated results, such as the funded ratio and the actuarially required contribution (ARC). 22 Amortization Method A method for determining the Amortization Payment. The most common methods used are level dollar and level percentage of payroll. Under the Level Dollar method, the Amortization Payment is one of a stream of payments, all equal, whose Actuarial Present Value is equal to the UAAL. Under the Level Percentage of Pay method, the Amortization Payment is one of a stream of increasing payments, whose Actuarial Present Value is equal to the UAAL. Under the Level Percentage of Pay method, the stream of payments increases at the rate at which total covered payroll of all active members is assumed to increase. Amortization Payment That portion of the plan contribution or ARC which is designed to pay interest on and to amortize the Unfunded Actuarial Accrued Liability. Amortization Period The period used in calculating the Amortization Payment. Annual Required Contribution (ARC) The employer’s periodic required contributions, expressed as a dollar amount or a percentage of covered plan compensation, determined under GASB No. 25. The ARC consists of the Employer Normal Cost and Amortization Payment. Closed Amortization Period A specific number of years that is reduced by one each year, and declines to zero with the passage of time. For example if the amortization period is initially set at 30 years, it is 29 years at the end of one year, 28 years at the end of two years, etc. Employer Normal Cost The portion of the Normal Cost to be paid by the employer. This is equal to the Normal Cost less expected member contributions. Equivalent Single Amortization Period For plans that do not establish separate amortization bases (separate components of the UAAL), this is the same as the Amortization Period. For plans that do establish separate amortization bases, this is the period over which the UAAL would be amortized if all amortization bases were combined upon the current UAAL payment. Experience Gain/Loss A measure of the difference between actual experience and that expected based upon a set of Actuarial Assumptions, during the period between two actuarial valuations. To the extent that actual experience differs from that assumed, Unfunded Actuarial Accrued Liabilities emerge which may be larger or smaller than projected. Gains are due to favorable experience, e.g., the assets earn more than projected, salaries do not increase as fast as assumed, members retire later than assumed, etc. Favorable experience means actual results produce actuarial liabilities not as large as projected by the actuarial assumptions. On the other hand, losses are the result of unfavorable experience, i.e., actual results that produce Unfunded Actuarial Accrued Liabilities which are larger than projected. 23 Funded Ratio The ratio of the Actuarial Value of Assets to the Actuarial Accrued Liability. GASB Governmental Accounting Standards Board. GASB No. 25 and GASB No. 27 These are the governmental accounting standards that set the accounting rules for public retirement systems and the employers that sponsor or contribute to them. Statement No. 27 sets the accounting rules for the employers that sponsor or contribute to public retirement systems, while Statement No. 25 sets the rules for the systems themselves. Normal Cost The annual cost assigned, under the Actuarial Cost Method, to the current plan year. Open Amortization Period An open amortization period is one which is used to determine the Amortization Payment but which does not change over time. In other words, if the initial period is set as 30 years, the same 30-year period is used in determining the Amortization Period each year. In theory, if an Open Amortization Period is used to amortize the Unfunded Actuarial Accrued Liability, the UAAL will never completely disappear, but will become smaller each year, either as a dollar amount or in relation to covered payroll. Unfunded Actuarial Accrued Liability The difference between the Actuarial Accrued Liability and Actuarial Value of Assets. Valuation Date The date as of which the Actuarial Present Value of Future Benefits are determined. The benefits expected to be paid in the future are discounted to this date. SECTION C PENSION FUND INFORMATION 24 Statement of Plan Assets at Market Value Item20122011 A.Cash and Cash Equivalents (Operating Cash)1,285,425$ 129,016$ B.Receivables: 1.Member Contributions34,753$ 73,914$ 2.Employer Contributions- 971,393 3.State Contributions- - 4.Investment Income and Other Receivables240,411 350,067 5.Total Receivables275,164$ 1,395,374$ C.Investments 1.Short Term Investments3,499,191$ 1,701,615$ 2.Domestic Equities30,327,759 21,218,413 3.International Equities3,680,875 3,083,297 4.Domestic Fixed Income14,463,030 15,483,122 5.International Fixed Income1,545,948 1,432,846 6.Real Estate557,928 - 7.Private Equity- - 8.Total Investments54,074,731$ 42,919,293$ D.Liabilities 1.Benefits Payable-$ -$ 2.Accrued Expenses and Other Payables(374,168) (164,299) 3.Total Liabilities(374,168)$ (164,299)$ E.Total Market Value of Assets Available for Benefits55,261,152$ 44,279,384$ F.Reserves 1.State Contribution Reserve(538,552)$ (505,662)$ 2.DROP Accounts(5,578,164) (3,394,236) 3.Total Reserves(6,116,716)$ (3,899,898)$ G.Market Value Net of Reserves49,144,436$ 40,379,486$ H.Allocation of Investments 1.Short Term Investments6.5%4.0% 2.Domestic Equities56.1%49.4% 3.International Equities6.8%7.2% 4.Domestic Fixed Income26.7%36.1% 5.International Fixed Income2.9%3.3% 6.Real Estate1.0%0.0% 7.Private Equity0.0%0.0% 8.Total Investments100.0%100.0% September 30 25 Reconciliation of Plan Assets Item 20122011 A.Market Value of Assets at Beginning of Year44,279,384$ 41,403,852$ B.Revenues and Expenditures 1.Contributions a.Member Contributions559,305$ 690,226$ b.Employer Contributions3,785,539 3,885,572 c.State Contributions445,534 435,787 d.Total4,790,378$ 5,011,585$ 2.Investment Income a.Interest, Dividends, and Other Income773,887$ 832,952$ b.Net Realized/Unrealized Gains/(Losses)*7,589,148 (851,895) c.Investment Expenses(152,703) (136,513) d.Net Investment Income8,210,332$ (155,456)$ 3.Benefits and Refunds a.Regular Monthly Benefits(1,679,226)$ (1,568,779)$ b.Refunds- (21,975) c.Lump Sum Benefits- - d.DROP Distributions(227,800) (254,626) e.Total(1,907,026)$ (1,845,380)$ 4.Administrative and Miscellaneous Expenses(111,916)$ (135,217)$ 5.Transfers-$ -$ C.Market Value of Assets at End of Year55,261,152$ 44,279,384$ D.Reserves 1.State Contribution Reserve(538,552)$ (505,662)$ 2.DROP Accounts(5,578,164) (3,394,236) 3.Total Reserves(6,116,716)$ (3,899,898)$ E.Market Value Net of Reserves49,144,436$ 40,379,486$ September 30 * Breakdown between realized and unrealized gains/(losses) was not provided. 26 Year Ended 9/30 Balance at Beginning of YearCreditsInterestDistributionsAdjustments Balance at End of Year 2002-$ 25,536$ 559$ -$ -$ 26,095$ 200326,09535,048962(33,734) - 28,371 200428,37167,2784,210- - 99,859 200599,859107,7169,307(54,224) - 162,658 2006162,65888,33213,653- - 264,643 2007264,643164,84422,183- - 451,670 2008451,670188,43424,255(215,043) 2,665 451,981 2009451,981557,33946,178- - 1,055,498 20101,055,498993,75396,296(91,000) - 2,054,547 20112,054,5471,426,393167,922(254,626) - 3,394,236 20123,394,2362,128,627283,101(227,800) - 5,578,164 Reconciliation of DROP Accounts 27 Calculation of Actuarial Value of Assets Item A. Beginning of Year Assets* 1. Market Value$44,279,384 *$41,403,852 2. Actuarial Value49,609,638 44,485,075 B. End of Year Market Value of Assets*55,261,152 44,279,384 C. Net of Contributions Less Disbursements2,771,436 *3,007,948 D. Actual Net Investment Earnings8,210,332 (155,456) E. Expected Investment Earnings3,773,656 3,449,179 F. End of Year Expected Actuarial Value56,154,730 50,942,202 G. End of Year Market Value Less Expected Actuarial Value: B - F(893,578)(6,662,818) H. 20% of Difference(178,716)(1,332,564) I. End of Year Assets 1. Actuarial Value: F + H55,976,014 49,609,638 2. Final Actuarial Value Within 80% to 120% of Market Value55,976,014 49,609,638 J. State Contribution Reserve538,552 505,662 K. DROP Accounts5,578,164 3,394,236 L. Final Actuarial Value of Assets: I2 - J - K49,859,298 45,709,740 M. Recognized Investment Earnings3,594,940 2,116,615 N. Recognized Rate of Return7.0%4.6% 20122011 Year Ending September 30 * Before offset of DROP Account Balances and State Contribution Reserve. 28 1990 9.1 % 9.1 % 1991 8.6 8.6 1992 8.2 8.2 1993 8.8 8.8 1994 2.4 2.4 1995 18.2 18.2 1996 5.2 5.2 1997 24.2 10.3 1998 5.3 9.2 1999 11.6 9.6 2000 6.7 9.0 2001 (7.8) 6.3 2002 (6.5) (1.6) 2003 12.7 3.7 2004 8.6 3.9 2005 9.6 4.8 2006 6.4 6.5 2007 11.5 8.1 2008 (13.9) 3.6 2009 6.7 4.4 2010 9.8 5.6 2011 (0.4) 4.6 2012 18.0 7.0 Average Returns: Last 5 Years 3.5 % 5.0 % Last 10 Years 6.6 % 5.2 % All Years 6.8 % 6.7 % * Net of investment expenses after 2005. Investment Rate of Return Actuarial ValueMarket Value * Year Ending September 30 The above rates are based on the retirement system’s financial information reported to the actuary. They may differ from figures that the investment consultant reports, in part because of differences in the handling of administrative and investment expenses, and in part because of differences in the handling of cash flows. SECTION D FINANCIAL ACCOUNTING INFORMATION 29 A.Valuation Date B.Actuarial Present Value of Accumulated Plan Benefits 1.Vested Benefits a.Members Currently Receiving Payments$51,493,510$44,459,157 b.Terminated Vested Members279,574254,908 c.Other Members17,138,30020,221,453 d.Total68,911,38464,935,518 2.Non-Vested Benefits1,241,3001,834,546 3.Total Actuarial Present Value of Accumulated Plan Benefits: 1d + 270,152,68466,770,064 4.Accumulated Contributions of Active Members4,190,4944,622,917 C.Changes in the Actuarial Present Value of Accumulated Plan Benefits 1.Total Value at Beginning of Year66,770,06460,581,471 2.Increase (Decrease) During the Period Attributable to: a.Plan Amendment and Change in Actuarial Assumptions684,655764,846 c.Latest Member Data, Benefits Accumulated and Decrease in the Discount Period6,505,8188,440,894 d.Benefits Paid(3,807,853)(3,017,147) e.Net Increase3,382,6206,188,593 3.Total Value at End of Period70,152,68466,770,064 D. a.Vested65,610,39762,459,677 b.Non-Vested1,106,3331,697,782 c.Total66,716,73064,157,459 E.Market Value of Assets49,144,43640,379,486 F.Funded Ratio Using FRS Interest Rate (7.75%)73.7%62.9% G.Actuarial Assumptions - See page entitled Actuarial Assumptions and Methods Actuarial Present Value of Accumulated Plan Benefits Using FRS Interest Rate (7.75%) October 1, 2012October 1, 2011 FASB NO. 35 INFORMATION S C H E D U L E O F F U N D I N G P R O G R E S S ( G A S B S t a t e m e n t N o . 2 5 ) 10 / 1 / 1 9 9 3 $ 2 , 4 2 4 , 9 8 1 $ 2 , 4 7 9 , 0 4 9 $ 5 4 , 0 6 8 9 7 . 8 % $ 2 , 8 9 6 , 3 5 9 1 . 9 % 10 / 1 / 1 9 9 4 2 , 7 1 4 , 6 5 1 2 , 5 5 2 , 4 1 2 ( 1 6 2 , 2 3 9 ) 1 0 6 . 4 3 , 1 4 8 , 4 1 2 ( 5 . 2 ) 10 / 1 / 1 9 9 5 3 , 5 1 7 , 5 6 5 3 , 8 0 7 , 3 9 3 2 8 9 , 8 2 8 9 2 . 4 3 , 3 6 7 , 3 2 4 8 . 6 10 / 1 / 1 9 9 6 4 , 4 4 3 , 5 9 2 4 , 8 5 5 , 2 8 0 4 1 1 , 6 8 8 9 1 . 5 3 , 5 7 8 , 4 7 3 1 1 . 5 10 / 1 / 1 9 9 7 5 , 5 1 1 , 3 1 0 6 , 9 5 4 , 0 7 7 1 , 4 4 2 , 7 6 7 7 9 . 3 3 , 8 7 2 , 7 9 9 3 7 . 3 10 / 1 / 1 9 9 8 6 , 7 0 0 , 7 2 6 8 , 9 8 8 , 2 3 1 2 , 2 8 7 , 5 0 5 7 4 . 5 4 , 4 7 6 , 8 0 7 5 1 . 1 10 / 1 / 1 9 9 9 8 , 1 6 2 , 7 3 6 1 1 , 0 1 9 , 0 7 2 2 , 8 5 6 , 3 3 6 7 4 . 1 4 , 7 2 0 , 8 1 3 6 0 . 5 10 / 1 / 2 0 0 0 9 , 7 9 5 , 5 3 4 1 4 , 0 9 7 , 0 6 8 4 , 3 0 1 , 5 3 4 6 9 . 5 5 , 1 5 6 , 1 3 6 8 3 . 4 10 / 1 / 2 0 0 1 1 1 , 4 1 7 , 8 4 4 1 6 , 1 0 6 , 7 3 1 4 , 6 8 8 , 8 8 7 7 0 . 9 4 , 9 0 8 , 3 1 5 9 5 . 5 10 / 1 / 2 0 0 2 1 2 , 3 0 3 , 4 8 6 1 9 , 1 4 0 , 9 6 2 6 , 8 3 7 , 4 7 6 6 4 . 3 5 , 5 7 2 , 5 1 4 1 2 2 . 7 10 / 1 / 2 0 0 3 1 4 , 2 3 1 , 5 1 5 2 2 , 1 9 6 , 4 1 3 7 , 9 6 4 , 8 9 8 6 4 . 1 5 , 9 8 9 , 1 4 6 1 3 3 . 0 10 / 1 / 2 0 0 4 1 6 , 4 0 5 , 7 9 4 2 4 , 9 6 2 , 5 5 1 8 , 5 5 6 , 7 5 7 6 5 . 7 6 , 7 5 5 , 0 7 8 1 2 6 . 7 10 / 1 / 2 0 0 5 1 8 , 9 5 0 , 1 0 4 3 5 , 0 0 4 , 2 0 3 1 6 , 0 5 4 , 0 9 9 5 4 . 1 7 , 3 3 2 , 4 4 8 2 1 8 . 9 10 / 1 / 2 0 0 6 2 2 , 7 4 0 , 8 3 8 4 6 , 5 0 3 , 2 1 8 2 3 , 7 6 2 , 3 8 0 4 8 . 9 8 , 3 2 2 , 3 3 2 2 8 5 . 5 10 / 1 / 2 0 0 7 2 7 , 7 9 9 , 3 8 6 5 2 , 2 3 0 , 5 1 1 2 4 , 4 3 1 , 1 2 5 5 3 . 2 8 , 9 1 5 , 5 6 3 2 7 4 . 0 10 / 1 / 2 0 0 8 3 2 , 2 6 1 , 2 7 4 6 0 , 4 5 0 , 4 4 1 2 8 , 1 8 9 , 1 6 7 5 3 . 4 9 , 8 4 2 , 8 7 4 2 8 6 . 4 10 / 1 / 2 0 0 9 3 6 , 8 3 4 , 6 2 2 6 5 , 5 5 0 , 0 2 7 2 8 , 7 1 5 , 4 0 5 5 6 . 2 9 , 2 9 0 , 8 2 9 3 0 9 . 1 10 / 1 / 2 0 1 0 4 1 , 9 4 8 , 0 0 9 7 1 , 3 4 1 , 7 4 0 2 9 , 3 9 3 , 7 3 1 5 8 . 8 8 , 4 9 9 , 7 2 2 3 4 5 . 8 10 / 1 / 2 0 1 1 4 5 , 7 0 9 , 7 4 0 6 8 , 8 2 2 , 7 3 8 2 3 , 1 1 2 , 9 9 8 6 6 . 4 5 , 7 2 4 , 2 2 5 4 0 3 . 8 10 / 1 / 2 0 1 2 ( b ) 4 9 , 8 5 9 , 2 9 8 7 1 , 3 6 4 , 2 1 2 2 1 , 5 0 4 , 9 1 4 6 9 . 9 4 , 9 1 0 , 0 2 3 4 3 8 . 0 10 / 1 / 2 0 1 2 ( a ) 4 9 , 8 5 9 , 2 9 8 7 2 , 1 5 6 , 7 3 1 2 2 , 2 9 7 , 4 3 3 6 9 . 1 4 , 9 1 0 , 0 2 3 4 5 4 . 1 Un f u n d e d A A L ( U A A L ) (b ) - ( a ) Ac t u a r i a l A c c r u e d Li a b i l i t y ( A A L ) - E n t r y Ag e (b ) Ac t u a r i a l Va l u a t i o n D a t e UAAL As % of Covered Payroll (b - a) / c Co v e r e d P a y r o l l (c ) Fu n d e d R a t i o (a ) / ( b ) Ac t u a r i a l V a l u e o f As s e t s (a ) ( a ) = A f t e r c h a n g e s ( b ) = B e f o r e c h a n g e s 30 31 SCHEDULE OF CONTRIBUTIONS FROM THE EMPLOYER AND THE STATE OF FLORIDA (GASB Statement No. 25) Year Ending September 30 1994$242,083$268,705111.0% 1995244,317258,492105.8 1996404,856438,206108.2 1997438,074469,583107.2 1998592,522601,235101.5 1999760,142760,959100.1 2000853,790853,790100.0 2001935,273945,392101.1 20021,005,6621,015,588101.0 20031,425,3281,425,328100.0 20041,475,3401,475,340100.0 20051,704,0411,704,041100.0 20061,931,0542,107,880109.2 20073,176,7913,176,791100.0 20083,556,5483,556,548100.0 20093,762,3233,762,323100.0 20104,368,6124,368,612100.0 20114,298,2164,298,216100.0 20124,198,1834,198,183100.0 Contribution Percentage Contributed Annual Required Contribution Actual 32 Employer FYE September 30201320122011 Annual Required Contribution (ARC)*3,113,406$ 1 4,198,183$ 4,298,216$ Interest on Net Pension Obligation (NPO)(14,017) (14,872) (15,858) Adjustment to ARC(18,347) (23,829) (26,320) Annual Pension Cost (APC)3,117,736 4,207,140 4,308,678 Contributions made**4,198,183 4,298,216 Increase (decrease) in NPO**8,957 10,462 NPO at beginning of year(192,016) (200,973) (211,435) NPO at end of year**(192,016) (200,973) * Includes expected State contribution. ** To be determined. ANNUAL PENSION COST AND NET PENSION OBLIGATION (GASB STATEMENT NO. 27) 1 This amount is an estimate. The final required contribution should be no less than the percent of payroll requirement multiplied by the actual covered payroll for the fiscal year. Fiscal Annual PensionActual Year EndingCost (APC)Contribution 9/30/20104,380,133$ 4,368,612$ 99.7%(211,435)$ 9/30/20114,308,678 4,298,216 99.8(200,973) 9/30/20124,207,140 4,198,183 99.8(192,016) APC ContributedObligation THREE YEAR TREND INFORMATION Percentage of Net Pension 33 REQUIRED SUPPLEMENTARY INFORMATION GASB Statement No. 25 and No. 27 The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation: Valuation Date October 1, 2012 Contribution Rates Employer (and State) 60.62% Plan Members 8.60% Actuarial Cost Method Entry Age Normal Amortization Method Level percent, closed Remaining Amortization Period 24 years Asset Valuation Method Recognizes 20% of difference between market value of assets and expected actuarial asset value Actuarial Assumptions Investment rate of return 7.3% Projected salary increases 7.5% Includes inflation and other general increases at 3.0% Cost-of-living adjustments Not Applicable SECTION E MISCELLANEOUS INFORMATION 34 A. 1.Number Included in Last Valuation8493 2.New Members24 3.Non-Vested Employment Terminations(3)(2) 4.Vested Employment Terminations00 5.Service Retirements00 6.DROP Retirement(8)(11) 7.Disability Retirements00 8.Deaths(1)0 9.Other -- Data Corrections00 10.Number Included in This Valuation7484 B. 1.Number Included in Last Valuation11 2.Additions from Active Members00 3.Lump Sum Payments/Refund of Contributions00 4.Payments Commenced00 5.Deaths00 6.Other00 7.Number Included in This Valuation11 1.Number Included in Last Valuation2415 2.Additions from Active Members811 3.Retirements(4)(2) 4.Deaths Resulting in No Further Payments00 5.Other00 6.Number Included in This Valuation2824 D. 1.Number Included in Last Valuation3230 2.Additions from Active Members00 3.Additions from Terminated Vested Members00 4.Additions from DROP42 5.Deaths Resulting in No Further Payments00 6.Deaths Resulting in New Survivor Benefits00 7.End of Certain Period - No Further Payments00 8.Other 00 9.Number Included in This Valuation3632 RECONCILIATION OF MEMBERSHIP DATA Active Members Service Retirees, Disability Retirees and Beneficiaries Terminated Vested Members From 10/1/10From 10/1/11 To 10/1/11To 10/1/12 C. DROP Plan Members 35 ACTIVE PARTICIPANT DISTRIBUTION Age Group 0-1 1-2 2-3 3-4 4-5 5-9 10-14 15-19 20-24 25 & Up Totals 20-24 NO.21000000003 TOT PAY90,45245,22600000000135,678 AVG PAY45,22645,2260000000045,226 25-29 NO.00011400006 TOT PAY00047,97247,931201,9860000297,889 AVG PAY00047,97247,93150,496000049,648 30-34 NO.00000520007 TOT PAY00000256,554112,169000368,723 AVG PAY0000051,31156,08400052,675 35-39 NO.0000010600016 TOT PAY00000566,988357,091000924,079 AVG PAY0000056,69959,51500057,755 40-44 NO.000008690023 TOT PAY00000431,990369,443704,259001,505,692 AVG PAY0000053,99961,57478,2510065,465 45-49 NO.000003170011 TOT PAY00000170,30664,106565,28100799,693 AVG PAY0000056,76964,10680,7540072,699 50-54 NO.00100104006 TOT PAY00120,0000057,8500350,45800528,308 AVG PAY00120,0000057,850087,6140088,051 55-59 NO.00000100001 TOT PAY0000057,490000057,490 AVG PAY0000057,490000057,490 60-64 NO.01000000001 TOT PAY0115,00000000000115,000 AVG PAY0115,00000000000115,000 65-69 NO.00000000000 TOT PAY00000000000 AVG PAY00000000000 TOT NO.221113215200074 TOT AMT90,452160,226120,00047,97247,9311,743,164902,8091,619,998004,732,552 AVG AMT45,22680,113120,00047,97247,93154,47460,18781,0000063,953 Years of Service to Valuation Date 36 INACTIVE PARTICIPANT DISTRIBUTION DisabledRetired* TotalTotalTotalTotal Age Group NumberBenefitsNumberBenefitsNumberBenefitsNumberBenefits Under 20- - - - - - - - 20-24- - - - - - - - 25-29- - - - - - - - 30-34- - - - - - - - 35-39- - - - - - - - 40-441 49,452 - - 2 122,783 - - 45-49- - 1 23,392 17 1,462,422 - - 50-54- - 3 87,331 14 1,280,783 - - 55-59- - 5 144,248 6 380,608 - - 60-64- - 1 17,851 7 385,978 2 65,847 65-69- - - - 4 144,116 - - 70-74- - - - 2 92,260 - - 75-79- - - - - - - - - 80-84- - - - - - - - 85-89- - - - - - - - 90-94- - - - - - - - 95-99- - - - - - - - 100 & Over- - - - - - - - Total 1 49,452 10 272,822 52 3,868,950 2 65,847 Average Age 41 56 55 62 Terminated Vested Deceased with Beneficiary * Does not include deferred supplemental benefits for DROP members SECTION F SUMMARY OF PLAN PROVISIONS 37 SUMMARY OF PLAN PROVISIONS A. Ordinances The Plan was established under the Code of Ordinances for the City of Palm Beach Gardens, Florida, Chapter 50, Article III, and was most recently amended under Ordinance No. 24, 2012 passed and adopted on September 13, 2012. The Plan is also governed by certain provisions of Chapter 185, Florida Statutes, Part VII, Chapter 112, Florida Statutes and the Internal Revenue Code. B. Effective Date July 1, 1972 C. Plan Year October 1 through September 30 D. Type of Plan Qualified, governmental defined benefit retirement plan; for GASB purposes it is a single employer plan. E. Eligibility Requirements All full-time police officers are eligible for membership on the first day of the month coincident with or next following date of employment. F. Credited Service Service is measured as the total number of full years (and fraction thereof) of continuous service from the date of employment to the date of termination. No service is credited for any periods of employment for which the member received a refund of employee contributions. G. Compensation Base pay, but not less than the amount of total W-2 Compensation prior to September 13, 2012. H. Average Monthly Earnings (AME) The average of Compensation over the last 5 years of Credited Service; includes a lump sum payment of unused leave pay (no more than the dollar amount of unused leave accrued as of September 13, 2012). 38 I. Normal Retirement Eligibility: A member with at least ten years of service on September 13, 2012 may retire on the first day of the month coincident with or next following the earlier of: (1) age 52 and 10 years of Credited Service, or (2) 20 years of Credited Service regardless of age. A member with less than ten years of service on September 13, 2012 may retire on the first day of the month coincident with or next following: age 59 and 10 years of Credited Service. Benefit: For service accrued before September 13, 2012, 3.5% of AME multiplied by years of Credited Service. For service accrued after September 13, 2012, 2.75% of AME multiplied by years of Credited Service. The maximum benefit is equal to 75% of AME, or the percentage earned as of September 13, 2012, if greater. Normal Form of Benefit: 10 Years Certain and Life thereafter; other options are also available. Supplemental Benefit: A monthly supplemental benefit of $12.50 per year of Credited Service is payable to all retirees and their beneficiaries in pay status. COLA: None J. Early Retirement Eligibility: A member may elect to retire earlier than the Normal Retirement Eligibility upon attainment of age 50 and 10 years of Credited Service. Benefit: The Normal Retirement Benefit is reduced by 3.0% for each year by which the Early Retirement date precedes the Normal Retirement date. Normal Form of Benefit: 10 Years Certain and Life thereafter; other options are also available. Supplemental Benefit: A monthly supplemental benefit of $12.50 per year of Credited Service is payable to all retirees and their beneficiaries in pay status. COLA: None K. Delayed Retirement Same as Normal Retirement taking into account compensation earned and service credited until the date of actual retirement. L. Service Connected Disability Eligibility: Any member who becomes totally and permanently disabled and unable to render useful and efficient service as a police officer for a period of at least 6 months 39 resulting from an act occurring in the performance of service for the City is eligible for a disability benefit. Benefit: 60% of the current rate of pay, but no less than the accrued Normal Retirement Benefit taking into account compensation earned and service credited until the date of disability. Disability benefits, when combined with Social Security, Worker’s Compensation or any other local, state or federal government benefits, cannot exceed and will be limited to the AME on the date of disability. Normal Form of Benefit: 10 Years Certain and Life thereafter; other options are also available. Supplemental Benefit: A monthly supplemental benefit of $12.50 per year of Credited Service is payable to all retirees and their beneficiaries in pay status. COLA: None M. Non-Service Connected Disability Eligibility: Any member with 10 years of Credited Service who becomes totally and permanently disabled and unable to render useful and efficient service as a police officer for a period of at least 6 months is eligible for a disability benefit. Benefit: 2.5% of AME multiplied by Credited Service, but not less than 25% of salary or the accrued Normal Retirement Benefit taking into account compensation earned and service credited until the date of disability. Disability benefits, when combined with Social Security, Worker’s Compensation or any other local, state or federal government benefits, cannot exceed and will be limited to the AME on the date of disability. Normal Form of Benefit: 10 Years Certain and Life thereafter; other options are also available. Supplemental Benefit: A monthly supplemental benefit of $12.50 per year of Credited Service is payable to all retirees and their beneficiaries in pay status. COLA: None N. Death in the Line of Duty Eligibility: Members who die as a result of personal injury or disease arising out of the member’s actual performance of duties are eligible for survivor benefits regardless of Credited Service. 40 Benefit: The surviving spouse will receive the greater of: (1) 50% of the member’s AME, or (2) the member’s accrued Normal Retirement Benefit as of the date of death with no actuarial reduction for Early Retirement. If there is no spouse, or if the surviving spouse dies, the spouse’s benefit determined above shall be distributed equally among any eligible children. If there is no spouse or eligible children, the benefit will be paid to the deceased member’s estate. Normal Form of Benefit: Spouse’s benefits are payable until death; children’s benefits are payable until age 18 (24 if a full-time student), marriage, death, or adoption. Benefits paid to a member’s estate may be paid as a lump sum at the discretion of the Board of Trustees. Supplemental Benefit: A monthly supplemental benefit of $12.50 per year of Credited Service is payable to all retirees and their beneficiaries in pay status. COLA: None O. Other Pre-Retirement Death Eligibility: Members are eligible for survivor benefits after the completion of 5 or more years of Credited Service. Benefit: The survivor benefit payable to the designated beneficiary is the member’s accrued Normal Retirement Benefit. Benefit is payable at the member’s Early or Normal retirement date and will be actuarially reduced for Early Retirement when applicable. Normal Form of Benefit: For member’s eligible for Normal or Delayed Retirement on the date of death, the designated beneficiary’s benefit will be paid for life. For members not yet eligible, benefits will be paid for 10 years. Supplemental Benefit: A monthly supplemental benefit of $12.50 per year of Credited Service is payable to all retirees and their beneficiaries in pay status. COLA: None The beneficiary of a plan member with less than 5 years of Credited Service at the time of death will receive a refund of the member’s accumulated contributions without interest. 41 P. Post Retirement Death Benefit determined by the form of benefit elected upon retirement. Q. Optional Forms In lieu of electing the Normal Form of benefit, the optional forms of benefits available to all retirees are a Single Life Annuity or the 50%, 66 2/3%, 75% and 100% Joint and Survivor options. R. Vested Termination Eligibility: A member has earned a non-forfeitable right to Plan benefits after the completion of 5 years of Credited Service (see vesting table below). Years of Credited Service Vested % Under 5 5 6 7 8 9 10 or more 0% 25 40 55 70 85 100 Benefit: The benefit is the member’s vested accrued Normal Retirement Benefit as of the date of termination. Benefit begins at the member’s Normal Retirement date. Alternatively, members with at least 10 years of Credited Service may elect to receive an actuarially reduced Early Retirement Benefit any time after age 50. Normal Form of Benefit: 10 Years Certain and Life thereafter; other options are also available. Supplemental Benefit: A monthly supplemental benefit of $12.50 per year of Credited Service is payable to all retirees and their beneficiaries once in pay status. COLA: None Members terminating employment with less than 5 years of Credited Service will receive a refund of their own accumulated contributions without interest. S. Refunds Eligibility: All members terminating employment with less than 5 years of Credited Service are eligible. Optionally, vested members (those with 5 or more years of Credited Service) may elect a refund in lieu of the vested benefits otherwise due. Benefit: Refund of the member’s contributions without interest. 42 T. Member Contributions 8.6% of Compensation U. State Contributions Chapter 185 Premium Tax Refunds V. Employer Contributions Any additional amount needed to fund the plan properly according to State laws. W. Cost of Living Increases None. X. 13th Check Not Applicable Y. Deferred Retirement Option Plan Eligibility: A member who had at least ten years of Credited Service as of September 13, 2012 may enter the DROP on the first day of the month coincident with or next following the earlier of: (1) age 52 and 10 years of Credited Service, or (2) 20 years of Credited Service regardless of age. Members with less than ten years of Credited Service on September 13, 2012 may enter the DROP on the first day of the month coincident with or next following: age 59 and 10 years of Credited Service. Members who meet eligibility must submit a written election to participate in the DROP. The election to participate must be made within the first 28.5 years of Credited Service and members can no longer participate after attaining 33.5 years of employment service. Benefit: The member’s Credited Service and AME are frozen upon entry into the DROP. The monthly retirement benefit as described under Normal Retirement is calculated based upon the frozen Credited Service and AME. Maximum DROP Period: 60 months Interest Credited: The member's DROP account is credited quarterly at an interest rate based upon the option chosen by the member. Members must elect from 1 of the 2 following options: 1. Gain or loss at the same rate earned by the Plan, or 2. Guaranteed rate of 6.5% per annum. 43 Normal Form of Benefit: Lump Sum; member may also elect that the DROP distribution be paid in 3 equal payments over 3 years or used to purchase an annuity to be paid in monthly installments. COLA: None Z. Other Ancillary Benefits There are no ancillary retirement type benefits not required by statutes but which might be deemed a City of Palm Beach Gardens Police Officers’ Pension Fund liability if continued beyond the availability of funding by the current funding source. AA. Changes from Previous Valuation Under Ordinance 24, 2012, adopted on September 13, 2012, the following changes have been made:  The benefit multiplier was lowered from 3.50% to 2.75% per year of service for service accrued after September 13, 2012. This change did not apply to members who were eligible for normal retirement as of September 13, 2012.  The total maximum benefit that may be accrued under the Plan was reduced from 100% to 75% of Average Final Compensation. However, any member who had accrued a greater percentage as of September 13, 2012 retains that percentage and will not accrue an increased percentage. This change did not apply to members who are eligible for normal retirement as of September 13, 2012.  Compensation was changed from total W-2 earnings to base pay excluding all other pay. However, compensation for pension purposes after September 13, 2012 will not be less than the compensation on the day before the effective date under the previous definition.  The amount of unused leave pay included in compensation is limited to the dollar amount accrued on September 13, 2012.  The normal retirement date was changed to age 59 with 10 years of service from the earlier of age 52 with 10 years of service or 20 years of service regardless of age. This change did not apply to members who had at least ten years of service as of September 13, 2012.  The COLA provided by actuarial gains was eliminated. Florida Senate - 2013 CS for SB 458 By the Committee on Governmental Oversight and Accountability; and Senator Ring 585-01746-13 2013458c1 Page 1 of 33 CODING: Words stricken are deletions; words underlined are additions. A bill to be entitled 1 An act relating to firefighter and police officer 2 pension plans; amending s. 175.021, F.S.; revising the 3 legislative declaration to require all plans to meet 4 the requirements of ch. 175, F.S., in order to receive 5 insurance premium tax revenues; amending s. 175.032, 6 F.S.; revising definitions to conform to changes made 7 by the act and adding new definitions; amending s. 8 175.071, F.S.; conforming a cross-reference; amending 9 s. 175.091, F.S.; revising existing payment provisions 10 and providing an additional mandatory payment by the 11 municipality or special fire control district to the 12 firefighters’ pension trust fund; amending s. 175.351, 13 F.S., relating to municipalities and special fire 14 control districts that have their own pension plans 15 and want to participate in the distribution of a tax 16 fund; revising how income from the premium tax must be 17 used; requiring plan sponsors to have a defined 18 contribution plan in place by a certain date; amending 19 s. 185.01, F.S.; revising the legislative declaration 20 to require all plans to meet the requirements of ch. 21 185, F.S., in order to receive insurance premium tax 22 revenues; amending s. 185.02, F.S.; revising 23 definitions to conform to changes made by the act and 24 adding new definitions; deleting a provision allowing 25 a local law plan to limit the amount of overtime 26 payments which can be used for retirement benefit 27 calculations; amending s. 185.06, F.S.; conforming a 28 cross-reference; amending s. 185.07, F.S.; revising 29 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 2 of 33 CODING: Words stricken are deletions; words underlined are additions. existing payment provisions and providing for an 30 additional mandatory payment by the municipality to 31 the police officers’ retirement trust fund; amending 32 s. 185.35, F.S., relating to municipalities that have 33 their own pension plans for police officers and want 34 to participate in the distribution of a tax fund; 35 revising how income from the premium tax must be used; 36 requiring plan sponsors to have a defined contribution 37 plan in place by a certain date; providing a 38 declaration of important state interest; providing an 39 effective date. 40 41 Be It Enacted by the Legislature of the State of Florida: 42 43 Section 1. Subsection (2) of section 175.021, Florida 44 Statutes, is amended to read: 45 175.021 Legislative declaration.— 46 (2) This chapter hereby establishes, for all municipal and 47 special district pension plans existing now or hereafter under 48 this chapter, including chapter plans and local law plans, base 49 minimum benefits and minimum standards for the operation and 50 funding of such plans, hereinafter referred to as firefighters’ 51 pension trust funds, which must be met as a condition precedent 52 to the plan or plan sponsor receiving a distribution of 53 insurance premium tax revenues under s. 175.121. The base 54 minimum benefits and minimum standards for each plan as set 55 forth in this chapter may not be diminished by local charter, 56 ordinance, or resolution or by special act of the Legislature, 57 or nor may the minimum benefits or minimum standards be reduced 58 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 3 of 33 CODING: Words stricken are deletions; words underlined are additions. or offset by any other local, state, or federal law that may 59 include firefighters in its operation, except as provided under 60 s. 112.65. 61 Section 2. Section 175.032, Florida Statutes, is amended to 62 read: 63 175.032 Definitions.—For any municipality, special fire 64 control district, chapter plan, local law municipality, local 65 law special fire control district, or local law plan under this 66 chapter, the term following words and phrases have the following 67 meanings: 68 (1) “Additional premium tax revenues” means revenues 69 received by a municipality or special fire control district 70 pursuant to s. 175.121 which exceed base premium tax revenues. 71 (2)(1)(a) “Average final compensation” for: 72 (a) A full-time firefighter means one-twelfth of the 73 average annual compensation of the 5 best years of the last 10 74 years of creditable service before prior to retirement, 75 termination, or death, or the career average as a full-time 76 firefighter since July 1, 1953, whichever is greater. A year is 77 shall be 12 consecutive months or such other consecutive period 78 of time as is used and consistently applied. 79 (b) “Average final compensation” for A volunteer 80 firefighter means the average salary of the 5 best years of the 81 last 10 best contributing years before a prior to change in 82 status to a permanent full-time firefighter or retirement as a 83 volunteer firefighter or the career average of a volunteer 84 firefighter, since July 1, 1953, whichever is greater. 85 (3) “Base benefits” means the level of benefits in 86 existence for firefighters on March 12, 1999. 87 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 4 of 33 CODING: Words stricken are deletions; words underlined are additions. (4) “Base premium tax revenues” means revenues received by 88 a municipality or special fire control district pursuant to s. 89 175.121 equal to the amount of such revenues received for 90 calendar year 1997. 91 (5)(2) “Chapter plan” means a separate defined benefit 92 pension plan for firefighters which incorporates by reference 93 the provisions of this chapter and has been adopted by the 94 governing body of a municipality or special district. Except as 95 may be specifically authorized in this chapter, the provisions 96 of a chapter plan may not differ from the plan provisions set 97 forth in ss. 175.021-175.341 and 175.361-175.401. Actuarial 98 valuations of chapter plans shall be conducted by the division 99 as provided by s. 175.261(1). 100 (6)(3) “Compensation” or “salary” means, for 101 noncollectively bargained service earned before July 1, 2011, or 102 for service earned under collective bargaining agreements in 103 place before July 1, 2011, the fixed monthly remuneration paid a 104 firefighter. If remuneration is based on actual services 105 rendered, as in the case of a volunteer firefighter, the term 106 means the total cash remuneration received yearly for such 107 services, prorated on a monthly basis. For noncollectively 108 bargained service earned on or after July 1, 2011, or for 109 service earned under collective bargaining agreements entered 110 into on or after July 1, 2011, the term has the same meaning 111 except that when calculating retirement benefits, up to 300 112 hours per year in overtime compensation may be included as 113 specified in the plan or collective bargaining agreement, but 114 payments for accrued unused sick or annual leave may not be 115 included. 116 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 5 of 33 CODING: Words stricken are deletions; words underlined are additions. (a) Any retirement trust fund or plan that meets the 117 requirements of this chapter does not, solely by virtue of this 118 subsection, reduce or diminish the monthly retirement income 119 otherwise payable to each firefighter covered by the retirement 120 trust fund or plan. 121 (b) The member’s compensation or salary contributed as 122 employee-elective salary reductions or deferrals to any salary 123 reduction, deferred compensation, or tax-sheltered annuity 124 program authorized under the Internal Revenue Code shall be 125 deemed to be the compensation or salary the member would receive 126 if he or she were not participating in such program and shall be 127 treated as compensation for retirement purposes under this 128 chapter. 129 (c) For any person who first becomes a member in any plan 130 year beginning on or after January 1, 1996, compensation for 131 that plan year may not include any amounts in excess of the 132 Internal Revenue Code s. 401(a)(17) limitation, as amended by 133 the Omnibus Budget Reconciliation Act of 1993, which limitation 134 of $150,000 shall be adjusted as required by federal law for 135 qualified government plans and shall be further adjusted for 136 changes in the cost of living in the manner provided by Internal 137 Revenue Code s. 401(a)(17)(B). For any person who first became a 138 member before the first plan year beginning on or after January 139 1, 1996, the limitation on compensation may not be less than the 140 maximum compensation amount that was allowed to be taken into 141 account under the plan in effect on July 1, 1993, which 142 limitation shall be adjusted for changes in the cost of living 143 since 1989 in the manner provided by Internal Revenue Code s. 144 401(a)(17)(1991). 145 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 6 of 33 CODING: Words stricken are deletions; words underlined are additions. (7)(4) “Creditable service” or “credited service” means the 146 aggregate number of years of service, and fractional parts of 147 years of service, of any firefighter, omitting intervening years 148 and fractional parts of years when such firefighter may not have 149 been employed by the municipality or special fire control 150 district, subject to the following conditions: 151 (a) A No firefighter may not will receive credit for years 152 or fractional parts of years of service if he or she has 153 withdrawn his or her contributions to the fund for those years 154 or fractional parts of years of service, unless the firefighter 155 repays into the fund the amount he or she has withdrawn, plus 156 interest determined by the board. The member shall have at least 157 90 days after his or her reemployment to make repayment. 158 (b) A firefighter may voluntarily leave his or her 159 contributions in the fund for a period of 5 years after leaving 160 the employ of the fire department, pending the possibility of 161 being rehired by the same department, without losing credit for 162 the time he or she has participated actively as a firefighter. 163 If the firefighter is not reemployed as a firefighter, with the 164 same department, within 5 years, his or her contributions shall 165 be returned without interest. 166 (c) Credited service under this chapter shall be provided 167 only for service as a firefighter, as defined in subsection (8), 168 or for military service and does not include credit for any 169 other type of service. A municipality may, by local ordinance, 170 or a special fire control district may, by resolution, may 171 provide for the purchase of credit for military service prior to 172 employment as well as for prior service as a firefighter for 173 some other employer as long as a firefighter is not entitled to 174 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 7 of 33 CODING: Words stricken are deletions; words underlined are additions. receive a benefit for such prior service as a firefighter. For 175 purposes of determining credit for prior service as a 176 firefighter, in addition to service as a firefighter in this 177 state, credit may be given for federal, other state, or county 178 service if the prior service is recognized by the Division of 179 State Fire Marshal as provided under chapter 633, or the 180 firefighter provides proof to the board of trustees that his or 181 her service is equivalent to the service required to meet the 182 definition of a firefighter under subsection (12) (8). 183 (8)(5) “Deferred Retirement Option Plan” or “DROP” means a 184 local law plan retirement option in which a firefighter may 185 elect to participate. A firefighter may retire for all purposes 186 of the plan and defer receipt of retirement benefits into a DROP 187 account while continuing employment with his or her employer. 188 However, a firefighter who enters the DROP and who is otherwise 189 eligible to participate may shall not thereby be precluded from 190 participating, or continuing to participate, in a supplemental 191 plan in existence on, or created after, March 12, 1999 the 192 effective date of this act. 193 (9) “Defined contribution plan” means the component of a 194 local law plan to which deposits are made to provide benefits 195 for firefighters, or for firefighters and police officers if 196 both are included, under this chapter. Such component is an 197 element of a local law plan and exists in conjunction with the 198 defined benefit component that meets the base benefits and 199 minimum standards of this chapter. The retirement benefits of 200 the defined contribution plan shall be provided through 201 individual member accounts in accordance with the applicable 202 provisions of the Internal Revenue Code and related regulations 203 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 8 of 33 CODING: Words stricken are deletions; words underlined are additions. and are limited to the contributions made into each member’s 204 account and the actual accumulated earnings, net of expenses, 205 earned on the member’s account. 206 (10)(6) “Division” means the Division of Retirement of the 207 Department of Management Services. 208 (11)(7) “Enrolled actuary” means an actuary who is enrolled 209 under Subtitle C of Title III of the Employee Retirement Income 210 Security Act of 1974 and who is a member of the Society of 211 Actuaries or the American Academy of Actuaries. 212 (12)(8)(a) “Firefighter” means any person employed solely 213 by a constituted fire department of any municipality or special 214 fire control district who is certified as a firefighter as a 215 condition of employment in accordance with s. 633.35 and whose 216 duty it is to extinguish fires, to protect life, or to protect 217 property. The term includes all certified, supervisory, and 218 command personnel whose duties include, in whole or in part, the 219 supervision, training, guidance, and management responsibilities 220 of full-time firefighters, part-time firefighters, or auxiliary 221 firefighters but does not include part-time firefighters or 222 auxiliary firefighters. However, for purposes of this chapter 223 only, the term also includes public safety officers who are 224 responsible for performing both police and fire services, who 225 are certified as police officers or firefighters, and who are 226 certified by their employers to the Chief Financial Officer as 227 participating in this chapter before October 1, 1979. Effective 228 October 1, 1979, public safety officers who have not been 229 certified as participating in this chapter are considered police 230 officers for retirement purposes and are eligible to participate 231 in chapter 185. Any plan may provide that the fire chief has an 232 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 9 of 33 CODING: Words stricken are deletions; words underlined are additions. option to participate, or not, in that plan. 233 (b) “Volunteer firefighter” means any person whose name is 234 carried on the active membership roll of a constituted volunteer 235 fire department or a combination of a paid and volunteer fire 236 department of any municipality or special fire control district 237 and whose duty it is to extinguish fires, to protect life, and 238 to protect property. Compensation for services rendered by a 239 volunteer firefighter shall not disqualify him or her as a 240 volunteer. A person shall not be disqualified as a volunteer 241 firefighter solely because he or she has other gainful 242 employment. Any person who volunteers assistance at a fire but 243 is not an active member of a department described herein is not 244 a volunteer firefighter within the meaning of this paragraph. 245 (13)(9) “Firefighters’ Pension Trust Fund” means a trust 246 fund, by whatever name known, as provided under s. 175.041, for 247 the purpose of assisting municipalities and special fire control 248 districts in establishing and maintaining a retirement plan for 249 firefighters. 250 (14)(10) “Local law municipality” is any municipality in 251 which there exists a local law plan exists. 252 (15)(11) “Local law plan” means a retirement defined 253 benefit pension plan, which includes both a defined benefit plan 254 component and a defined contribution plan component, for 255 firefighters, or for firefighters or police officers if both are 256 where included, as described in s. 175.351, established by 257 municipal ordinance, special district resolution, or special act 258 of the Legislature, which enactment sets forth all plan 259 provisions. Local law plan provisions may vary from the 260 provisions of this chapter if the base, provided that required 261 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 10 of 33 CODING: Words stricken are deletions; words underlined are additions. minimum benefits and minimum standards of this chapter are met. 262 However, any such variance must shall provide a greater benefit 263 for firefighters. Actuarial valuations of local law plans shall 264 be conducted by an enrolled actuary as provided in s. 265 175.261(2). 266 (16)(12) “Local law special fire control district” is any 267 special fire control district in which there exists a local law 268 plan exists. 269 (17) “Long-term funded ratio” or “funded ratio” means the 270 ratio of the actuarial value of assets of the plan to the 271 actuarial accrued liabilities of the plan, as reported in the 272 most recent actuarial valuation of the plan, deemed to be in 273 compliance with chapter 112 by the Department of Management 274 Services. 275 (18)(13) “Property insurance” means property insurance as 276 defined in s. 624.604 and covers real and personal property 277 within the corporate limits of a any municipality, or within the 278 boundaries of a any special fire control district, within the 279 state. “Multiple peril” means a combination or package policy 280 that includes both property and casualty coverage for a single 281 premium. 282 (19)(14) “Retiree” or “retired firefighter” means a 283 firefighter who has entered retirement status. For the purposes 284 of a plan that includes a Deferred Retirement Option Plan 285 (DROP), a firefighter who enters the DROP is shall be considered 286 a retiree for all purposes of the plan. However, a firefighter 287 who enters the DROP and who is otherwise eligible to participate 288 may shall not thereby be precluded from participating, or 289 continuing to participate, in a supplemental plan in existence 290 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 11 of 33 CODING: Words stricken are deletions; words underlined are additions. on, or created after, March 12, 1999 the effective date of this 291 act. 292 (20)(15) “Retirement” means a firefighter’s separation from 293 city or fire district employment as a firefighter with immediate 294 eligibility for receipt of benefits under the plan. For purposes 295 of a plan that includes a Deferred Retirement Option Plan 296 (DROP), “retirement” means the date a firefighter enters the 297 DROP. 298 (21) “Special benefits” means benefits provided in a 299 defined contribution plan for firefighters. 300 (22)(16) “Special fire control district” means a special 301 district, as defined in s. 189.403(1), established for the 302 purposes of extinguishing fires, protecting life, and protecting 303 property within the incorporated or unincorporated portions of a 304 any county or combination of counties, or within any combination 305 of incorporated and unincorporated portions of a any county or 306 combination of counties. The term does not include any dependent 307 or independent special district, as those terms are defined in 308 s. 189.403(2) and (3), respectively, the employees of which are 309 members of the Florida Retirement System pursuant to s. 310 121.051(1) or (2). 311 (23)(17) “Supplemental plan” means a plan to which deposits 312 are made to provide extra benefits for firefighters, or for 313 firefighters and police officers if both are where included, 314 under this chapter. Such a plan is an element of a local law 315 plan and exists in conjunction with a defined benefit component 316 plan that meets the base minimum benefits and minimum standards 317 of this chapter. 318 (24)(18) “Supplemental plan municipality” means a any local 319 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 12 of 33 CODING: Words stricken are deletions; words underlined are additions. law municipality in which there existed a supplemental plan 320 existed, of any type or nature, as of December 1, 2000. 321 Section 3. Paragraph (b) of subsection (7) of section 322 175.071, Florida Statutes, is amended to read: 323 175.071 General powers and duties of board of trustees.—For 324 any municipality, special fire control district, chapter plan, 325 local law municipality, local law special fire control district, 326 or local law plan under this chapter: 327 (7) To assist the board in meeting its responsibilities 328 under this chapter, the board, if it so elects, may: 329 (b) Employ an independent enrolled actuary, as defined in 330 s. 175.032(7), at the pension fund’s expense. 331 332 If the board chooses to use the municipality’s or special 333 district’s legal counsel or actuary, or chooses to use any of 334 the municipality’s or special district’s other professional, 335 technical, or other advisers, it must do so only under terms and 336 conditions acceptable to the board. 337 Section 4. Paragraphs (d) through (g) of subsection (1) of 338 section 175.091, Florida Statutes, are amended, and a new 339 paragraph (e) is added to that subsection, to read: 340 175.091 Creation and maintenance of fund.—For any 341 municipality, special fire control district, chapter plan, local 342 law municipality, local law special fire control district, or 343 local law plan under this chapter: 344 (1) The firefighters’ pension trust fund in each 345 municipality and in each special fire control district shall be 346 created and maintained in the following manner: 347 (d) By mandatory payment by the municipality or special 348 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 13 of 33 CODING: Words stricken are deletions; words underlined are additions. fire control district of a sum equal to the normal cost of and 349 the amount required to fund any actuarial deficiency shown by an 350 actuarial valuation as provided in part VII of chapter 112 after 351 taking into account the amounts described in paragraphs (b), 352 (c), (f), (g), and (h) and the amounts of the tax proceeds 353 described in paragraph (a) that must be used to fund defined 354 benefit plan benefits, except as otherwise excluded from 355 consideration in determining the mandatory payment. 356 (e) For local law plans, and in addition to the mandatory 357 payment described in paragraph (d), by mandatory payment by the 358 municipality or special fire control district of the amount 359 specified in s. 175.351(3) if the long-term funded ratio of the 360 plan is less than 80 percent. 361 (f)(e) By all gifts, bequests, and devises when donated to 362 the fund. 363 (g)(f) By all accretions to the fund by way of interest or 364 dividends on bank deposits, or otherwise. 365 (h)(g) By all other sources or income now or hereafter 366 authorized by law for the augmentation of such firefighters’ 367 pension trust fund. 368 369 Nothing in this section shall be construed to require adjustment 370 of member contribution rates in effect on the date this act 371 becomes a law, including rates that exceed 5 percent of salary, 372 provided that such rates are at least one-half of 1 percent of 373 salary. 374 Section 5. Section 175.351, Florida Statutes, is amended to 375 read: 376 175.351 Municipalities and special fire control districts 377 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 14 of 33 CODING: Words stricken are deletions; words underlined are additions. having their own pension plans for firefighters.—For any 378 municipality, special fire control district, local law 379 municipality, local law special fire control district, or local 380 law plan under this chapter, In order for a municipality or 381 municipalities and special fire control district that has its 382 districts with their own pension plan plans for firefighters, or 383 for firefighters and police officers if both are included, to 384 participate in the distribution of the tax fund established 385 under pursuant to s. 175.101, a local law plan and its plan 386 sponsor plans must meet the base minimum benefits and minimum 387 standards set forth in this chapter. 388 (1) If a municipality has a pension plan for firefighters, 389 or a pension plan for firefighters and police officers if both 390 are included, which in the opinion of the division meets the 391 base minimum benefits and minimum standards set forth in this 392 chapter, the board of trustees of the pension plan, as approved 393 by a majority of firefighters of the municipality, must may: 394 (a) place the income from the premium tax in s. 175.101 in 395 such pension plan for the sole and exclusive use of its 396 firefighters, or for firefighters and police officers if both 397 are included, where it shall become an integral part of that 398 pension plan and shall be used to fund benefits for firefighters 399 as follows: 400 (a) The base premium tax revenues must be used to fund base 401 benefits. 402 (b) Of the premium tax revenues received that are in excess 403 of the amount received for the 2012 calendar year, and any 404 accumulations of additional premium tax revenues that have not 405 been applied to fund extra benefits: 406 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 15 of 33 CODING: Words stricken are deletions; words underlined are additions. 1. If the plan has a long-term funded ratio of less than 80 407 percent: 408 a. Fifty percent must be used as additional contributions 409 to pay the plan’s actuarial deficiency and may not be considered 410 in the determination of the mandatory payment described in s. 411 175.091(1)(d); 412 b. Twenty-five percent must be used to fund base benefits; 413 and 414 c. Twenty-five percent must be placed in a defined 415 contribution plan to fund special benefits. 416 2. If the plan has a long-term funded ratio of 80 percent 417 or greater: 418 a. Fifty percent must be used to fund base benefits; and 419 b. Fifty percent must be placed in a defined contribution 420 plan to fund special benefits. 421 (c) Additional premium tax revenues not described in 422 paragraph (b) must be used to fund benefits that were not 423 included in the base benefits to pay extra benefits to the 424 firefighters included in that pension plan; or 425 (b) Place the income from the premium tax in s. 175.101 in 426 a separate supplemental plan to pay extra benefits to 427 firefighters, or to firefighters and police officers if 428 included, participating in such separate supplemental plan. 429 (2) Insurance premium tax revenues may not be used to fund 430 benefits provided in a defined benefit plan which were not 431 provided by the plan as of March 1, 2013. 432 (3) If a plan offers benefits in excess of its base 433 benefits, such benefits may be reduced if the plan continues to 434 meet the base benefits of the plan and the minimum standards set 435 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 16 of 33 CODING: Words stricken are deletions; words underlined are additions. forth in this chapter. The amount of insurance premium tax 436 revenues previously used to fund benefits in excess of the 437 plan’s base benefits before the reduction must be used as 438 provided in subsection (1)(b). Twenty-five percent of the amount 439 of any mandatory contribution paid by the municipality or 440 special fire control district which was previously used to fund 441 extra benefits before the reduction must be used as additional 442 contributions as specified in s. 175.091 to fund the plan’s 443 actuarial deficiency. 444 (4)(2) The premium tax provided by this chapter shall in 445 all cases be used in its entirety to provide retirement extra 446 benefits to firefighters, or to firefighters and police officers 447 if both are included. However, local law plans in effect on 448 October 1, 1998, must comply with the minimum benefit provisions 449 of this chapter only to the extent that additional premium tax 450 revenues become available to incrementally fund the cost of such 451 compliance as provided in s. 175.162(2)(a). If a plan is in 452 compliance with such minimum benefit provisions, as subsequent 453 additional premium tax revenues become available, they must be 454 used to provide extra benefits. Local law plans created by 455 special act before May 27, 1939, are deemed to comply with this 456 chapter. For the purpose of this chapter, the term: 457 (a) “Additional premium tax revenues” means revenues 458 received by a municipality or special fire control district 459 pursuant to s. 175.121 which exceed that amount received for 460 calendar year 1997. 461 (b) “Extra benefits” means benefits in addition to or 462 greater than those provided to general employees of the 463 municipality and in addition to those in existence for 464 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 17 of 33 CODING: Words stricken are deletions; words underlined are additions. firefighters on March 12, 1999. 465 (5)(3) A retirement plan or amendment to a retirement plan 466 may not be proposed for adoption unless the proposed plan or 467 amendment contains an actuarial estimate of the costs involved. 468 Such proposed plan or proposed plan change may not be adopted 469 without the approval of the municipality, special fire control 470 district, or, where permitted, the Legislature. Copies of the 471 proposed plan or proposed plan change and the actuarial impact 472 statement of the proposed plan or proposed plan change shall be 473 furnished to the division before the last public hearing 474 thereon. Such statement must also indicate whether the proposed 475 plan or proposed plan change is in compliance with s. 14, Art. X 476 of the State Constitution and those provisions of part VII of 477 chapter 112 which are not expressly provided in this chapter. 478 Notwithstanding any other provision, only those local law plans 479 created by special act of legislation before May 27, 1939, are 480 deemed to meet the base minimum benefits and minimum standards 481 only in this chapter. 482 (6)(4) Notwithstanding any other provision, with respect to 483 any supplemental plan municipality: 484 (a) A local law plan and a supplemental plan may continue 485 to use their definition of compensation or salary in existence 486 on March 12, 1999. 487 (b) Section 175.061(1)(b) does not apply, and a local law 488 plan and a supplemental plan shall continue to be administered 489 by a board or boards of trustees numbered, constituted, and 490 selected as the board or boards were numbered, constituted, and 491 selected on December 1, 2000. 492 (c) The election set forth in paragraph (1)(b) is deemed to 493 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 18 of 33 CODING: Words stricken are deletions; words underlined are additions. have been made. 494 (7)(5) The retirement plan setting forth the benefits and 495 the trust agreement, if any, covering the duties and 496 responsibilities of the trustees and the regulations of the 497 investment of funds must be in writing, and copies made 498 available to the participants and to the general public. 499 (8) In addition to the defined benefit component of the 500 local law plan, each plan sponsor must have a defined 501 contribution plan component within the local law plan by October 502 1, 2013, or upon the creation date of a new participating plan. 503 However, the plan sponsor of any plan established by special act 504 of the Legislature has until July 1, 2014, to create a defined 505 contribution component within the plan. 506 Section 6. Subsection (2) of section 185.01, Florida 507 Statutes, is amended to read: 508 185.01 Legislative declaration.— 509 (2) This chapter hereby establishes, for all municipal 510 pension plans now or hereinafter provided for under this 511 chapter, including chapter plans and local law plans, base 512 minimum benefits and minimum standards for the operation and 513 funding of such plans, which must be met as a condition 514 precedent to the plan or plan sponsor receiving a distribution 515 of insurance premium tax revenues under s. 185.10 hereinafter 516 referred to as municipal police officers’ retirement trust 517 funds. The base minimum benefits and minimum standards for each 518 plan as set forth in this chapter may not be diminished by local 519 ordinance or by special act of the Legislature, or nor may the 520 minimum benefits or minimum standards be reduced or offset by 521 any other local, state, or federal plan that may include police 522 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 19 of 33 CODING: Words stricken are deletions; words underlined are additions. officers in its operation, except as provided under s. 112.65. 523 Section 7. Section 185.02, Florida Statutes, is amended to 524 read: 525 185.02 Definitions.—For any municipality, chapter plan, 526 local law municipality, or local law plan under this chapter, 527 the term following words and phrases as used in this chapter 528 shall have the following meanings, unless a different meaning is 529 plainly required by the context: 530 (1) “Additional premium tax revenues” means revenues 531 received by a municipality pursuant to s. 185.10 which exceed 532 base premium tax revenues. 533 (2)(1) “Average final compensation” means one-twelfth of 534 the average annual compensation of the 5 best years of the last 535 10 years of creditable service prior to retirement, termination, 536 or death. 537 (3) “Base benefits” means the level of benefits in 538 existence for police officers on March 12, 1999. 539 (4) “Base premium tax revenues” means revenues received by 540 a municipality pursuant to s. 185.10 equal to the amount of such 541 revenues received for calendar year 1997. 542 (5)(2) “Casualty insurance” means automobile public 543 liability and property damage insurance to be applied at the 544 place of residence of the owner, or if the subject is a 545 commercial vehicle, to be applied at the place of business of 546 the owner; automobile collision insurance; fidelity bonds; 547 burglary and theft insurance; and plate glass insurance. 548 “Multiple peril” means a combination or package policy that 549 includes both property coverage and casualty coverage for a 550 single premium. 551 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 20 of 33 CODING: Words stricken are deletions; words underlined are additions. (6)(3) “Chapter plan” means a separate defined benefit 552 pension plan for police officers which incorporates by reference 553 the provisions of this chapter and has been adopted by the 554 governing body of a municipality as provided in s. 185.08. 555 Except as may be specifically authorized in this chapter, the 556 provisions of a chapter plan may not differ from the plan 557 provisions set forth in ss. 185.01-185.341 and 185.37-185.39. 558 Actuarial valuations of chapter plans shall be conducted by the 559 division as provided by s. 185.221(1)(b). 560 (7)(4) “Compensation” or “salary” means, for 561 noncollectively bargained service earned before July 1, 2011, or 562 for service earned under collective bargaining agreements in 563 place before July 1, 2011, the total cash remuneration including 564 “overtime” paid by the primary employer to a police officer for 565 services rendered, but not including any payments for extra duty 566 or special detail work performed on behalf of a second party 567 employer. A local law plan may limit the amount of overtime 568 payments which can be used for retirement benefit calculation 569 purposes; however, such overtime limit may not be less than 300 570 hours per officer per calendar year. For noncollectively 571 bargained service earned on or after July 1, 2011, or for 572 service earned under collective bargaining agreements entered 573 into on or after July 1, 2011, the term has the same meaning 574 except that when calculating retirement benefits, up to 300 575 hours per year in overtime compensation may be included as 576 specified in the plan or collective bargaining agreement, but 577 payments for accrued unused sick or annual leave may not be 578 included. 579 (a) Any retirement trust fund or plan that meets the 580 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 21 of 33 CODING: Words stricken are deletions; words underlined are additions. requirements of this chapter does not, solely by virtue of this 581 subsection, reduce or diminish the monthly retirement income 582 otherwise payable to each police officer covered by the 583 retirement trust fund or plan. 584 (b) The member’s compensation or salary contributed as 585 employee-elective salary reductions or deferrals to any salary 586 reduction, deferred compensation, or tax-sheltered annuity 587 program authorized under the Internal Revenue Code shall be 588 deemed to be the compensation or salary the member would receive 589 if he or she were not participating in such program and shall be 590 treated as compensation for retirement purposes under this 591 chapter. 592 (c) For any person who first becomes a member in any plan 593 year beginning on or after January 1, 1996, compensation for 594 that plan year may not include any amounts in excess of the 595 Internal Revenue Code s. 401(a)(17) limitation, as amended by 596 the Omnibus Budget Reconciliation Act of 1993, which limitation 597 of $150,000 shall be adjusted as required by federal law for 598 qualified government plans and shall be further adjusted for 599 changes in the cost of living in the manner provided by Internal 600 Revenue Code s. 401(a)(17)(B). For any person who first became a 601 member before the first plan year beginning on or after January 602 1, 1996, the limitation on compensation may not be less than the 603 maximum compensation amount that was allowed to be taken into 604 account under the plan as in effect on July 1, 1993, which 605 limitation shall be adjusted for changes in the cost of living 606 since 1989 in the manner provided by Internal Revenue Code s. 607 401(a)(17)(1991). 608 (8)(5) “Creditable service” or “credited service” means the 609 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 22 of 33 CODING: Words stricken are deletions; words underlined are additions. aggregate number of years of service and fractional parts of 610 years of service of any police officer, omitting intervening 611 years and fractional parts of years when such police officer may 612 not have been employed by the municipality subject to the 613 following conditions: 614 (a) A No police officer may not will receive credit for 615 years or fractional parts of years of service if he or she has 616 withdrawn his or her contributions to the fund for those years 617 or fractional parts of years of service, unless the police 618 officer repays into the fund the amount he or she has withdrawn, 619 plus interest as determined by the board. The member shall have 620 at least 90 days after his or her reemployment to make 621 repayment. 622 (b) A police officer may voluntarily leave his or her 623 contributions in the fund for a period of 5 years after leaving 624 the employ of the police department, pending the possibility of 625 his or her being rehired by the same department, without losing 626 credit for the time he or she has participated actively as a 627 police officer. If he or she is not reemployed as a police 628 officer with the same department within 5 years, his or her 629 contributions shall be returned to him or her without interest. 630 (c) Credited service under this chapter shall be provided 631 only for service as a police officer, as defined in subsection 632 (11), or for military service and may not include credit for any 633 other type of service. A municipality may, by local ordinance, 634 may provide for the purchase of credit for military service 635 occurring before employment as well as prior service as a police 636 officer for some other employer as long as the police officer is 637 not entitled to receive a benefit for such other prior service 638 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 23 of 33 CODING: Words stricken are deletions; words underlined are additions. as a police officer. For purposes of determining credit for 639 prior service, in addition to service as a police officer in 640 this state, credit may be given for federal, other state, or 641 county service as long as such service is recognized by the 642 Criminal Justice Standards and Training Commission within the 643 Department of Law Enforcement as provided under chapter 943 or 644 the police officer provides proof to the board of trustees that 645 such service is equivalent to the service required to meet the 646 definition of a police officer under subsection (16) (11). 647 (d) In determining the creditable service of a any police 648 officer, credit for up to 5 years of the time spent in the 649 military service of the Armed Forces of the United States shall 650 be added to the years of actual service, if: 651 1. The police officer is in the active employ of the 652 municipality before prior to such service and leaves a position, 653 other than a temporary position, for the purpose of voluntary or 654 involuntary service in the Armed Forces of the United States. 655 2. The police officer is entitled to reemployment under the 656 provisions of the Uniformed Services Employment and Reemployment 657 Rights Act. 658 3. The police officer returns to his or her employment as a 659 police officer of the municipality within 1 year after from the 660 date of his or her release from such active service. 661 (9)(6) “Deferred Retirement Option Plan” or “DROP” means a 662 local law plan retirement option in which a police officer may 663 elect to participate. A police officer may retire for all 664 purposes of the plan and defer receipt of retirement benefits 665 into a DROP account while continuing employment with his or her 666 employer. However, a police officer who enters the DROP and who 667 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 24 of 33 CODING: Words stricken are deletions; words underlined are additions. is otherwise eligible to participate may shall not thereby be 668 precluded from participating, or continuing to participate, in a 669 supplemental plan in existence on, or created after, March 12, 670 1999 the effective date of this act. 671 (10) “Defined contribution plan” means the component of a 672 local law plan to which deposits are made to provide benefits 673 for police officers, or for police officers and firefighters if 674 both are included. Such component is an element of a local law 675 plan and exists in conjunction with the defined benefit 676 component that meets the base benefits and minimum standards of 677 this chapter. The retirement benefits of the defined 678 contribution plan shall be provided through individual member 679 accounts, in accordance with the applicable provisions of the 680 Internal Revenue Code and related regulations, and are limited 681 to the contributions made into each member’s account and the 682 actual accumulated earnings, net of expenses, earned on the 683 member’s account. 684 (11)(7) “Division” means the Division of Retirement of the 685 Department of Management Services. 686 (12)(8) “Enrolled actuary” means an actuary who is enrolled 687 under Subtitle C of Title III of the Employee Retirement Income 688 Security Act of 1974 and who is a member of the Society of 689 Actuaries or the American Academy of Actuaries. 690 (13)(9) “Local law municipality” is any municipality in 691 which there exists a local law plan exists. 692 (14)(10) “Local law plan” means a retirement defined 693 benefit pension plan, which includes both a defined benefit plan 694 component and a defined contribution plan component, for police 695 officers, or for police officers and firefighters if both are, 696 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 25 of 33 CODING: Words stricken are deletions; words underlined are additions. where included, as described in s. 185.35, established by 697 municipal ordinance or special act of the Legislature, which 698 enactment sets forth all plan provisions. Local law plan 699 provisions may vary from the provisions of this chapter if the 700 base, provided that required minimum benefits and minimum 701 standards of this chapter are met. However, any such variance 702 must shall provide a greater benefit for police officers. 703 Actuarial valuations of local law plans shall be conducted by an 704 enrolled actuary as provided in s. 185.221(2)(b). 705 (15) “Long-term funded ratio” or “funded ratio” means the 706 ratio of the actuarial value of assets of the plan to the 707 actuarial accrued liabilities of the plan, as reported in the 708 most recent actuarial valuation of the plan, deemed to be in 709 compliance with chapter 112 by the Department of Management 710 Services. 711 (16)(11) “Police officer” means any person who is elected, 712 appointed, or employed full time by a any municipality, who is 713 certified or required to be certified as a law enforcement 714 officer in compliance with s. 943.1395, who is vested with 715 authority to bear arms and make arrests, and whose primary 716 responsibility is the prevention and detection of crime or the 717 enforcement of the penal, criminal, traffic, or highway laws of 718 the state. The term This definition includes all certified 719 supervisory and command personnel whose duties include, in whole 720 or in part, the supervision, training, guidance, and management 721 responsibilities of full-time law enforcement officers, part-722 time law enforcement officers, or auxiliary law enforcement 723 officers, but does not include part-time law enforcement 724 officers or auxiliary law enforcement officers as those terms 725 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 26 of 33 CODING: Words stricken are deletions; words underlined are additions. the same are defined in s. 943.10(6) and (8), respectively. For 726 the purposes of this chapter only, the term also includes 727 “police officer” also shall include a public safety officer who 728 is responsible for performing both police and fire services. Any 729 plan may provide that the police chief shall have the an option 730 to participate, or not, in that plan. 731 (17)(12) “Police Officers’ Retirement Trust Fund” means a 732 trust fund, by whatever name known, as provided under s. 185.03 733 for the purpose of assisting municipalities in establishing and 734 maintaining a retirement plan for police officers. 735 (18)(13) “Retiree” or “retired police officer” means a 736 police officer who has entered retirement status. For the 737 purposes of a plan that includes a Deferred Retirement Option 738 Plan (DROP), a police officer who enters the DROP is shall be 739 considered a retiree for all purposes of the plan. However, a 740 police officer who enters the DROP and who is otherwise eligible 741 to participate may shall not thereby be precluded from 742 participating, or continuing to participate, in a supplemental 743 plan in existence on, or created after, March 12, 1999 the 744 effective date of this act. 745 (19)(14) “Retirement” means a police officer’s separation 746 from city employment as a police officer with immediate 747 eligibility for receipt of benefits under the plan. For purposes 748 of a plan that includes a Deferred Retirement Option Plan 749 (DROP), “retirement” means the date a police officer enters the 750 DROP. 751 (20) “Special benefits” means benefits provided in a 752 defined contribution plan for police officers. 753 (21)(15) “Supplemental plan” means a plan to which deposits 754 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 27 of 33 CODING: Words stricken are deletions; words underlined are additions. of the premium tax moneys as provided in s. 185.08 are made to 755 provide extra benefits to police officers, or police officers 756 and firefighters if both are where included, under this chapter. 757 Such a plan is an element of a local law plan and exists in 758 conjunction with a defined benefit component plan that meets the 759 base minimum benefits and minimum standards of this chapter. 760 (22)(16) “Supplemental plan municipality” means any local 761 law municipality in which there existed a supplemental plan 762 existed as of December 1, 2000. 763 Section 8. Paragraph (b) of subsection (6) of section 764 185.06, Florida Statutes, is amended to read: 765 185.06 General powers and duties of board of trustees.—For 766 any municipality, chapter plan, local law municipality, or local 767 law plan under this chapter: 768 (6) To assist the board in meeting its responsibilities 769 under this chapter, the board, if it so elects, may: 770 (b) Employ an independent enrolled actuary, as defined in 771 s. 185.02(8), at the pension fund’s expense. 772 773 If the board chooses to use the municipality’s or special 774 district’s legal counsel or actuary, or chooses to use any of 775 the municipality’s other professional, technical, or other 776 advisers, it must do so only under terms and conditions 777 acceptable to the board. 778 Section 9. Paragraphs (d) through (g) of subsection (1) of 779 section 185.07, Florida Statutes, are amended, and a new 780 paragraph (e) is added to that subsection, to read: 781 185.07 Creation and maintenance of fund.—For any 782 municipality, chapter plan, local law municipality, or local law 783 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 28 of 33 CODING: Words stricken are deletions; words underlined are additions. plan under this chapter: 784 (1) The municipal police officers’ retirement trust fund in 785 each municipality described in s. 185.03 shall be created and 786 maintained in the following manner: 787 (d) By payment by the municipality or other sources of a 788 sum equal to the normal cost and the amount required to fund any 789 actuarial deficiency shown by an actuarial valuation as provided 790 in part VII of chapter 112, after taking into account the 791 amounts described in paragraphs (b), (c), (f), (g), and (h) and 792 the amounts of the tax proceeds described in paragraph (a) that 793 must be used to fund defined benefit plan benefits, except as 794 otherwise excluded from consideration in determining the 795 mandatory payment. 796 (e) For local law plans, and in addition to the mandatory 797 payment described in paragraph (d), by mandatory payment by the 798 municipality of the amount specified in s. 185.35(3) if the 799 long-term funded ratio of the plan is less than 80 percent. 800 (f)(e) By all gifts, bequests and devises when donated to 801 the fund. 802 (g)(f) By all accretions to the fund by way of interest or 803 dividends on bank deposits or otherwise. 804 (h)(g) By all other sources of income now or hereafter 805 authorized by law for the augmentation of such municipal police 806 officers’ retirement trust fund. 807 808 Nothing in this section shall be construed to require adjustment 809 of member contribution rates in effect on the date this act 810 becomes a law, including rates that exceed 5 percent of salary, 811 provided that such rates are at least one-half of 1 percent of 812 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 29 of 33 CODING: Words stricken are deletions; words underlined are additions. salary. 813 Section 10. Section 185.35, Florida Statutes, is amended to 814 read: 815 185.35 Municipalities having their own pension plans for 816 police officers.—For any municipality, chapter plan, local law 817 municipality, or local law plan under this chapter, In order for 818 a municipality municipalities with its their own retirement plan 819 pension plans for police officers, or for police officers and 820 firefighters if both are included, to participate in the 821 distribution of the tax fund established under pursuant to s. 822 185.08, a local law plan and its plan sponsor plans must meet 823 the base minimum benefits and minimum standards set forth in 824 this chapter: 825 (1) If a municipality has a retirement pension plan for 826 police officers, or for police officers and firefighters if both 827 are included, which, in the opinion of the division, meets the 828 base minimum benefits and minimum standards set forth in this 829 chapter, the board of trustees of the pension plan, as approved 830 by a majority of police officers of the municipality, must may: 831 (a) place the income from the premium tax in s. 185.08 in 832 such pension plan for the sole and exclusive use of its police 833 officers, or its police officers and firefighters if included, 834 where it shall become an integral part of that pension plan and 835 shall be used to fund benefits for police officers as follows: 836 (a) The base premium tax revenues must be used to fund base 837 benefits. 838 (b) Of the premium tax revenues received that are in excess 839 of the amount received for the 2012 calendar year, and any 840 accumulations of additional premium tax revenues that have not 841 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 30 of 33 CODING: Words stricken are deletions; words underlined are additions. been applied to fund extra benefits: 842 1. If the plan has a long-term funded ratio of less than 80 843 percent: 844 a. Fifty percent must be used as additional contributions 845 to pay the plan’s actuarial deficiency and may not be considered 846 in the determination of the mandatory payment described in s. 847 185.07(1)(d); 848 b. Twenty-five percent must be used to fund base benefits; 849 and 850 c. Twenty-five percent must be placed in a defined 851 contribution plan to fund special benefits. 852 2. If the plan has a long-term funded ratio of 80 percent 853 or greater: 854 a. Fifty percent must be used to fund base benefits; and 855 b. Fifty percent must be placed in a defined contribution 856 plan to fund special benefits. 857 (c) Additional premium tax revenues not described in 858 paragraph (b) must be used to fund benefits that were not 859 included in the base benefits pay extra benefits to the police 860 officers included in that pension plan; or 861 (b) May place the income from the premium tax in s. 185.08 862 in a separate supplemental plan to pay extra benefits to the 863 police officers, or police officers and firefighters if 864 included, participating in such separate supplemental plan. 865 (2) Insurance premium tax revenues may not be used to fund 866 benefits provided in a defined benefit plan which were not 867 provided by the plan as of March 1, 2013. 868 (3) If a plan offers benefits in excess of its base 869 benefits, such benefits may be reduced if the plan continues to 870 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 31 of 33 CODING: Words stricken are deletions; words underlined are additions. meet the base benefits of the plan and the minimum standards set 871 forth in this chapter. The amount of insurance premium tax 872 revenues previously used to fund benefits in excess of the 873 plan’s base benefits before the reduction must be used as 874 provided in subsection (1)(b). Twenty-five percent of the amount 875 of any mandatory contribution paid by the municipality or 876 special fire control district which was previously used to fund 877 extra benefits before the reduction must be used as additional 878 contributions as specified in s. 185.07 to fund the plan’s 879 actuarial deficiency. 880 (4)(2) The premium tax provided by this chapter shall in 881 all cases be used in its entirety to provide retirement extra 882 benefits to police officers, or to police officers and 883 firefighters if both are included. However, local law plans in 884 effect on October 1, 1998, must comply with the minimum benefit 885 provisions of this chapter only to the extent that additional 886 premium tax revenues become available to incrementally fund the 887 cost of such compliance as provided in s. 185.16(2). If a plan 888 is in compliance with such minimum benefit provisions, as 889 subsequent additional tax revenues become available, they shall 890 be used to provide extra benefits. Local law plans created by 891 special act before May 27, 1939, shall be deemed to comply with 892 this chapter. For the purpose of this chapter, the term: 893 (a) “Additional premium tax revenues” means revenues 894 received by a municipality pursuant to s. 185.10 which exceed 895 the amount received for calendar year 1997. 896 (b) “Extra benefits” means benefits in addition to or 897 greater than those provided to general employees of the 898 municipality and in addition to those in existence for police 899 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 32 of 33 CODING: Words stricken are deletions; words underlined are additions. officers on March 12, 1999. 900 (5)(3) A retirement plan or amendment to a retirement plan 901 may not be proposed for adoption unless the proposed plan or 902 amendment contains an actuarial estimate of the costs involved. 903 Such proposed plan or proposed plan change may not be adopted 904 without the approval of the municipality or, where permitted, 905 the Legislature. Copies of the proposed plan or proposed plan 906 change and the actuarial impact statement of the proposed plan 907 or proposed plan change shall be furnished to the division 908 before the last public hearing thereon. Such statement must also 909 indicate whether the proposed plan or proposed plan change is in 910 compliance with s. 14, Art. X of the State Constitution and 911 those provisions of part VII of chapter 112 which are not 912 expressly provided in this chapter. Notwithstanding any other 913 provision, only those local law plans created by special act of 914 legislation before May 27, 1939, are deemed to meet the base 915 minimum benefits and minimum standards only in this chapter. 916 (6)(4) Notwithstanding any other provision, with respect to 917 any supplemental plan municipality: 918 (a) Section 185.02(7)(a) 185.02(4)(a) does not apply, and a 919 local law plan and a supplemental plan may continue to use their 920 definition of compensation or salary in existence on March 12, 921 1999. 922 (b) A local law plan and a supplemental plan must continue 923 to be administered by a board or boards of trustees numbered, 924 constituted, and selected as the board or boards were numbered, 925 constituted, and selected on December 1, 2000. 926 (c) The election set forth in paragraph (1)(b) is deemed to 927 have been made. 928 Florida Senate - 2013 CS for SB 458 585-01746-13 2013458c1 Page 33 of 33 CODING: Words stricken are deletions; words underlined are additions. (7)(5) The retirement plan setting forth the benefits and 929 the trust agreement, if any, covering the duties and 930 responsibilities of the trustees and the regulations of the 931 investment of funds must be in writing and copies made available 932 to the participants and to the general public. 933 (8) In addition to the defined benefit component of the 934 local law plan, each plan sponsor must have a defined 935 contribution plan component within the local law plan by October 936 1, 2013, or upon the creation date of a new participating plan. 937 However, the plan sponsor of any plan established by special act 938 of the Legislature has until July 1, 2014, to create a defined 939 contribution component within the plan. 940 Section 11. The Legislature finds that a proper and 941 legitimate state purpose is served when employees and retirees 942 of the state and its political subdivisions, and the dependents, 943 survivors, and beneficiaries of such employees and retirees, are 944 extended the basic protections afforded by governmental 945 retirement systems that provide fair and adequate benefits and 946 that are managed, administered, and funded in an actuarially 947 sound manner as required by s. 14, Article X of the State 948 Constitution and part VII of chapter 112, Florida Statutes. 949 Therefore, the Legislature determines and declares that this act 950 fulfills an important state interest. 951 Section 12. This act shall take effect July 1, 2013. 952