HomeMy WebLinkAboutAgenda Fire Pension 043007THE PENSION RESOURCE CENTER, INC.
4360 Northlake Boulevard, Suite 206 ❖Palm Beach Gardens, FL 33410
Phone (561) 624 -3277 ❖ Fax (561) 624 -3278 ❖ www.REcOLIRCECE-NTERS.COM
PALM BEACH GARDENS FIREFIGHTERS'
PENSION FUND
Meeting of Monday, April 30, 2007
Location: Palm Beach Gardens Fire Rescue — Station 3
5161 Northlake Blvd.
Palm Beach Gardens, Florida 33410
(561) 776 -1071
Time: 10.00 A.M.
AGENDA
1. Cali Meeting to Order
2. Minutes of Meeting Held March 19, 2007
3. Actuary Report: Brad Armstrong (10.00 A.M.)
• Actuarial Valuation
4. Investment Monitor Report: Joe Bogdahn
• Update on 1 st Quarter Performance
5. Presentation by Galliard Capital Management (11 .-00 A.M)
6. Attorney Report: Bob Sugarman
• Status of Offset Regarding Kathleen Bush
7. Administrative Report- Margie Adcock
8. Disbursements
9., Other Business
10.Schedule Next Meeting: Monday, May 21, 2007 at 10:00 A.M.
11.Adjourn
PLEASE NOTE:
Should any interested party seek to appeal any decision made by the Board with respect to any matter
considered at such meeting or hearing, he will need a record of the proceedings, and for such purpose he
may need to insure 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 needinq a special accommodation to participate in this meetinq should contact The
CITY OF PALM BEACH GARDENS FIREFIGHTERS'
PENSION FUND
ACTUARIAL VALUATION REPORT
SEPTEMBER 30, 2006
Gabriel Roeder Smith & Company
OUTLINE OF CONTENTS
REPORT OF SEPTEMBER 30, 2006 ACTUARIAL VALUATION
'ages Items
Cover Letter
Valuation Process, Experience, Commentary and Certification
A -1 Actuarial valuation process
A -2 Observed experience
A -3 Comments, conclusion and certification
Detailed Valuation Results
B -1 Funding objective and contribution rates
B -2/3 Contribution requirement
B -4 Experience gain (loss)
B -5/6 Unfunded actuarial accrued liability
B -7 Actuarial balance sheet
Summary of Benefit Provisions and Valuation Data
C -1/5 Summary of benefit provisions
C -6 Financial data
C -7 Funding value of assets
C -8/14 Member data
Actuarial Valuation Process, Summary of Actuarial Assumptions
and Definitions of Technical Terms
D -1/4 Actuarial valuation process in detail
D -5/11 Summary of actuarial assumptions
D -12/13 Definitions of technical terms
Certain Disclosers Required by Statement No. 25 of the
Governmental Accounting Standards Board
E -1 Actuarial accrued liability
E -2 Contributions required and contributions made
E -3 Schedule of funding progress
F -1/5 Summary of Valuation Data Results in State Format
Gabriel Roeder Smith & Company One Towne Square 248.799.9000 phone
J Consultants & Actuaries Suite 800 248.799.9020 fax
GIIXJ Southfield, MI 480761-3723 www.gabrielroeder.com
April 26, 2007
The Board of Trustees
City of Palm Beach Gardens Firefighters' Pension Fund
Palm Beach Gardens, Florida
Submitted in this report are the results of an actuarial valuation of the benefit
" r obligations, assets and contribution requirements of the City of Palm Beach Gardens
Firefighters' Pension Fund.
The date of the valuation was September 30, 2006.
A summary of valuation results,, comments, conclusions, and our certification are
contained in Section A.
Detailed valuation results are contained in Section B.
The valuation was based upon information, furnished by the Fund administrator and
Auditor concerning individual members, terminated members, retired members and
beneficiaries, plan benefits and financial transactions and assets. Data was checked for
reasonableness and missing information but was not otherwise audited. This information
is summarized in-Section C.
A description of the actuarial valuation process, actuarial assumptions and definitions
of technical terms are contained in Section D.
Governmental Accounting Standards Board Statement No. 25 information is contained
5 in Section E. -
5 " A summary of valuation results in the State format is contained in Section F.
r This report has been prepared by; actuaries who have substantial experience valuing
public employee retirement systems. To the best of our knowledge, this report is
complete and accurate and was made in accordance with actuarial methods recognized by
,1 the Actuarial Standards Board of the American Academy of Actuaries. The actuarial.
a
} . assumptions used for the valuation produce results which, individually and in the
aggregate, are reasonable.
A Respectfully submitted,
rad Lee Armstrong, ASA, , MAAA all J. z ubek, ASA, EA, MAAA
BLA:mrb
2678
SECTION A
VALUATION PROCESS, EXPERIENCE, COMMENTARY
AND CERTIFICATION
ACTUARIAL VALUATION PROCESS
An actuarial valuation is the process by which a balance between revenues (member contributions,
City contributions, Chapter 175 receipts and investment income) and obligations (benefits and
expenses) is determined and the funded condition is measured.
The flow of activity constituting the valuation may be summarized as follows:
A. Covered person information about:
— each person receiving pension payments
— each former member with a vested pension not yet payable
— each former member who is not vested and has not claimed a member contribution
refund
— each active member
B. Financial Information (assets, revenues, and expenditures)
C. Benefit Provisions (Retirement Ordinance)
D. Experience Assumptions about the volume and incidence of future activities
E. Actuarial Cost Method (Projected Unit Credit) for allocating benefit costs to time periods
F. Mathematical linking of the person information, financial information, benefit provisions,
experience estimates and actuarial cost method
G. Determination of-
- contribution rate for the plan year
— current funded condition
Items A, B and C are furnished by the Pension Fund and constitute the current "knowns" about the
Fund. Since the majority of activities will occur in the future, estimates must be made about these
future activities (Item D).
Under the Projected Unit Credit Actuarial Cost Method, each year's differences between projected and
actual Fund activities (experience gains /losses) reduce /increase the Unfunded Actuarial Accrued
Liability. This treatment of experience gains/losses leaves the Normal Cost unaffected by year -to -year
experience fluctuations and thereby more likely to satisfy the level percent of payroll Funding
Objective set out on page B -1. Normal Cost changes occur primarily in response to changes in
benefits, experience assumptions average past service, and age at hire patterns.
City of Palm Beach Gardens Firefighters' Pension Fund A -1
OBSERVED EXPERIENCE AND ASSUMPTION AND METHOD CHANGES
Year -to -year differences between assumed experience and observed experience are inevitable in the
operation of the Fund. Each annual actuarial valuation takes observed experience differences into
account. If on net balance the differences are favorable, the unfunded actuarial accrued liability is less
than projected (an experience gain) otherwise it is more than projected (an experience loss). Specific
activity information is located in sections C and D.
The principal sources of experience gains /losses during the period from October 1, 2005 to September
30, 2006 were:
• a gain of approximately $O.IM due to the rate of return on the value of assets of 9.3%
versus the projected 8.5% (page C -7).
• a gain of approximately $0.8M due to 1.9% average salary increases versus 5.3% expected;
• a loss of approximately $1.4M due to 3 terminations versus 10.9 expected;
• a loss of approximately $0.2M due to a death in service;
• a gain of approximately $0.1 M due to no retirements.
In addition, this report adopts the proposed assumptions and methods as presented in the February
19, 2007 experience study which were adopted by the Board at its February 19, 2007 meeting.
The City contribution requirement increased by 6.25% of payroll to 30.40% of payroll including
administrative and investment expenses. Actuarial assumption changes were the primary factors
accounting for the increase. Additional contribution rate detail is provided on page B -2.
City of Palm Beach Gardens Firefighters' Pension Fund A -2
COMMENTS
• The Share Accounts totaled $3,219,943 with 110 active members having non -zero balances as
of September 30, 2006.
• The assumptions and methods should be reviewed again prior to the September 30, 2011
actuarial valuation.
CONCLUSION
The funding status described on page E -3 indicates that the accrued obligations of the Fund, as
measured by the method prescribed in Statement No. 25 of the Governmental Accounting Standards
Board, are 46.8% funded by the funding value of assets vs. 38.4% one year ago. This is excluding
Share Accounts. Since the Share Accounts are 100% funded, including them increases the funded
ratio to 52.0% this year vs. 43.5% last year. It is the actuary's opinion that the required contribution
rate determined by the most recent actuarial valuation is sufficient to meet the Fund's funding
objective, presuming continued timely receipt of required contributions.
STATEMENT BY ENROLLED ACTUARY
This actuarial valuation and/or cost determination was prepared and completed by me or under my
direct supervision, and I acknowledge responsibility for the results. To the best of my knowledge and
belief, the results are complete and accurate, and in my opinion, the techniques and assumptions used
are reasonable and meet the requirements and intent of Part VII, Chapter 112, Florida Statutes. There
is no benefit or expense to be provided by the plan and/or paid from the plan's assets for which
liabilities or current costs have not been established or otherwise taken into account in the valuation.
All known events or trends which may require a material increase in plan costs or required
contribution rates have been taken into account in the valuation.
r'
Bred Lee Armstrong, ASA, MAAA, EA [05 -5614]
`Z- ,/)0 %
Date
City of Palm Beach Gardens Firefighters' Pension Fund A -3
SECTION B
DETAILED VALUATION RESULTS
FUNDING OBJECTIVE
The funding objective for the Pension Fund is to establish and receive contributions, expressed as
percents of active member covered payroll, which are inherently level from year -to -year when funding
assumptions are realized and benefits are unchanged. This objective meets the requirements of Part
VII, Chapter 112, Florida Statutes.
CONTRIBUTION RATES
The Pension Fund is supported by member contributions; City contributions; receipts pursuant to
Chapter 175, Florida Statutes; and investment income on Pension Fund assets.
Contributions which satisfy the funding objective are determined by the annual actuarial valuation and
are sufficient to:
(1) Cover the costs allocated to the current year (normal cost) by the actuarial cost methods
described in Section D ; and
(2) Finance over a period of future years the actuarial cost not covered by present assets and
anticipated future normal cost (unfunded actuarial accrued liability).
Financing periods used for this valuation were:
17 years for experience gains and losses occurring prior to 10101105;
26 years for benefit changes occurring prior to 10/0 1 105;
27 years for all unfunded amortization bases attributable to periods occurring after 9/30/05.
Contribution requirements for the fiscal year beginning October 1, 2007 are shown on pages B -2 and
City of Palm Beach Gardens Firefighters' Pension Fund B -1
CONTRIBUTIONS TO FINANCE BENEFITS OF THE PENSION FUND
FOR THE FUND YEAR BEGINNING OCTOBER 1, 2007
TO BE CONTRIBUTED DURING THE CITY FISCAL YEAR
BEGINNING OCTOBER 1, 2007
Contributions Expressed as Percents
Contributions for of Active Member Covered Payroll
Normal Cost
Normal and Early retirement pensions
21.11
%
Disability pensions
0.35
Survivor pensions
Pre - retirement
0.14
Post - retirement
0.00
Termination benefits
Deferred service pensions
0.80
Refunds of member contributions
0.73
Total Normal Cost
23.13
Unfunded Actuarial Accrued Liability (1)
Retired members and beneficiaries
0.00
Active and vested terminated members
13.35
Total Unfd. Actuarial Accrued Liability
13.35
Administrative and Investment Expenses
1.83
Total Calculated Contribution Requirement
38.31
%
Adjustments to Calculated Contribution Requirement
Temporary full funding credit
0.00
FS 112.64(5) Compliance
0.00
Total adjustments
0.00
Total Adjusted Contribution Requirement
38.31
%
Member portion
6.00
Chapter 175 portion (based on 2% member payroll with one year lag)
1.91
Additional Premium Tax Revenue portion
0.00
City portion
30.40
%
(1) Please refer to page B -6 for a schedule of financing periods.
FS 112.64 requires City contributions to be deposited not less frequently than quarterly. Member
contributions, which are in addition to the City contributions, must be deposited immediately after each
pay period. FS 112.64 requires that Chapter 175 monies must be deposited within 5 days of receipt
from the State.
Procedures for determining dollar contribution amounts are shown on page B -3.
City of Palm Beach Gardens Firefighters' Pension Fund B -2
DETERMINING DOLLAR CONTRIBUTIONS
For any period of time, the percent -of- payroll contribution rate needs to be converted to dollar
amounts. We recommend one of the following procedures:
Procedure (1)
Contribute dollar amounts at the end of each payroll period which are equal to the City's percent -of-
payroll contribution requirement multiplied by the active member covered payroll for the period.
Adjustments should be made as necessary to exclude items of pay that are not compensation for
Pension Fund benefits and to include non - payroll amounts that are compensation for Pension Fund
benefits.
Procedure (2)
Contribute $3,055,991 during the Fund fiscal year beginning October 1, 2007. Included in these
amounts is the projected increase in salary level between the valuation date and the fiscal year in
which the contribution is made. The projection factor of 1.06825 [(1.045 ^1.5)] is consistent with that
used to calculate the actuarial liability. The member contribution amounts may be used as projected
dollar contributions for purposes of the CAFR, but should not be used to reconcile actual member
contributions.
The above amounts are assumed to be contributed, on average, halfway through the fiscal year. If
contributions are made on a later schedule, interest should be added at the rate of .68% (.0068) for
each month of delay.
City of Palm Beach Gardens Firefighters' Pension Fund B -3
07/08
06/07
Total Contribution Requirement
$ 3,851,152
$ 2,987,082
Less Member Contributions
603,156
558,507
Total Employer Contribution Requirement
3,247,996
2,428,575
Less Chapter 175 Prem. "frozen"
192,005
180,747
Less Chapter 175 Supp. "frozen"
0
0
Less Additional Premium Tax Revenue
0
0
Base City Contribution
$ 3,055,991
$ 2,247,828
The above amounts are assumed to be contributed, on average, halfway through the fiscal year. If
contributions are made on a later schedule, interest should be added at the rate of .68% (.0068) for
each month of delay.
City of Palm Beach Gardens Firefighters' Pension Fund B -3
DERIVATION OF EXPERIENCE GAIN (LOSS)
FOR THE PERIOD FROM OCTOBER 1, 2004
TO SEPTEMBER 30, 2006
DERIVATION
(1) UAAL at start of year
(2) Normal cost for year
(ER Normal cost + expenses) x valuation pay for 05/06)
(3) Employer contribution
(4) Interest accrued
.085 x [(1) +1/2((2) - (3))]
(5) Expected UAAL before changes
[(1) + (2) - (3) + (4)]
(6) Effect of assumption changes
(7) Effect of cost method changes /accounting and timing differences
(8) Effect of benefit changes
(9) Expected UAAL after changes
(10) Actual UAAL
(11) Gain/(Loss) (9) - (10)
UAAL represents Unfunded Actuarial Accrued Liability.
2006
$ 17,292,081
502,651
1,542,934
1,425,615
17,677,413
(2,157,223)
(335,438)
0
15,184,752
15,872,094
$ (687,342)
City of Palm Beach Gardens Firefighters' Pension Fund B -4
UNFUNDED ACTUARIAL ACCRUED LIABILITY
A. Actuarial present value of future benefits
September 30, 2006
September 30, 2005
$ 437135,158
$ 36,430,620
(excluding Share Accounts)
B. Actuarial present value of future
normal costs
13,289,296
8,347,240
C. Actuarial accrued liability
29,8457862
28,083,380
D. Net assets available for funding
13,973,768
10,791,299
E. Unfunded actuarial accrued liability
$ 15,872,094
$ 17,292,081
City of Palm Beach Gardens Firefighters' Pension Fund B -5
SOURCES AND FINANCING OF UNFUNDED
ACTUARIAL ACCRUED LIABILITY
Remaining
Source of Unfunded Act. Accrued Liability Financing % of Covered
Unfunded Act. Initial Current Period Payroll FS112.64(5)
Accrued Liab. Amount Fin. Per. Amount 9/30/2006 Contribution Compliance
Changes from experience deviations.
Prior combined n/a 30 yrs. $ 15,153,766
9/30/2006 $ 687,342 27 yrs. $ 687,342
Changes from actuarial assumption and cost method revisions.
9/30/2006 $ (2,157,223) 27 yrs. $ (2,157,223)
Changes from amendments to benefit provisions.
9/30/2002 n/a 30 yrs. $ 2,188,209
Totals
$ 15,872,094
17 yrs. 12.87% 0.00%
27 yrs. 0.43% 0.00%
27 yrs. (1.35)% 0.00%
26 yrs. 1.40% 0.00%
13.35% 0.00%
City of Palm Beach Gardens Firefighters' Pension Fund B -6
ACTUARIAL BALANCE SHEET - SEPTEMBER 30, 2006
Present Resources and Expected Future Resources
A. Net assets available for benefits
1. Market value (page C -7)
2. Funding value adjustment
3. Funding value of assets
B. Actuarial present value of expected
future City and Chap. 175 contributions
1. For normal costs
2. For unfunded actuarial accrued liability
3. Total
C. Actuarial present value of expected
future Member contributions
D. Actuarial present value of Chapter 175 Share Accounts
E. Total Present and Expected Future Resources
$14,102,397
($128,629)
$13,973,768
9,749,868
15,872,094
25,621,962
3,539,428
3,219,943
$46,355,101
Actuarial Present Value of Expected Future Benefit Payments and Reserves
A. To retired members and beneficiaries $ 1,610,536
B. To vested terminated members 34,446
C. To present active members
1. Allocated to service rendered prior
to valuation date 28,200,880
2. Allocated to service likely to be
rendered after valuation date 13,289,296
3. Total 41,490,176
D. Reserve for Chapter 175 Share Accounts 3,219,943
E. Total Actuarial Present Value of Expected
Future Benefit Payments
$ 46,355,101
City of Palm Beach Gardens Firefighters' Pension Fund B -7
SECTION C
SUMMARY OF BENEFIT PROVISIONS AND
VALUATION DATA
SUMMARY OF BENEFIT PROVISIONS
AS OF SEPTEMBER 30, 2006
Membership
All full -time certified (F.S.633.35) firefighters become members as a condition of employment.
Average Final Compensation
One twelfth (1/12) of the average annual salary for the best five years of the last ten years of credited
service prior to retirement, termination, or death.
Normal Retirement
Eligibility. Age 52 with 10 or more years of credited service; or any age with 25 or more years of
credited service.
Pension Amount. Three percent (3 %) of average final compensation multiplied by credited service,
provided, however, that the benefit shall not exceed 99% of average final compensation. The normal
form of benefit is a benefit payable for life with 120 monthly payments guaranteed. Optional forms
are available on an actuarial equivalent basis.
Early Retirement
Eligibility. Age 50 with 10 or more years of credited service.
Pension Amount. Normal retirement pension earned at time of early retirement but reduced by 3%
for each year early retirement date precedes age 52.
Mandatory Retirement (No Provision)
City of Palm Beach Gardens Firefighters' Pension Fund C -1
SUMMARY OF BENEFIT PROVISIONS (CONTINUED)
Disability - Service Connected
Eligibility. Total and likely to be permanent disability for duties of a firefighter.
Pension Amount. 60% of AFC. Minimum benefit shall be 2% of AFC times credited service.
Disability - Non - Service Connected
Eligibility. 10 or more years of credited service and total and likely to be permanent disability for
duties of a firefighter.
Pension Amount. 2.5% of AFC times credited service. Maximum benefit is 50% of AFC.
Vesting
Eligibility. Members with 5 or more years of credited service but not eligible for any other benefits
under, the system.
Vested Percentage. 25% after 5 years, plus 15% per year thereafter to 100% after 10 years of credited
service.
Pension Amount. Vested portion of member's accrued benefit payable upon reaching age 50 under
the provisions for Early Retirement or age 52 under the provisions for Normal Retirement provided
the member's accumulated contributions are left in the Pension Fund.
Non - Vested Termination
Members who terminate employment with less than 5 years of credited service are entitled to a refund
of their accumulated contributions.
City of Palm Beach Gardens Firefighters' PensionTund C -2
SUMMARY OF BENEFIT PROVISIONS (CONTINUED)
Deferred Retirement Option Plan (DROP)
Eligibility. Any member who is eligible to receive a normal retirement pension and who can perform
the full scope of duties assigned to a firefighter. Participation shall cease after the earlier of 5 years in
the DROP or termination of service.
Pension Amount. Calculated as if the member had elected to retire on the date of election to
icipate in the DROP, using credited service and final average salary at the date of election. The
retirement benefits, including any future cost -of- living increases, shall be deposited in the
s DROP account. Earnings of each DROP account shall be credited or debited at the end of
each fiscal year quarter at the actual net rate of investment return achieved by the fund. As an
alternative, the DROP member may elect that his or her DROP account be invested in a fixed rate
market fund. Disbursements from the account are deferred until termination of employment.
Contributions All contributions on behalf of the member to the fund cease following
to participate in the DROP.
Survivor Benefits
Member Partially or Fully Vested. The member's accrued retirement pension is paid to the
beneficiary for 120 months. (Pension is reduced if paid prior to otherwise Normal
Date.)
Not Vested or Eligible for Retirement. Refund of accumulated contributions.
Cost -of- Living Adjustments (COLA)
Beginning January 1, 2004, and each January 1 thereafter, all members receiving benefits, excluding
Disability Retirees, shall receive an age based Cost -of- Living increase. The amount will be 1.0% for
members who are age 53, 2.0% for members who are age 54, and 3.0% for members who are age 55
or greater.
City of Palm Beach Gardens Firefighters' Pension Fund C -3
SUMMARY OF BENEFIT PROVISIONS (CONTINUED)
Member Contributions
Each member contributes 6% of salary. An additional 2% of salary will come out of member share
account and credited as member contributions to the defined benefit provisions of the Pension Fund.
Non - Employee Contributions
Chapter 175, Florida Statutes Premium tax monies received pursuant to F.S. Chapter 175 will be
to individual member share accounts based on years of credited services. On each valuation
date, ;each individual share account shall be adjusted to reflect the investment gains or losses and to
allocate the costs, fees and expenses of administration of the fund. Each October 1St, beginning with
October 1St, 2003, 2% of the salary shall be deducted from the monies received from F.S. Chapter 175,
tax
City of Palm Beach Garden, Amounts determined actuarially in accordance with Chapter 175 and
112, Florida Statutes.
Forfeiture of Retirement Benefits
benefits granted by the Pension Fund are subject to forfeiture if an employee is convicted
of anloffense specified in Sections 112.3173 and 175.195, Florida Statutes, pursuant to the procedures
set forth in the cited statute.
City of Palm Beach Gardens Firefighters' Pension Fund C -4
SUMMARY OF BENEFIT PROVISIONS (CONCLUDED)
Disclaimer
The preceding summary briefly describes the principle benefits of the Pension Fund. Detailed benefit
conditions and limitations are contained in the Palm Beach Gardens Code, Division 2 Firefighters'
Pension Fund, which established the Fund. Interpretations of the Palm Beach Gardens Code are made
by the Board of Trustees. The Internal Revenue Code, Florida Statutes, the Palm Beach Gardens
Code establishing the Fund, and Board interpretations govern the operation of the Fund and prevail
over any conflict with the terms of this Summary of Benefit Provisions and should be consulted before
you Hake any action concerning your membership or benefits. In case of any conflict between this
Summary and the provisions of the Palm Beach Gardens Code or other applicable law, the Palm
Beach Gardens Code or other applicable law will prevail. Copies are available at the office of the
Administrative Manager.
City of Palm Beach Gardens Firefighters' Pension!Fund C -S
ACCOUNTING INFORMATION SUBMITTED FOR VALUATION
Revenues and Expenditures
REVENUES:
a. Member contributions
b. City contributions
c. Chapter 175 receipts to member contributions
d. Chapter 175 receipts to Share Accounts
e. Interest and dividends
f. Net appreciation in fair value of investments
g. Miscellaneous income
h. Total revenues
►PENDITURES:
a. Benefits paid
b. Administrative expenses
c. Investment expenses
d. Total expenditures
?T INCOME:
Total revenues minus total expenditures
Audit Adjustment
[ARE ACCOUNT NET CHANGE
3SETS(Defined Benefits) BEGINNING YEAR
3SETS(Share Accounts) BEGINNING YEAR
3SETS (Defined Benefits) END YEAR
iSETS (Share Accounts) END YEAR
)TAL ASSETS END YEAR
Summary of Assets
Year Ended Year Ended
9/30/2006 9/30/2005
$ 556,032
1,542,934
173,271
479,359
447,060
796,721
3,230
3,998,607
197,262
62,184
105,999
365,445
$3,633,162
0
668,108
$111137,343
2,551,835
$14,102,397
3,219,943
$17,322,340
$ 519,513
1,188,002
152,590
423,415
315,879
1,199,914
10,472
fG :�
120,461
50,952
84,181
255,594
$3,554,191
(1,511)
678,498
$8,261,650
1,873,337
$11,137,343
2,551,835
$13,689,178
September 30, 2006 September 30, 2005
Market Market
Cash & equivalents
$ 8761,211
$ 356,887
Receivables\ (payables)
168,783
90,384
Corporate Bonds /Government Securities
6,022,468
4,322,895
Common Stocks
8,488,980
8,521,659
Real Estate
212,943
-
International
1,552,955
397,353
Total Assets
$17,322,340
$13,689,178
City of Palm Beach Gardens Firefighters' Pension Fund
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NORMAL AND EARLY RETIRED MEMBERS
City of Palm Beach Gardens Firefighters' Pension Fund C -9
Averages for All Service
New Retired Members
Pension Recipients
During Prior Period
Current
Averages
Plan
Attained
Retirement
Annual
Ret.
Annual
Year
Number
Age
Age
Pension
No.
Age
Serv.
Pension
1998
1
58.7 yrs.
58.7 yrs.
$ 51,471
1
58.7
N/A
$51,471
1999
1
59.7
58.7
51,471
2000
1
60.7
58.7
51,471
2001
1
61.7
58.7
51,471
2002
1
62.7
58.7
51,471
2003
1
63.7
58.7
51,471
2004
1
64.7
58.7
52,628
2005
1
65.7
58.7
54,208
2006
1
66.7
58.7
54,605
City of Palm Beach Gardens Firefighters' Pension Fund C -9
REiTIRED MEMBER AND BENEFICIARY DATA AS OF SEPTEMBER 30, 2006
TABULATED BY TYPE OF PENSION BEING PAID
Actuarial
Present
Annual Value of
Type of Pension Being Paid No. Pensions Pensions
Ten Year Guaranteed to
Beneficiary
Age and Service Benefits
Straight Life Only
Age and Service Benefits
Joint and Survivor
Disability Benefits
Total Pensions Being Paid
1 $ 31,584 $ 217,586
1 54,605 577,500
4 79,519 815,450
6 165,708 1,610,536
City of Palm Beach Gardens Firefighters' Pension Fund C-10
RETIRED MEMBERS AND BENEFICIARIES AS OF SEPTEMBER 30, 2006
TABULATED By ATTAINED AGES
City of Palm Beach Gardens Firefighters' Pension Fund C-11
Fire
Members
Attained
Annual
Ages
No.
Pension
37
1
$20,785
46
1
15,588
47
1
21,136
48
1
22,010
59
1
31,584
66
1
54,605
Totals
6
$165,708
City of Palm Beach Gardens Firefighters' Pension Fund C-11
VESTED TERMINATED MEMBERS AS OF SEPTEMBER 30, 2006
TABULATED BY ATTAINED AGES
Attained
Ages
No.
Estimated
Annual Pensions
50
1
$ 6,196
Totals
1
$ 6,196
City of Palm Beach Gardens Firefighters' Pension Fund C -12
ACTIVE AND VESTED TERMINATED MEMBERS INCLUDED IN VALUATION
Vested Active
Valuation Active Term. Member Average
Date Members Members Payroll Age Service Pay
9/30/2001
84
1
$ 4,255,524
36.5
9.1
$ 50,661
9/30/2002
92
1
4,839,568
36.9
9.3
52,604
9/30/2003
100
1
6,541,837
37.1
9.5
65,418
9/30/2004
109
1
7,567,887
37.4
9.8
69,430
9/3 0/2005
114
1
8,774,107
37.1
8.8
76,966
9/30/2006
121
1
99205,470
37.3
9.2
76,078
9/3
9/3
9/3
NUMBER ADDED TO AND REMOVED FROM ACTIVE PARTICIPATION
Number
Added Terminations During Period Active
During Norm/Early Disability Died -in Terminations Members
'riod Period Retirement Retirement Service Vested Other Total End of
ded A E A E A E A E A A A E Period
100
12 0 0 N/A 0 N/A 0 N/A 0 3 3 N/A 109
6 1 0 N/A 1 N/A 0 N/A 0 0 0 N/A 114
11 4 0 1.5 0 0.1 1 0.1 0 3 3 10.9 121
for 9 -30 -07 4.2 0.1 0.1
A represents actual number.
E represents expected number.
6.1
City of Palm Beach Gardens Firefighters' Pension Fund C -13
■
i
■
ACTIVE MEMBERS AS OF SEPTEMBER 30, 2006
TABULATED BY ATTAINED AGE AND YEARS OF SERVICE
■
■
Years of Service to Valuation
Date
Totals
■
Attained
Valuation
Age
0 -4
5 -9
10 -14
15 -19
20 -24
25 -29
30 Plus
No.
Payroll
■
20 -24
8
8
$ 402,738
25 -29
12
3
15
847,864
■
30 -34
12
3
2
17
1,021,220
■
35 -39
10
10
7
3
30
2,228,255
40 -44
3
4
12
9
2
30
2,564,452
■
45 -49
1
7
5
1
3
17
1,728,009
50 -54
1
2
3
299,807
55 -59
-
60+
1
1
113,125
■
Totals
46
22
28
19
3
3
121
$ 9,205,470
■
■
■
Age: 37.3 years.
Service: 9.2 years.
■
Annual Pay: $76,078
■
■
■
■
■
■
■
■
City of Palm Beach Gardens Firefighters' Pension Fund
C -14
■
SECTION D
ACTUARIAL VALUATION PROCESS, SUMMARY OF
ACTUARIAL ASSUMPTIONS AND DEFINITIONS OF
TECHNICAL TERMS
ACTUARIAL VALUATION PROCESS IN DETAIL
An actuarial valuation is the mathematical process by which a pension fund contribution requirement
is determined and its actuarial condition is measured.
The flow of activity constituting the valuation may be summarized as follows:
A. Covered Person Data, furnished by the fund administrator including:
- Retired members and beneficiaries now receiving benefits
- Former members with vested benefits not yet payable
- Active members
B. + Asset Data (cash & investments), furnished by the fund administrator
C. + Fund Description Data, furnished by the fund administrator
D. + Assumptions about various future activities of the fund (risk elements)
E. + The Actuarial Cost Method for allocating costs to time periods and determining the long -term
planned pattern for employer contributions
F. + Mathematically combining the Data, the Estimates of Future Activities, and the Cost
Method
G. = Determination of-
Employer Contribution Requirement and Actuarial Condition
Items A, B and C constitute the current "knowns" about the Fund. A good deal of fund activity which
will result in benefit payments has yet to occur. Accordingly, certain assumptions must be made about
future fund activity. These assumptions (Item D) may be classified as demographic or fiscal.
Demographic assumptions include future mortality rates, disability rates, rates of pre- retirement
withdrawal from employment, and retirement ages. Fiscal assumptions consist of future salary
increases and rates of investment return.
City of Palm Beach Gardens Firefighters' Pension Fund D -1
Demographic assumptions are generally selected on the basis of the Fund's historical activity,
modified for expected future differences. Past activity of funds which are similar in nature to the fund
being valued may be utilized if fund data or activities are insufficient to be reliable.
Fiscal assumptions, on the other hand, do not lend themselves to prediction on the basis of historical
activity -- the reason being that both salary increases and investment return are impacted by inflation.
Inflation defies reliable prediction. Fiscal assumptions are generally selected on the basis of what
would be expected to occur in an inflation -free environment and then both are increased by some
provision for long -term inflation.
This is a case where two wrongs may make a right. If inflation is higher than expected it will probably
result in actual rates of salary increase and investment return which exceed the assumed rates.
Salaries increasing faster than expected result in unexpected costs. Investment return exceeding the
assumed rate results in unanticipated assets. To a large degree, the additional assets will offset the
additional costs over the long -term.
Once items A, B, C and D are available, the actuarial valuation process begins. The first step is to
determine the plan's total actuarial present value for individuals in each of the 3 covered person
categories.
Retired members now receiving monthly payments;
Vested terminated members not yet at'retirement age;
Active members.
The actuarial present value is the value today after taking into account the probabilities of payment
and the effect of time the plan promises to pay benefits in the future on the basis of both service
already. completed and projected future service.
The projected unit credit cost method (item E) was used to establish the actuarial position of the plan
and to determine an appropriate level of contributions.
This method is designed to fund each participant's projected benefits under the plan as they accrue.
Thus, the total pension to which each participant is expected to become entitled at retirement is broken
down into units, each associated with a year of past or future service. The principle underlying the
City of Palm Beach Gardens Firefighters' Pension Fund D -2
method is that each unit is funded in the year for which it is credited. Typically, when the method is
introduced there will be an initial liability for benefits credited for service prior to that date. To the
extent that this liability is not covered by assets of the plan, there is an unfunded liability to be funded
over a chosen period in accordance with an amortization schedule.
An actuarial accrued liability is calculated at the valuation date as the present value of benefits
credited with respect to service to that date.
The unfunded. accrued liability at. the valuation date is the excess of the actuarial accrued liability
over the assets of the plan. The level annual payment to be made over a stipulated number of years to
amortize this unfunded liability is the past service cost.
The normal cost is the present value of those benefits which are expected to be credited with respect
to service during the year beginning on the valuation date.
Under this method, differences between the actual experience and that assumed in the determination
of costs and liabilities will emerge as adjustments in the unfunded liability, subject to amortization.
The next step in the valuation process is a determination of the contribution rate (Item G) required to
support Fund benefits in accordance with the funding objective (page B -1).
The contribution rate is determined in two basic components:
1. The normal cost component; and
2. The component which will finance (pay off) the unfunded actuarial accrued liability over
the periods indicated on page B -6.
Active member covered payroll was projected to increase 4.5% a year in determining the level
percent -of- payroll component for the unfunded actuarial accrued liability -- which is consistent with
base rate of salary increase used to calculate the total actuarial present value. The characteristics of
this method are shown on page D -4.
City of Palm Beach Gardens Firefighters' Pension Fund D -3
LEVEL PERCENT OF ACTIVE MEMBER COVERED PAYROLL
AMORTIZATION OF UNFUNDED ACTUARIAL ACCRUED LIABILITY*
($ AMOUNTS IN THOUSANDS)
Year
Ended
Inflated
Dollars
Payroll
Constant
Value
Unfunded
Inflated Constant
Dollars Value
Contribution
Inflated Constant
Dollars Value
2006
$ 9,205
$ 9,205
$ 15,872
$ 15,872
$ 1,229
$ 1,229
2007
9,620
9,205
15,874
15,191
1,285
1,229
2008
10,053
9,205
15,817
14,485
1,342
1,229
2009
10,505
9,205
15,695
13,753
1,403
1,229
2010
10,978
9,205
15,497
12,996
1,466
1,229
2015
13,680
9,205
13,048
8,780
1,827
1,229
2020
17,048
9,205
6,947
3,751
2,276
1,229
2025
21,245
9,205
482
209
102
44
2030
26,475
9,205
23
8
127
44
2033
30,212
9,205
0
0
0
0
* $ (1,469,881)
over 27 years
2,188,209
over 26 years
15,153,766
over 17 years
$ 15,872,094
Level' percent -of- payroll financing of unfunded actuarial accrued liability treats each generation of
taxpayers equally during the financing period. The alternative, level dollar financing, produces
declining percent -of- payroll contributions and places a greater relative burden on current taxpayers.
The annual rate of increase in member payroll used to compute the level percent -of- payroll
contribution is the same rate of payroll growth used to compute actuarial liability and costs. It reflects
across -the -board salary increases, not group size increases.
If future payroll growth is less than the assumed rate due to smaller than projected salary increases, the
percent -of- payroll contribution rate for unfunded actuarial accrued liability will tend to decline.
If future payroll growth is less than the assumed rate due to decreases in the number of members, the
percent -of- payroll contribution rate for unfunded actuarial accrued liability will tend to increase but
dollar contributions will be less than indicated in the preceding schedule.
City of Palm Beach Gardens Firefighters' Pension Fund D -4
ACTUARIAL ASSUMPTIONS
The actuarial assumptions regarding the INFLATION rate, REAL INVESTMENT RETURN rate, and
SALARY INCREASE rates are used, in combination with the other assumptions, to (i) determine the
present value of amounts expected to be paid in the future and (ii) establish rates of contribution
which are expected to remain relatively level as a percent of total active member covered payroll. The
annual interest rate used in making this valuation was 8.25 %. It is composed of inflation and real
investment return.
INFLATION RATE. 4/2% per annum, compounded annually. This is the rate at which growth in
the supply of money and credit is estimated to exceed growth in the supply of goods and services. It
may be thought of as the rate of depreciation of the purchasing power of the dollar. There are a
number, of indices for measuring the inflation rate. The recent inflation rate as measured by the
Consumer Price Index has been:
REAL INVESTMENT RETURN RATE. 8 ' /a% per annum, compounded annually. This is the rate
of return estimated to be produced by investing a pool of assets in an inflation -free environment.
Recent real rates of investment return on the funding value of assets have been:
Period Ended
Period Ended
I Average
9/30/2006
9/30/2005
9/30/2004
1 9/30/2003
1 9/30/2002
1 3 Year
5 Year
Actual
Assumed
2.1%
4.5%
4.7%
3.0%
2.5%
3.0%
2.3%
3.0%
1.5%
3.0%
3.1%
3.5%
2.6%
3.3%
REAL INVESTMENT RETURN RATE. 8 ' /a% per annum, compounded annually. This is the rate
of return estimated to be produced by investing a pool of assets in an inflation -free environment.
Recent real rates of investment return on the funding value of assets have been:
The total investment return rate was computed on the funding value of assets using the approximate
formula i = I divided by 112 (A + B - I), where I is actual investment income, A is the beginning of
year asset funding value, and B is the end of year asset funding value.
The preceding investment return rates reflect the particular characteristics of this pension fund and
the method of determining the funding value of assets. They should not be used to measure an
investment advisor's performance or for comparison with other pension funds. Such use will usually
mislead.
City of Palm Beach Gardens Firefighters' Pension Fund D -5
Period Ended
Average
9/30/2006
9/30/2005
9/30/2004
9/30/2003
9/30/2002
3 Year
5 Year
Total Rate
9.3%
9.9%
(1.3)%
(1.4)%
(0.9)%
6.0%
3.1%
less Inflation Rate
2.1%
4.7%
2.5%
2.3%
1.5%
3.1%
2.6%
Actual Real Rate
7.2%
13.2%
(3.8)%
(3.7)%
(2.4)%
5.5%
2.1%
Projected Real Rate
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
Projected Total Rate
8.25%
8.5%
8.5%
8.5%
8.5%
8.4%
8.5%
The total investment return rate was computed on the funding value of assets using the approximate
formula i = I divided by 112 (A + B - I), where I is actual investment income, A is the beginning of
year asset funding value, and B is the end of year asset funding value.
The preceding investment return rates reflect the particular characteristics of this pension fund and
the method of determining the funding value of assets. They should not be used to measure an
investment advisor's performance or for comparison with other pension funds. Such use will usually
mislead.
City of Palm Beach Gardens Firefighters' Pension Fund D -5
SALARY INCREASE RATES. Active member salaries are assumed to increase between the date of
hire and date of retirement or DROP. Salary increases occur in recognition of (i) individual merit and
seniority, (ii) inflation - related depreciation of the purchasing power of salaries, and (iii) competition
from other employers for personnel.
A schedule of assumed rates of increases in individual salaries for sample ages follows:
Attributable to:
Annual Rates for Salary Increase for Sample Ages
20 30 40 50 60
Merit & Seniority
3.7% 1.1% 0.7% 0.2% 0.0%
General Increase in
9/30/2005
Wage Level Due to:
9/30/2003
Inflation
4.5% 4.5% 4.5% 4.5% 4.5%
Total
8.2% 5.6% 5.2% 4.7% 4.5%
The valuation is based on the number of active members remaining constant, and the total payroll for
the group increasing at the rate of 4.5% a year (the assumed increase in wage levels due to inflation
and other causes).
A schedule of recent salary change experience, as measured by average reported pay, follows:
(1) Excluding terminations and new members.
(2) Including pays of members electing DROP participation but still working.
City of Palm Beach Gardens Firefighters' Pension Fund D -6
Period Ended
Average
9/30/2006
9/30/2005
9/30/2004
9/30/2003
9/30/2002
3 Year
5 Year
10 Year
Change: Actual
Average(1)
1.9%
12.8%
8.9%
28.5%
7.7%
7.9%
12.0%
N/A
Projected
5.3%
6.5%
6.5%
6.5%
6.5%
6.1%
6.3%
6.4%
Change in
Total Payroll(2)
4.9%
15.9%
15.7%
35.2%
13.7%
12.2%
17.1%
N/A
(1) Excluding terminations and new members.
(2) Including pays of members electing DROP participation but still working.
City of Palm Beach Gardens Firefighters' Pension Fund D -6
In order to achieve the funding objective of a contribution rate which remains level as a percent of
payroll, the total rate of investment return on the funding value of assets must exceed the rate of
average increase in salaries by an amount equal to the projected real investment return rate. The
following schedule illustrates the recent history of the relationship between total investment return and
average pay changes.
MORTALITY TABLE FOR NON - DISABLED LIVES. The RP -2000 Mortality Table for males
and females.
Value of Future Life
Sample $1 Monthly for Life Expectancy (Years)
Ages Men Women Men Women
50
$135.60
Period Ended
Average
9/30/2006
9/30/2005
9/30/2004
9/30/2003
9/30/2002
3 Year
5 Year
,Total Investment
124.05
21.74
24.38
65
107.04
113.86
17.61
Return Rate
9.3%
17.9%
17.9%
(1.3)%
(1.4)%
6.0%
3.1%
Rate of Change
10.57
12.74
80
63.99
74.38
7.75
9.68
in Average Pay
1.9%
12.8%
12.8%
8.9%
28.5%
7.9%
12.0%
Difference: Actual
7.4%
5.1%
5.1%
(10.2)%
(29.9)%
(1.9)%
(4.5)%
Target
4.5%
3.0%
3.0%
3.0%
3.0%
3.5%
3.3%
MORTALITY TABLE FOR NON - DISABLED LIVES. The RP -2000 Mortality Table for males
and females.
Value of Future Life
Sample $1 Monthly for Life Expectancy (Years)
Ages Men Women Men Women
50
$135.60
$138.81
30.80
33.59
55
128.15
132.41
26.18
28.91
60
118.59
124.05
21.74
24.38
65
107.04
113.86
17.61
20.12
70
93.87
102.05
13.88
16.23
75
79.25
88.78
10.57
12.74
80
63.99
74.38
7.75
9.68
The mortality table is used to measure the probabilities of members dying before retirement and the
probabilities of each benefit payment being made after retirement.
City of Palm Beach Gardens Firefighters' Pension Fund D -7
MORTALITY TABLE FOR DISABLED LIVES. The RP -2000 Disabled Mortality Table for
males and females.
Value of Future Life
Sample $1 Monthly for Life Expectancy (Years)
Ages Men Women Men Women
50
$101.87
$120.42
18.21
25.11
55
95.64
113.28
15.94
21.69
60
89.04
105.69
13.81
18.58
65
81.48
97.09
11.76
15.66
70
72.77
87.28
9.77
12.93
75
63.43
76.80
7.95
10.49
80
54.40
66.18
6.39
8.37
The mortality table is used to measure the probabilities of members dying before retirement and the
probabilities of each benefit payment being made after retirement.
RATES OF SEPARATION FROM ACTIVE MEMBERSHIP. The rates do not apply to members
eligible to retire and do not include separation on account of death or disability. Separation rates are
used to measure the probabilities of members remaining in employment.
Sample
Ages
Years of
Service
Percent separating
Within Next Year
All
0
15.0 %
1
10.0
2
9.0
3
8.0
4
7.0
25
5 & Over
7.0
30
5.9
35
4.4
40
3.0
45
2.1
50
1.7
55
1.0
60
1.0
VESTED MEMBERS who terminate with a benefit worth less than 100% of their own accumulated
contributions were presumed to elect a refund of accumulated contributions and forfeit the vested
benefit.
City of Palm Beach Gardens Firefighters' Pension.Fund D -8
RATES OF DISABILITY. Disability rates measure the probabilities of active members becoming
disabled
Sample
Ages
Percent Becoming
Disabled Within Next Year
25
0.05 %
30
0.06
35
0.09
40
0.12
45
0.27
50
0.43
55
0.43
60
0.43
Fifty percent of disabilities were projected to be duty related.
RATES OF RETIREMENT. Rates of retirement are used to measure the probabilities of an eligible
member retiring during the next year.
Retirement
Age
Percent
Retiring
Service at
Retirement
Percent
Retiring
50
5.00 %
25
100 %
51
5.00
52
50.00
53
10.00
54
10.00
55
100.00
EXPENSES. Administrative and investment expenses are included as an additional employer
contribution to provide for reimbursement of these expenses. Expenses are assumed to be the same as
the preceding year.
ACTIVE MEMBER GROUP SIZE. The valuation was based on a constant active member group
size. This is unchanged from previous valuations.
SALARY. All amounts included in the calculation of benefits were reported and valued in the
actuarial valuation.
City of Palm Beach Gardens Firefighters' Pension Fund D -9
SUMMARY OF ASSUMPTIONS USED
SEPTEMBER 30, 2006
Pensions in an Inflationary Environment
Value of $1,000 /month Retirement Benefit
To an Individual Who Retires at Age 52
In an Environment of 4.5% Inflation
Age
Value
52
$1,000
53
957
54
916
55
877
56
839
57
803
62
644
67
517
72
415
77
333
82
267
87
214
The life expectancy of a 60 year old male retiree is age 82. The life expectancy for a 60 year old
female retiree is age 84. Half of the people will outlive their life expectancy. The effects of even
moderate amounts of inflation can be significant for those who live to an advanced age.
City of Palm Beach Gardens Firefighters' Pension Fund D -10
SUMMARY OF ASSUMPTIONS USED
SEPTEMBER 30, 2006
MISCELLANEOUS AND TECHNICAL ASSUMPTIONS
Marriage Assumption: 100% of males and 100% of females are assumed to be married
for purposes of death -in- service benefits.
Pay Increase Timing: Beginning of (Fiscal) year. This is equivalent to assuming that
reported pays represent amounts paid to members during the year
ended �on the valuation date.
Decrement Timing:
Decrements of all types are assumed to occur mid -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.
Benefit Service: Exact! fractional service is used to determine the amount of
benefit payable.
Decrement Relativity: Decrement rates are used without adjustment for multiple
decrement table effects.
Decrement Operation: Disability and withdrawal do not operate during retirement
eligibility.
Normal Form of Benefit: The assumed normal form of benefit is the 10 -year guaranteed
straight life form.
Loads: Age and service benefits were loaded by 4.5% for lump sums of
accumulated annual leave.
Incidence of Contributions: Contributions are assumed to be received halfway through the
fiscal year.
City of Palm Beach Gardens Firefighters' Pension Fund D -11
DEFINITIONS OF TECHNICAL TERMS
Accrued Service. Service credited under the fund which was rendered before the date of the actuarial
valuation.
Actuarial Accrued Liability. The difference between the actuarial present value of future benefit
payments and the actuarial present value of future normal costs. Also referred to as "accrued liability"
or "past service liability."
Actuarial Assumptions. Estimates of expected future experience with respect to rates of mortality,
disability, turnover, retirement, rate or rates of investment income and salary increases. Decrement
estimates (rates of mortality, disability, turn-over and retirement) are generally based on past
experience, often modified for projected changes in conditions. Economic estimates (salary increases
and investment income) consist of the underlying rates in an inflation -free environment plus a
provision for a long -term average rate of inflation.
Actuarial Cost Method. A mathematical budgeting procedure for allocating the dollar amount of the
"actuarial present value of future benefit payments" between future normal costs and actuarial accrued
liability. Sometimes referred to as the "actuarial valuation cost method."
Actuarial Equivalent. A single amount or series of amounts of equal actuarial present value to
another single amount or series of amounts, computed on the basis of appropriate actuarial
assumptions.
Actuarial Present Value. The amount of .funds currently required to provide a payment or series of
payments in the future. It is determined by discounting future payments at predetermined rates of
interest, and by probabilities of payment. Also referred to as "present value."
City of Palm Beach Gardens Firefighters' Pension Fund D -12
Amortization. Paying off an interest- discounted amount with periodic payments of interest and
principal -- as opposed to paying it off with a lump sum payment.
Experience Gain (Loss). The difference between actual actuarial costs and assumed actuarial costs --
during the period between two valuation dates.
Funding Value of Assets. Also referred to as actuarial value of assets, smoothed market value of
assets, or valuation assets.
Valuation assets recognize assumed investment return fully each year. Differences between actual and
assumed investment return are phased in over a closed 4 -year period. During periods when
investment performance exceeds the assumed rate, valuation assets will tend to be less than market
value. During periods when investment performance is less than the assumed rate, valuation assets
will tend to be greater than market value. If assumed rates are exactly realized for 4 consecutive years,
valuation assets will become equal to market value.
Normal Cost. The actuarial cost allocated to the current year by the actuarial cost method.
Sometimes referred to as "current service cost."
Unfunded Actuarial Accrued Liability. The difference between actuarial accrued liability and the
actuarial value of fund assets. Sometimes referred to as "unfunded past service liability," "unfunded
accrued liability" or "unfunded supplemental present value."
Most pension funds have unfunded actuarial accrued liability. It arises each time new benefits are
added and each time an experience loss is realized.
The existence of unfunded actuarial accrued liability is not in itself bad, any more than a mortgage on
a house is bad. Unfunded actuarial accrued liability does not represent a debt that is payable today.
What is important is the ability to control the amount of unfunded actuarial accrued liability and the
trend in its amount (after due allowance for devaluation of the dollar).
City of Palm Beach Gardens Firefighters' Pension Fund D -13
SECTION E
CERTAIN DISCLOSURES REQUIRED BY STATEMENT
NO. 25 OF THE GOVERNMENTAL ACCOUNTING
STANDARDS BOARD
ACTUARIAL ACCRUED LIABILITY
The actuarial accrued liability is a measure intended to help users assess (i) a pension fund's funded
status on a going concern basis, and (ii) progress being made toward accumulating the assets needed
to pay benefits as due. Allocation of the actuarial present value of projected benefits between past and
future service was based on service using the projected unit credit actuarial cost method.
Assumptions, including projected pay increases, were the same as used to determine the Fund's level
percent of payroll annual required contribution between entry-age and assumed exit age. Entry-age
was established by subtracting credited service from current age on the valuation date.
The preceding methods comply with the financial reporting standards established by the
Governmental Accounting Standards Board.
The unit credit actuarial accrued liability was determined as part of an actuarial valuation of the plan
as of September 30, 2006. Significant actuarial assumptions used in determining the unit credit
actuarial accrued liability include (a) a rate of return on the investment of present and future assets of
8.25% per year compounded annually, and (b) projected salary increases of 4.5% per year
compounded annually attributable to inflation and other causes, (c) additional projected salary
increases of 3.7% to 0.0% per year, depending on age, attributable to seniority /merit.
At September 30, 2006, the unfunded actuarial accrued liability is $15,872,094 determined as follows:
Actuarial Accrued Liability
Active participants (75 vested and 46 non - vested) $ 28,200,880
Retired participants and beneficiaries currently receiving benefits (5 recipients) 1,610,536
Vested terminated participants not yet receiving benefits (1 inactives) 34,446
Total Actuarial Accrued Liability 29,845,862
Actuarial Value of Assets (market value was $14,102,397) 13,973,768
Unfunded Actuarial Accrued Liability $ 15,872,094
During the period from October 1, 2005 to September 30, 2006, the Fund experienced a net change of
$1,762,482 in the actuarial accrued liability. Both the actuarial assumptions and cost method have
been changed since last valuation. The details can be found in the recent Experience Study.
City of Palm Beach Gardens Firefighters' Pension Fund E -1
CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE
The City's funding policy provides for periodic employer contributions at actuarially determined rates
that, expressed as percentages of covered payroll, are designed to accumulate sufficient assets to pay
benefits when due. The normal cost and actuarial accrued liability are determined using a projected
unit credit actuarial cost method. Unfunded actuarial accrued liability is being amortized as a level
percent of payroll over periods ranging from 17 -27 years.
During the year ended September 30, 2006 contributions totaling $2,272,237 -- $1,716,205 employer
($1,542,934 from the City and $173,271 from the State under Chapter 175) and $556,032 employee --
were made in accordance with contribution requirements determined by an actuarial valuation of the
Fund as of September 30, 2004. The employer contributions consisted of $502,651 for normal cost
and administrative expenses, and $1,213,554 for amortization of the unfunded actuarial accrued
liability. Employer contributions represented 18.64% of covered payroll.
Schedule of Employer Contributions
Fiscal
Year
Valuation
Datej
Annual
Required
Contribution*
Percentage
Contributed
9/30/98 -99
9/30/1996
$ 200,759
100%
9/30/99 -00
9/30/1998
227,154
100
9/30/00 -01
9/30/1998
423,628
100
9/30/01 -02
9/30/1998
594,562
100
9/30/02 -03
9/30/2001
731,241
100
9/30/03 -04
9/30/2003
739,310
100
9/30/04 -05
9/30/2004
1,188,002
100
9/30/05 -06
9/30/2005
1,542,934
140
* Since it was stated to the actuary that the City's practice is to contribute at least the percent of payroll employer
contribution rate shown in the actuarial valuation results, the values shown are the actual contributions reported by
the City in the fiscal year.
City of Palm Beach Gardens Firefighters' Pension Fund E -2
REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF FUNDING PROGRESS
Actuarial
Valuation
Date
Actuarial
Value of
Assets
(a)
Actuarial
Accrued
Liability
(AAL)
(b) *
Unfunded
AAL
I (b) -(a)
Funded
Ratio
(a) /(b)
Active
Member
Covered
Payroll
(c)
Unfunded AAL as
a Percentage of
Active Member
Covered Payroll
((b -a) /c)
9/30/1999
$ 3,943
$ 5,313
$ 1,371
74.2%
$ 3,194
42.9 %
9/30/2000
4,810
6,066
1,255
79.3
3,841
32.7
9/30/2001
5,415
6,675
1,260
81.1
4,255
29.6
9/30/2002
5,754
12,577
6,823
45.8
4,840
141.0
9/30/2003
7,183
17,411
10,258
41.2
6,542
156.8
9/30/2004
8,146
21,254
13,108
38.3
7,568
173.2
9/30/2005
10,791
28,083
17,292
38.4
8,774
197.1
9/30/2006 (b)
13,974
32,003
18,029
43.7
9,205
195.9
9/30/2006 (a)
13,974
29,846;
15,872
46.8
9,205
172.4
Dollar amounts are in thousands
* Based on the Entry Age Actuarial Cost Method, except last row is Projected Unit Credit.
(b) Before changes in benefit provisions, actuarial assumptions, or cost methods.
(a) After changes in benefit provisions, actuarial assumptions, or cost methods.
Analysis of the dollar amounts of actuarial value of assets, actuarial accrued liability, or unfunded
actuarial accrued liability in isolation can be misleading. Expressing the actuarial value of assets as a
percentage of the actuarial accrued liability provides one indication of the system's funded status on a
going - concern basis. Analysis of this percentage over time indicates whether the system is becoming
financially stronger or weaker. Generally, the greater this percentage, the stronger the plan. The
unfunded actuarial accrued liability and annual covered payroll are both affected by inflation.
Expressing the unfunded actuarial accrued! liability as a percentage of covered payroll approximately
adjusts for the effects of inflation and aids analysis of the progress being made in accumulating
sufficient assets to pay benefits when due. Generally, the smaller this percentage, the stronger the
plan.
City of Palm Beach Gardens Firefighters' Pension Fund E -3
SECTION F
SUMMARY OF VALUATIN DATA RESULTS
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DROP ACTIVITY
FOR THE PERIOD ENDED SEPTEMBER 30, 2006
Age
9/30/2006
Eligible
Elected
45 -49
3
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City of Palm Beach Gardens Firefighters' Pension Fund F -5
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March 31, 2007
Fund Facts _
■ Benchmark Lehman Aggregate Index
■ Inception Date January 1, 19%
fund Assets $1,267.1 million
Total assets managed against the Lehman Bros.
Aggregate Index: $5,576.7 million
is
• The Income Fund is benchmarked to the Lehman Brothers Aggregate Index.
Our style focuses on risk control and adding value through strategic sector diversification
and bottom -up, issue selection - we are not sector rotators.
• Market risk is managed tightly to the benchmark. We are not market timers.
• Our active management focus is on issue selection using a relative valuation approach to
buy attractive securities.
• We emphasize corporate, mortgage and asset - backed sectors of the fixed income market.
Performance Recap
-1-he Gaillard Income Fund outperformed its benchmark, the Lehman Brothers Aggregate
Index, for the quarter, 1, 3, 5, and 10 year periods ending March 31, 2007.
C
a
Annualized Investment Performance as of March 31, 2007
Q nnoi
1Q -07' 1 Year 3 Year 5 Year 10 Year
■ Galliard Income Fund (before fees)
■ Lehman Brothers Aggregate Index
Annualized Performance
1Q -07°
1Yr
Fixed Income Analytics
3Yr
5 Y
10 Yr
Fund
Benchmark
Wtd. Avg. Quality
AA+
AA+
.Wtd.Avg. Maturity
6.02 yrs.
6.86 yrs.
Yield to Maturity
5.47%
5.30%
Effective Duration
4.65 yrs.
4.50 yrs.
. Wtd. Avg. Coupon
5.60%
5.38%
Convexity
-0.18
-0.29
# of Issues
394
-
Annual Turnover
31.2%
-
# of Corporates
126
-
' IQ -117 returns
arc tun annualized
. Sector Distribution
Fund( %)
Benchmark(%)
. U.S. Gov't /Agency
10.1
35.4
Taxable Municipal
2.5
-
Corporates
22.2
22.8
Asset Backed
5.8
1.2
Mortgage Backed
59.5
40.6
Cash
-0.1
-
income Fund (after fees)
9.28 8.10
- 0.20
Duration Distribution
8.12
.
Fund( %)
Benchmark( %)
Less than 1 Year
13.4
1.3
1 -3 Years
.
23.9
31.3
3 -5 Years
43.6
37.9
5 -10 Years
12.5
21.4
. 10+ Years
6.6
8.1
Quality Distribution
.
Fund( " %)
Benchmark(%)
U.S. Gov't /Agency
49.4
70.6
AAA
■
26.8
8.5
AA
5.9
5,3
A
9,1
8.3
BBB
8.2
7.3
<BBB
0.6
-
is
• The Income Fund is benchmarked to the Lehman Brothers Aggregate Index.
Our style focuses on risk control and adding value through strategic sector diversification
and bottom -up, issue selection - we are not sector rotators.
• Market risk is managed tightly to the benchmark. We are not market timers.
• Our active management focus is on issue selection using a relative valuation approach to
buy attractive securities.
• We emphasize corporate, mortgage and asset - backed sectors of the fixed income market.
Performance Recap
-1-he Gaillard Income Fund outperformed its benchmark, the Lehman Brothers Aggregate
Index, for the quarter, 1, 3, 5, and 10 year periods ending March 31, 2007.
C
a
Annualized Investment Performance as of March 31, 2007
Q nnoi
1Q -07' 1 Year 3 Year 5 Year 10 Year
■ Galliard Income Fund (before fees)
■ Lehman Brothers Aggregate Index
Annualized Performance
1Q -07°
1Yr
3Yr
5 Y
10 Yr
Income Fund (before fees)
1.66
7.13
3.96
6.32
7.09
Income Fund (after fees)
1.59
6.82
3.65
6.01
6.78
Lehman Bros. Aggregate
1.50
6.59
3.31
5.35
6.46
' IQ -117 returns
arc tun annualized
Calendar Year Performance
1997 1998
1999
2000
2001
2002 2003
2004
2005
2006
Income Fund (before fees)
9.58 8.40
0.10
12.54
8.42
10.42 6.37
5.08
3.47
4.81
income Fund (after fees)
9.28 8.10
- 0.20
12.24
8.12
10.12 6.07
4.77
3.13
4.49
Lehman Bros. Aggregate
9.65 8.69
-0.82
11.63
8.44
10.25 4.10
4.34
2.43
4.33
D -lowm:
The (:alli;vd Income FunJ i, a collccove trust fund trusteed by Wells Fargo Bank, N.A. and ndrtsed by (ialliard. Returns include all income, realized and unrealized .apiral gains
and lushes, and all tmnsaaional and c.cauion co . Net r Yarns arc gross reruns Icss the maximum fund charge of 3u " <, and include the effect of compounding. Aetna] fees
may vary by Parrieipam. Fund track raorJ inception date is February 1, 2010. friar to 2/1 100, the Income Fund returns reflect the composite returns of the three non -fee pay-
ing separate account pntfolius, which acre merged to form the collective fund. The Fund is not insured by the FDIC, Federal Reserve Rank, or guaranteed by We11s Fargo Bank,
N.A. ar Wells Fargn & Company. I9st Performance is no gw ramm of future molts.
Top Five Issuers
Issuer
Portfolio W
Bank of America, NA
0.6%
Western Financial Bank
0.6%
UBS Preferred Funding Trust 1
0.6%
Barclays Bank PLC
0.5%
US Bank, NA
0.5%
' Total cntity cxpnutrc - includes all rclatcd cnritics.
About Galliard
Registered Investment Advisor
Incorporated 1995
Minneapolis, MN
Wholly -owned subsidiary of
Wells Fargo Bank, N.A.
Institutional fixed income
and stable value specialists
Over $24.1 billion in assets
under management
For More Information Contact
Duration Yield Curve
Mortgage
Credit Backed
Securities
(MBS)
Overweight
Neutral short Neutral
maturities
Investment Strategy
Overweight
Duration
• Portfolio durations are positioned neutral to the benchmark.
Asset Backed
Securities
(ABS)
Overweight
Inflatio%,
Protecte=
Securities
(TIPS)
Overweight
2
Yield Curve
• Portfolios remain positioned for a curve steepening versis the benchmark. We are
underweight duration on the long end and overweight on the short/intermediate
end of the curve.
I.
It
M
■
Credit .
• We continue to believe that investors are not yet being compensated fairly for taking on
additional risk. As such, portfolio spread duration remains short in anticipation of more .
attractive entry levels in the future.
• New issues have come to market relatively cheap, and we will look to selectively .
add positions as these types of opportunities present themselves.
• Current portfolio allocations to hybrid securities are approximately 3 %. We plan to .
optimize these securities within their current allocations.
• We may also look to sell select issues if secondary bids are strong.
Institutional Sales
and Consultant Relations Mortgage Backed Securities (MBS)
Rhonda Bozich • We remain overweight in MBS relative to the benchmark. We continue to maintain our
Senior Director core positions in seasoned discount collateral.
Institutional Sales /Consultant Relations
612- 667 -0215 • Housing finance agency (HFA) bonds continue to be a source of value. We will look to
Rhonda.L.Bozich @Galliard.com opportunistically add positions in these securities.
Carrie Callahan
Senior Director
Institutional Sales /Consultant Relations
612- 667 -1793
Carrie.A.Callahan@Galliard.com
Client Services
Mike Norman
Principal
Client Services
612- 667 -3219
Michael.D.Norman@Galliard.com
David Bodine
Senior Director
Client Services
612- 667 -8007
David.F.Bodine @ Galliard.com
I0
Asset Backed Securities (ABS)
• We continue to add seasoned CMBS to our core positions throughout the first quarter;
however, our activity will diminish going forward as we are near our target allocation
for this sector.
• Our activity in ABS remains light. We will look to marginally sell high quality ABS in
the coming months.
Treasury Inflation Protected Securities (TIPS)
• Current portfolio allocations to TIPS are approximately 2 %. We will maintain theses
positions in the short -term and may consider reducing the positions in the long -term if
warranted.
Galliard Capital Management, 800 LaSalle Avenue, Suite 2060, Minneapolis, MN 55402 -2033 800 - 717 -1617 www.Gailiafd.com
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