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Home My WebLink AboutCC 4 5 16 2015 Actuarial Study report (2) Cathy Bendel From: Mike Born <mike.born@hildiinc.com> Sent: Thursday, March 17, 2016 4:34 PM To: Cathy Bendel Cc: steverutkowski80@yahoo.com; David C. Minch;Julianne Harstad Subject: Lake Elmo FRA GASB 67&68 report at 12.31.2015 from Hildi Inc. Attachments: Lake Elmo VFRA 2016 GASB 67&68 Report.pdf Hi Cathy, Attached is our actuarial report for the Lake Elmo Firefighters Relief Association as of December 31, 2015. Included are the fiscal 2015 disclosure exhibits under GASB 67 (for the pension plan) and the fiscal 2016 disclosure exhibits under GASB 68 (for the city). All details are included in the report. A few highlights include: • The report is an actuarial rollforward. It relies on the results from the previous valuation report. Another full valuation will be required next year. • Under the GASB measurement standards,the plan is financially healthy,funded at approximately 165%of plan assets. • Financial reporting for 2015: o Pension Plan (GASB 67): Use the disclosure exhibits provided in the attached report. o City of Lake Elmo (GASB 68): Use the disclosure exhibits provided in last year's report. • Financial reporting for 2016: o Pension Plan (GASB 67): Please contact Hildi Inc.following year-end to prepare the 2016 disclosure exhibits. o City of Lake Elmo (GASB 68): Use the disclosure exhibits provided in the attached report. Though the results are measured as of December 31, 2015, employers may use a one-year lookback under GASB 68. You will need to supply the total employer contribution to the plan in 2016 and report that item as a Deferred Outflow of Resources. • Next steps: o Another actuarial valuation will be required as of January 1, 2017. o To ensure our records are complete and consistent, please forward to us when available a copy of the RF- 15 and final audit report for the Relief Association. Please let us know if you have any questions. Thank you! Mike 1 Michael J. Born, FSA, EA, CFA, MAAA Consulting Actuary cltvl c[MATIP�(;� � Hildi Incorporated f�tv Specializing in Actuarial Retirement Plan Services �N 11800 Singletree Lane, Suite 305 Minneapolis, MN 55344 P 952.934.5554 Til F 952.934.3027 H 1 I E mike.born@hildiinc.com W www.hildiinc.com eclaWng in Actuarfal Retfrement Plan Services EschangeDefender Message Security: Check Authenticity 2 Lake Elmo Firefighters Relief Association Actuarial Rollforward Report Under GASB Statements 67 & 68 Valuation Date: January 1, 2015 Plan Fiscal Year Beginning: January 1, 2015 Plan Fiscal Year Ending: December 31, 2015 Employer Fiscal Year Beginning: January 1, 2016 Employer Fiscal Year Ending: December 31, 2016 Hild! Ins Table of Contents Actuarial Certification 3 Executive Summary 4 Summaryof Results .........................................................................................................4 Events& Decisions...........................................................................................................4 Plan Accounting 5 Reconciliation of Changes in Net Pension Liability..........................................................5 Sensitivity to Changes in Discount Rate...........................................................................5 GASB68 Pension Expense................................................................................................6 GASB 67 Liability Summary..............................................................................................7 Plan Assets g PlanAsset Reconciliation.................................................................................................8 Glossary g Lake Elmo Firefighters Relief Association Page 2 Actuarial Certification We have prepared an actuarial rollforward of the Lake Elmo Relief Association Pension Plan as of December 31, 2015 to enable the plan sponsor to satisfy the accounting requirements under Statements of Governmental Accounting Standards Nos. 67 and 68.The results set forth in this report reflect the provisions of the plan communicated to us through December 31, 2015.This report should not be used for other purposes or relied upon by any other person without prior written consent from Hildi Incorporated. This report is based on participant and financial data provided by Lake Elmo Firefighters Relief Association and is summarized in this report.An audit of the financial and participant data provided was not performed, but we have checked the data for reasonableness as appropriate based on the purpose of the valuation. We have relied on all the information provided, including plan provisions and asset information, as complete and accurate. A range of results, different from those presented in this report, could be considered reasonable. The numbers are not rounded, but this is for convenience and should not imply precision. Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements; and changes in plan provisions or applicable law. Due to the limited scope of this assignment,we did not perform an analysis of the potential range of such future measurements. All costs, liabilities and other factors under the plan were determined in accordance with generally accepted actuarial principles and procedures using assumptions that we believe reasonably estimate the anticipated experience of the plan.The calculations reported herein are consistent with our understanding of the provisions of GASB Statements 67 and 68. Actuarial computations under Statements of Governmental Accounting Standards are for the purposes of fulfilling employer accounting requirements and trust accounting requirements. Computations for other purposes may differ significantly from the results shown in this report. We are available to answer any questions on this material, or to provide explanations or further details, as may be appropriate. The undersigned credentialed actuaries meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained in this report. A"w� 9 Lz4t- Michael J. Born, FSA Hildi Incorporated 11800 Singletree Lane, Suite 305 Minneapolis, MN 55344 P 952.934.5554 March 2016 Lake Elmo Firefighters Relief Association Page 3 Executive Summary This report has been prepared for the Lake Elmo Relief Association Pension Plan,for the fiscal year beginning January 1, 2015 and ending December 31, 2015,to assist in complying with the reporting and disclosure requirements under GASB Statements 67 and 68. Lake Elmo Firefighters Relief Association has implemented GASB 67 for the fiscal year beginning January 1, 2014. Summary of Results The results below reflect initial implementation in the fiscal year ending December 31, 2014. GASB liabilities have been valued using a split interest rate based on the estimated investment return on the pension fund for the funded portion of liabilities and the estimated yield of 20-Year AA-rated municipal bonds for the unfunded portion of liabilities. The overall discount rate is 6.00%. GAS8 Accounting Summary December 31,2015 1. Liabilities a. Total Pension Liability 588,689 b. Gross Service Cost 28,520 c. Estimated Benefit Payments 113,413 d. Valuation Salary N/A 2. GASB Funded Status a. Total Pension Liability(TPL) 588,689 b. Fiduciary Net Position (FNP) (963,628) c. Net Pension Liability (NPL),a. +b. (374,939) d. NPL as%of Payroll,c./1.d. N/A 3. Estimated Annual Costs for the Following Fiscal Year a. Pay-as-you-go Cost (PAYGO) 113,413 b. Pension Expense Under GASB 68 (19,395) c. PAYGO as%of Pension Expense -585% 4. Discount Rate 6.00% Events & Decisions This report is an addendum to the actuarial valuation report issued for this plan as of January 1, 2015. Actuarial data, assumptions, and methods are as described in that previous report. Lake Elmo Firefighters Relief Association Page 4 Plan Accounting Reconciliation of Changes in Net Pension Liability Total Pension Fiduciary Net Net Pension Liability Position Liability 1. Balances at January 1, 2015 714,621 1,155,599 (440,978) 2. Changes from the prior year: a. Service Cost 28,520 28,520 b. Interest Cost 37,130 37,130 c. Assumption Changes 0 0 d. Plan Changes 0 0 e. Municipal Contributions 0 0 f. Nonemployer Contributions 61,166 (61,166) g. Projected Investment Return 65,024 (65,024) h. Gain or Loss 0 (113,265) 113,265 i. Benefit Payments (191,582) (191,582) 0 j. Administrative Expenses (13,314) 13,314 k. Other Changes 0 0 0 3. Total Net Changes (125,932) (191,971) 66,039 4. Balances at December 31, 2015 588,689 963,628 (374,939) Sensitivity to Changes in Discotint Rate 1%Decrease Selected Discount 1%Increase Rate 1. Net Pension Liability (353,634) (374,939) (394,937) 2. Discount Rate 5.00% 6.00% 7.00% Note: These exhibits should be used as the basis for financial reporting under GASB 67 for the fiscal year ending December 31,2015 and under GASB 68 for the fiscal year ending December 31, 2016. As described in the GASB 68 standard, a one-year lookback may be used when preparing financial disclosures under GASB 68. Lake Elmo Firefighters Relief Association Page 5 GASB 68 Pension Expense Fiscal Year Ending December 31,2016 December 31,2015 1. Components Of Pension Expense a. Service Cost 28,520 27,825 b. Interest Cost 37,130 41,263 c. Liability Gain or Loss - - d. Assumption Changes - - e. Nonemployer Contributions (61,166) (53,446) f. Projected Investment Return (65,024) (65,736) g. Investment Gain or Loss 27,831 5,178 h. Administrative Expenses 13,314 13,154 i. Other Changes 0 0 j. Total (19,395) (31,762) 2. Deferred Outflows of Resources a. Liability Losses - b. Assumption Changes - - c. Investment Losses 106,145 20,711 d. Employer Contributions* TBD - e. Total 106,145 20,711 3. Deferred Inflows of Resources a. Liability Gains - - b. Assumption Changes - - c. Investment Gains - - d. Total - - 4. Future Recognition of Deferred Flows in Pension Expense(Fiscal Years Ending) a. December 31, 2016 N/A 5,178 b. December 31, 2017 27,831 5,178 c. December 31, 2018 27,831 5,178 d. December 31, 2019 27,830 5,177 e. December 31, 2020 22,653 - f. December 31, 2021 - N/A g. Thereafter - *Under GASB 68, employer contributions made after the Measurement Date and on or before the Reporting Date must be disclosed as Deferred Outflows of Resources. If the contribution amount is not available at the time of this report, "TBD" is shown temporarily. Lake Elmo Firefighters Relief Association Page 6 GASB 67 Liability Summary Liabilities are determined as of the valuation date,then adjusted as necessary to the fiscal year-end date using standard actuarial processes. Liabilities at Valuation Date 1. Fiscal Year Beginning January 1, 2015 2. Valuation Date January 1, 2015 3. Discount Rate 6.00% 4. Present value of benefits 993,598 5. Accrued liability at Valuation Date a. Actives 447,281 b. Vested Terminations and Transfers 267,340 c. Retirees and Beneficiaries - d. Total Pension Liability at Valuation Date 714,621 6. Total Pension Liability at Fiscal Year-End 588,689 Lake Elmo Firefighters Relief Association Page 7 Plan Assets Plan Asset Reconciliation Assets for Fiscal Year Ending December 31,2015 December 31,2014 1. Value at Beginning of Fiscal Year 1,155,599 1,075,460 a. Municipal Contributions - - b. Employee Contributions - - c. State Contributions 61,166 53,446 d. Benefits paid (191,582) - e. Non-investment expense paid (13,314) (13,154) f. Return on plan assets (48,241) 39,847 2. Value at End of Fiscal Year 963,628 1,155,599 3. Rate of Return for Year -4.5% 3.6% Lake Elmo Firefighters Relief Association Page 8 Glossary Total Pension Liability/Funding Target Liability:The portion of the present value of prospective benefits allocated to service before the valuation date in accordance with the actuarial cost method. Fiduciary Net Position/Actuarial Value of Assets—Plan assets based on market value as of the valuation date including receivable contributions and offset by plan payables. Market values are sometimes smoothed to soften the impact of investment gains and losses. Net Pension Liability:The difference between Total Pension Liability and Net Financial Position. Actuarial Cost Method:Sometimes called "funding method," a particular technique used by actuaries to establish the amount and incidence of the annual actuarial cost of pension plan benefits,or normal cost,and the related unfunded liability. Ordinarily,the annual contribution to the plan comprises the normal cost and an amount for amortization of the unfunded liability. Normal Cost:A component of the Annual Pension Expense. The actuarial present value of benefits attributed by the benefit formula to services rendered by employees during that period based on assumptions as to future compensation levels. The interest rate used in determining the present value is the discount rate. Annual Pension Expense:An accrual-basis measure of the periodic cost of an employer's participation in a defined benefit pension plan. Discount Rate—The single interest rate that will calculate the same Total Pension Liability as the rates used to calculate the funded and unfunded portion of Total Pension Liability. Investment Return Assumption:The rate used to adjust a series of future payments to reflect the time value of money. Plan Members: The individuals covered by the terms of the plan.The plan membership generally includes employees in active service,terminated employees who have accumulated benefits but are not yet receiving them, and retired employees and beneficiaries currently receiving benefits. Required Supplementary Information (RSI): Schedules, statistical data, and other information that are an essential part of financial reporting. RSI should be presented with, but is not part of,the basic financial statements of a governmental entity. Lake Elmo Firefighters Relief Association Page 9