May, 2009 as part of an ongoing digital archiving project. … · 2009. 6. 19. · MINNEAPOLIS POLICE RELIEF ASSOCIATION. December 31,2008Actuarial Valuation. 4. FundingBasis ActuarialValue

This document is made available electronically by the Minnesota Legislative Reference Library as part of an ongoing digital archiving project. http://www.leg.state.mn.us/lrl/lrl.asp

May, 2009

VAN IWAARDEN ASSOCIATES 840 LUMBER EXCHANGE TEN SOUTH Fwrn STREET MINNEAJ'OLlS MN 55402-1032611.596.5960 j: 612.596.5999 WWW.VANIWAARDEN.COM

MINNEAPOLIS POLICE RELIEF ASSOCIATIONDecember 31, 2008 Actuarial Valuation

Table of Contents

Introduction

Introduction and actuarial celiification , , ..

Sumnlary of results , , , ,., .

Valuation data - plan assets and members

Actuarial value of assets ,

SUlnmary ofmelnber data , , , , ,

SUlllmary of changes in Inembership., ,' .

Valuation results - actuarial values

Actuarial valuer> used to detenlline contribution \ ~ , ; ..

Changes in the unfunded actuarial accrued liability. , , .

Accounting basis results - GASB disclosure b~for11lation

Statelnent ofplan net assets : ' , , ,

Statement of changes in plan net assets : , , ..

Schedule of funding progress , , , , , ..

Schedule of employer contributions ' .

Historical tables

Historical unit values , .

Historical funding ratio schedule , , , ,..

History of actuarially determined employer contributions , , , , , ..

Comparative schedule of active members ..

Comparative schedule of inactive members , ..

Sllpplementary information

Actuarial assulnptions and 111ethods, , , ..

Sunlmary of plan provisions , , , , , .

1

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19


Introduction

Purpose

This report presents the results ofthe December 31, 2008 valuation for the Minneapolis PoliceReliefAssociation. Its primary purposes are:

to detern1ine the funded status as of December 31, 2008,• to determine the normal cost and the required amOliization payment, and

to present infol1nation required to be disclosed under Govemmental Accounting StandardsBoard Statement No. 25 (GASB 25) as of December 31, 2008.

Sources ofdata

The ReliefAssociation supplied December 31, 2008 data for all active and inactive members,including unit values and historical salary increase rates. The Relief Association has also provided.asset infonuation regarding the special fund including historical rates ofreturn. We have relied onthis data in preparing this report

Changes from the previous valuation

The prior actuarial valuation of the plan was prepared as ofDecember 3f, 2007. The actuarialassumptions and methods used to prepare this repOli are the same as those used in the 2007report, except for the mo·rtality assumption. We have updated the mortality assumption ii-om theUP-1984 MOliality Table set forward 2 years for males and set back 3 years for females to the1983 GAM Mortality Table set back 2 years for males and set forward 1 year for females. Thismortality table change has been approved by the Legislative Commission on Pensions andRetirement (LCPR). .

The most recent union contract was through October 14,2008. A unit value of96.64 becameeffective January 1, 2008, and remains in effect as of the valuation date for this report - December31,2008.

For purposes ofthis valuation, we have used the 96.64 unit value as of the valuation date, withprojected annual increases of4% per year - the statutory salary increase assumption. For theDecember 31, 2007 valuation, we used the established unit value of 91.74. We projected this rateat 4% per year as required by statute, so that the estimated unit value as of December 31, 2008would have been 95.41 - compared to the actual rate of96.64 that has now been established.

Since the actual rate is more than what was projected in the previous year, and therefore benefitcosts are more than expected, the plan liabilities have experienced an actuarial"loss" of $5.5million (see page 8, item A.3.b.)

2MINNEAPOLIS POLICE RELIEF ASSOCIATION

December 31, 2008 Actuarial Valuation

Introduction (continued)

Summary ofvaluation results

As of December 31, 2008, the funded status of the plan (actuarial value of assets divided byactuarial accrued liabilities) is 64.1 % (see page 7). This is a decrease from last year's funded ratioof 87.9%. The drop in funded status is due to the change in mortality table, the actuarial lossdescribed above, and to a decrease in the actuarial value of assets (see pages 4 and 8). The-29.8% return on the market value of assets produced a -5.5% return on the actuarial value thatwas less than the 6% statutory assumption. On a market value basis, the funded status hasdecreased ii'om 90.8% to 49.2%.

Because the five~yea,r average rate of return on investments as of the valuation date does notexceed the five-year average salary increase rate, a "13th Check" will not bepayable in 2009.

[1ctuarial certification

We certifY that the actuarial valuation has been prepared in accordance with Minnesota Statutes§§356.20-.23, §423B, and §69.77 as they relate: to police department reliefassoci:f;ltions in citiesof the first class in general and the Minneap6'lis Police Relief Association in particular. '

Mark D. Meyer, FSA, MAAAConsulting Actuary

Peter 1. Cullen, EAConsulting Actuary

December 31, 2007 December 31, 2008

MINNEAPOLIS POLICE RELIEF ASSOCIATIONDecember 31,2008 Actuarial Valuation

Summary of Results

A. Plan participant data1. Number ofparticipants

a. Active employeesb. Terminated vested employeesc .. Retireesd. Disabilitye. Surviving spousesf. Surviving childreng. Total

14o

627o

233

12874

3

14o

607o

239

12860

B. Normal costs1. Total nonnal cost

a. Amountb. Percentage of active payroll

2. Employer nonnal costa. Amountb. Percentage of active payroll

C. Amortization payments1. Ui1funded actuarial accrued liability2. Amortization payment

2007 Plan Year

$187,40315.81 %

92,5587.81%

$51,814,9095,830',498

2008 Plan Year

$219,89017.61%

119,9799.61%

$182,225,69821,797,105

D. Value ofplan assets1. Market value2. Actuarial value (for calculating contributions)

December 31, 2007 December 31, 2008$389,025,966 $249,250,415

376,465,987 324,723,051

E. Bene.fit liabilities1. Present value of future benefits2. Actuarial accrued liability

F. Funded status1. Market value of assets as a % of liabilities2. Actuarial value of assets as a % of liabilities

$428,468,299428,280,896

90.8%87.9%

$507,168,639506,948,749

49.2%64.1%


4

Funding Basis

Actuarial Value of Assets

A. Unrealized ggjH

Year EndingDecember 31 :

MarketValue

BookValue

Unrealized Gain(Market - Book)

2005200620072008

366,406,914390,831,714389,025,966249,250,215

331,038,035340,010,710330,008,751307,540,360

35,368,87950,821,00459,017,215

(58,290,145)

B. Preliminary actuarial value ofassets1. Book value of assels2. Average unrealized gain for previous three years3. Preliminary actuarial value

December 31, 2007$330,008,751

1R,402,366378,411,117

December 31, 2008$307,540,360

17,182,691324,723,051

.·Asset Return22.7%9.6%5.9%13.7%7.2%

-29.8%

Salary Increase3.196%3.525%3.082%1.932%2.245%7.635%

C. Excess investment income1. Salary increases and time-weighted rate of return on assets

Year EndingDecember 31 :

200320042005200620072008

2. Determination of excess investment incomea. Arithmetic average of previous 5 years salary increasesb. Arithmetic average of previous 5 years of asset returnsc, Excess of asset return over salary increased, Excess minus 2%e. Lesser of 0.5% or 2.d., times market value (not < 0)f. December 2008 monthly benefits paidg. Adjustment to assets (lesser of e. or f.)

2.796%11.820%9,024%7.024%

$1,945,1302,850,3541,945,130

3.684%1.320%0.000%0.000%

$03,208,120

.Q

D. Actuarial value of-assets (B.3. - C.2.gJ lli6A65.987 $324.723.Qil


Summary of Member Data

5

December 31, 2007 December 31, 2008

A. Active members1. Number

a. Fully vestedb. Nonvestedc. Total

2. Average age3. Average years of service4. Total mIDua1 payroll for the year ending on valuation date5. Average annual salary

B. Vested terminated members1. Number2. Total mIDua1 deferred be~efits

C. Retirees1. Age & service2. Disability3. Total4. Total mIDua1 benefits5. Average arIDua1 benefit

D. Beneficiaries1. Spouses2. Children3. Total4. Total annual benefits5. Average alTIma1 benefit

E. Total number ofmembers CA.I. + D.I. + C.3. + D.3J

14.Q

1459.735.8

$1,185,563$84,683

o$0

627o

627$28,274,121

$45,094

233o

233$5,917,285

$25,396

874

14Q

1460.736.8

$1,248,886$89,206

o$0

607o

607$28,812,621

$47,467

239o

239$6,409,470

$26,818

860

MINNEAPOLIS POLICE RELIEF ASSOCIATION

December 31,2008 Actuarial Valuation

Summary of Changes ill Membership

Vestedhctives Tenninees Retirees Beneficiaries Total

A. Number ofmembers 011 December 31, 2007 14 0 627 233 874

B. Changes ill membership

1. Retirements 0

2. Vested terminations 0

3. Active deaths 0

4. Retiree deaths (20) 16 (4)

5. Beneficiary deaths (10) (10)

6. ExpiTation Of survivitlg child betiefits 0

7. Corrections 0

8. Total changes 0 0 (20) 6 (14)

C. Number ofmembers on December 31, 2008 14 0 607 239' 860

6


Funding Basis

Actuarial Values Used to Determine Contribution

7

December 31,2007 December 31,2008

$11,361,941o

365,853,39851,252,960

.Q

428,468,299

A. Actuarial present value ofprojected benefits (the value ofall/uture benefitsto be paid to the current group o/members)

1. Active members2. Vested terminated members3. Retired members4. Spouses and children receiving benefits5. Disabled members receiving benefits6; Total present value of projected benefits

$13,449,118o

432,662,53661,056,985

.Q

507,168,639

B. Actuarial accrued liability (the cost allocated to allprioryear~1. Active members2. Vested terminated members.·3. Retired members4. Spouses and children receiving benefits5. Disabled members receiving benefits6. Total actuarial accrued liability

C. Amortization o/unfunded actuarial accrued liabilifJ!1.. Total actuarial accrued liability (B.6.)2. Actuarial value of assets3. Unfunded actuarial accrued liability (1. - 2.)4. Funded status (2. -;- 1.)5. Years left in amortization period6. Amortization payment

$11,174,538o

: 365,853,39851,252,960

.Q

428,280,896

$428,280,896376,465,987

51,814,90987.9%

125,830,498

$13,229,228o

432,662,53(;1.61,056,985'

.Q

506,948,749

$506,948,749324,723,051182,225,698

64.1%11

21,797,105

D. Normal cost (the cost allocated to the current year)1. Present value of future normal costs (A.6. - B.6.)2. Normal cost as a dollar amount

a. Total normal costb. Statutory adjustment for member contributionsc. Employer normal cost (a. - b.)

3. Payroll for year ending on valuation date4. Normal cost as a percent of active payroll

a. Total normal cost (2.a. -;- 3.)b. Statutory adjustment for member contributions (2.b. -;- 3.)c. Employer nonnal cost (2.c. -;- 3.)

$187,403 $219,890

187,403 219,890 '94,845 99,91192,558 119,979

1,185,563 1,248,886

15.81 % 17.61%8.00% 8.00%7.81% 9.61%


Funding Basis

Changes in the Unfunded Actuarial Accrued Liability

A. Liability gain or loss for the year ending 011 December 31, 20081. Expected actuarial accrued liability (AAL)

a. AAL as ofDecember 31,2007b. Normal cost as of December 31,2007 (excluding expenses)c. Interest to December 31, 2008 on the AAL and normal costd. Benefit payments for the year (excluding post-retirement payments)e. hlterest on benefitpayments (1/2 year)£ Expected AAL on December 31, 2008 (sum of a. through e.)

2. Actual AAL on December 31,2008a. Before any assumption or plan changesb. After unit value changesc. After assumption and unit value changesd. After plan changes

3. Liability (gain) or loss .a. Due to plan experience different from that exi)ected (2a. ~ If.)b. Due to change in unit value different fi'om expected (2.b. - 2.a.)c. Due to changes in actuarial assumptions (2co - 2b.)d. Due to plan changes (2d. - 2c.)e. Total (a. + b. + c. + d.)

B. Asset gain or 10ssJor·the year ending on December 31,200'81. Expected actuarial value of assets

a. Actuarial value of assets on December 31, 2007b. Benefit payments and expenses (including post-retirement payments)c. Contributions for the yeard. Expected return on assetse. Expected actuarial value of assets on December 31, 2008 (sum of a. through d.)

2. Actual actuarial value of assets on December 31, 20083. Asset (gain) or loss (1e. - 2.)

C. Changes in the unfunded AAL1. Expected unfunded AAL on December 31, 20082. Changes

a. Actuarial (gain) or loss other than change in unit valueb. Change in unit value different fi'om expectedc. Changes in actuarial methods and assumptionsd. Plan changee. Total change

3. Unfunded AAL on December 31, 2008

8

$428,280,896187,403

25,708,098(35,666,049)(l,069~

417,440,367

424,206,345429,675,101506,948,749506,948,749

6;765,9785,468,756

77,273,64812

89,508,382

376,465,987(38,186,021)

5,811,348.2L616,719

365,708,033324,723,051

40,984,982

51,732,334

47,750,9605,468,756

77,273,648

12130,493,364182,225,698

MINNEAPOLIS POLICE RELIEF ASSOCIATIONDecember 3J, 2008 Actuarial Valuation

Accounting Basis

Statement of Plan Net Assets

9

A. Investment assets Market BookFixed income 21,784,576 23,174,552State Board of Inveshnent 139,832,761 171,544,601Mutual funds 71,642,459 95,025,994Cash equivalents and other investments 16,888,314 18,693,108Total 250,148,110 308,438,255

B. Checking account 5,943 5,943

C. Accrued/payableAccrued investment income 222,000 222,000Accrued contributions 82,354 82,354Investment sales receivable 999,931 999,9) 1Investment purchase payable ° 0Accounts payable (2,208,123) (2,208,123)Total (903,838) (903,838)

D. Total pension assets (A. +B. + C.) $249,250,215 $307,540,360

MINNEAPOLIS POLICE RELIEF ASSOCIATIONDecember 3/. 2008 Actuarial Valuation

Accounting Basis

Statement of Changes in Plan Net Assets

10


Accounting Basis

Schedule of Funding Progress(Dollar amounts in thousands)

Actuarial Actuarial UnfundedAs of Value of Accrued AAL Funded

December 31: Assets Liability (AAL) (VAAL) Ratio

1992 $265,307 $325,891 $60,584 81.4%1993 288,942 347,879 58,937 '83.1 %

1994 280,772 344,087 63,315 81.6%1995 294,692 358,657 63,965 82.2%

1996 320,686 382,957 62,271 83.7%

1997 362,683 398,728 36,045 91.0%1998 "387,530 414,694 27,164 93.4%

1999 427,122 447,596 20,474 95.4%

2000 391,083 447,086 56,003 ' 87.5%

2001 349,170 464,649 115,479 75.1%

2002 309,667 463,487 153,820 66.8%

2003 300,154 465,276 165,122 64.5%2004* 322,278 469,557 147,279 68.6%

2005 359,032 464,222 105,190 77.3%

2006 377,013 439,992 62,979 ,85.7%

2007 376,466 428,281 51,815 87.9%

2008 324,723 506,949 182,226 64.1%

*After change in' benefit and funding provisions, ji-om restated report

11


Accounting Basis

Schedule of Employer Contributions

Total

Year Ended City State Employer

December 31 : Contributions Contributions Contributions

1992 $5,926,443 $2,975,695 $8,902,138

1993· 5,664,620 2,550,138 . 8,214,758

1994 4,437,124 2,354,380 6,791,504

1995· 4,583,006 3,776,109 8,359,115

1996 4,144,998 4,317,908 8,462,906

1997 3,907,944 3,630,557 7,538,501

1998 2,698,561 3,431,684 6,130,245

1999 698,080 3,021,373 3,719,453

2000 1,295,071 3,268,06~ . 4,563,134

2001 10,812 .. 3,448,383 3,459,195

2002· 2,912,060 5,413,835 8,325,895

2003 13,540,305 5,879,854 19,420,159

2004 20,800,530 7,089,022 27,889,552

2005 24,976,747 6,573,582 31,550,329

2006 5,366,224 5,200,521 10,566,745

2007 . 3,647,229 3,167,214 6,814,443

2008· 3,535,999 2,275,349 . 5,811,348

12

Contract Unit Values: The most recent contract as ofthe date of this report expired October 14, 2008. The last unitvalue determined under that contract was 96.64 effective as of January 1, 2008.


Historical Tables

Historical Funding Ratio Schedule(Dollar amounts in thol/sands)

14

As ofDecember 31:

19891990*19911992*1993*1994*1995199619971998*199920002001200220032004*2005200620072008

ActuarialAcclUedLiability

$290,537299,151309,429325,891347,879344,087358,657382,957398,728414,694447,596447,086464,649463,487465,276469,557464,222439,992428,281506,949

ActuarialValue ofAssets

$211,081223,919238,975265,307288,942280,772294,692320,686362,683387,531418,122

;. 391,083349,170309,667300,154322,278359,032377,013376,466324,723

PercentFunded

72.7%74.9%77.2%81.4%83.1%81.6%82.2%83.7%91.0%93.4%95.4%87.5%75.1%66.8%64.5%68.6%77.3%85.7%87.9%64.1%

*After change in benefit andfunding provisions, from restated report

500

450

400

350

300

250

200

150

1001991 1993 1995 1997 1999 2001 2003 2005 2007

MINNEAPOI~IS POLICE RELIEF ASSOCIATIONDecember 31, 2008 Actuarial Valuation

Historical Tables

History of Actuarially Determined Employer Contributions

15

ValuationDecember 31 :

198919901991199219931994

, 1995

199619971998199920002001200220032004*2005200620072008

Nonna1 Costas a Percentof Payroll

24.53%25.61 %25.58%25.62%25.57%25.43%24.91 %24.83%24.66%26.53%26.50%24.03%23.10%21.56%19.78%18.96%17.93%16.87%15.8'1 %17.61 %

Amortizationof UnfundedActuarialLiability

$6,727,4956,547,8506,319,1935,615,5875,663,6766,331,0006,683,1066,831;1654,175,2613,344,8092,624,2387,767,618

17,543,53325,994,75631,678,80714,305,93210,676,2476,711,4135,830,498

21,797,105

The required municipal normal cost contribution is the total normal cost shownless an 8% adjustment for member payroll contributions.

*After change in benefit andfunding provisions, Fom restated report


Historical Tables

Comparative Schedule of Active Members

Number ofValuation Active Projected Averages

December 31: Members Payroll Age Service Pay

1989 460 $18,421,160 46.6 21.0 $40,0461990 433 17,859,951 47.3 21.8 41,247

1991 410 17,658,290 48.0 22.5 43,0691992 381 16,913,352 48.5 23.2 44,3921993 349 16,576,802 49.2 24.0 47,4981994 307 14,799,242 49.8 24.6 48,2061995 278 13,937,530 50.3. 25.3 50,1351996 239 13,002,556 50.9 25.9 54,4041997 188 10,817,520 51.1 26.3 57;540 '.

1998 148 . 8,856,616 51.5 26.8 59,8421999* 123 7,804,036 51.3 26.6 63,4472000 97 6,583,342 51.7 27.2 67,870

2001 73 5,238,480 52.6 28.4 71,7602002 53 3,955,411 53.7 29.4 74,6302003 24 1,860,356 55.0 30.4 77,515 .

2004 18 1,429,255 55.2 31.1 79,4032005 17 1,403,846 57.4 33.3 82;5792006 15 1,236,046 58.8 34.5 82,403

2007 14 1,185,563 59.7 35.8 84,6832008 14 1,248,886 60.7 36.8 89,206

"rpayroll used to calculate normal cost.for calendar year 1999 is $7,503,881.

16


Historical Tables

Comparative Schedule of Inactive Members

Number of Retirees and Beneficiaries Actual ProjectedAs of Added Removed On Valuation Annual Annual Present Value

December 31: to Rolls from Rolls Date Benefits Benefits ofBenefits

1989 40 31 752 $12,988,156 $12,007,149 $163,236,3241990 33 33 752 13,179,656 12,579,039 169,649,676

·1991 30 25 757 12,726,042 13,152,752 175,237,6801992 55 28 784 14,764,375 14,352,332 192,504,8401993 45 33 796 15,646,456 15,690,269 212,051,8561994 56 40 812 18,040,942 17,238,698 226,104,5061995 35 39 808 17,597,704 17,375,347 235,698,3271996 51 28 831 20,240,597 19,435,342 263,685,600

. 1997 82 35 878 25,513,260 . 21,662,581 298,497,9841998 65 '·23 920 24,511,366 . 24,020,183 330,745,5361999 34 37 917 26,213,944 26,701,339 368,568,5242000 34 37 924 30,697,541 . 28,043,660 385,062,7552001 41 34 933/ 30,503,691 30,398,324 413 ,026,2642002 35 40 928 30,724,261 31,446,287 423,583,4832003 40 31 935 31,855,476 33,194,254 447,163,5902004* 40 31 921 32,797,952 34,479,242 455,208,1692005 10 27 904 33,789,746 34,157,890 450,360,5512006 19 39 884 34,121,401 34,216,563 428,105,6512007 14 38 860 36,033,230 34,191,406 417,106,3582008 16 30 846 37,607,090 35,222,091 493,719,521

*After change in benefit andfunding provisions, fi'om restated report

17

1. Mortality

2. Withdrawal

3. Disability

4. Retirement age

5. Interest rate


Actuarial Methods and Assumptions

The 1983 GAM Mortality Table set back 2 years formales and set forward 1 year for females.

Changedfrom the UP-1984 Mortality Table setforward2 years for males and set back 3 years for females as ofDecember 31, 2007

The rate of withdrawal is 0% after age 50. The plan isfiozen, and all remaining active members are over age 50.

Rates varying by age. Sample disability rates are asfollows:

Age Rate25 0.08%30 0.0835 0.0840 0.2045 0.2650 0.495'5 0.89

Members are assumed to retire at age'54, or attained ageif older.

6% compounded annually.

18

6. Unit value/Salary scale

7. Actuarial cost method

The unit value as ofDecember 31,2008, based on themost recent,union contract (which expired October 14,2008) is 96.64. All future unit values for actives andinactives are assumed to increase 4% per year ii-om thevaluation date.

The Entry Age Normal Cost Method. Under this method,the n01111al cost for an individual member is the levelpercentage ofpay required, beginning on the date ofjoining the association, to accumulate the funds needed topay the member's accrued benefits by their assumedretirement age. The actuarial accrued liability is theaccumulated value ofthese annual normal costs on agiven date. The nonnal cost and accrued liability for theplan is the total of these values for

19MINNEAPOLIS POLICE RELIEF ASSOCIATION

December 31, 2008 Actuarial Valuation

Summary of Plan Provisions

1. Normal retirement benefit

2. Deferred vested benefit

3. Disability benefit

4. Surviving spouse's benefit

5. Surviving children's benefit

6. Member contributions

Annual benefit of30.40/S0 of base pay for first 19 yearsof service. An additionaI4.60/S0 units are awarded forthe 20th year of service. For service years in excess of20, an additional 1.60/S0 is granted; to a maxinmm of 25years of service and 43/S0 of base pay. "Base pay" forthis purpose means the maximum monthly salary of a firstclass patrolman. Members must be at least age 50 with 5years of service to receive this benefit.

The plan is fi-ozen. All remaining active tpembers areeligible for an immediate benefit upon retirement.

Annual benefit of34/S0 ofbase pay fat members no. longer able to perfonn the duties of a policeman due to

disability.

Annual benefit of23/80 ofbase pay for the survivingspouse of an active or retired member.

Annual benefit of S/80 of basepay for each surviving childof ail active or retired member. Benefits continue to ageIS, or to age 22 ifthe child is a full-time student. Thetotal benefit for surviving children and spouse combined islimited to 41180 ofbase pay.

Members are required to contribute S% of base pay.After 25 years of service, member contributions are paidto a separate health insurance acqount. In the event ofdeath without survivorship, member contributions arerefundable including 5%·interest from the month thecontribution is made.

Documents

May, 2009 as part of an ongoing digital archiving project. … · 2009. 6. 19. · MINNEAPOLIS POLICE RELIEF ASSOCIATION. December 31,2008Actuarial Valuation. 4. FundingBasis ActuarialValue