CITY OF TITUSVILLE GENERAL EMPLOYEES' PENSION PLAN
ACTUARIAL VALUATION AS OCTOBER 1, 2019

Foster & Foster Actuaries & Consultants

January 31, 2020
 
Board of Trustees
City of Titusville
General Employees' Pension Board
 
Re: City of Titusville General Employees' Pension Plan
 
Dear Board:
 
We are pleased to present to the Board this report of the annual actuarial valuation of the City of Titusville General Employees' Pension Plan. Included are the related results for GASB Statements No. 67 and No. 68. The funding valuation was performed to determine whether the assets and contributions are sufficient to provide the prescribed benefits and to develop the appropriate funding requirements for the applicable plan year. The calculation of the liability for GASB results was performed for the purpose of satisfying the requirements of GASB Statements No. 67 and No. 68. Use of the results for other purposes may not be applicable and may produce significantly different results.

The valuations have been conducted in accordance with generally accepted actuarial principles and practices, including the applicable Actuarial Standards of Practice as issued by the Actuarial Standards Board, and reflect laws and regulations issued to date pursuant to the provisions of Chapter 112, Florida Statutes, as well as applicable federal laws and regulations. In our opinion, the assumptions used in the valuations, as adopted by the Board of Trustees, represent reasonable expectations of anticipated plan experience. Future actuarial measurements may differ significantly from the current measurements presented in this report for a variety of reasons including: changes in applicable laws, changes in plan provisions, changes in assumptions, or plan experience differing from expectations. Due to the limited scope of the valuations, we did not perform an analysis of the potential range of such future measurements.

In conducting the valuations, we have relied on personnel, plan design, and asset information supplied by the City of Titusville, financial reports prepared by the custodian bank, and the actuarial assumptions and methods described in the Actuarial Assumptions section of this report. While we cannot verify the accuracy of all this information, the supplied information was reviewed for consistency and reasonableness. As a result of this review, we have no reason to doubt the substantial accuracy of the information and believe that it has produced appropriate results. This information, along with any adjustments or modifications, is summarized in various sections of this report.
 
 
13420 Parker Commons Blvd., Suite 104 Fort Myers, FL 33912 · (239) 433-5500 · Fax (239) 481-0634 · www.foster-foster.com

 
The total pension liability, net pension liability, and certain sensitivity information shown in this report are based on an actuarial valuation performed as of October 1, 2018. The total pension liability was rolled-forward from the valuation date to the plan’s fiscal year ending September 30, 2019 using generally accepted actuarial principles. It is our opinion that the assumptions used for this purpose are internally consistent, reasonable, and comply with the requirements under GASB No. 67 and No. 68.

The undersigned are familiar with the immediate and long-term aspects of pension valuations, and meet the Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinions contained herein. All of the sections of this report are considered an integral part of the actuarial opinions.

To our knowledge, no associate of Foster & Foster, Inc. working on valuations of the program has any direct financial interest or indirect material interest in the City of Titusville, nor does anyone at Foster & Foster, Inc. act as a member of the Board of Trustees of the General Employees' Pension Plan. Thus, there is no relationship existing that might affect our capacity to prepare and certify this actuarial report.

If there are any questions, concerns, or comments about any of the items contained in this report, please contact us at 239-433-5500.
 
Respectfully submitted,
Foster & Foster, Inc.
 
By:    _/s/___
Douglas H. Lozen, EA, MAAA
Enrolled Actuary #17-7778
 
By:    _/s/___
Tyler A. Koftan, EA, MAAA
Enrolled Actuary #17-8685
 
DHL/lke
Enclosures

TABLE OF CONTENTS

1. Introduction​

   1. Summary of Report - Page 5

   2. Changes Since Prior Valuation - Page 6

   3. Contribution Impact of Annual Changes - Page 6

   4. Comparative Summary of Principal Valuation Results - Page 7

2. Valuation Information

   1. Reconciliation of Unfunded Actuarial Accrued Liabilities - Page 13

   2. Detailed Actuarial (Gain)/Loss Analysis - Page 15

   3. Actuarial Assumptions and Methods - Page 16

   4. Glossary - Page 19

   5. Discussion of Risk - Page 22

3. Trust Fund - Page 25

4. Member Statistics

   1. Statistical Data - Page 30

   2. Age and Service Distribution - 31

   3. Valuation Participant Reconciliation - 32

5. Summary of Current Plan - Page 33

6. Governmental Accounting Standards Board Statements No. 67 and No. 68 Disclosure Information - Page 37

SUMMARY OF REPORT

CHANGES SINCE PRIOR VALUATION

Plan Changes

Actuarial Assumptions/Method Changes

COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS

A. Participant Data

B. Assets

C. Liabilities

COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS (Cont'd)

C. Liabilities (Continued)

COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS (Cont'd)

D. Actuarial Present Value of Accrued Benefits

COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS (Cont'd)

E. Pension Cost

F. Past Contributions

G. Net Actuarial (Gain)/Loss

¹ The asset values and liabilities include accumulated DROP Plan Balances as of
9/30/2019 and 9/30/2018.

² Contributions developed as of 10/1/2019 displayed above have been adjusted to
account for assumed salary increase and interest components.

City of Titusville General Employees' Pension Plan                                   FOSTER & FOSTER | 10

COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS (Cont'd)

H. Schedule Illustrating the Amortization of the Total Unfunded Actuarial Liability as of:

I. (i) 5 Year Comparison of Actual Assumed Salary Increases

I. (ii) 5 Year Comparison of Investment Return on Market Value and Actuarial Value

I. (iii) Average Annual Payroll Growth

STATEMENT BY ENROLLED ACTUARY

RECONCILIATION OF UNFUNDED ACTUARIAL ACCRUED LIABILITIES

1. Unfunded Actuarial Accrued Liability as of October 1, 2018 = $6,036,459
2. Sponsor Normal Cost developed as of October 1, 2018 = 618,444
3. Expected administrative expenses for the year ended September 30, 2019 = 89,003
4. Expected interest on (1), (2) and (3) = 519,204
5. Sponsor contributions to the System during the year ended September 30, 2019 = 2,628,066
6. Expected interest on (5) = 101,838
7. Expected Unfunded Actuarial Accrued Liability as of September 30, 2019 (1)+(2)+(3)+(4)-(5)-(6) = 4,533,206
8. Change to UAAL due to Assumption Change = 0
9. Change to UAAL due to Actuarial (Gain)/Loss = (462,347)
10. Unfunded Actuarial Accrued Liability as of October 1, 2019 = 4,070,859

DETAILED ACTUARIAL (GAIN)/LOSS ANALYSIS

1. Unfunded Actuarial Accrued Liability (UAAL) as of October 1, 2018 = $6,036,459
2. Expected UAAL as of October 1, 2019 = 4,533,206
3. Summary of Actuarial (Gain)/Loss, by component:
   • Investment Return (Actuarial Asset Basis) = (815,242))
   • Salary Increases = 30,042
   • Active Decrements = 93,467
   • Inactive Mortality = 92,501
   • Other = 136,885
   • Increase in UAAL due to (Gain)/Loss = (462,347)
   • Assumption Changes = 0
4. Actual UAAL as of October 1, 2019 = $4,070,859

ACTUARIAL ASSUMPTIONS AND METHODS

ASSUMPTION TABLES

GLOSSARY

1. The normal cost accrual rate equals:
   1. the present value of future benefits for the participant, determined as of the participant’s entry age, divided by
   2. the present value of the compensation expected to be paid to the participant for each year of the participant’s anticipated future service, determined as of the participant’s entry age. 
2. In calculating the present value of future compensation, the salary scale is applied both retrospectively and prospectively to estimate compensation in years prior to and subsequent to the valuation year based on the compensation used for the valuation. 
3. The accrued liability is the sum of the individual accrued liabilities for all participants and beneficiaries. A participant’s accrued liability equals the present value, at the participant’s attained age, of future benefits less the present value at the participant’s attained age of the individual normal costs payable in the future. A beneficiary’s accrued liability equals the present value, at the beneficiary’s attained age, of future benefits. The unfunded accrued liability equals the total accrued liability less the actuarial value of assets. 
4. Under this method, the entry age used for each active participant is the participant’s age at the time he or she would have commenced participation if the plan had always been in existence under current terms, or the age as of which he or she first earns service credits for purposes of benefit accrual under the current terms of the plan.​

SPECIAL ACTUARIAL ACCOUNT ACTIVITY
10/1/2018 to 10/1/2019

Growth Assuming 7.75% Return

(1)

¹ Excludes Member Service Buyback

(2)

(3)

09/30/2019 Actuarial Assets = 62,315,479

(4)

Excess Earnings: (3) - (2) = (12,190,264)

(5)

09/30/2019 Actuarial Gain (Loss) = 462,347

* Share Account Allocation:
Lesser of [(4) or (5)]x50% = (6,095,132)

Share Account Activity:

10/1/2018 Adjusted Actuarial Assets

(6) 

Actuarial Assets (3), above = 62,315,479

(7)

10/1/2019 Account Balance = (121,991,203)

Adjusted Actuarial Assets
Lesser of: (6) or [(6) - (7)] = 62,315,479

*Per Ordinance No.25-1999

SPECIAL ACTUARIAL ACCOUNT

DISCUSSION OF RISK

• Investment Return: When the rate of return on the Actuarial Value of Assets falls short of the assumption, this produces a loss representing assumed investment earnings that were not realized. Further, it is unlikely that the plan will experience a scenario that matches the assumed return in each year as capital markets can be volatile from year to year. Therefore, contribution amounts can vary in the future.
• Salary Increases: When a plan participant experiences a salary increase that was greater than assumed, this produces a loss representing the cost of an increase in anticipated plan benefits for the participant as compared to the previous year. The total gain or loss associated with salary increases for the plan is the sum of salary gains and losses for all active participants.
• Demographic Assumptions: Actuarial results take into account various potential events that could happen to a plan participant, such as retirement, termination, disability, and death. Each of these potential events is assigned a liability based on the likelihood of the event and the financial consequence of the event for the plan. Accordingly, actuarial liabilities reflect a blend of financial consequences associated with various possible outcomes (such as retirement at one of various possible ages). Once the outcome is known (e.g. the participant retires) the liability is adjusted to reflect the known outcome. This adjustment produces a gain or loss depending on whether the outcome was more or less favorable than other outcomes that could have occurred.

DISCUSSION OF RISK (Cont'd)

Impact of Plan Maturity on Risk

• The Support Ratio, determined as the ratio of active to inactive members, has decreased from 68.5% on October 1, 2016 to 66.0% on October 1, 2019, indicating that the plan has been maturing during the period.
• The Accrued Liability Ratio, determined as the ratio of the Inactive Accrued Liability, which is the liability associated with members who are no longer employed but are due a benefit from the plan, to the Total Accrued Liability, is 72.0%. With a plan of this maturity, losses due to lower than expected investment returns or demographic factors may result in larger increases in contribution requirements than would be needed for a less mature plan. Please note Chapter 112, Florida Statutes, requires that the plan sponsor contributes the minimum required contribution; thus, there is minimal solvency risk to the plan.
• The Funded Ratio, determined as the ratio of the Actuarial Value of Assets to the Total Accrued Liability, has increased from 86.9% on October 1, 2016 to 93.9% on October 1, 2019, due to net favorable experience realized by the plan. The increase was offset by assumption changes implemented during the period.
• The Net Cash Flow Ratio, determined as the ratio of the Net Cash Flow (contributions minus benefit payments and administrative expenses) to the Market Value of Assets, increased from -4.4% on October 1, 2016 to -2.7% on October 1, 2019. The current Net Cash Flow Ratio of -2.7% indicates that contributions are not currently covering the plan's benefit payments and administrative expenses.

PLAN MATURITY MEASURES AND OTHER RISK METRICS

STATEMENT OF FIDUCIARY NET POSITION
SEPTEMBER 30, 2019

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE YEAR ENDED SEPTEMBER 30, 2019

Additions:

Deductions:

Net Position Restricted for Pensions

ACTUARIAL ASSET VALUATION
SEPTEMBER 30, 2019

Details of the derivation are set forth as follows:

(A)

(I)

(B)

Actuarial Asset Rate of Return = 2I/(A+B-I): 9.16%

10/01/2019 Limited Actuarial Assets = $62,315,478.63

10/01/2019 Market Value of Assets = $61,671,198.90

Actuarial Gain/(Loss) due to Investment Return (Actuarial Asset Basis): $815,242.40

CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS SEPTEMBER 30, 2019

Revenues

Expenditures

CITY CONTRIBUTIONS IN EXCESS OF MINIMUM REQUIREMENT FOR THE FISCAL YEAR ENDED (FYE) SEPTEMBER 30, 2019

1. Required City Contributions = $2,628,056.00
2. Less 2018 Prepaid Contribution = 0.00
3. Less Actual City Contributions = (2,628,066.00)
4. City Contributions in Excess of Minimum Requirement Applied to Reduce Unfunded Actuarial Accrued Liability as of September 30, 2019 = ($10.00)

STATISTICAL DATA

Actives

Service Retirees

DROP Retirees

Beneficiaries

Disability Retirees

Terminated Vested

AGE AND SERVICE DISTRIBUTION

VALUATION PARTICIPANT RECONCILIATION

1. Active Lives
   1. Number in prior valuation 10/1/2018 = 289
   2. Terminations
      1. Vested (partial or full) with deferred benefits = (3)
      2. Non-vested or full lumps sum distribution received = (7)
      3. Refund of member contributions or full lump sum distribution received = (12)
   3. Deaths
      1. Beneficiary receiving benefits = 0
      2. No future benefits payable = 0
   4. Disabled = 0
   5. Retired = (14)
   6. DROP = 0
   7. Continuing participants = 253
   8. New entrants = 40
   9. Total active life participants in valuation = 293
2. Non-Active lives (including beneficiaries receiving benefits), see table below:

SUMMARY OF CURRENT PLAN
(Through Ordinance 41-2019)

Normal Retirement

Early Retirement

Vesting

Disability

Death Benefits

Contributions

Board of Trustees

Deferred Retirement Option Plan

GASB 67 STATEMENT OF FIDUCIARY NET POSITION
SEPTEMBER 30, 2019

GASB 67 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE YEAR ENDED SEPTEMBER 30, 2019

Market Value Basis

Additions:

Deductions:

Net Position Restricted for Pensions

GASB 67 NOTES TO THE FINANCIAL STATEMENTS
(FOR THE YEAR ENDED SEPTEMBER 30, 2018)

Plan Description

Plan Administration

Plan Membership as of October 1, 2018

Benefits Provided

Contributions

Investments
Investment Policy

Concentrations:

Rate of Return:

Deferred Retirement Option Program

GASB 67 NET PENSION LIABILITY OF THE SPONSOR

Actuarial Assumptions:

Mortality Rate Healthy Active Lives:

Mortality Rate Healthy Inactive Lives:

Mortality Rate Disabled Lives:

Discount Rate:

GASB 67 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS - Last 10 Fiscal Years

Notes to Schedule:

Changes of assumptions:

1. The investment return assumption was reduced from 8.00% to 7.75% per year, net of investment-related expenses.
2. The assumptions for salary increases, withdrawal, disability, Early Retirement, and Normal Retirement were updated to better align with anticipated future plan experience.

GASB 67 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS - Last 10 Fiscal Years

Notes to Schedule:

Changes of benefit terms:

Changes of assumptions:

GASB 67 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS - Last 10 Fiscal Years

Notes to Schedule:

GASB 67 SCHEDULE OF CONTRIBUTIONS
Last 10 Fiscal Years

^{Note 1} The Covered Payroll numbers shown are in compliance with GASB 82, except for the 09/30/2015 measurement period which includes DROP payroll.

Notes to Schedule

City of Titusville General Employees' Pension Plan                                   FOSTER & FOSTER | 45

Termination and Disability Rate Tables:

GASB 67 SCHEDULE OF INVESTMENT RETURNS
Last 10 Fiscal Years

GASB 68 NOTES TO THE FINANCIAL STATEMENTS
(For the Year Ended September 30, 2019)

Plan Description

Plan Membership as of October 1, 2018:

Benefits Provided

Normal Retirement:

Contributions:

Net Pension Liability

Actuarial Assumptions:

Mortality Rate:

GASB 68 CHANGES IN NET PENSION LIABILITY

Increase (Decrease in parenthesis)

Sensitivity of the Net Pension Liability to changes in the Discount Rate.

Pension Plan Fiduciary Net Position.

GASB 68 PENSION EXPENSE AND DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RELATED TO PENSIONS

GASB 68 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS - Last 10 Fiscal Years

Notes to Schedule:

Changes of assumptions:

1. The investment return assumption was reduced from 8.00% to 7.75% per year, net of investment-related expenses.
2. The assumptions for salary increases, withdrawal, disability, Early Retirement, and Normal Retirement were updated to better align with anticipated future plan experience.

GASB 68 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS - Last 10 Fiscal Years

Notes to Schedule:

Changes of benefit terms:

Changes of assumptions:

GASB 68 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS - Last 10 Fiscal Years

Notes to Schedule:

GASB 68 SCHEDULE OF CONTRIBUTIONS
Last 10 Fiscal Years

^{Note 1} The Covered Payroll numbers shown are in compliance with GASB 82, except for the 09/30/2015 measurement period which includes DROP payroll.

Notes to Schedule

City of Titusville General Employees' Pension Plan                                   FOSTER & FOSTER | 55

Termination and Disability Rate Tables:

EXPENSE DEVELOPMENT AND AMORTIZATION SCHEDULES

GASB 68 COMPONENTS OF PENSION EXPENSE
FISCAL YEAR SEPTEMBER 30, 2019

GASB 68 AMORTIZATION SCHEDULE - INVESTMENTS

GASB 68 AMORTIZATION SCHEDULE - CHANGES OF ASSUMPTIONS

GASB 68 AMORTIZATION SCHEDULE - EXPERIENCE