1083 Amends Police Officers Pension Plan ORDINANCE NO. 1083
AN ORDINANCE OF THE CITY OF OKEECHOBEE AMENDING THE CITY
OF OKEECHOBEE MUNICIPAL POLICE OFFICERS' PENSION TRUST
FUND, ADOPTED PURSUANT TO ORDINANCE 1054; AMENDING
SECTION 1, DEFINITIONS; PROVIDING FOR CODIFICATION;
• PROVIDING FOR SEVERABILITY OF PROVISIONS; REPEALING ALL
ORDINANCES IN CONFLICT HEREWITH AND PROVIDING AN
EFFECTIVE DATE.
WHEREAS,the City of Okeechobee and the City Police employees are presently provided
pension and certain other benefits under Ordinances of the City of Okeechobee;
and
WHEREAS, it becomes necessary from time to time to amend said ordinances in order to
clarify or restate certain provisions of the ordinance, or to enact amendments to
comply with revised Federal regulations; and
WHEREAS, the amendment of this ordinance to change the definition of actuarial
equivalence, to change the percentage rate that future payments are discounted for
interest and mortality, as well as amending the definition of salary to reflect
permissible overtime, sick or annual leave from and after July 1, 2011, will have no
actuarial impact on the plan; and
WHEREAS, such changes are recommended by the Pension Board of Trustee's upon the
advise of the plan's Actuary.
NOW THEREFORE, be it ordained before the City Council of the City of Okeechobee,
Florida; presented at a duly advertised public meeting; and passed by majority vote
of the City Council; and properly executed by the Mayor or designee, as Chief
Presiding Officer for the City:
SECTION 1: That the City of Okeechobee Municipal Police Officers' Pension Trust
Fund, adopted pursuant to Ordinance No. 1054, is hereby amended by amending
Section 1, Definitions, to amend the definitions of "Actuarial Equivalent" and
"Salary," to read as follows:
Actuarial Equivalent means that any benefit payable under the terms of this System
in a form other than the normal form of benefit shall have the same actuarial
present value on the date payment commences as the normal form of benefit. For
purposes of establishing the actuarial present value of any form of payment other
than a lump sum distribution, all future payments shall be discounted for interest
and mortality by using eight seven percent (8 7%) interest and the 1983 Group
Annuity Mortality Table for Ma 1994 Group Annuity Mortality Table. This
definition may only be amended by the City pursuant to the recommendation of the
Board using assumptions adopted by the Board with the advice of the plan's
actuary, such that actuarial assumptions are not subject to City discretion.
Salary means the total compensation for services rendered to the City as a Police
Officer reported on the Member's W-2 form plus all tax deferred, tax sheltered or tax
exempt items of income derived from elective employee payroll deductions or salary
reductions. For service earned after July 1, 2011 (the "effective date"), Salary shall
not include more than three hundred (300) hours of overtime per fiscal year and
shall also not include payments for accrued unused sick or annual leave. Provided
however, in any event, payments for overtime in excess of three hundred (300)
hours per year or accrued unused sick or annual leave accrued as of the effective
date and attributable to service earned prior to the effective date, may still be
included in Salary for pension purposes even if the payment is not actually made
until on or after the effective date. In any event, with respect to unused sick leave
and unused annual leave accrued prior to the effective date, Salary will include the
lesser of the amount of sick or annual leave time accrued on the effective date or
the actual amount of sick or annual leave time for which the retiree receives
• payment at the time of retirement, at the then current rate of pay, regardless of
whether the amount of sick or annual leave was, at some time prior to retirement,
reduced below the amount on the effective date.
Ordinance No. 1083 - Page 1 of 2
Compensation in excess of the limitations set forth in Section 401(a)(17) of the
Code as of the first day of the Plan Year shall be disregarded for any purpose,
including employee contributions or any benefit calculations. The annual
compensation of each member taken into account in determining benefits or
employee contributions for any Plan Year beginning on or after January 1, 2002,
may not exceed $200,000, as adjusted for cost-of-living increases in accordance
with Code Section 401(a)(1 7)(B). Compensation means compensation during the
fiscal year. The cost-of-living adjustment in effect for a calendar year applies to
annual compensation for the determination period that begins with or within such
calendar year. If the determination period consists of fewer than 12 months, the
annual compensation limit is an amount equal to the otherwise applicable annual
compensation limit multiplied by a fraction, the numerator of which is the number
of months in the short determination period, and the denominator of which is 12. If
the compensation for any prior determination period is taken into account in
determining a Member's contributions or benefits for the current Plan Year, the
compensation for such prior determination period is subject to the applicable annual
compensation limit in effect for that prior period. The limitation on compensation for
an "eligible employee" shall not be less than the amount which was allowed to be
taken into account hereunder as in effect on July 1, 1993. "Eligible employee" is an
individual who was a Member before the first Plan Year beginning after December
31, 1995.
SECTION 2: Specific authority is hereby granted to codify and incorporate this
Ordinance in the existing Code of Ordinances of the City of Okeechobee.
SECTION 3: All Ordinances or parts of Ordinances in conflict herewith be and the
same are hereby repealed.
SECTION 4: If any section, subsection, sentence, clause, phrase of this ordinance,
or the particular application thereof shall be held invalid by any court, administrative
agency, or other body with appropriate jurisdiction, the remaining section,
subsection, sentences, clauses, or phrases under application shall not be affected
thereby.
SECTION 5: That this Ordinance shall become effective upon adoption.
INTRODUCED on first reading and set for public hearing t th day of March, 2012.
1
es E. Kirk, Mayor
ATTEST:
Lane Gamiotea, C ty Clerk
PASSED AND ADOPTED after Second and Final Public Hearing public hearing this 3rd
day of April, 2012.
1
mes E. Kirk, Mayor
ATTEST:
Lane Gialmiotea, City Clerk
APPROVED FOR LEGAL SUFFICIENCY:
John R. Cook, City Attorney
Ordinance No. 1083 - Page 2 of 2
•
G ahi;ei Po, &-r Siilth & Compan-,
GRS
January 13, 2012
CONFIDENTIAL
Ms. Janet McKinley
Financial Liaison
City of Okeechobee
100 SW 5th Avenue
Okeechobee, FL 34974-4221
•
One East Brox and Blvd.
Suite .505
Fr. Lauderdale. FL 33301- 1827
Re: City of Okeechobee Police Officers' Pension Plan and Trust Agreement
Actuarial Impact Statement for Change in Pensionable Earnings 10
Dear Janet:
EXHIBIT 2
MAR 20, 2012
Enclosed is our Actuarial Iinpact Statement to measure the financial impact of the proposed ordinance which
makes the following changes:
■ For service earned after July 1, 2011, salary shall not include more than 300 hours of overtime per fiscal
year and shall also not include payments for accrued unused sick or annual leave.
■ Payments for overtime in excess of 300 hours per year or accrued unused sick or annual leave accrued as of
July 1, 2011 and attributable to service earned prior to July 1, 2011, may still be included in pensionable
salary, even if payment is made after July 1, 2011.
■ With respect to unused sick leave and unused annual leave accrued prior to July 1, 2011, salary will include
the lesser of the time accrued on July 1, 2011 or the actual amount of accrued time for which the retiree
receives payment at the time of retirement, at the then current rate of pay.
■ The Actuarial Equivalence assumptions are changed from 8% interest and the 1983 Group Annuity
Mortality Table to 7% interest and the 1994 Group Annuity Mortality Table.
Summary of Findings
■ Eliminating future accruals for unused sick and annual leave time makes this a fairly significant change
because it reduces the amount included in the calculation of final average earnings.
■ As of October 1, 2010, there was approximately $5,500 of pay due to overtime hours in excess of 300
hours, so the cap on overtime also has an effect.
■ The present value of projected benefits is about 5% less, reflecting both of these changes. The resulting
reduction in annual required City contribution is about $34,000.
■ The change in assumptions used to determine actuarial equivalence is only used when calculating optional
forms of benefit for retirees, and has no measurable effect on the cost of the plan.
Additional Disclosures
At October 1, 2010, the actuarial value of assets exceeded the market value by $351,976. This excess
represents investment losses that have not been recognized yet. By the time such losses are fully recognized,
the annual cost of the Plan will have increased by about $43,000.
The Statement must be filed with the Division of Retirement before the final public hearing on the ordinance.
Please have a member of the Board of Trustees sign the Statement. Then send the Statement along with a copy
of the proposed ordinance to Tallahassee.
Ms. Janet McKinley
January 13, 2012
Page 2
This report was prepared at the request of the Board and is intended for use by the Retirement System and those
designated or approved by the Board. This report may be provided to parties other than the System only in its
entirety and only with the permission of the Board.
The purpose of this report is to describe the financial effect of the proposed plan changes. No statement in this
report is intended to be interpreted as a recommendation in favor of the changes, or in opposition of them. This
report should not be relied on for any purpose other than the purpose described above.
The calculations in this report are based upon information furnished by the plan administrator and the City for
the October 1, 2010 Actuarial Valuation concerning Plan benefits, financial transactions, plan provisions and
active members, terminated members, retirees and beneficiaries. We reviewed this infonnation for internal and
year-to-year consistency, but did not otherwise audit the data. We are not responsible for the accuracy or
completeness of the information provided by the plan administrator or the City.
The calculations are based upon assumptions regarding future events, which may or may not materialize. They
are also based on the assumptions, methods, and plan provisions outlined in this report. 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 (such as the end of an amortization period or
additional cost or contribution requirements based on the plan's funded status); and changes in plan provisions
or applicable law. If you have reason to believe that the assumptions that were used are unreasonable, that the
plan provisions are incorrectly described, that important plan provisions relevant to this proposal are not
described, or that conditions have changed since the calculations were made, you should contact the author of
the report prior to relying on information in the report.
The undersigned actuaries are members of the American Academy of Actuaries and meet the Qualification
Standards of the American Academy of Actuaries to render the actuarial opinions contained herein. The
undersigned actuaries are independent of the plan sponsor.
This report has been prepared by actuaries who have substantial experience valuing public employee retirement
systems. To the best of our knowledge the information contained in this report is accurate and fairly presents
the actuarial position of the Plan as of the valuation date. All calculations have been made in conformity with
generally accepted actuarial principles and practices, and with the Actuarial Standards of Practice issued by the
Actuarial Standards Board and with applicable statutes.
Respectfully submitted,
Theora P. Braccialarghe, FSA, MAY
f A f Amrose, MAAA
Enrolled Actuary No. 11-02826 Xnr Jed Actuary No. 11-06599
TPB/rh
Gabriel Roeder Smith & Company
CITY OF OKEECHOBEE MUNICIPAL POLICE OFFICERS' PENSION TRUST FUND
Impact Statement — January 13, 2012
Description of Amendment
Under the provisions of the proposed ordinance, the overtime included in pensionable salary is limited to
300 hours per fiscal year for overtime earned on or after July 1, 2011. Additionally, with respect to unused
sick leave and unused annual leave, salary will include the lesser of the time accrued prior to July 1, 2011,
or the actual amount of accrued time for which the retiree receives payment at the time of retirement, at the
then current rate of pay. Finally, the assumptions used to determine actuarially equivalent optional forms of
benefit have been changed.
Funding Implications of Amendment
An actuarial cost estimate is attached.
Certification of Administrator
I believe the amendment to be in compliance with Part VII, Chapter 112, Florida Statutes and Section 14,
Article X of the Constitution of the State of Florida.
For the Board of Trustees
as Plan Administrator
Plan
CITY OF OKEECHOBEE MUNICIPAL POLICE OFFICERS' PENSION TRUST FUND
SUPPLEMENTAL ACTUARIAL VALUATION REPORT
City Of Okeechobee Municipal Police Officers' Pension Trust Fund
Valuation Date
October 1, 2010
Date of Report
January 13, 2012
Report Requested by
Board of Trustees
Prepared by
Theora P. Braccialarghe and Jeffrey Amrose
Group Valued
All active and inactive members in the Plan
Plan Provisions Being Considered for Change
■ For service earned after July 1, 2011, salary shall not include more than 300 hours of overtime per
fiscal year and shall also not include payments for accrued unused sick or annual leave.
■ Payments for overtime in excess of 300 hours per year or accrued unused sick or annual leave
accrued as of July 1, 2011 and attributable to service earned prior to July 1, 2011, may still be
included in pensionable salary, even if payment is made after July 1, 2011.
■ With respect to unused sick leave and unused annual leave accrued prior to July 1, 2011, salary
will include the lesser of the time accrued on July 1, 2011 or the actual amount of accrued time for
which the retiree receives payment at the time of retirement, at the then current rate of pay.
■ The Actuarial equivalence assumptions are changed from 8% interest and the 1983 Group Annuity
Mortality Table to 7% interest and the 1994 Group Annuity Mortality Table.
Participants Affected
Active members who retire or become disabled and receive disability retirement benefits
after the effective date of this proposed ordinance.
Actuarial Assumptions and Methods
Currently, unused sick time and vacation time are assumed to increase by 96 and 160 hours
per year, respectively. To measure the proposed changes, we have changed this assumption
to reflect no increases in the unused sick and vacation time.
All other assumptions are the same as those shown in our October 1, 2010 Actuarial
Valuation Report. Some of the key assumptions and methods are:
Investment returns - 7.0% per year
Cost Method - Aggregate
Amortization Period for Any Increase in Actuarial Accrued Liability
�IWn
Summary of Data Used in Report
See later page
Actuarial Impact of Proposal(s)
See attached page(s)
Risks Involved With the Proposal Not Previously Exposed
None
Other Cost Considerations
At October 1, 2010, the actuarial value of assets exceeded the market value by $351,976.
This excess represents investment losses that have not been recognized yet. By the time
such losses are fully recognized, the annual cost of the Plan will have increased by about
$43,000.
Possible Conflicts with IRS Qualification Rules
None
As indicated below, the undersigned are Members of the American Academy of Actuaries (MAAA) and
meet the Qualification Standards of the Academy of Actuaries to render the actuarial opinion contained
herein.
Gabriel, Roeder, Smith & Company
B
Theora P. Braccialarghe, FSA, MAKA
Enrolled Actuary No 11-02826
Jeffre� Amrose, MAAA
Enrolled Actuary No. 11-06599
COMPARATIVE SUMMARY OF VALUATION RESULTS
AS OF OCTOBER 1
2010 Old
2010 New
Change
Covered Group
A. Number of Participants
Actives
19
19
0
Retirees, Disabilities, Beneficiaries
and Vested Terminations
10
10
0
Total Covered Annual Payroll
$ 965252
$ 959,376
$ (5,876)
Long Range Cost
B. Actuarial Present Value (APV) of Projected Benefits
$ 7,847,459
$ 7,558,630
$ (288,829)
C. Valuation Assets
5,666,207
5,666,207
0
D. APV of Prospective Contributions: (B) - (C)
2,181252
1,892,423
(288,829)
E. Actuarial Accrued (Past Service) Liability per GASB
No.25
5,659,633
5,546,001
(113,632)
F. Funded Ration: (C) / (E)
100.1%
102.2%
2.1%
Current Cost
G. Total Normal Cost (for current year)
For Benefits
$ 242,403
210,959
$ (31,444)
For Administrative Expense
19,008
19,008
0
261,411
229,967
Total Normal Cost
(31,444)
i
Increase with Salary Scale
14,544
12,658
(1,886)
Increase with Interest
1,331
1,331
0
Total
277,286
243,956
(33,330)
H. Fiscal Year End to which Contributions Apply
2012
2012
0
1. Total Required Contributions if paid
quarterly during the fiscal year in (H)
289,107
254,357
(34,750)
As % of Payroll
29.95
%
26.51
%
(3.44)
%
J. Expected Member Contributions in fiscal year (H)
45,947
45,635
(312)
As % of Payroll
4.76
%
4.76
%
0.00
%
K. Total Required City and State Contributions
if paid quarterly during the fiscal year in (H)
243,160
208,722
(34,438)
As % of Payroll
25.19
%
21.76
%
(3.43)
%
L. Estimated State Premium Tax Refund
78,274
78,274
0
As % of Payroll
8.11
%
8.16
%
0.05
%
M. Balance Required from City
164,886
130,448
(34,438)
As % of Payroll
17.08
%
13.60
%
(3.48)
%
DERIVATION OF NORMAL COST
AS OF OCTOBER 1
2010 Old 2010 New 2009
A. Actuarial Present Value of Projected Benefits
1. Active Members
Service Retirement Benefits
$ 5,004,462
$ 4,748,219
$ (256,243)
Vesting Benefits
240,786
226,000
(14,786)
Disability Benefits
267,620
252,879
(14,741)
Preretirement Death Benefits
49,787
46,800
(2,987)
Return of Contributions
24,417
24,345
72
5,587,072
5,298,243
Total
(288,829)
2. Inactive Members
Service Retirees
1,927,717
1,927,717
0
Disability Retirees
120,311
120,311
0
Beneficiaries Receiving Benefits
117,480
117,480
0
Terminated Vested Members
94,879
94,879
0
2,260,387
0
Total
2,260,387
3. Grand Total
7,847,459
7,558,630
(288,829)
B. Valuation Assets
5,666,207
5,666,207
0
C. Actuarial Present Value of Projected
Normal Costs: (A)-(B)
2,181,252
1,892,423
(288,829)
D. Actuarial Present Value of Projected
i
Covered Payroll
7,800,900
7,724,000
(76,900)
E. Normal Cost Rate: (C) / (D)
27.962 %
24.501 %
(3.461) %
F. Annual Payroll of Active Members
under Assumed Retirement Age
866,900
861,024
(5,876)
G. Normal Cost for Benefits: (E) x (F)
242,403
210,959
(31,443)
H. Normal Cost for Administrative Expense
19,008
19,008
0
I. Total Normal Cost: (G) + (H)
261,411
229,967
(31,443)
STATISTICAL DATA
10/1/10 Old
10/1/10 New
Change
Active Partipants
Number
19
19
0
Total Annual Earnings
$ 916,190
$ 916,190
$ 0
Average Annual Earnings
48,221
48,221
0
Averages
Current Age
40.7
40.7
0.0
Age at Employment
31.1
31.1
0.0
Past Service
9.6
9.6
0.0
Service at Age 55
23.9
23.9
0.0
Retirees and Beneficiaries
Number
8
8
0
Total Annual Pension
$ 170,357
$ 170,357
$ 0
Average Monthly Benefit
1,775
1,775
0
Average Current Age
61.2
61.2
0.0
(Retirees Only)
Disability Retirees
Number
1
1
0
Total Annual Pension
$ 11,762
$ 11,762
$ 0
Average Monthly Benefit
980
980
0
Average Current Age
57.7
57.7
0.0
Terminated Members with Vested Benefits
Number
1
1
0
Total Annual Pensions
$ 11,208
$ 11,208
$ 0
Average Monthly Benefit
934
934
0
Average Current Age
50.3
50.3
0.0
DEPARTMENT OF MANAGEMENT
RicK Sc°'n SERVICES ,/°IIN P.MILES
Governor Secretary
March 27, 2012
Ms. Lane Gamiotia, City Clerk
City of Okeechobee
55 S.E. Third Avenue
Okeechobee, FL 34974-2903
RE: Notification of Receipt
Dear Ms. Gamiotia:
This letter acknowledges receipt of the following items:
• March 13, 2012 Actuarial Impact Statement for the City of Okeechobee Employees' and Utility
Authority Employees' Retirement System, prepared by Gabriel Roeder Smith & Company
• Ordinance No. 1082
• January 13, 2012 Actuarial Impact Statement for the City of Okeechobee Police Officers' Pension
Plan and Trust Agreement, prepared by Gabriel Roeder Smith & Company
• Ordinance 1083
• March 13, 2012 Actuarial Impact Statement for the City of Okeechobee Municipal Firefighters'
Pension Fund, prepared by Gabriel Roeder Smith & Company
• Ordinance 1084
Upon further review of this material, you will be notified if additional information is needed. Please feel
free to contact our office with arty questions or concerns you may have. You may also contact me by
e-mail, if more convenient.
Sincerely,
Barbara Lorberg
Staff Assistant
Bureau of Local Retirement Systems
barbara.lorberg(a,dms.myflorida.com
/bl
Department of Management Services I Division of Retirement I Bureau of Local Retirement Systems
P.O. Box 9000 1 Tallahassee, Florida 32315-9000
Toll Free: 877-738-5622 1 Tel: 850-488-2784 1 Fax: 850-921-2161 1 Web: http://frs.myflorida.com