City of Hallandale Beach Retirement Plan Actuarial Review

City of Hallandale Beach Retirement Plan Actuarial Review March 17, 2014

October 1, 2012 Valuation Review 2

Basic Funding Equation 3

The Annual Required Contribution (ARC) for the 2013 and 2014 fiscal year is $3, 940, 595 and $3, 659, 156. • The 2013 ARC is equal to 53. 46% of estimated participant compensation. • The 2014 ARC is equal to 48. 83% of estimated participant compensation. • Expected employee contributions for the 2013 fiscal year are $221, 137. • Expected employee contributions for the 2014 fiscal year are $224, 795. 4

Analysis of Actuarial Experience • Total Normal Cost increased from $ 3, 895, 351 for the 2013 fiscal year to $3, 636, 595 for the 2014 fiscal year. As a percentage of estimated payroll, the decrease was from 52. 85% to 48. 53%. • Participant salaries were slightly lower than expected. The expected increase for active participants was 5. 02%; the actual increase was 4. 61%. • The actuarial value of plan assets increased approximately 9. 41% due to investment earnings assuming mid-year cash flow. We anticipated an increase of 7. 25%. The market value of assets increased approximately 8. 9%. 5

Development of Actuarial Value of Assets • Smooth unexpected investment return over 4 years • Reduces volatility of ARC 6

Development of Actuarial Value of Assets continued…. a) Market Value of Assets as of 10/01/2012 b) Contributions/Transfers c) 4, 629, 717 Benefit payments (2, 189, 188) d) Expenses (52, 260) e) Expected Interest on (a, b, c, and d) f) $36, 956, 563 2, 767, 309 Expected Value of Assets as of 10/01/2013 (a+b+c+d+e) g) Market Value of Assets as of 10/01/2013 h) Current year excess appreciation/(shortfall) (g-f) i) Adjustments to market value (sum of deferred amounts) j) Actuarial value of assets (g-i) 42, 112, 141 42, 758, 149 646, 008 1, 584, 652 41, 173, 497 7

Deferred Asset Gains/(Losses) Plan Year Allocation Year 2010 $213, 464 2011 $213, 464 $(503, 819) 2012 $213, 463 $(503, 819) $801, 983 2013 $213, 463 $(503, 819) $801, 983 $161, 502 $(503, 818) $801, 982 $161, 502 2014 2011 2015 2012 2016 2013 $161, 502 Total $853, 854 $(2, 015, 275) $3, 207, 930 $646, 008 Deferred $0 $(503, 818) $1, 603, 964 $484, 506 Adjustment to market value (sum of deferred amounts) 8 $1, 584, 652

Valuation History Deposit calculations are based on the plan’s actuarial funding method and the City’s funding policy. The City’s funding policy has been to calculate the Annual Required Contribution equal to the City’s Normal Cost. Plan Year Beginning 10/1/2013 10/1/2012 10/1/2011 $3, 636, 595 $3, 895, 351 $3, 491, 371 $3, 379, 069 (% of Estimated Payroll) (48. 53%) (52. 85%) (46. 81%) (42. 17%) Employee Normal Cost $224, 795 $221, 137 $223, 757 $224, 223 Employer Normal Cost $3, 411, 800 $3, 674, 214 $3, 267, 614 $3, 154, 846 Annual Required Contribution $3, 659, 156 $3, 940, 595 $3, 512, 685 $3, 391, 459 (48. 8%) (53. 5%) (47. 1%) (45. 3%) Total Normal Cost (% of Estimated Payroll) 9 10/1/2010

Funded Status The funded status is a measurement of the plan’s assets compared to the benefit liabilities. The value of these benefit liabilities on either an “accrued” or “projected” basis. • Present Value of Accrued Benefits: The comparison uses the asset values divided by the present value of all benefits accrued to date. The liability measure does not include a provision for future service accruals or salary increases. • Present Value of Future Benefits: Ultimately, the plan will need to fund the Present Value of Future Benefits. This present value assumes future salary increases and service credits. It is the present value of the projected benefit payable at retirement for each current plan participant. Another measure that we have not shown includes the plan termination liabilities. The actual cost to terminate the plan would be based on annuity purchase rates at the time of termination. 10

Funded Status Plan Year Beginning 10/1/2013 10/1/2012 10/1/2011 10/1/2010 Plan Assets • Market Value $42, 758, 149 $37, 804, 428 $31, 026, 638 $29, 592, 676 • Actuarial Value * $41, 173, 497 $36, 192, 655 $32, 766, 978 $32, 088, 033 Present Value of Accrued Bens $48, 869, 792 $46, 052, 116 $41, 548, 860 $39, 943, 354 • Funded % (Market Value) 87% 82% 75% 74% • Funded % (Actuarial Value) 84% 79% 80% Present Value of Proj. Bens $63, 584, 992 $61, 025, 913 $55, 583, 324 $54, 511, 310 • Funded % (Market Value) 67% 62% 56% 54% • Funded % (Actuarial Value) 65% 59% 59% * Limited to 120% MVA 11

Actuarial History Plan Year Beginning 10/1/2013 10/1/2012 $20, 996, 093 $20, 911, 483 6, 062, 296 5, 788, 676 21, 811, 403 19, 351, 957 $48, 869, 792 $46, 052, 116 $35, 711, 293 $35, 885, 280 6, 062, 296 5, 788, 676 21, 811, 403 19, 351, 957 $63, 584, 992 $61, 025, 913 $42, 758, 149 $37, 804, 428 Liability (Accumulated Plan Benefits) • Active • Vested Terminated/DROP • Retired • Total Liability (PV Projected Plan Benefits) • Active • Vested Terminated/DROP • Retired • Total Asset Information • Market • City Contributions $3, 391, 459 • Pension Payment $2, 189, 188 12

Actuarial History Plan Year Beginning 10/1/2013 10/1/2012 10/1/2011 10/1/2010 Lives Covered • Active 142 151 158 165 70 72 70 71 • Retired 134 128 126 123 • Total 346 351 354 359 • Actual 4. 6% 7. 5% 3. 1% 1. 2% • Expected 5. 0% 5. 5% 5. 6% • Market 8. 94% 17. 78% 0. 70% 10. 63% • Actuarial 9. 41% 6. 67% 0. 53% 0. 54% • Vested Terminated/DROP Salary Increases Investment Return 13

Defined Benefit Plan Sponsors are in a Challenging Environment Law changes Accounting Changes Market Conditions Administrative Complexity Plan Sponsor Forecasting & Projections Plan Design Review Asset Liability Modeling Frozen Plan Solutions Bundled Services Principal Financial Group