HomeMy WebLinkAboutResolution No. 07-C068RESOLUTION NO. 07-C68
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA AUTHORIZING
THE ESTABLISHMENT OF A PUBLIC AGENCY RETIREMENT SYSTEM (PARS)
SUPPLEMENTAL RETIREMENT PLAN FOR SERVICE EMPLOYEES INTERNATIONAL
UNION LOCAL (721) AND AZUSA MIDDLE MANAGEMENT ASSOCIATION (AMMA)
TO BE ADMINISTERED BY PHASE 11 SYSTEMS, PARS TRUST ADMINISTRATOR
WHEREAS, the City is a member of the Public Agency Retirement System
(PARS) for the purpose olf providing tax qualified retirement benefits; and
WHEREAS, it is to be determined to be in the best interest of the City and its
SEW AND AMMA employees to provide a Retirement Enhancement Program to
eligible employees; and
WHEREAS, the PAILS Trust has made available a Retirement Enhancement Plan
supplementing CalPERS and qualifying under the relevant sections of the Internal
Revenue Code and the California Government Code.
NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Azusa as
follows:
Section 1. The City Council, being a member of the PARS Trust, does hereby
adopt the PARS Retirement Enhancement Plan (Exhibit A) for SEW employees, as part
of the City Retirement Program, effective July 1, 2006 and for AMMA employees as
part of the City Retirement Program, effective July 1, 2007.
Section 2. The City Council hereby appoints the City Manager or his/her
successor or his/her designee as the City's Plan Administrator for the Public Agency
Retirement System.
Section 3. The City's PARS administrator is hereby authorized to execute the
PARS legal and administrative service documents on behalf of the City to implement a
PARS supplemental plan to CalPERS for SEW and AMMA covered eligible employees.
In addition, if the City's PARS Administrator finds that the PARS supplemental plan
benefit must be limited under Section 415 of the Internal Revenue Code, then the
Plan Administrator will implement a replacement benefit program at no additional
cost to the City.
4/ 0
PASSED AND ADOPTED by the City Council of the City of Azusa at a regular
meeting held on the 16`h day, of July 2007.
0
Jo ph R. Rocha, Mayor
1 HEREBY CERTIFY that the forgoing Resolution No. 07-C68, was duly adopted
at a regular meeting of said City Council on the 16th day of July 2007, by the following
roll call vote:
AYES: COUNCIL MEMBERS: GONZALES, CARRILLO, MACIAS, HANKS, ROCHA
NOES: COUNCIL MEMBERS: NONE
ABSENT: COUNCIL MEMBERS: NONE
Vera Mendoza, City Clerk:
11 0
A MIL.LIMAN GLOOAL FIRM
4D Milliman
Consultants and Actuaries
VIA OVERNIGHT DELIVERY
June 5, 2007
Mr. Kevin J. Murphy
Executive Vice President, Consulting
Public Agency Retirement Services
5141 California Avenue, Suite 150
Irvine, CA 92617-3069
1921 Gallows Road, Suite 900
Vienna, VA 221823995
Tel: 703 917-0143
Fax: 703 827.9266
w .milliman.com
Re: January 1, 2007 Contribution Rate for the City of Azusa Retirement
Enhancement Plan for SEIU Bargaining Group Employees
Dear Kevin:
As requested, we have completed our January 1, 2007 contribution rate calculations for
the City of Azusa Retirement Enhancement Plan for SEIU Bargaining Group
Employees. The calculations were completed as follows:
1. The Retirement Enhancement Plan provides a supplemental retirement benefit
for miscellaneous employees of the City of Azusa in the bargaining group
SEIU. The supplemental benefit is described below:
(i) The supplemental benefit is equal to the difference between the CalPERS
"2.5% at 55" formula and the CaIPERS "2% at 55" formula for years of City
service and prior CalPERS credited service (excluding airtime or military
service credit purchase). Employees will be eligible for the benefit upon
attaining age 55 with five years of City service and concurrent CalPERS
retirement.
(ii) A deferred retirement benefit for employees who have five years of City
service but do not concurrently separate from City employment and retire
from CaIPERS is equal to the difference between the CalPERS "2.5% at
55" formula and the CalPERS "2% at 55" formula for years of City service
only. The deferred retirement benefit will begin at age 55 or later.
(iii) Final average compensation is equal to the highest twelve months of
compensation (including Employer Paid Member Contributions if eligible)
with the City of Azusa, subject to IRC 401(a)(17) limitations.
(iv) Employees will contribute 4% of compensation. If an employee terminates
prior to having the required years of City service, he or she will receive a
OFFICES IN PRINCIPAL CITIES WORLDWIDE
This work product was prepared solely for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or llabilify to
other parties who receive this work.
•
Mr. Kevin J. Murphy
June 5, 2007
Page 2
0
return of employee contributions and 4% interest. Similarly, should an
employee die prior to retirement, his or her beneficiary will receive a return
of employee contributions and 4% interest.
2. We valued the Retirement Enhancement Plan benefits using an interest
assumption of 7.00% per annum. In general, the interest rate assumption
should be a best estimate of the expected long-term rate of return on assets,
which is largely driven by your expected asset mix, once your plan is
implemented.
3. We have utilized tables based on the RP -2000 Combined Healthy mortality
tables for males and females in an attempt to emulate a published table of
mortality rates used by CalPERS for the June 30, 2004 valuations.
4. We used the salary scale assumption for Public Agency Miscellaneous
employees with an Entry Age of 30 used in the June 30, 2004 CalPERS
valuations. We used an overall payroll growth assumption of 3.25%, which is
the annual increase rate of amortization payments for the unfunded actuarial
liability.
5. The select and ultimate withdrawal rates used are based on those rates used
by CalPERS in their June 30, 2000 actuarial valuation reports for various
municipal Miscellaneous plans.
6. Finally, we valued the Retirement Enhancement Plan benefits using the male
and female retirement rates for service retirement used by CalPERS in their
June 30, 2004 valuations for Public Agency 2.5% at 55 Miscellaneous plans.
We also added a one-time retirement rate of 20%, as of Plan inception, for
those participants age 55 or older, since the value of the proposed benefit
steadily decreases after age 55, until leveling off at age 63.
This letter -report summarizes our results and is separated into the following five
sections:
I. Results
II. Participant Data
III. Plan Provisions
IV. Actuarial Assumptions
V. Actuarial Methods
Mill 4lma
This work product was prepared solely for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duly or liability to
other parties who receive this work.
is
Mr. Kevin J. Murphy
June 5, 2007
Page 3
0
In preparing this letter -report, we relied, without audit, on information supplied by PARS.
This information includes, but is not limited to, plan provisions, employee data, plan
assumptions, and financial information. In our examination of these data, we have
found them to be reasonably consistent and comparable with data used for other
purposes. Since the contribution rate calculations are dependent on the integrity of the
data supplied, the results can be expected to differ if the underlying data is incomplete
or missing. It should be noted that if any data or other information is inaccurate or
incomplete our calculations may need to be revised.
On the basis of the foregoing, we hereby certify that, to the best of our knowledge and
belief, this report is complete and accurate and has been prepared in accordance with
generally recognized and accepted actuarial principles and practices which are
consistent with the actuarial standards of Practice promulgated by the Actuarial
Standards Board and applicable Guides to Professional Conduct, amplifying Opinions,
and supporting Recommendations of the American Academy of Actuaries.
We further certify that all costs, liabilities, rates of interest, and other factors for the Plan
have been determined on the basis of actuarial assumptions and methods which are
individually reasonable, taking into account the experience of CalPERS and reasonable
expectations. Nevertheless, the emerging costs will vary from those presented in this
report to the extent actual experience differs from that projected by the actuarial
assumptions.
Actuarial computations presented in this letter -report are for purposes of determining
the recommended funding amounts for the 2007 fiscal year. Actuarial computations
under GASB Statements No. 25 and 27 are for purposes of fulfilling financial accounting
requirements. The calculations in the enclosed report have been made on a basis
consistent with our understanding of the Plan's funding goals and of the GASB
Statements No. 25 and 27. Determinations for purposes other than meeting those
requirements may be significantly different from the results contained in this report.
Accordingly, additional determinations may be needed for other purposes.
Milliman's work product was prepared exclusively for the management of the City of
Azusa and PARS for a specific and limited purpose. It is a complex, technical analysis
that assumes a high level) of knowledge concerning the City of Azusa operations, and
uses City of Azusa data, which Milliman has not audited. It is not for the use or benefit
of any third party for any purpose. Any third party recipient of Milliman's work product
who desires professional guidance should not rely upon Milliman's work product, but
should engage qualified professionals for advice appropriate to its own specific needs.
MILLIMAN
This work. product was prepared solefv for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work. -
•
Mr. Kevin J. Murphy
June 5, 2007
Page 4
0
We respectfully submit the following report, and we look forward to discussing it with
you at your convenience.
I, Robert S. Dezube, am a consulting actuary for Milliman, Inc. I am a member of the
American Academy of Actuaries and meet the Qualification Standards of the American
Academy of Actuaries to render the actuarial opinion contained herein.
Sincerely,
Milliman, Inc.
Laura Lyn-Ke/v
Actuarial Analyst
`o --C'
Robert S. Dezube, FSA
Consulting Actuary
C: Dennis Yu
RSDA-LK/ST/PHA/04
MAPASV.zusaLSE102007val.dac
MILLIMAN
This wortc product was prepared solely for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work.
lip
Mr. Kevin J. Murphy
June 5, 2007
Page 5
L City of Azusa SEW Results
6. Unfunded Actuarial Liability [(3.) — (5)]) $ 148,545
7. Unfunded Actuarial Liability Amortization:' $ 10,557
8. Valuation Payroll: $ 635,486
9. Final Year 2007-2008 Contribution %:
a.
January 1. 2006'
1. Present Value of Future Benefits:
b.
a. Actives
$ 334,668
b. Terminated Vesteds
0
c. Retirees
0
d. Total
$ 334,668
2. Present Value of Future Normal Costs:
a. Actives
$ 186,123
b. Terminated Vesteds
0
c. Retirees
0
d. Total
$ 186,123
3. Actuarial Liability [(1.) — (2.)]:
a. Actives
$ 148,545
b. Terminated Vesteds
0
c. Retirees
0
d. Total
$ 148,545
4. Entry Age Normal Cost (Employer plus Employee):
$ 15,326
5. Actuarial Value of Asset:
$ 0
6. Unfunded Actuarial Liability [(3.) — (5)]) $ 148,545
7. Unfunded Actuarial Liability Amortization:' $ 10,557
8. Valuation Payroll: $ 635,486
9. Final Year 2007-2008 Contribution %:
a.
Normal Cost [(4.) / (8.)]
2.41%,
b.
Unfunded Actuarial Liability 1(7.) / (8.)]
1.66%
c.
Expenses
0.00%
d.
Total
4.07%
10. Final Year 2007-2008 Contribution Allocation:
a. Employee W 4.00%
b. Employer Balance 0.07%
c. Total 4.07%
. See page 9 for valuation assumptions; interest rate of 7.00% employed.
'Based on a 20 -year amortization period from 1/1/2007 and amortization payments increasing 3.25%
annually. Payments are assumed to be made throughout the year.
2 Employee contributions are assumed to be 4% of compensation.
BtqjHjTffjq
This work product was prepared solely for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to We for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work.
•
Mr. Kevin J. Murphy
June 5, 2007
Page 6
ll. Participant Data
•
a. Active Participant Counts:
Male 12
Female 0
Total 12
b. Average Active Ages:
Male 43.3
Female n/a
Overall 43.3
c. Average Service: _
City of Azusa 10.1'
Other CalPERS2.4
d. Valuation Pay: $635,486
e. Average Pay: $52,957
'The average of other CaIPERS service among the 7 participants who have such service
is 4.2 years.
MILLIMAN
This work product was prepared solely for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work.
9
Mr. Kevin J. Murphy
June 5, 2007
Page 7
Ill. Plan Provisions
a. Benefit Service
E
Benefit service for the supplemental retirement benefit includes City
service from date of hire and prior CalPERS credited service (excluding
airtime or military service credit purchase). Benefit service for the
deferred retirement benefit includes City service only.
b. Vesting Service
Vesting service is elapsed time from date of hire with the City of Azusa.
C. Employee Contributions
Participants will be required to contribute 4% of compensation.
d. Final Average Compensation
Final Average Compensation is equal to the highest twelve consecutive
months of compensation with the City of Azusa (including Employer Paid
Member Contributions if eligible), subject to IRC 401(a)(17) limitations.
e. Supplemental Benefit
A covered miscellaneous employee in the bargaining group SEIU retiring
from active service on or after age 55 with at least five years of City
service and concurrently retiring from CalPERS is eligible for a lifetime
supplemental benefit from the Retirement Enhancement Plan, equal to the
product of the following three items:
i. Benefit Service
ii. Final Average Compensation
iii. The following CalPERS "2.5% at 55" factors:
Age Factor
55+ 2.500%
Less the CallPERS "2% at 55" service retirement benefit, calculated as the
product of the following three items:
i. Benefit Service
ii. Final Average Compensation
iii. The following CalPERS "2.0% at 55 for Local Miscellaneous
Members" factors:
MILLIMAN
This work product was prepared solep, for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or ftabifity to
olherparties who receive this work.
Mr. Kevin J. Murphy
June 5, 2007
Page 8
Ll
Age
Factor
Age
Factor
55
2.000%
60
2.262%
56
2.052%
61
2.314%
57
2.104%
62
2.366%
58
2.156%
63
2.418%
59
2.210%
64+
2.418%
Disability Retirement Benefit
0
There is no special disability benefit under this plan other than a refund of
employee contributions with interest at 4% per annum.
g. Death Benefit
There is no death benefit under this plan, other than a return of employee
contributions and 4% interest paid to the participant's beneficiary.
Withdrawal Benefit
Participants who have five years of City service for a supplemental
retirement benefit but do not concurrently separate from City employment
and retire under CaIPERS will receive a deferred retirement benefit to
begin at age 55 or later, using Final Average Compensation at date of
termination from the City. Employees terminating prior to having five
years of City service receive a return of employee contributions and 4%
interest.
Normal Form of Payment
The normal form of benefit for the Retirement Enhancement Plan is a life -
only annuity.
j. Optional Forms of Payment
In lieu of a life -only annuity, a participant may elect an actuarial equivalent
optional form of payment. The optional form is a joint and survivor
annuity.
k. Post -Retirement Pension Increases
Any benefit in payment status will increase by 2% per annum on each
participant's anniversary date of retirement.
MILLIMAN
This work product was prepared solely for Pubic Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Miffiman does not Intend to benefit and assumes no duty or liability to
other parties who receive this work.
1s
Mr. Kevin J. Murphy
June 5, 2007
Page 9
IV. Actuarial Assumptions
P
a.
Valuation Date:
January -1,2007
b.
Investment Return:
7.00%
C.
Inflation:
3.00%
d.
Salary Increases:
Increases are based on service.
35
0.044%
Sample rates are as follows:
40
0.077%
Years of Annual
45
0.108%
Service Increase
50
0.151%
0 12.65%
55
0.214%
1 10.75%
2 9.35%
3 8.25%
4 7.35%
5 6.75%
10 4.85%
15 4.35%
20 3.95%
25 3.65%
30 or more 3.25%
e.
Cost of Living Adjustment: 2.00% compounded annually
f. Pre -Retirement Mortality: RP -2000 Combined Healthy mortality
tables for males and females, with a 5 -
year setback. Sample rates are as
follows:
Age
Male
Female
20
0.027%
0.017%
25
0.035%
0.019%
30
0.038%
0.021%
35
0.044%
0.026%
40
0.077%
0.048%
45
0.108%
0.071%
50
0.151%
0.112%
55
0.214%
0.168%
MILLIMAN
This work product was prepared solely for Public Agency Retirement services and the City of Azusa for the purposes described
herein and may not be appropriate to uce for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
otherpanies who receive this work.
•
Mr. Kevin J. Murphy
June 5, 2007
Page 10
0
g. Post -Retirement Mortality: RP -2000 Combined Healthy mortality
tables for males and females. Sample
rates are as follows:
AiLe
Male
Female
60
0.67%
0.51%
70
2.22%
1.67%
80
6.44%
4.59%
90"
18.34%
13.17%
100 34.46% 23.75%
110 100.00% 100.00%
h. Withdrawal:
Sample select and ultimate rates are as follows:
Female
30
Years of Service - Males
3.86%
Hire
2.42%
3.55%
40
2.27%
3.29%
Acre
Under 1
1 to 2
2 to 3
3 to 4
4 to 5
30
6.60%
12.55%
8.61 %
7.14%
9.-81%
40
6.18%
10.48%
7.21%
5.54%
4.54%
50
5.79%
8.77%
6.11%
4.40%
3.69%
Years of
Service - Females
Hire
Age
Under 1
1 to 2
2 to 3
3 to 4
4 to 5
30
8.07%
15.32%
11.23%
9.02%
7.20%
40
7.66%
12.88%
8.56%
6.63%"
4.54%
50
7.25%
10.85%
6.59%
4.98%
2.98%
For participants with more than ten years of service:
Attained
Acme
Male
Female
30
2.58%
3.86%
35
2.42%
3.55%
40
2.27%
3.29%
45
2.13%
3.05%
MILLIMAN
This work product was prepared solely for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Mililman does not Intend to benefit and assumes no duty or liabitV to
other parties who receive this work.
i*
Mr. Kevin J. Murphy
June 5, 2007
Page 11
Retirement: Rates are as follows:
Acme
Male
Female
55
8.0%
9.0%
56
6.0%
7.0%
57
7.0%
6.0%
58
8.0%
10.0%
59
9.0%
9.0%
60
16.0%
12:0%
61
15.0%
10.0%
62
26.0%
21.0%
63
22.0%
18.0%
64
15.0%
13.0%
65
25.0%
25.0%
66
14.0%
15.0%
67
12.0%
14.0%
68
12.0%
11.0%
69
9.0%
13.0%
70
100.0%
100.0%
For employees eligible to retire on the plan's inception
(January 1, 2007) the rate of retirement in this fiscal
year is increased to 20%.
j. Disability. Sample rates are as follows:
a,c�e Male Female
30 .10% .07%
40 .22% .15%
50 .46% .32%
k. Maximum Benefits and Salary:
Salary used in the calculation of final average
compensation is subject to the limitations of IRC
401(a)(17). The limit is assumed to increase 3.0%
per annum.
I. Expenses: None are assumed.
M. Form of Payment: All current participants are assumed to elect a single
life annuity.
n. a Entry Age: Age at hire with City of Azusa.
MILLIMAN
This work product was prepared solely for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milkman does not intend to benefit and assumes no duty or liability to
other parties who receive this work.
• 0
Mr. Kevin J. Murphy
June 5, 2007
Page 12
V. Actuarial Methods
Funding Method
The cost method for valuation of liabilities used for this valuation is the entry age
normal method. This is one of a family of valuation methods known as projected
benefits methods. The chief characteristic of projected benefits methods is that
the actuarial present value of all plan benefits is determined as of the valuation
date and then allocated between the period before and after the valuation date.
The present value of plan benefits earned prior to the valuation date is called the
actuarial liability. The present value of plan benefits to be earned after the
valuation date is called the present value of future normal costs.
Under the entry age normal actuarial cost method, an individual entry age'normal
cost ratio is determined for each participant by taking the value, as of his entry
age in the plan, of the participant's projected future benefits (assuming the
current plan benefit provisions had always been in existence), and dividing it by
the value, as of the participant's entry age, of his expected future salary. This
ratio for each participant is then multiplied by the present value, as of the
valuation date, of the participant's future salary. The sum of these values for all
active participants is the plan's present value (as of the -valuation date) of future
normal costs. The excess of the present value of all plan benefits over the
present value of future normal costs is the actuarial liability. The difference
between the actuarial liability and the value of the plan assets as of the valuation
date is the unfunded actuarial liability.
MILLIMAN
This work product was prepared solely for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or (lability to
other parties who receive this work.
is 0
June 27, 2007
Mr. Kevin J. Murphy
Executive Vice President, Consulting
Public Agency Retirement Services
5141 California Avenue, Suite 150
Irvine, CA 92617-3069
Re: July 1, 2007 Contribution Rate for the City of Azusa Retirement
Enhancement Plan for AMMA Bargaining Group Employees
Dear Kevin:
As requested, we have completed. our July 1, 2007 contribution rate calculations for the.
City of Azusa Retirement Enhancement Plan for AMMA Bargaining Group Employees.
The calculations were completed as follows:
1.. The Retirement Enhancement Plan provides a supplemental retirement benefit
for miscellaneous employees of the City of Azusa in the bargaining group
AMMA. The supplemental benefit is described below:
(i) The supplemental benefit enhances the CalPERS "2% at 55" formula by
adding 0.5% to each CalPERS age factor at 55 and older. Benefit service
includes years of City service and prior CalPERS credited service
(excluding airtime or military service credit purchase). Employees will be
eligible for the benefit upon attaining age 55 with 5 consecutive years of
City service and concurrent CaIPERS retirement. No employee will be
permitted to retire under the plan prior to July 1, 2008.
(ii) A deferred retirement benefit for employees with 5 consecutive years of
City service but do not concurrently separate from City employment and
retire from CalPERS will begin at age 55 or later. Benefit service for the
deferred retirement benefit will include City service only.
(iii) Final average compensation is equal to the highest twelve months of
compensation (including Employer Paid Member Contributions if eligible)
with the City of Azusa, subject to IRC 401(a)(17) limitations.
(iv)Employees will. contribute 7.5% of compensation (see description of
funding of Plan in #2 below). If an employee terminates prior to having 5
consecutive years of City service, he or she will receive a return of
employee contributions and 4% interest. Similarly, should an employee
OFFICES IN PRINCIPAL CITIES WORLDWIDE
This work product was prepared sofefy for Public Agency Retirement services and the City of Azusa for the purposes described
herein and may not be appropriate louse for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work.
A MILLIMAN GLOBAL FIRM
Milliman
1921 Gallows Road. Suite 900
Conaallantm and Actuaries
Vienna, VA 221823995
Tel: 703 917-0143
Fax: 703 827-9266
www.meliman.com
June 27, 2007
Mr. Kevin J. Murphy
Executive Vice President, Consulting
Public Agency Retirement Services
5141 California Avenue, Suite 150
Irvine, CA 92617-3069
Re: July 1, 2007 Contribution Rate for the City of Azusa Retirement
Enhancement Plan for AMMA Bargaining Group Employees
Dear Kevin:
As requested, we have completed. our July 1, 2007 contribution rate calculations for the.
City of Azusa Retirement Enhancement Plan for AMMA Bargaining Group Employees.
The calculations were completed as follows:
1.. The Retirement Enhancement Plan provides a supplemental retirement benefit
for miscellaneous employees of the City of Azusa in the bargaining group
AMMA. The supplemental benefit is described below:
(i) The supplemental benefit enhances the CalPERS "2% at 55" formula by
adding 0.5% to each CalPERS age factor at 55 and older. Benefit service
includes years of City service and prior CalPERS credited service
(excluding airtime or military service credit purchase). Employees will be
eligible for the benefit upon attaining age 55 with 5 consecutive years of
City service and concurrent CaIPERS retirement. No employee will be
permitted to retire under the plan prior to July 1, 2008.
(ii) A deferred retirement benefit for employees with 5 consecutive years of
City service but do not concurrently separate from City employment and
retire from CalPERS will begin at age 55 or later. Benefit service for the
deferred retirement benefit will include City service only.
(iii) Final average compensation is equal to the highest twelve months of
compensation (including Employer Paid Member Contributions if eligible)
with the City of Azusa, subject to IRC 401(a)(17) limitations.
(iv)Employees will. contribute 7.5% of compensation (see description of
funding of Plan in #2 below). If an employee terminates prior to having 5
consecutive years of City service, he or she will receive a return of
employee contributions and 4% interest. Similarly, should an employee
OFFICES IN PRINCIPAL CITIES WORLDWIDE
This work product was prepared sofefy for Public Agency Retirement services and the City of Azusa for the purposes described
herein and may not be appropriate louse for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work.
Mr. Kevin J. Murphy
June 27, 2007
Page 2
die prior to retirement, his or her beneficiary will receive a return of
employee contributions and 4% interest.
2. The Plan will be funded as follows:
(i) The employer will initially contribute the lesser of 1 % of compensation and
the required percentage of pay contribution amount.
(ii) If the required contribution expressed, as a percentage of pay, is greater
than 1%, the employees will contribute the lesser of the balance of the
required contributions and 7.5% of compensation.
(iii) If the required contribution expressed, as a percentage of pay, is greater
than 8.5% of compensation, the employer will contribute the balance of
the required contribution.
3. We valued the Retirement Enhancement Plan benefits using an interest
assumption of 7.00% per annum. In general, the interest rate assumption
should be a best estimate or the expected long-term rate of return on assets,
which is largely driven by your expected asset mix, once your plan is
implemented.
4. We have utilized tables based on the RP -2000 Combined Healthy mortality
tables for males and females in an attempt to emulate a published table of
mortality rates used by CaIPERS for the June 30, 2004 valuations.
5. We used the salary scale assumption for Public Agency Miscellaneous
employees with an Entry Age of 30 used in the June 30, 2004 CaIPERS
valuations. We used an overall payroll growth assumption of 3.25%, which is
the annual increase rate of amortization payments for the unfunded actuarial
liability.
6. The select and ultimate withdrawal rates used are based on those rates used
by CalPERS in their June 30, 2000 actuarial valuation reports for various
municipal Miscellaneous plans.
7. Finally, we valued the Retirement Enhancement Plan benefits using the male
and female retirement rates for service retirement used by CalPERS in their
June 30, 2004 valuations for Public Agency 2.5% at 55 Miscellaneous plans.
This letter -report summarizes our results and is separated into the following five
sections:
MILLIMAN
This work product was prepared solely for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benerd and assumes no duty or liability to
otherparties who receive this work.
I.
Mr. Kevin J. Murphy
June 27, 2007
Page 3
I. Results
it. Participant Data
III. Plan Provisions
IV. Actuarial Assumptions
V. Actuarial Methods
0
In preparing this letter -report, we relied, without audit, on information supplied by PARS.
This information includes; but is not limited to, plan provisions, employee data, plan
assumptions, and financial information. In our examination of these data, we have
found them to be reasonably consistent and comparable with data used for other
purposes. Since the contribution rate calculations are dependent on the integrity of the
data supplied, the results can be expected to differ if the underlying data is incomplete
or missing. It should be noted that if any data or other information is inaccurate or
incomplete our calculations may need to be revised.
On the basis of the foregoing, we hereby certify that, to the best of our knowledge and
belief, this report is complete and accurate and has been prepared in accordance with
generally recognized and accepted actuarial principles and practices which are
consistent with the actuarial standards of Practice promulgated by the Actuarial
Standards Board and applicable Guides to Professional Conduct, amplifying Opinions,
and supporting Recommendations of the American Academy of Actuaries.
We further certify that all costs, liabilities, rates of interest, and other factors for the Plan
have been determined on the basis of actuarial assumptions and methods which are
individually reasonable, taking into account the experience of CalPERS and reasonable
expectations. Nevertheless, the emerging costs will vary from those presented in this
report to the extent actual experience differs from that projected by the actuarial
assumptions.
Actuarial computations presented in this letter -report are for purposes of determining
the recommended funding amounts for the 2007-2008 fiscal year. Actuarial
computations under GASB Statements No. 25 and 27 are for purposes of fulfilling
financial accounting requirements. The calculations in the enclosed report have been
made on a basis consistent with our understanding of the Plan's funding goals and of
the GASB Statements No. 25 and 27. Determinations for purposes other than meeting
those requirements may be significantly different from the results contained in this
report. Accordingly, additional determinations may be needed for other purposes.
Milliman's work product vfas prepared exclusively for the management of the City of
Azusa and PARS for a specific and limited purpose. It is a complex, technical analysis
that assumes a high level of knowledge concerning the City of Azusa operations, and
uses City of Azusa data, which Milliman has not audited. It is not for the use or benefit
of any third party for any purpose. Any third party recipient of Milllman's work product
MILLIMAN
This work product was prepared sole!), for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work.
r
Mr. Kevin J. Murphy
June 27, 2007
Page 4
0
who. desires professional guidance should not rely upon Milliman's work product, but
should engage qualified professionals for advice appropriate to its own specific needs.
We respectfully submit the following report, and we look forward to discussing it with
you at your convenience. I, Robert S. Dezube, am a consulting actuary for Milliman,
Inc. I am a member of the American Academy of Actuaries and meet the Qualification
Standards of the American Academy of Actuaries to render the actuarial opinion
contained herein.
Sincerely,
Milliman, Inc.
Laura Lyn -Kew
Actuarial Analyst
/ ek�
Robert S. Dezube, FSA
Consulting Actuary
C: Dennis Yu
RSDlLLWST/PHA/03
MAPA&Azus"MMN20ONal,doc
MILLIMAN
This work product was prepared solely for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work.
Mr. Kevin J. Murphy
June 27, 2007
Page 5
L City of Azusa AMNIA Results
10. Fiscal Year 2007-2008 Contribution Allocation:
a. Employer 196 Initial 1.00%
b. Employee7.5%:2 7.50%
c. Employer Balance 0.41%
d. Total 8.91%
" See page 10 for valuation assumptions; interest rate of 7.00% employed.
'Based on a 20 -year amortization period from 7/1/2007 and amortization payments increasing 3.25%
annually. Payments are assumed to be made throughout the year.
'Employee. contributions are assumed to be 7.5% of compensation,
MILLIMAN
This work product was prepared solefv for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work.
July 1, 2007'
1. Present Value of Future Benefits:
a. Actives
$ 2,065,671
b. Terminated Vesteds
0
c. Retirees
0
d. Total
$ 2,065,671
2. Present Value of Future Normal Costs:
a. Actives
$ 965,357
b. Terminated Vesteds
0
c. Retirees
0
d. Total
$ 965,357
3. Actuarial Liability [(1.) — (2.)]:
a. Actives
$ 1,100,314
b. Terminated Vesteds
0
c. Retirees
0
d. Total
$ 1,100,314
4. Entry Age Normal Cost (Employer plus
$ 105,721
Employee):
5. Actuarial Value of Assets:
$ 0
6. Unfunded Actuarial Liability [(3.)—(5.)]
$1,100,314
7. Unfunded Actuarial Liability Amortization:'
$ 78,202
8. Valuation Payroll:
$ 2,064,427
9. Fiscal Year 2007-2008 Contribution %:
a. Normal Cost [(4.) / (8.)]
5.12%
b. Unfunded Actuarial Liability [(7.) / (8.)]
3.79%
c. Expenses
0.00%
d. Total
8.91%
10. Fiscal Year 2007-2008 Contribution Allocation:
a. Employer 196 Initial 1.00%
b. Employee7.5%:2 7.50%
c. Employer Balance 0.41%
d. Total 8.91%
" See page 10 for valuation assumptions; interest rate of 7.00% employed.
'Based on a 20 -year amortization period from 7/1/2007 and amortization payments increasing 3.25%
annually. Payments are assumed to be made throughout the year.
'Employee. contributions are assumed to be 7.5% of compensation,
MILLIMAN
This work product was prepared solefv for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work.
• o
Mr. Kevin J. Murphy
June 27, 2007
Page 6
ll. Participant Data.
a. Active Participant Counts:
Male' 18
Female 4
Total 22
b. Average Active Ages:
Male48.9
Female 53.2
Overall 49.7
c. Average Service:
City of Azusa 10.2
Other Cal PERS 2 3.2
d. Valuation Pay: $2,064,427'
e. Average Pay: $93,838
'Includes 3 vacant positions assumed to be male, the average age of all other
participants, and the pay level for the vacant positions.
2 The average of other CaIPERS service among the 9 participants who have such service
is 7.9 years.
MILUMAN
This work product was prepared solely for Public Agency Retirement Services and the City of Awsa for the purposes described
herein and may not be appropriate to use for other purposes. Miliiman does not intend to benefit and assumes no duty or liability to
other parties who receive this work.
10
Mr. Kevin J. Murphy
June 27, 2007
Page 7
Ill. Plan Provisions
a. Benefit Service
E
Benefit service for the supplemental retirement benefit includes City
service from date of hire and prior CalPERS credited service (excluding
airtime or military service credit purchase). Benefit service for the
deferred retirement benefit includes City service only.
b. Vesting Service
Vesting service is elapsed time from date of hire with the City of Azusa.
C. Employee Contributions
The Plan will be funded as follows:
(i) The employer will initially contribute the lesser of 1% of compensation
and the required percentage of pay contribution amount.
(ii) If the required contribution expressed, as a percentage of pay, is
greater than 1%, the employees will contribute the lesser of the
balance of the required contributions and 7.5% of compensation.
(iii) If the required contribution expressed, as a percentage of pay, is
greater than 8.5% of compensation, the employer will contribute the
balance of the required contribution.
It has been determined in this valuation that participants will be required to
contribute 7.5% of compensation.
d. Final Average Compensation
Final Average Compensation is equal to the highest twelve consecutive
months of compensation with the City of Azusa (including Employer Paid
Member Contributions if eligible), subject to IRC 401(a)(17) limitations.
MILLIMAN
This vrork product was prepared solely for Public Agency Retirement Services and the City of Azusa for Me purposes described
herein and may not be appropriate to use for other purposes, Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work.
• 0
Mr. Kevin J. Murphy
June 27, 2007
Page 8
e. Supplemental Benefit
A covered miscellaneous employee in the bargaining group AMMA retiring
from active service on or after age 55 with at least five consecutive years
of City service and concurrently retiring from CalPERS is eligible for a
lifetime supplemental benefit from the Retirement Enhancement Plan,
equal to the product of the following three items:
I. Benefit Service
ii. Final Average Compensation
iii. Age factor of 0.5% at 55 and older
Disability Retirement Benefit
There is no special disability benefit under this plan other than a refund of
employee contributions with interest at 4% per annum.
g.. Death Benefit
There is no death benefit under this plan, other than a return of employee
contributions and 4% interest paid to the participant's beneficiary.
h. Withdrawal Benefit
Participants who have five consecutive years of City service for a
supplemental retirement benefit but do not concurrently separate from City
employment and retire under CalPERS will receive a deferred retirement
benefit to begin at age 55 or later, using Final Average Compensation at
date of termination from the City. Employees terminating prior to having
five consecutive years of City service receive a return of employee
contributions and 4% interest.
Normal Form of Payment
The normal form of benefit for the Retirement Enhancement Plan is a life -
only annuity.
j. Optional Forms of Payment
In lieu of a life -only annuity, a participant may elect an actuarial equivalent
optional form of payment. The optional form is a joint and survivor
annuity.
MILUMAN
This work product was prepared solely for Public Agency Retirement Services and the qty of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work.
10
Mr. Kevin J. Murphy
June 27, 2007
Page 9
k. Post -Retirement Pension Increases
0
Any benefit in payment status will increase by 2% per annum on each
participant's anniversary date of retirement.
MILLIMAN
This work producl was prepared solely for Public Agency Reilrement Services and the City of Azusa for the purposes described
herein and may not be appropriate louse for other purposes. Milliman does not intend to bengfit and assumes no duty or liability to
other parties who receive this mrk.
•
Mr. Kevin J. Murphy
June 27, 2007
Page 10
IV. Actuarial Assumptions
0
a.
Valuation Date:
July 1, 2007
b.
Investment Return:
7.00%
C.
Inflation:
3.00%
d.
Salary Increases:'
Increases are based on service.
35
0.044%
Sample rates are as follows:
40
0.077%
Years of Annual
45
0.108%
Service Increase
50
0.151%
0 12.65%
55
0.214%
1 10.75%
2 9.35%
3 8.25%
4 7.35%
5 6.75%
10 4.85%
15 4.35%
20 3.95%
25 3.65%
30 or more 3.25%
e.
Cost of Living Adjustment: 2.00% compounded annually
f. Pre -Retirement Mortality: RP -2000 Combined Healthy mortality
tables for males and females, with a 5 -
year setback. Sample rates are as
follows:
Age
Male
Female
20
0.0279/6
0.017%
25
0.035%
0.019%
30
0.038%
0.021%
35
0.044%
0.026%
40
0.077%
0.048%
45
0.108%
0.071%
50
0.151%
0.112%
55
0.214%
0.168%
MILLIMAN
This work product was prepared solely for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for otherpurposes. Milliman does not intend to benefit and assumes no duty or liability to
otherparties who receive this work.
lip
Mr. Kevin J. Murphy
June 27, 2007
Page 11
9- Post -Retirement Mortality: RP -2000 Combined Healthy mortality
tables for males and females. Sample
rates are as follows:
Ape
Male
Female
60
0.67%
0.51%
70
2.22%
1.67%
.80,-
6.44%
4.59%
`90
18.34%
13.17%
100 34.46% 23.75%
110 100.00% 100.00%
h. Withdrawal: Sample select and ultimate rates are as follows:
For participants with more than ten years of service:
Attained
Age
Male
Years of Service - Males
30
Hire
3.86%
35
2.42%
3.55%
40
Ape
tinder 1
1 to 2
2 to 3
3 to 4
4 to 5
30
6.60%
12.55%
8.61 %
7.14%
5.81 %
40
6.18%
10.48%
7.21%
5.54%
4.54%
50
5.790/c
8.77%
6.11%
4.40%
3.69%
Years of Service - Females
Hire
Age
Under 1
1 to 2
2 to 3
3 to 4
4 to 5
30
8.07%
15.32%
11.23%
9.02%
7.20%
40
7.66%
12.88%
8.56%
6.63%
4.54%
50
7.25%
10.85%
6.59%
4.98%
2.98%
For participants with more than ten years of service:
Attained
Age
Male
Female
30
2.58%
3.86%
35
2.42%
3.55%
40
2.27%
3.29%
45
2.13%
3.05%
MILUMAN
This work product was prepared solely for Public Agency Retirement Services and the City of Awsa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work. '
Mr. Kevin J. Murphy
June 27, 2007
Page 12
Retirement: Rates are as follows:
Age
Male
Female
55
8.0%
9.0%
56
6.0%
7.0%
57
7.0%
6.0%
58
8.0%
10.0%
59
9.0%
9.0%
60
16.0%
12.0%
61
15.0%
10.0%
62
26.0%
21.0%
63
22.0%
18.0%
64
15.0%
13.0%
65
25.0%
25.0%
66
14.0%
15.0%
67
12.0%
14.0%
68
12.0%
11.0%
69
9.0%
13.0%
70
100.0%
100.0%
j. Disability:
Sample rates are as follows:
Aye
Male
Female
30
.10%
.07%
40
.22%
.15%
50
.46%
.32%
k. Maximum Benefits and Salary:
Salary used in the calculation of final average
compensation is subject to the limitations of IRC
401(a)(17). The limit is assumed to increase 3.0%
per annum.
I. Expenses:. None are assumed.
M. Form of Payment: All current participants are assumed to elect a single
life annuity.
n. Entry Age: Age at hire with City of Azusa.
MILLIMAN
This work product was prepared solely for Public Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work.
Mr. Kevin J. Murphy
June 27, 2007
Page 13
V. Actuarial Methods
Funding Method
The cost method for valuation of liabilities used for this valuation is the entry age
normal method. This is one of a family of valuation methods known as projected
benefits methods. The chief characteristic of projected benefits methods is that
the actuarial present value of all plan benefits is determined as of the valuation
date and then allocated between the period before and after the valuation date.
The present value of plan benefits earned prior to the valuation date is called the
actuarial liability. The present value of plan benefits to be earned after the
valuation date is called the present value of future normal costs.
Under the entry age, normal actuarial cost method, an individual entry age normal
cost ratio is determined for each participant by taking the value, as of his entry
age in the plan, of the participant's projected future benefits (assuming the
current plan benefit provisions had always been in existence), and dividing it by
the value, as of tha participant's entry age, of his expected future salary. This
ratio for each participant is then multiplied by the present value, as of the
valuation date, of the participant's future salary. The sum of these values for all
active participants is the plan's present value (as of the valuation date) of future
normal costs. The excess of the present value of all plan benefits over the
present value of future normal costs is the actuarial liability. The difference
between the actuarial liability and the value of the plan assets as of the valuation
date is the unfunded actuarial liability.
MILLIMAN
This work product was prepared solely for Pubtic Agency Retirement Services and the City of Azusa for the purposes described
herein and may not be appropriate to use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to
other parties who receive this work