File Ref. #192 (3 of 3)
CITY OF MIAMI BEACH, FLORIDA
GENERAL EMPLOYEES
RETIREMENT SYSTEM
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
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ASSOCIATION
CERTIFIED PUBLIC ACCOUNTANTS
I
8350 N.W. 52nd Terrace. Suite 301
Miami. Florida 33166
1-800-776-1099
Tel: (305) 591,8850
Fax: (305) 593-9883
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of City of Miami Beach,
Florida, General Employees Retirement System
Miami Beach, Florida
We have audited the accompanying statements of plan net assets of the City of Miami Beach, Florida,
General Employees Retirement System (the "Plan") as of September 30, 1999 and 1998, and the related
statements of changes in plan net assets for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
information regarding the Plan's net assets as of September 30, 1999 and 1998, and changes therein for
the years then ended in conformity with generally accepted accounting principles.
The supplementary schedules of funding progress and employer contributions are not required parts of
the basic financial statements, but are supplementary information. We have applied certain limited
procedures, which consisted principally of inquiries of management regarding the methods of
measurement and presentation of the supplementary information. However, we did not audit the
information and express no inion on it.
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CITY OF MIAMI BEACH, FLORIDA
GENERAL EMPLOYEES RETIREMENT SYSTEM
Statements of Plan Net Assets
September 30, 1999 and 1998
1999 1998
Assets:
Cash $ 55,601 $ 19,733
Interest and dividends receivables 1, 790,290 1,611,000
Investments, at fair value:
Common stocks 60,554,792 52,198,603
Common stock index funds 60,542,080 55,287,177
United States Government securities 81,516,307 95,243,227
Corporate bonds 37,561,103 22,447,917
Short-term investments 6,117,456 3,032,607
Other 1,475 1, 744
Total Investments 246,293,213 228,211,275
Liabilities:
Payable for Securities Purchased (928,1 14) 0,101,593)
Net Assets Held in Trust for Pension
Benefits (a schedule of funding progress
is presented on Page 8) $ 247,210,990 $ 228,740.415
See accompanying notes to financial statements.
1
CITY OF MIAMI BEACH, FLORIDA
GENERAL EMPLOYEES RETIREMENT SYSTEM
Statements of Changes in Plan Net Assets
Years Ended September 30, 1999 and 1998
1999 1998
Additions:
Contributions -
Employer $ 1,008,615 $ 2,496,704
Employee 1 ,940,672 1 ,824,996
2,949,287 4,321,700
Library / Metro Dade 16,385 25,241
Total Contributions 2,965,672 4,346,941
Investment income -
Net increase in fair value of investments 20,281,802 9,317,149
Interest income 7,996,783 7,873,467
Dividends 1,056,894 979,949
29,335,479 18,170,565
Less investment management expenses 572,084 553.253
Net Investment Income 28,763.395 17,617,312
Total Additions 31,729,067 21,964.253
Deductions:
Benefit paid 12,683,844 12,243,096
Contributions refunded 291,879 333,418
Transfers to other Systems 15,164 52,775
Administrative expenses 267,605 221,388
Total Deductions 13.258.492 12.850,677
Net Increase 18.470.575 9.113,576
Net Assets Held in Trust for Pension Benefits:
Beginning of Year 228,740.415 219.626.839
End of Year $ 247.210,990 $ 228.740.415
See accompanying notes to financial statements.
2
CITY OF MIAMI BEACH, FLORIDA
GENERAL EMPLOYEES RETIREMENT SYSTEM
Notes to Financial Statements
Years Ended September 30, 1999 and 1998
NOTE 1 - PLAN DESCRIPTION
All full-time employees of the City of Miami Beach, Florida (the "City") who hold classified
positions, except for Policemen and Firemen, are covered by the City of Miami Beach,
Florida, General Employees Retirement System (the "Plan"). A classified employee is one
who is employed by the City on a regular basis, receives compensation from the City for
personal services, and who is within a group or classification of employees designated by the
Board of Trustees as eligible for membership in the Plan. The Plan is the administrator of a
single-employer pension plan that was established by the City in accordance with City
Ordinance #1901 (November I, 1971), as amended through January 10, 1996. At October I,
1998 and 1997, membership consisted of:
1998
1997
Retirees and beneficiaries currently receiving
benefits and terminated employees entitled to
benefits but not yet receiving them
961
949
Current Employees
554
576
Principally all full-time classified employees of the City, except those joining the 401(a)
Plan, must participate in the Plan.
The Plan provides retirement benefits as well as death and disability benefits at two different
levels depending on when the employees entered the Plan. Under the first level (which
comprises all employees in the Plan prior to the dates stated below), employees who retire on
or after age 50 with five years of credited service are entitled to an annual retirement benefit,
payable monthly for life, in an amount equal to 3% of their final average monthly earnings
("FAME"), for each year of credited service for the first 15 years, and equal to 4% for every
year thereafter, not to exceed 90% of their F AME. FAME is the employee's earnings during
the two (2) highest paid years of creditable service. An annual 1.5% Cost of Living
Adjustment ("COLA") is provided to benefit recipients. All employees are required to
contribute 10% of their salary to the Plan. Employee contributions include buybacks.
Vesting for employees under the first level occurs with five years of credited service and a
retirement age of 50. Upon termination, the employee may also choose to receive a return of
accumulated contributions with any amount of years of creditable service. An early
retirement benefit is offered, payable for life, that provides for benefits subjected to a
reduced scale.
3
CITY OF MIAMI BEACH, FLORIDA
GENERAL EMPLOYEES RETIREMENT SYSTEM
Notes to Financial Statements (Continued)
NOTE 1 - PLAN DESCRIPTION (Continued)
All employees in the Plan, under either level, are segregated into two unions: American
Federation of State, County, and Municipal Employees ("AFSCME") and CW A (formerly
Benevolent). The employees may also be segregated into an "Other" category. Employees
who joined the Plan on or after April 30, 1993 for members of AFSCME, August 1, 1993 for
members of "Other," and February 21, 1994 for members of CWA (collectively new
employees) retire with a benefit of 3% of FAME per year of creditable service. Effective on
such dates, each union bargained with the City to establish new guidelines for retirement
benefits. These new guidelines prescribe for the benefits to begin at or after age 60 with 10
years of credited service, payable monthly for life, in an amount equal to 3% of their FAME,
for each year of credited service, not to exceed 80% of their FAME. FAME is now revised
to equal the employee's earnings during their highest 3 years of credited service. These
employees are also required to contribute 10% of their salary to the Plan.
New employees to the Plan will vest in this new benefit, incrementally, over ten years
instead of five years and the retirement age for them will be age 60 instead of age 50. An
early retirement window option was put into effect for employees with five or more years of
service and ages 48 or older. This option granted an additional two years of service to those
at or above the normal retirement age of 50. It also granted a two-year age credit to any
employee between ages 48 and 50, which gave them the ability to commence their pension
payments up to two years earlier than normally permitted. This window period lasted 60
days during 1993.
If a new employee leaves covered employment, the member may either receive a return of
accumulated employee contributions or the accrued benefit at age 60 with 10 years of
credited service, age 62 with any amount of credited service, or age 60 with any amount
subject to a special vesting schedule which provides for a reduced benefit of 10% per year of
credited service with a maximum of 100%.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The Plan's financial statements are prepared using the accrual basis of
accounting. Employee and employer contributions are recognized as revenues in the period
in which employee services are performed. Benefits and refunds are recognized when due
and payable in accordance with the terms of the Plan. Effective October 1, 1996, the Plan
has implemented Statement 25 of the Governmental Accounting Standards Board for
financial statement presentation. Effective June 15, 1997, the Plan has also implemented
Statement 27 of Governmental Standards Board for financial statement presentation.
4
CITY OF MIAMI BEACH, FLORIDA
GENERAL EMPLOYEES RETIREMENT SYSTEM
Notes to Financial Statements (Continued)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments - Investments in common stocks, index funds, and bonds are recorded at fair
value as determined by quoted published prices. Short-term investments are recorded at cost
which approximates fair value. Dividend and interest income are recognized when earned.
Gains and losses on sales and exchanges of investments are recognized on the trade date.
Investments may be made as deemed appropriate by the investment managers of the Plan.
Administrative Expenses - Administrative and investment expenses are paid directly by the
Plan. These expenses include, but are not limited to, all attorney fees and costs incurred by
or on behalf of the Plan. The Plan is responsible for reimbursing the Unclassified
Retirement Plan for 60% of the expenses paid by that Plan that benefit both the Unclassified
Employees and Elected Officials Retirement System and the Plan.
Year 2000 Issue - The year 2000 issue is the result of shortcomings in many electronic data
processing systems and other electronic equipment that may adversely affect the City's
operations as early as fiscal year 1999.
The City has completed an inventory of computer systems and other electronic equipment
that may be affected by the year 2000 issue and that are necessary to conducting City
operations. The City has identified the following systems as they relate to the Plan requiring
year 2000 compliance:
The financial system was upgraded and made year 2000 compliant during fiscal year 1999.
The payroll systems validation and testing was completed by December 31, 1999.
Estimates - The preparation of financial statements in conformity with generally accepted
accounting principles requires the plan administrator to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results may differ from
those estimates.
NOTE 3 - CONTRIBUTIONS
The Plan's funding policy provides for periodic employer contributions at actuarially
determined rates that, expressed as percentages of annual covered payroll, are sufficient to
accumulate sufficient assets to pay benefits when due. Level percentage of payroll employer
contribution rates are determined using the entry age actuarial cost method. The Plan also
uses the level percentage of payroll method to amortize any unfunded actuarial accrued
liability over a l4-year period.
5
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CITY OF MIAMI BEACH, FLORIDA
GENERAL EMPLOYEES RETIREMENT SYSTEM
Notes to Financial Statements (Continued)
NOTE 3 - CONTRIBUTIONS (Continued)
Effective October I, 1996,'the asset valuation method was changed to the difference between
actual investment return and expected return and will be recognized over five (5) years.
Significant actuarial assumptions used include (a) investment return of 8.5%, net after
administrative expenses, (b) 1983 Group Annuity Mortality Table; for those who have
terminated employment before October I, 1993, rates are based on the Plan's own
experience, (c) for retirement, once a member is eligible to retire, a probability of retirement
based on age is used (effective October I, 1996), (d) projected salary increases of 6% per
year compounded annually, attributable to inflation, and ( e) cost of living increases of 1.5%
per year.
The contribution made to the Plan during the year ended September 30, 1999 was $2,949,287
and was made in accordance with actuarially determined requirements computed through an
actuarial valuation performed as of October 1, 1997. The employee contribution was solely
attributable to normal costs. For the year ended September 30, 1999, the City contributed
$1,008,615 and employees contributed $1,940,672 which represents 5.19% and 10%,
respectively, of covered payroll.
NOTE 4 - INVESTMENTS
As of September 30, 1999 and 1998, the level of credit risk of the Plan's investments is in
Category I as defined by the Governmental Accounting Standard Board, which includes
investments that are insured or registered or securities held by the Plan or its agent in the
Plan's name. There are no investments, loans to or leases with parties related to the Plan.
There were no investments in anyone company which exceeded 5% of the net assets
available for Plan benefits.
The carrying amounts of investments held at September 30, are as follows:
1999 1998
Common stocks $ 48,552,056 $ 42,877,340
Common stock index funds 35,988,195 41,596,650
United States Government securities 81,454,655 91,337,162
Corporate bonds 37,469,674 21,579,516
Short-term investments 6,117,456 3,032,607
Other 1.475 1.744
$ 209,583,511 $ 200.425,019
6
CITY OF MIAMI BEACH, FLORIDA
GENERAL EMPLOYEES RETIREMENT SYSTEM
Notes to Financial Statements (Continued)
NOTE 4 - INVESTMENTS (Continued)
Net increase (decrease) in fair value of the Plan's investments (including investments
bought, sold, and held during the year) for the years ended September 30, 1999 and 1998 is
as follows:
1999 1998
Common stocks $ 12,980,653 $ (1,547,157)
Common stock index funds 14,735,889 5,852,683
United States Government securities (4,591,653 ) 4,228,392
Corporate bonds (2.843.087) 783.231
$ 20.281.802 $ 9.317.149
The calculation of realized gains and losses is independent of the calculation of net increase
(decrease) in fair value of Plan investments. Realized gains and losses on investments that
had been held in more than one fiscal year and sold in the current year were included as a
change in the fair value of investments in the prior years and current year.
Net realized gains on the sale of investments, using the historical cost method of accounting,
for the years ended September 30, 1999 and 1998, amounted to $13,424,468 and
$10,996,519 , respectively.
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CITY OF MIAMI BEACH, FLORIDA
GENERALEMPLOYEESRETrnEMENTSYSTEM
Required Supplementary Information - Schedule of Employer Contributions
Year Ended Annual Required Percentage
September 30, Contribution Contributed
1994 $ 1,494,969 100%
1995 2,235,227 100
1996 3,549,633 100
1997 3,409,645 100
1998 2,496,704 100
9
CITY OF MIAMI BEACH, FLORIDA
GENERAL EMPLOYEES RETIREMENT SYSTEM
Notes to Required Supplementary Information
The information in the required supplementary schedules was determined as part of the actuarial
valuations at the dates indicated. For funding progress, October 1993 was the earliest year for which
information, according to the parameters, was available to the actuary. The annual required
contribution is reflected for the corresponding years. Additional information as of October I, 1998,
the latest actuarial valuation, follows:
Actuarial Cost Method
Entry Age
Equivalent Single Amortization Period
32 years
Amortization Method
Level Dollar Method
Amortization Period
15 years
Actuarial Asset Valuation Method
5 years smoothed market
Actuarial Assumptions:
Investment rate of return
Projected salary increases
Inflation
Cost of living adjustment (COLA)
8.5%
6%
4%
1.5%
10