LTC 277-2010 FY 2009/10 Investment Earnings for City of Miami Beach Pension Plans?~ MIAMIBEACH
OFFICE OF THE CITY MANAGER
NO. LTC #'
277-2®1®
TO: Mayor Matti Herrera
FROM: Jorge M. Gonzalez,
DATE: October 14, 2010
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LETTER ~T~~a0'JV'~M~~~~N
Bower and Members of the ity Commission
City Manage .
SUB.IECT: FY 2009/10 Investment Earnings for City of Miami Beach Pension Plans
This letter provides the preliminary estimates for investment earnings in each of the two City of Miami
Beach Pension Plans: the Pension Fund for Firefighters and Police Officers in the City of Miami Beach
(Fire and Police Pension) and the Miami Beach Employees Retirement, Plan (MBERP).
BACKGROUND
The City of Miami Beach has two defined benefit pension plans for its employees: the Fire and Police Pension
Plan provides pension benefits to police ofFcers and fire fighters, while the MBERP provides pension benefits
for almost all other employees. A few employees participate in defined contribution 401 Plans (no longer
offered to new employees).:
The City's contribution requirement to each of the two pension plans is determined annually by the
pension plan's actuary and,, specified in each plan's annual valuation report. The required contribution is
determined in accordance with State Statues and is based on various assumptions, including wage data,
mortality rates, retirement ages, future salary increases, marriage assumptions, plan expenses, etc. as
well as investment performance assumptions.
The market value of the assets of each plan, determined annually on October 1, reflects the value if all. the
assets of the plan were liquidated on that day. In contrast, the actuarial value of the pension plan assets is
equal to the market value of the assets adjusted to reflect a five year phase-in (or smoothing) of any asset
experience gain or loss. Only 20% of the experience gain or loss that the fund experiences in any one year is
recognized immediately for the purpose of determining the actuarial value of the plan.
The investment performance assumptions in both plans have been slowly adjusted downwards overthe last
few years. In FY 2009/10, the assumed investment rate of return for the Fire and Police Pension Plan was
8.3% while the assumed rate of return for MBERP was 8.35%, net of investment fee and commissions.
PRELIMINARY INVESTMENT RATE OF RETURN
The following is the preliminary estimated investment rate of return, based on market value, for each of the two
pension plans for the fiscal year ending September 30, 2010 as provided by the administrator for each plan.
Fire and Police 10.5%
MBERP 11.2%
The actuarial rate of return will be provided by each plan's actuary as part of the 10/1/10 plan valuation report;
typically available in the following spring.
JMG/KGB