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20120829 WSMIAMI BEACH City Commission Workshop City Hall, Commission Chambers, 3rd Floor, 1700 Convention Center Drive August 29, 2012 Mayor Matti Herrera Bower Vice-Mayor Jorge R. Exposito Commissioner Michael Gongora Commissioner Jerry Libbin Commissioner Edward L. Tobin Commissioner Deede Weithorn Commissioner Jonah Wolfson Interim City Manager Kathie G. Brooks City Attorney Jose Smith City Clerk Rafael E. Granado Visit us at www.miamibeachfl.gov for agendas and video "streaming" of City Commission Meetings. ATTENTION ALL LOBBYISTS Chapter 2, Article VII, Division 3 of the City Code of Miami Beach entitled "Lobbyists" requires the registration of all lobbyists with the City Clerk prior to engaging in any lobbying activity with the City Commission, any City Board or Committee, or any personnel as defined in the subject Code sections. Copies of the City Code sections on lobbyists laws are available in the City Clerk's office. Questions regarding the provisions of the Ordinance should be directed to the Office of the City Attorney. Call to Order-5:00 p.m. COMMISSION WORKSHOP AGENDA 1. Discussion Regarding The Budget Advisory Committee's Proposed Recommendations Concerning Pension Reform 1 THIS PAGE INTENTIONALLY LEFT BLANK 2 MIAMI BEACH City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov TO: FROM: DATE: COMMISSION MEMORANDUM Mayor Matti Herrera Bower and Memb#es o he City Commission Kathie G. Brooks, Interim City Manager August29, 2012 SUBJECT: DISCUSSION REGARDING THE BUDGET ADVISORY COMMITTEE'S PROPOSED RECOMMENDATIONS CONCERNING PENSION REFORM BACKGROUND The City currently has two (2) pension plans, which include the City Pension Fund for Firefighters and Police Officers in the City of Miami Beach and the Miami Beach Employees' Retirement Plan (MBERP). During the previous collective bargaining process for the City's five (5) collective bargaining units, issues were raised concerning the long-term fiscal health of the City's two (2) pension plans in terms of the growing unfunded liability, the funding ratio percentages of each plan and the growing costs of the plans as they relate to percentage of payroll. As a result, the City and the Unions negotiated several changes that were implemented for each of the pension plans for both, current and future employees in November 2011. In particular, the General Employees' pension plan (MBERP) was amended to include significant pension reform initiatives that will significantly reduce the City's pension contributions in the short-term, mid-term and long-term. Although the changes made to both plans will yield both short- term and long-term savings, these changes fail to fully address the increasing costs derived from the benefits that are currently provided to the pension plan members, particularly in the Fire and Police Pension Plan, which represents the fastest growing costs to the City's budget in recent years. In early 2011, the Mayor approached the City's Budget Advisory Committee (BAC) regarding undertaking a study of pension reform for each of the pension plans in an effort to identify options available to ensure the long-term sustainability of the Plans, particularly the Police and Fire Pension system which represents the fastest growing costs to the City budget within recent years. The Mayor's Charge" to the BAC was: " ... to develop recommendations that address the benefits and funding concerns associated with the City's pension plans. While the BAC will examine all retirement benefits, the focus will be to address the Fire and Police pension system, as this plan has significantly greater cost to the City that the General Employees' pension plan." More specifically, the requested deliverable work product was: " ... to develop a series of written, implementable recommendations that address the long-term sustainability of the Fire and Police Pension Plan. An explanation of the recommendations, cost implications , impacts to the City and its employees, advantages and disadvantages should be included. Recommendations may be split into short-term and long-term objectives. Subsequently, the BAC may provide additional recommendations regarding other pension benefits in the City." 3 BAG Recommendation on Pension Reform Commission Pension Workshop, August 29, 2012 Page 2 Over the past year, the BAC has held twenty meetings to accomplish their objective by developing an approach that included the following components: • Develop an understanding of the City's current pension plans benefits and costs for the Fire and Police Pension Plan and the Miami Beach Employees' Retirement Plan (for General employees) from the perspective of legal counsel, the City's actuary, the City Manager and the pension plan administrator for each of the City's pension plans (the Fire and Police Pension Plan and the Miami Beach Employees' Retirement Plan -MBERP). • Solicit input from the City's collective bargaining groups and employees. • Survey comparative jurisdictions in the region regarding pension plan costs and benefits. • Develop draft policies and guidelines to guide management of the City's pension plans into the future, (a copy of which is attached for your review). • Identify and review options of potential changes to the Fire and Police Pension Plan based on 6 major categories, namely: o Florida Retirement System (FRS) o Defined Benefit similar to FRS, including a Social Security equivalent o Hybrid Plans with both, a defined benefit and a defined contribution component o Changes to the existing plan with a combination of past service benefits and benefits earned prospectively o Freezing the existing plan and defining new benefits based on Florida Statute Chapter 175 and 185 minimum benefits to continue receiving premium taxes o Changes to the existing plan to reflect the savings associated with plan changes included in the 2010 collective bargaining agreements with the International Federation of Fire Fighters (IAFF) and the Fraternal Order of Police (FOP) that have not yet been implemented by the Fire and Police Pension Board • Evaluate the cost impacts of potential options • Develop Recommendations On April 17, 2012, by a majority vote of 7-2, the BAC approved a motion for the Committees' final recommendation on pension reform for the Fire and Police Pension Plan. The Committee's final recommendation is for the City to negotiate a "Hybrid Plan" that is comprised of a defined benefit component for Police and Fire employees that are not vested (have less than ten (10) years of creditable service) and for newly hired employees that would provide the minimum benefits required to receive Premium Taxes from the State of Florida, as defined by F.S. Chapters 175 and 185, while also providing a defined contribution component that will be funded by the City, while employees would be required to provide a matching contribution. In addition, the Committee is also recommending that the City negotiate changes for vested Fire and Police Pension Plan members to achieve thresholds in the policies and guidelines that were adopted by the BAC. The Committee's final recommendation report is attached. On August 29, 2012, a Commission Workshop on Pension Reform will be held, where the BAC will present their final recommendation report to the Mayor and City Commission. This workshop is intended to be educational and informative in nature. KGB:CG c:\users\humagomc\desktop\august 29 2012 commission workshop on pension memo.docx 4 City of Miami Beach Budget Advisory Committee Recommendation Report on Pension Reform July 2012 5 TABLE OF CONTENTS GLOSSARY OF TERMS EXECUTIVE SUMMARY • Mayor's Charge • Recent Events Impacting Pension Plans • Summary of Recommended Pension Reform Policies and Guidelines • Pension Reform Options Evaluated (Summary Table) • Recommendations PART 1: BACKGROUND a. Mayor's Charge b. Approach c. Types of Pension Plans d. Overview of Miami Beach Pension Plans i. Recent Events Driving Pension Plan Costs -CMB Investment Returns and Salary Growth ii. Recent Changes in Investment Return Assumptions in Other Plans 1. California 2. Local Florida Government Pension Plans iii. CMB Historical Pension Costs and Unfunded Liability iv. CMB Budget Impacts PART 2: RECENT CHANGES TO PUBLIC PENSION PLANS a. City of Miami Beach b. Other Jurisdictions in Florida c. Other Jurisdictions Outside of Florida i. California ii. New York iii. Texas PART 3: CURRENT PLAN STATUS a. Fire and Police Pension Plan i. Overview of Current Benefits ii. Premium Taxes/Share Plans iii. Summary of Changes in Benefits iv. Plan Status v. Plan projections b. MBERP i. Overview of Current Benefits ii. Summary of Changes in Benefits iii. Plan Status iv. Plan Projections 6 PART 4: RECOMMENDATIONS PART 5: FACTORS FOR CONSIDERATION a. Financial Affordability and Sustainability of the Plan vs. Providing Appropriate Benefits and Ensuring Competitiveness b. Unfunded Liability-No Instant Fix c. How Much Risk is the City Willing to Take? d. Legal Guidelines PART 6: RECOMMENDED POLICIES AND GUIDELINES PART 7: OVERVIEW OF OPTIONS EVALUATED APPENDICES • Detail of Actuarial Studies • Survey of Comparative Jurisdictions • Supporting Rationale and Data for Proposed Guidelines and Policy Statements • Presentations by City Pension Counsel/Actuary and Pension Plan Administrators • History of Plan Benefits • Fire and Police Pension Plan • Miami Beach Employees Retirement Plan REFERENCES • Presentations by City Pension Counsel/Actuary and Pension Plan Administrators • History of Plan Benefits • GFOA Best Practices and Advisories • Designing and Implementing Sustainable Pension Benefit Tiers (2011) • Responsible Management and Design Practices for Defined Benefit Pension Plans (201 0) • Governance of Public Employee Post-Retirement Benefits Systems (201 0) (CORBA) • Sustainable Funding Practices for Defined Benefit Plans • Developing a Policy for Retirement Plan Design Options (1999, 2007) (CORBA) • Florida Department of Management Services, Financial Rating of Local Government Defined Benefit Pension Plans, January 25, 2012 • United State Government Accountability Office (GAO) Report to Congressional Requestors , State and Government Local Pension Plans, Economic Downturn Spurs Efforts to Address Costs and Sustainability, March 2012 • Center For State and Local Government Excellence, What are Hybrid Retirement Plans, A Quick Reference Guide, January 2011 • The Leroy Collins Institute (LCI) Report Card: Florida Municipal Pension Plans, 2011 • US Postal Service Office of The Inspector General Report of Pension Funding, June 2010 • United State Government Accountability Office (GAO) State and Local Government Retiree Benefits Current Funded Status of Pension and Health Benefits, January 2008 7 GLOSSARY OF TERMS 401 (a) Qualified Plans: A retirement plan that meets the requirements of IRC 401 (a) and certain other sections. The plan, its employees and its retirees receive favorable tax status. 401 (k) Plan: An employer-sponsored retirement plan that permits employees to divert part of their pay into the plan and avoid current taxes on that income. Money direcxted to the plan may be partially matched by the employer, and investment earnings within the plan accumulate tax until they are withdrawn. The 401 (k) is named for the section of the federal tax code that authorizes it. 457(b) Plan: A defined contribution plan, also called a deferred compensation plan, available to all state and local governmental entitites. Such plans permit employees to defer (that is, move into a tax-favored account) a portion of their pay. The employee typically directs the investments. Because of the tax-favored treatment, the employee pays no tax on contributions and earnings until the individual separates from service of meets other criteria. The IRC limist the amount of the yearly deferrals. The limit is adjusted for inflation. Accrued Benefit: The pension benefit an employee earns through participation ina plan as of a specific date. In a defined benefit plan, once vested, this is the annual benefit an individual receives at normal retirement age. In a defined contribution plan, this is the balance in the plan account, whether vested or not. Accrual/ Accrued Income: Pro-rated income earned, but not yet paid, is called accrued income. Accrual Rate: The percentage of salary level at which a pension benefit builds up, or accrues, over years of credited service in a typical defined benefit plan. Accrued Liability: The actuarial present value of the plan's pension obligations as determined by an actuarial cost method. It projects the total obligation to cover the costs to provide pensions for former and present employees and builds these assets over time to cover the liabilities. Active Participant: An employee not yet retired, participating in a retirement plant, whereby contributions are made to the plan by the active participant, the employer or both. Actuarial Assumptions: Projections of anticipated behavior associated with certain plan variables (such as mortality rates) that are developed by an actuary and then used to make estimates of future plan costs. Actuarial Cost Method: A formal actuarial process used to measure the present value of future pension benefits and perhaps administrative expenses. Its purpose is to develop an allocation of pension costs and needed contributions to ensure that the plan is sufficiently funded to meet all pension obligations. Budget Advisory Committee Pension Reform Report-Glossary of Terms 8 Actuarial Gains and Losses: Measures of the differences between actual plan experience and the experience that the plan's actuary had predicted based on the actuarial assumptions. Actuarial Impact Statement: A description of the liabilities and funding requirements related to a proposed change in the retirement system. Actuarial Valuation: The amount the pension contributions the employer will have to make each year to fund the actuarial liability. Actuarial Value of Assets: The total value of a plan's asstes used for performing an actuarial valuation. Actuary: Professional who guides the fiduciaries of a pension fund with information for making sound short and long range planning decisions for events that might occur next year, 5, 10 or more years from now. Using actuarial, accounting, legal, financial, investment and human resource planning assumptions to assist with the projections. Administrator: The person appointed by a court to administer and settle the estate of a person dying without a will or the estate of a person whose will appoints an executer who cannot serve. Adiusted Gross Income (AGI): Taken from the individual's income tax return, this term means total annual income, less tax-exempt income, less othef 'adjustments to income' such as deductible IRA contributions, self-employed health insurance premiums. Annual Leave Payment -Any payment, made either during an employee's employment or at termination or retirement, for leave accrued during the employee's career that was intended for personal use, but never utilized by the employee . Annual Required Contribution (ARC): The employer's periodic required contributions to a defined benefit plan, as defined by GASB. If an employer's contributions fall below the ARC, the shortfalls must appear in the employer's financial statements. Annualized Return: Rate of return calculated for an interval of greater than 1 year, such as 2 years or 5 years, expressed in terms of the "average" return for each of the years in the period. Annuity: A series of regular payments, usually from an insurance company, guaranteed to continue for a specific time, usually the annuitant's lifetime, in exchange for a single payment to the company. With a deferred annuity, payments begin sometime in the future. Asset: Something with monetary value, e.g., stocks, real estate, accounts payable. Net assets are assets minus liabilities. Budget Advisory Committee Pension Reform Report-Glossary of Terms 9 Asset Allocation: Proportion in which investments are divided amoung various types of securities, such as equities, bonds, cash equivalents of other assets. There are different levels of risks associated with different asset allocation. Overall risk, however, is reduced with an allocation to more than one type of security. Beneficiary: Person or organization entitled to receive income and/or principal under the terms of a trust or a will. The person designated to receive the benefits of an insurance policy or a retirement plan such as an IRA. Benefit: A payment received from a pension plan, which could include pension, disability or survivor benefits. Benefit Payment Forms: The payments from a plan to a beneficiary can be made in several ways: single-life, 50% joint & survivor, 100% joint & survivor, period certain, certain and life. Cost of Living Adiustment (COLA): A device to prevent inflation from eroding the value of a pension payment. A COLA can be a flat adjustment or can be tied to an index. The index can be internal or external. The COLA with which most people are familiar with is the one enacted in 1973 for Social Security and Supplemental Security Income Benefits. The Social Security COLA is based upon the Consumer. Collectively Bargained Plan: A retirement plan negotiated through a collective bargaining process between an employer and a union or employee representative. Compensation • Regular payment of salary to a member for work performed in a covered position, which may include certain overtime payments. Contribution -Regular payment by employers and employees of the percentage of reported compensation required by law to fund the members' retirement benefits. Note that the term may also refer to contributions either required of or voluntarily made by Plan Members. Finally, the term may also refer to payments made by Plan members or their employers to purchase service credit or pay for upgraded service credit. Contribution Rate -The percentage of compensation required to fund each member's future retirement benefits (through employer and employee contributions). Contribution rates vary, depending on retirement plan, membership class and other factors. Cost·of·Living Adiustment (COLA)-An annual increase in the pension plan retirement benefit. Creditable Service -Service for which retirement credit is earned through paid employment in a regularly established position with an employer participating in a Pension Plan, as well as any additional service that may be credited under the plan. (The term may also be used to refer to service for which retirement credit is earned under any other defined benefit plan, such as one of the closed retirement systems.) Budget Advisory Committee Pension Reform Report-Glossary of Terms 10 Death Benefit: Funds paid to the designated beneficiary of a deceased plan participant. Deferred Benefit -A benefit to which a member or his designated beneficiary is entitled, but for which application is voluntarily delayed until a later date. When the benefit application is filed by the member, the deferred monthly benefit will be calculated based on his/her actual creditable service, average final compensation at termination, and age at the time of application. If the benefit application is filed by the member's surviving beneficiary, the deferred monthly benefit will be calculated based on the member' creditable service, the member's average final compensation at termination, and the age the member would have been had he/she lived to the date of application. Deferred Retirement Option Program (DROP) -A retirement feature allowing an employee, eligible to retire and receive normal benefits from the defined benefit plan, to defer the monthly benefits while continuing to work. The benefit payments are placed in a separate account until the deferred retirement period ends. During this time the calculation for years of service and final compensation formula used to calculate pension benefits is frozen. DROPs can be used for phased retirement or to retain experienced employees. Defined Benefit Plan (DB): A retirement plan in which the amount of the pension benefit is set by a formula established through the plan. Benefits are calculated based on age, length of service, and final salary. The benefit is payable as a lifetime annuity and possibly for the lifetime of the designated beneficiary. Benefits are typically paid out in substantially equal periodic payments. The plan funds these benefits through a combination of employee contributions, employer contributions, and investment returns. There are no individual accounts. Defined Contribution Plan (DC) -A plan that provides for an individual account for each participant and the benefits are based solely on the amount contributed to the participant's account plus any income, expenses, gains and losses, and forfeitures of accounts. A 401 (k), 403(b) and 457(b) are defined contribution plans. At retirement, the account balance is the total funds available to provide an individual's retirement benefits and an individual can outlive the fund's balance. Disability-Total and permanent disability by reason of a medically determinable physical or mental impairment that prevents a member from rendering useful and efficient service as an officer or employee. ln·Line·of·Duty Disability-Means disability resulting from an injury or illness arising out of and in the actual performance of duty required by a member's employment during his regularly scheduled working hours or irregular working hours as required by the employer. Regular Disability-Means disability due to injury or illness suffered other than in the line of duty. Early Retirement -Under a defined benefit plan, "early retirement" is an elective, service-based retirement that occurs before the member reaches his/her normal retirement age or date. If a member retires early, he or she will receive a reduced retirement benefitl because he or she has not yet qualified for normal retirement. Final Average Monthly Earnings (FAME): Formula used to help determine the member's final accrued benefit. Budget Advisory Committee Pension Reform Report-Glossary of Terms 11 Florida Administrative Code (FAC) -Rules and regulations of Florida regulatory agencies divisions of Chapter 120, Florida Statutes. Florida Retirement System (FRS) -The retirement system established in December 1970 to consolidate the existing pension plans (now closed retirement systems) and provide a retirement, disability, and survivor benefit program for participating state and local government employees. Today, the FRS is a single retirement system consisting of two primary retirement plans and other nonintegrated programs administered under Chapter 121, Florida Statutes. (The primary plans are the FRS Pension Plan, a defined benefit plan established under Part I, and the FRS Investment Plan, a defined contribution plan established under Part II.) In addition to the two primary plans, alternative optional defined contribution programs are available for specified employee groups under Part I, including the SUSORP, the CCORP, and the SMSOAP. Funded Ratio: The funded ratio places the unfunded liabilities in the context of the retirement system's assets . Expressed as a percentage of a system's liabilities, the funded ratio is calculated by dividing net assets by the actuarial accrued liabilities. The result is the percentage of the accrued liabilities that are covered by assets. Hybrid Plan: Benefit plan that incorporates features of both defined benefit and a defined contribution plan. In-Line-of-Duty -In the performance of the duties required by your employer during regular scheduled work hours or irregular work hours. Interest -The term may refer to the amount charged on money owed to a trust fund, or, for participants of the Deferred Retirement Option Program, the term may refer to the amount earned on retirement benefits that accrue on a participant's behalf. Interest owed is charged from the date required for the type of creditable service purchased and is compounded annually, while DROP interest is earned from the month following deposit and is compounded monthly. Joint Annuitant -A type of beneficiary who is eligible to receive certain continuing benefits upon a Pension Plan member's death. Member-Any officer or employee who is covered by the provisions of the pension plan. Normal Retirement Age or Date -The date when a member first becomes eligible to retire under the Pension Plan with unreduced benefits, by meeting the age or service requirements for his/her class of membership. The normal retirement date occurs on the first day of the month that a vested member attains the required age, or on the first day of the month following the date that a member completes the required service. "Normal retirement age" is attained on the normal retirement date. Rate of Return: A mathematical measure of the rate of change in the market value of a fund's assets. Rates of return reflect both realized and unrealized capital gains and losses, as well as total earnings from interest and dividends. Contributions of distributions that increase or decrease the total value of the fund have no effect on investment performance. Often referred to as Performance or Total Return. Budget Advisory Committee Pension Reform Report-Glossary of Terms 12 Risk: The uncertainty associated with the possibility that actual investment results may not coincide with the expected rate of return associated with a given level of assumptions about asset mix, quality of investments and other factors. Unfunded Actuarial Accrued Liability (UAAL): The unfunded liability of the plan is the actuarial accrued liability less the actuarial value of plan assets. Vest, Vested, or Vesting -Meeting the length-of-service requirements under a retirement plan necessary for a member to qualify for a future benefit under that plan. Budget Advisory Committee Pension Reform Report-Glossary of Terms 13 EXECUTIVE SUMMARY RECOMMENDATIONS On April 17, 2012, the Budget Advisory Committee (BAC) approved a motion for Fire and Police Pension Plan reform combining a number of prior individual motions. The combined motion includes the following motion and vote counts for pension reform for the Fire and Police Pension Plan: • Recommending that the City negotiate Options 11102 for all new and non-vested Fire and Police Pension Plan members shown in the table on the following page. Note: this portion of the motion was initially adopted as a separate motion by a 7-2 vote of the BAC. • Recommending that the City negotiate changes for vested Fire and Police Pension Plan members to achieve thresholds in the policies and guidelines adopted by the BAC (see Section 4 entitled Policies and Guidelines). Note: This portion of the motion was initially adopted as a separate motion by unanimous vote of the BAC. Budget Advisory Committee Pension Reform Report-Executive Summary Page i 14 HYBRID OPTION IIID2 FOR NEW AND NON-VESTED EMPLOYEES Provide a defined benefit component for Police and Fire non-vested and new hire employees to equal the minimum benefits to receive Premium Taxes from the State as defined by F.S. Chapter 17 5/185 and a defined contribution component of 11 percent funded by the City (with employees providing a matching 5% contribution). Multiplier Final Average Monthly Earnings (FAME) Calc-in years Retiree COLA* Normal Retirement Age %Employee Contribution to DB** % Employee Contribution to DC %City Contribution to Social Security % City Contribution to DC Share Plan DC (See Note Below) Social Security Beneficiaries 2% Highest 5 of last 10 0.0% 55&10 or 52&25 5.00% 5.00% 0.00% 11.00% Yes No 75% Joint & Survivor with 120 months guaranteed *Provided that the City Commission may periodically adjust the COLA up to 1.5% compounded for a given year, and COLA resets to 0% for the following year unless the City Commission affirmatively votes to increase above 0% for the next fiscal year ** This represents a minimum consistent with F.S. 175/185 but the defined benefit employee contribution can be set at any level Note Premium tax revenues for Fire and Police Plans are expected to continue. This results in reduction of pension benefits as a percentage of payroll to 21% over 30 years and a net present value (NPV) savings of $7 4 million over 30 years. In addition, year 1 savings are estimated at $2.5 million. While the savings can be achieved by other means, the reduction of risk through a hybrid plan is the key benefit to the City. The City will retain risk on the defined benefit portion of the pension; however, the City will have no risk on the defined contribution portion. In this regard, the City's Budget Advisory Committee Pension Reform Report-Executive Summary Page ii 15 risk is reduced by 40-50 percent. The employees will have a new risk associated with the defined contribution portion of this plan; however, ( 1) this is a risk of investment that a majority of the public faces (i.e., nearly all private sector employees hove defined contribution plans), and (2) along with the risk comes the reward as well to the extent that the employee invests wisely. The reward potential of a defined contribution plan exceeds the reward potential under the current defined benefit plan. MAYOR'S CHARGE In early 2011, the Mayor approached the City's Budget Advisory Committee (BAC) regarding undertaking a study of pension reform for the City's pension plans. The "Mayor's Charge" to the BAC was: " to develop recommendations that address the benefits and funding concerns associated with the City's pension plans. While the BAC will examine all retirement benefits, the focus will be to address the Fire and Police pension system, as this plan has a significantly greater cost to the City than the General Employees' pension plan." More specifically, the requested deliverable work product was "to develop a series of written, implementable recommendations that address the long-term sustainability of the Fire and Police Pension Plan. An explanation of the recommendations, cost implications, impacts to the City and its employees, advantages, and disadvantages should be included. Recommendations may be split into short-term and long-term objectives. Subsequently, the BAC may provide additional recommendations regarding other pension benefits in the City." While the direction provided by the Mayor did not have specific dates, the desire was to have the Committee's recommendations finalized in time for the collective bargaining negotiations with the City's five unions for the contract period October 1, 2012 through September 30, 2015. Initial discussions centered on a desired goal of January 2012 for preliminary recommendations. RECENT EVENTS IMPACTING PENSION PLANS Key events impacting the financial sustainability of City defined Benefit plans have been salary growth in excess of assumptions and investment return below assumed rates, due to one of the worst decades of investment returns in the United States. Also we have also reached and surpassed an inflection point where the number of Fire and Police retirees increasingly exceeds the number of employees . Budget Advisory Committee Pension Reform Report-Executive Summary Page iii 16 Both plans demonstrate strong investment returns well in excess of assumed rates, prior to 2001 . However, rates of return post 2001, and particularly since 2008, have been below assumed rates, thereby helping drive increases in unfunded liabilities and annual contribution requirements over that time period. Further, while MBERP salary growth has generally been in line with the assumed salary growth rate, Fire and Police Plan salary growth has almost consistently exceeded salary growth assumptions for the base plan, especially considering the fact that the salary basis for retirement benefits is the average of the last two years' salary, including incentive pays, longevity pays and approximately 11 percent of overtime that can be counted as pensionable pay. SUMMARY OF RECOMMENDED PENSION REFORM POLICIES AND GUIDELINES As part of the evaluation for Pension Reform in the City of Miami Beach, the Budget Advisory Committee (BAC) is recommending policies for long-term pension reform. The BAC is also recommending guidelines for the City to adopt which establish thresholds which if surpassed will require the City to take prompt and appropriate measures to meet the guideline criteria. The policies and guidelines address four perspectives : (1) Affordability and Sustainability, (2) Appropriate Benefits to Provide to Employees, (3) Recruitment and Retention, and (4) Management of Risk/Risk Sharing. These policies and guidelines were adopted unanimously by the BAC. AHordability and Sustainability • GUIDELINE STATEMENT: If the City's portion of the total annual cost of retirement benefits contribution exceeds 25 percent of payroll for general employees and 60 percent of payroll for high risk employees, the City should review and evaluate potential changes to the collective bargaining agreements between the City and the Unions, applicable towards the next contract negotiations, in order to identify potential approaches to reduce the contributions to these levels over the long term . • POLICY STATEMENT: The City shall fund at least the normal cost of pension. If this exceeds the amount of the actuarially determined annual required contribution, the excess should be placed in a pension stabilization fund, to be made available for future pension shortfalls. Budget Advisory Committee Pension Reform Report-Executive Summary Pageiv 17 • POLICY STATEMENT: The City should strive to maintain a funded ratio of at least 80 percent for each of its defined benefit pension plans. • GUIDELINE STATEMENT: If the funded ratio (actuarial value of assets minus actuarial liabilities) of either of the City of Miami Beach's pension plans falls below 70 percent, the City should strive to implement approaches to increase the funded ratio to that level over five (5) years. • POLICY STATEMENT: Salary growth should not exceed the average actuarially assumed salary growth in each of the City's pension plans. • POLICY STATEMENT: The City should require 5, 10 and 20-year projections of required pension contributions as part of the annual actuarial valuations for each of the City's pension plans. These projections shall be based on the current actuarial assumptions for each plan. The projections shall be updated to reflect the cost of any proposed benefit enhancement before the City Commission agrees to the enhancement. The cost of these studies shall be funded separately from the annual contribution to the pension plan. • POLICY STATEMENT: There shall be an experience study of each of the City's pension plan's actuarial assumptions performed by an actuary that is independent from the pension board. The experience study should be conducted at least once every three (3) years, to compare actual experience to the assumptions. The independent actuary shall make recommendations for any changes in assumptions based on the results of the experience study, and any deviations from those assumptions by the pension board shall be justified to the City Commission. • POLICY STATEMENT: Once pension reform is implemented, a 5/7th vote of the City Commission should be required for any further pension changes. Appropriate Benefits to Provide to Employees • POLICY STATEMENT: The City of Miami Beach should strive to provide a retirement benefit that provides for a replacement of salary at a level at least equivalent to Social Security plus a supplemental retirement benefit. • POLICY STATEMENT: The City of Miami Beach retirement benefits should be adjusted periodically after retirement to reflect the impacts of inflation, with rates no more than the Consumer Price Index for All Workers -CPI(W) that is subject to City Commission approval and with a maximum of 3 percent annually. Budget Advisory Committee Pension Reform Report-Executive Summary Page v 18 Recruitment and Retention • POLICY STATEMENT: The City of Miami Beach should strive to provide retirement benefits that ensure that the City is competitive in the recruitment and retention of employees. Management of Risk/Risk Sharing • POLICY STATEMENT: The City of Miami Beach should strive to share some portion of retirement benefit risk with employees. • GUIDELINE STATEMENT: If the City's contribution to a defined pension benefit plan exceeds 25 percent of payroll for general employees and 60 percent of payroll for high- risk employees, the employee contribution should be reviewed. Budget Advisory Committee Pension Reform Report-Executive Summary Page vi 19 N 0 PENSION REFORM OPTIONS EVALUATED FOR THE FIRE AND POLICE PENSION PLAN Option I CURRENT PLAN FRS DB+SS Employees to Which Applicable All IA.New Irs. New/Non Vested 3 first 15 years, Multiplier then4% 3% 3% Rnal Average Monthly Earnings (FAME) Calc-in years 2 8 8 Retiree COLA 2.5% 0 0 55&6 special risk YOS 55&6 special risk YOS or 52&25 special risk or 52&25 special risk YOS +militaryor25 YOS +military or 25 special risk YOS special risk YOS Normal Retirement Age Rule of70 regardless of age regardless of age %City Contribution to Social Security 0.00% 6.25% 6.25% %City Contribution to DB or DC+ Social Security 0.00% 17.75% 17.75% Share Plan DC (See Note Below) Yes No No Social Security No Yes Yes 75%Joint& Survivor with 120 months Beneficiaries guarenteed Life Annuity Life Annuity Employee Contribution to DB Plan** 10% 3% 3% Year 1 $Amount of City Contribution 35,439,063 35,559,519 33,612,185 Year 31$ Amount of City Contribution 42,349,557 34,156,148 34,156,148 Yr 1% of Payroll 74.14% 74.39% 70.32% Yr 31% of Payroll 31.57% 25.46% 25.46% Oty Year 1 Savings/(Cost) N/A (120,456) 1,826,878 City 30 NPV Savings/(Cost) N/A 22,030,653 51,~5,419 Budget Advisory Committee Pension Reform Report-Executive Summary OPTION II DC equiv to FRS lnv Plan -EUMINATES RISK IIA.New I liB. New/Non Vested 0 0 0 0 0 0 As Defined in As Defined in the Plan the Plan 0.00% 0.00% 24.00"/o 24.00"/o No No TBD TBD Not Applicable Not Applicable 10% 10% 35,559,519 33,612,185 34,156,148 34,156,148 74.39% 70.32% 25.46% 25.46% (120,456) 1,826,878 22,030,653 51,225,4.~ Page vii N ~ OP ON A C RREN Hybrid-Replaces 1 2 of DB with PLAN DC-RED CES R S Bn_l)IQYees to hich ApQiicable All Al. New l A2. New Non ested 3 first 15 years, 11/2 first 15 11/2 first 15 Multiplier then4% years, then 2% years, then 2% Anal Average Monthly Earnings (FAME) Calc-in years 2 2 2 Retiree COlA 2.5% 2.5% 2.5% Normal Retirement Age Rule of70 Rule of70 Rule of 70 %City Contribution to Sodal Security 0.00% 0.00% 0.00% %City Contribution to DB or DC +Social Security 0.00% 16.00% 16.00',(; Share Plan DC (See Note Below) Yes Yes Yes Social Security No No No 75%Joint& 75%Joint& 75%Joint& Survivor with 120 Survivor with Survivor with months 120months 120months Beneficiaries guarenteed guarenteed guarenteed Employee Contribution to DB Plan** 10% 10% 10% Year1 $Amount of City Contribution 35,439,063 35,439,063 35,718,266 Year 31$ Amount of City Contribution 42,349,557 43,354,448 43,354,448 Yr 1% of Payroll 74.14% 74.14% 74.72% Yr 31% of Payroll 31.57% 32.31% 32.31% City Year 1 Savings/( Cost) N/A -(279,203) City 30 NPV Savings/( Cost) N/A (2,839,080) (7,678,193) Budget Advisory Committee Pension Reform Report-Executive Summary OP ON B Hybrid-Replaces 1 of DB with DC-RED CES R S I B2. New Non B1. New ested 2% first 15 years, 2% first 15years, then 2.66% then 2.66% 2 2 2.5% 2.5% Rule of70 Rule of 70 0.00% 0.00% 10.00% 10.00% Yes Yes No No 75%Joint& 75%Joint& Survivor with Survivor with 120months 120months guarenteed guarenteed 10% 10% 35,439,063 35,672,176 43,204,184 43,204,184 74.14% 74.63% 32.20% 32.20% -(233,113) (2.414,54~4,218,mJ. OP ON c OP ON D Hybrid-Minimum DB Benefits Per Hybrid-Minimum DB Benefits Per State State Statute 12. %DC-RED CES Statute 17. %DC-RED CESRS RS I C2. New Non I 02. New Non C1. New ested D1. New ested 2% 2% 2% 2% Highest 5 of last 10 Highest 5 of last 10 Highest 5 of last 10 Highest 5 of last 10 2.5% 2.5% 2.5% 2.5% 55&10 or 52&25 55&10 or 52&25 55&10 or 52&25 55&10 or 52&25 I 0.00% 0.00% 0.00% 0.00% 16.00% 16.00% 11.00% 11.00% I Yes Yes Yes Yes No No No No 75%Joint& 75%Joint& 75%Joint& Survivor with 120 75%Joint& Survivor with 120 Survivor with 120 months Survivor with 120 months months guarenteed months guarenteed guarenteed guarenteed 5% 5% 5% 5% 35,439,063 33,844,490 35,439,063 32,960,590 34,139,547 34,139,547 27,431,335 27,431,355 74.14% 70.80% 74.14% 68.96% 25.45% 25.45% 20.45% 20.45% -1,594,573 -2,478,473 17,851,123 -43,n8Al4 --36,803,593 74,067,418 Page viii N N CURRENT Option IVA 3% Multiplier All PLAN Years Employees to Which Applicable All IVAl. New and I IV A2. All Non-Vested except NR 3 first 15 years, Multiplier then4% Final Average Monthly Earnings (FAME) Calc-in years 2 Retiree COLA 2.5% No Other Changes NormaJ Retirement Age Rule of70 %City Contribution to Social Security 0.00% %City Contribution to DB or DC+ Social Security 0.00% Share Plan DC (See Note Below) Yes Social Security No 75%Joint& Survivor with 120 months Beneficiaries guarenteed EmpiQ}'ee Contribution to DB Plan** 10% 10% 10% Year 1 $Amount of City Contribution 35.439,063 34,786,003 33,593,541 Year 31$ Amount of City Contribution 42,349,557 38.464,161 38,464,161 Yr 1% of Payroll 74.14% 72.77% 70.28% Yr 31% of Payroll 31.57% 28.67% 28.67% City Year 1 Savings/(Cost) N/A 653,060 1,845,522 City 30 N PV Savings/( Cost) N/A 19,448,159 34,362,906 Budget Advisory Committee Pension Reform Report-Executive Summary OPTION IV CHANGES TO EXISTING PLAN Option IVB 2% Multiplier All Option IVC Change FAME to Option IVD Change Existing Years highS COlAtol.S% IVB1. New and I IVB2. All Non-Vested el(cept NR IVC1. New and I IVC2. All Non-Vested except NR IVD1. New andl IVD2. All Non-Vested except NR No Other Changes No Other Changes No Other Changes 10% 10% 10% 10% 10% 10% 33,205,899 30,523,193 35,002.758 34,552,299 34,636,516 32,932.490 26,043,236 26,043,236 39,137,666 39,137,666 37,694,058 37,694,058 69.47% 63.86% 73.23% 72.29% 72.46% 68.90% 19.41% 19.41% 29.17% 29.17% 28.10% 28.10% 2,233,164 4,915,870 436,305 886,764 802,547 2,506,573 77,134,350 107,938,1~ -14,415,514 19,762,~22 -23,737,634 ~,J.90,053 Pageix I\) w OPTION IV CHANGES TO EXISTING PLAN (CONTINUED) CURRENT Option IVG Change Existing Option IVH Change Existing Option IVE Change Existing Option IVF Change Existing Plan to Normal Form of Ufe Plan Increase Employee PLAN Plan to No COLA Plan to 55&10 or 52&25 Annuity Contribution by 2% IVEL New and I IVE2.AII IVF1. New and I IVF2.AII IVG1. New and I IVG2. All IVhL New and I IVH2. All Employees to Which Applicable All Non-Vested exceptNR Non-Vested exceptNR Non-Vested except NR Non-Vested except NR 3 first 15 years, Multiplier then4% Final Average Monthly Earnings (FAME) Calc-in years 2 Retiree COLA 2.5% No Other Changes No Other Changes No Other Changes No Other Changes Normal Retirement Age Rule of70 %City Contribution to Social Security 0.00"/o %City Contribution to DB or DC+ Social Security 0.00"/o Share Plan DC (See Note Below) Yes Social Security No 75%Joint& Survivor with 120 months Beneficiaries guarenteed Employee Contribution to DB Plan** 10% 10% 10% 10% 10% 10% 10% 12% 12% Year 1 $Amount of City Contribution 35,439,063 33,660,923 29,889,218 34,450,821 32,003,876 34,863,363 33,746,253 35,085,376 34,597,069 Year 31$ Amount of City Contribution 42,349,557 32,040,378 32,040,378 36,487,922 36,847,922 38,868,451 38,868,451 39,666,273 39,666,273 Yr 1% of Payroll 74.14% 70.42% 62.53% 72.07% 66.95% 72.94% 70.60% 73.40% 72.38% Yr 31% of Payroll 31.57% 23.88% 23.88% 27.21J'/o 27.21J'/o 28.97% 28.97% 29.57% 29.57% City Year 1 Savings/(Cost) N/A 1,778,140 5,549,845 988,242 3,435,187 575,700 1,692,810 353,687 841,9941 City 30 NPV Savings/(Cost) N/A 53,673,164 100,633,984 29,833,132 61,555,116 17,096,883 30,067,071 11,.477,082 15,672,414 Budget Advisory Committee Pension Reform Report-Executive Summary Page x N ~ CURRENT OPTION VI 2010 PLAN OPTION V STATE Contract Changes (New STATUTE 175/185 Employees-see footnote*** Employees to Which Applicable All Minimum Benef"lts re existing employee.s) 3 first 15 years, Multiplier then4% 2% 3 first 20 years, then 4% Final Average Monthly Earnings (FAME) Calc-in years 2 Highest 5 of last 10 3 1.5% Deferred to 1 year after Retiree COLA 2.5% 0% DROP Rule of 70-Minimum age of Normal Retirement Age Rule of 70 55&10 or 52&25 48 %City Contribution to Social Security 0.00"/o 0.00"/o 0.00"/o %City Contribution to DB or DC+ Social Security 0.00% 0.00% 0.00% Share Plan DC (See Note Below) Yes Yes Yes Social Security No No No 75%Joint& Survivor with 120 months 10YearCertain and Life, 75%Joint&Survivorwith 120 Beneficiaries guarenteed thereafter annuity months guarenteed Employee Contribution to DB Plan** 10% 5% 10% Year 1 $Amount of City Contribution 35,439,063 24,259,101 35,439,063 Year 31 $Amount of City Contribution 42,349,557 30,858,185 30,722,497 Yr 1% of Payroll 74.14% 50.75% 74.14% Yr 31% of Payroll 31.57% 12.23% 22.90% City Year 1 Savings/(Cost) N/A 11,179,962 -City 30 NPV Savings/( Cost) N/A 167,331,205 32,849,516 Note: The impacts of changes to existing employees with the 2010 contract were estimated to be minimal by Buck Consultants. Budget Advisory Committee Pension Reform Report-Executive Summary I Page xi NOTES ON RECOMMENDATION AND REASONS FOR NOT RECOMMENDING OTHER OPTIONS OPTION 1: Florida Retirement System (FRS)-The FRS was not recommended because the City's loss of control of expenses to Tallahassee, ongoing litigation regarding FRS pension changes implemented in 2011, news of projected shortfalls and payment increases and loss of the premium insurance payments. OPTION II: Defined contribution similar to FRS, including a Social Security equivalent-Although this option eliminates risk, it was not recommended because of concerns with savings potential given the relatively early ages for retirement eligibility, the impact on morale for existing non-vested employees and the potential that this may prove to be unattractive to recruit police and fire employees in the future. OPTION Ill: Hybrid Plans-We recommend the City adopt a hybrid plan approach in Option IIID2, and do not recommend the other hybrid plans because although they reduced the risk to the City, they did not generate the NPV savings of Option IIID2. OPTION IV: Changes to the Existing Pension Plan -Past Service/Future Service Approach (with a combined benefit). Changes to the existing pension plan are recommended in regards to vested employees in order to meet the Policies and Guidelines identified in Section IV. However, they are not recommended for non-vested and new hire employees because although they can generate the NPV savings, they do not reduce the City's risk, and risk reduction was a key factor in the BAC's recommendation. Budget Advisory Committee Pension Reform Report-Executive Summary Page xii 25 1. BACKGROUND MAYOR'S CHARGE In early 2011, the Mayor approached the City's Budget Advisory Committee (BAC) regarding undertaking a study of pension reform for the City's pension plans. The "Mayor's Charge" to the BAC was: "to develop recommendations that address the benefits and funding concerns associated with the City's pension plans. While the BAC will examine all retirement benefits, the focus will be to address the Fire and Police pension system, as this plan has a significantly greater cost to the City than the General Employees' pension plan." More specifically, the requested deliverable work product was, "to develop a series of written, implementable recommendations that address the long-term sustainability of the Fire and Police Pension Plan. An explanation of the recommendations, cost implications, impacts to the City and its employees, advantages, and disadvantages should be included. Recommendations may be split into short-term and long-term objectives. Subsequently, the BAC may provide additional recommendations regarding other pension benefits in the City." While the direction provided by the Mayor did not have specific dates, the desire was to have the Committee's recommendations finalized in time for the collective bargaining negotiations with the City's five unions for the contract period October 1, 2012 through September 30, 2015. Initial discussions centered on a desired goal of January 2012 for preliminary recommendations. APPROACH To accomplish this objective, the BAC developed an approach that included the following components: • Develop an understanding of the City's current pension plans benefits and costs for the Fire and Police Pension Plan and the Miami Beach Employees' Retirement Plan (for General employees) from the perspective of legal counsel, the City's actuary, the City Manager and the pension plan administrator for each of the City's pension plans (the Fire and Police Pension Plan and the Miami Beach Employees' Retirement Plan-MBERP). • Solicit input from the City's collective bargaining groups and employees. Budget Advisory Committee Pension Reform Report Page 1 26 • Survey comparative jurisdictions in the region regarding pension plan costs and benefits. • Develop draft policies and guidelines to guide management of the City's pension plans into the future, (a copy of which is attached for your review). • Identify and review options of potential changes to the Fire and Police Pension Plan based on 6 major categories, namely: o Florida Retirement System (FRS) o Defined Benefit similar to FRS, including a Social Security equivalent o Hybrid Plans with both, a defined benefit and a defined contribution component o Changes to the existing plan with a combination of past service benefits and benefits earned prospectively o Freezing the existing plan and defining new benefits based on Florida Statute Chapter 175 and 185 minimum benefits to continue receiving premium taxes o Changes to the existing plan to reflect the savings associated with plan changes included in the 201 0 collective bargaining agreements with the International Federation of Fire Fighters (IAFF) and the Fraternal Order of Police (FOP) that have not yet been implemented by the Fire and Police Pension Board • Evaluate the cost impacts of potential options • Develop Recommendations TYPES OF PENSION PLANS A retirement benefit is a form of deferred compensation designed to assist the employer in the recruitment and retention of public employees and other workforce management goals . It is also provided to assist employees in preparing for retirement and to compensate individuals for their years in public service . Broadly speaking, there are two types of retirement plans, ( 1) defined benefit and (2) defined contribution. Defined Benefit Plans With very few exceptions, defined benefit plans provide a retirement benefit that is calculated using a formula based upon a plan participant's years of service and compensation. Generally, both employers and participants contribute to these public sector defined benefit plans. All assets accumulated to fund the retirement benefits are invested by the retirement board or by a central agency responsible for investing government funds. All investment-related risk is generally borne by the employer. These plans are predominant in the public sector, and based upon the Department of labor, Bureau of labor Statistics 1988 data, 90 percent of full-time public sector employees receive defined benefits. Budget Advisory Committee Pension Reform Report Page 2 27 Principal features of defined benefit plans generally include: 1 . Investment risk born by the plan sponsor; 2. Life expectancy risk born by the plan sponsor; 3. Survivor and disability coverage generally provided; 4. Guaranteed lifetime annuity to members at retirement unless they choose an alternate payment method; 5. Investments directed by the plan; 6. Generally lower investment costs associated with a defined benefit plan as compared to other plan designs; 7. More useful tool for employers to attract and retain employees for full careers and to manage workforce levels; and 8. Guaranteed or ad-hoc cost-of-living adjustments may be provided to annuitants. Defined Contribution Plans Defined contribution plans provide benefits based solely on the assets available in an employee's individual account, to which both employees and employers may contribute. All employees have their own accounts set up within the plan to which contributions and investment gains and losses are recorded. Typically, under a defined contribution plan, employees direct the investment of their contributions among investment options selected by plan trustees, the employer or the employer's designated agent, and therefore, fully bear the investment risk. The dollar amount accumulated in a defined contribution plan will vary depending upon the amount contributed to the plan, the investment performance, the level of risk taken and the fees paid. Principal features of defined contribution plans generally include: 1 . Portable vested benefits; 2. Employer obligations fulfilled annually as contributions are made, so there is no unfunded liability; 3. Investments directed by participants; 4. Account balances at retirement dependent upon a combination of investment rate of return, contribution levels and the period of investment; 5. Easier to understand account values as participants can see their balance on a regular basis; 6. Investment risk and fees born by participant; 7. Life expectancy risk born by the participant; Budget Advisory Committee Pension Reform Report 28 Page 3 8. No cost of living allowances after retirement; however, participants continue to earn investment income on their remaining assets; and 9. Neither disability nor survivor coverage generally provided. In addition to defined benefit and defined contribution plans, some entities provide retirement benefits through "hybrid plans" that incorporate features of both defined benefit and defined contribution plans, thereby reducing (although not eliminating) the risks to the plan sponsor . For any of these plans, the actual costs to plan sponsors and participants are determined by the number and amount of benefits actually paid to recipients, and the source and amount of plan contributions and investment returns. Source : GFOA Best Practices and Advisories, Developing a Policy for Retirement Plan Design Options (1 999, 2007) (CORBA) Source: Florida Pensions, Volume 1, Issue 1, April 2012. Actuarial Valuation Reports Independent actuarial reports are used to determine contribution requirements to a defined benefit plan by the plan sponsor, in accordance with Florida State Statutes. The valuation reports are based on various assumptions established by each pension plan Board in consultation with the pension plan Actuary and Investment Consultant. These assumptions include current wage data, mortality rates, retirement ages, future salary increases, pension plan expenses and investment performance assumptions. The actuarial valuation of the pension plan is a mathematical determination of the financial condition of the plan, which includes the computation of the present monetary value of benefits payable to present members, and the present monetary value of future employer and employee contributions, considering the expected mortality rates among employees and retirees, rates of disability, retirement age, withdrawal from service, salary increases, investment earnings and value of assets. In contrast to the market value of the pension plan assets, the actuarial value of the pension plan assets is equal to the market value of the assets at a specific data, adjusted to reflect a five-year phase-in (or smoothing) of any asset experience gain or loss. The 5-year smoothing of pension plan asset value means that 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 and the annual required contribution. The market value of the plan is the total value of all plan investments as of a given point in time based on current market value on that date. Both the actuarial and market value of the pension plan assets are important indicators of the plan's condition. Using the actuarial value Budget Advisory Committee Pension Reform Report Page 4 29 methodology allows the pension plan to spread the annual plan experience over a period of time (5 years). By doing this, the short-term swings of the market, economic upswings or downturns, or other near-term factors can be softened over time. The market value methodology for pension plan assets gives a point-in-time assessment of the plan's assets without any smoothing. This approach typically results in more volatility in the plan assets as any short-term experience affects the plan immediately. As part of the annual actuarial valuation for each plan based on plan data as of October 1, the Actuary evaluates how the actual data for the preceding year compared to the actuarial valuation for that year. Any differences are reflected as actuarial gains or losses. The unfunded liability for a plan is the difference between the value of benefits earned (accrued) and projected future benefits, and the assets of the plan on a given date, and is typically amortized and funded over 30 years . The amortization methodology varies by plan. Actuarial Accrued Uability The actuarial accrued liability reflects a snapshot at a point in time based on plan benefits and assumptions. For example, the actuary estimates when members of the plan will retire, how much they will get paid over their remaining lifetime once retired, and how long they will live, in order to calculate the total amount that will be paid in the future for plan members. The total value of these benefits is then "present valued" to current dollars . As a result, the investment rate of return is significant as this affects the calculation of present value of the plan benefits, i.e. how much the plan should have on hand today, which together with investment earnings (the investment rate of return), should be sufficient to fund the plan in the future. Each year, experience "gains" in the prior year reduces the actuarial accrued liability. Examples of experience gains would be investment earnings for the prior year in excess of plan assumptions, employees retiring later than assumed, salary growth less than assumed, etc. Experience "losses" for the prior year, conversely, increase the actuarial accrued liability. Changes to plan benefits can also affect the actuarial accrued liability of a plan, either positively or negatively. If plan benefits are increased, the mathematical calculations will result in more benefits anticipated to be paid to plan members in the future, which must be recognized at the time of the increase, although payments would be amortized over the long term. Conversely, if plan benefits are reduced, all else being equal, the plan will see a reduction in the actuarial accrued liability. Budget Advisory Committee Pension Reform Report Page 5 30 Rate of Return of lnveshnents and Asset Value The annual plan valuation is based on actuarial value of assets rather than market value. As noted earlier, actuarial value uses a 5-year smoothing approach. The intent of the smoothing is to mitigate the impact of significant annual changes in actual investment returns. Unfunded Actuarial Accrued Uability The unfunded liability of the plan is the actuarial accrued liability less the actuarial value of plan assets. This amount is expected to have year-by-year Auctuations; however, if the plan's assumptions are consistent with the plans long-term experience, the changes in the unfunded liability should be offsetting over the life of the plan. The percent of the actuarial accrued liability funded (funded ratio} is a measure of a pension fund's fiscal health. It compares assets to pension obligations. A percentage over 100% means the fund has more money than it needs to meet its obligations at that point in time. A funded ration of 80% or greater (actuarial value of assets divided by actuarial accrued liability} is generally considered a sign of an adequately funded plan. OVERVIEW OF MIAMI BEACH PENSION PLANS The Fire and Police Pension Plan provides defined pension benefits to police officers and fire fighters, while the MBERP provides defined pension benefits for almost all other full-time employees. Approximately 50 current employees participate in a defined contribution 401 Plan that is no longer offered to new employees. The Fire and Police Pension Fund was formerly known as the City Pension Fund for Firemen and Policemen -City of Miami Beach and City Supplemental Pension Fund for Fire Fighters and Police Officers-City of Miami Beach. The former plans were merged and the name changed to City Pension Fund for Fire Fighters and Police Officers in the City of Miami Beach. The defined benefit plan covers substantially all police officers and firefighters of the City of Miami Beach. The earliest origin of a retirement program for the City of Miami Beach was the Retirement System for General Employees created under and by authority of Chapter 18691, laws of Florida, Acts in 1937. The Retirement System for Unclassified Employees and Elected Officials was created in 1988. In March 2006, the Retirement System for General Employees and the Retirement System for Unclassified Employees and Elected Officials merged to form the Miami Beach Employees' Retirement Plan (Ord . 2006-3530}. Budget Advisory Committee Pension Reform Report Page 6 31 RECENT EVENTS DRIVING PENSION PLAN COSTS -CMB INVESTMENT RETURNS AND SALARY GROWTH In the Fire and Police Pension Plan, key drivers of the recent increases in unfunded liability have been salary growth in excess of assumptions and investment returns below assumed rates, due to one of the worst decades of investment returns in recent history. Also, we have also reached and surpassed an inflection point where the number of Fire and Police retirees exceeds the number of active employees. The following tables and graphs reflect the assumed and actuarial rate of return for each of the two plans as well as the assumed and actual salary growth for each of the two plans. In any year where the actuarial rate of return exceeded the assumed rate of return for the plan year, this would have resulted in a decrease in the actuarial accrued liability, all else being equal. Conversely, in any year where the actual rate of return was less than the assumed rate of return for the plan, this would have resulted in an increase in the actuarial accrued liability, all else being equal. Both plans demonstrated strong investment returns well in excess of assumed rates, prior to 2001 . However, rates of return post 2001, and particularly since 2008, have been below assumed rates, thereby helping to drive increases in unfunded liabilities and annual contribution requirements over that time period. Further, while MBERP salary growth has generally been in line with the assumed salary growth rate, Fire and Police Plan salary growth has almost consistently exceeded salary growth assumptions for the base plan, especially considering the fact that the salary basis for retirement benefits is the average of the last two years' salary, including incentive pays, longevity pays and approximately 11% of overtime that can be counted as pensionable pay. Budget Advisory Committee Pension Reform Report Page 7 32 Fire and Police Pension Plan Fire & Police Pension Plan Historical Return and Salary Growth BASE PLAN SUPPLEMENTAL PLAN INVESTMENT SALARY INVESTMENT SALARY RETURN INCREASES RETURN INCREASES Year Ending Actual Assumed Actual Assumed Actual Assumed Actual Assumed . . 09/30/1990 0.51% 8.50% 3 .30% 6.00% 13.14% 8.50% 3.40% 6.00% 09/30/1991 16.67% 8.50% 2.30% 6.00% 13.17% 8.50% 2.40% 6.00% 09/30/1992 10.28% 8.50% 3.20% 5.20% 10.46% 8.50% 3.30% 5 .20% 09/30/1993 12.82% 8 .50% 6.30% 5.20% 13.42% 8.50% 6.40% 5.20% 09/30/1994 0.84% 8.50% 5.30% 5.20% 0.74% 8.50% 5.30% 5.20% 09/30/1995 17.35% 8.50% 7.80% 5.20% 29.21% 8.50% 8.20% 5.20% 09/30/1996 13.58% 8.50% 8.00% 5.20% 11.24% 8.50% 8.00% 5.20% 09/30/1997 20.97% 8.50% 7 .60% 5.20% 26.40% 8.50% 7.70% 5.20% 09/30/1998 8 .32% 8.50% 9.54% 5.20% 09/30/1999 11.73% 8.50% 6.57% 5 .20% 09/30/2000 10.52% 8.50% 2.74% 5.20% 09/30/2001 ·8.79% 8.50% 4.00% 5.20% 09/30/2002 -1.65% 8.50% 8 .58% 4.82% 09/30/2003 15.05% 8.50% 6.88% 4.82% 09/30/2004 9.72% 8 .50% 6 .25% 4.82% 09/30/2005 9.99% 8.50% 5.73% 4.80% 09/30/2006 8.28% 8.50% 7 .87% 4.80% 09/30/2007 14.31% 8.50% 9.48% 4.90% 09/30/2008 -10.43% 8.50% 8.77% 4.90% 09/30/2009 1.35% 8.40% 7.93% 4.40% 09/30/2010 10.85% 8 .30% 2.71% 3 .83% The assumed salary scale from 1992 through 2010 is a graded salary scale Budget Advisory Committee Pension Reform Report Page 8 33 Fire and Police Pension Plan (Continued) Investment Return 30.00% ,---------=~------------ 25.00% +------lt----t------------ 20.00% +------!...__ .... __________ _ 15.00% +--+------~---------.....----=---- 10.00% t::&:l=ll==l:t:l=;;;:::l:+==lf:i:=t=;:IJ==:t 5.00% +-........ I--.... ~HI-1--t---l-1--l-1-111---+ 0.00% -+.,. ...... ..,-,..---.-..-,...~~,-~lL-,L .......... ,-rr-,,..,...,.._,.1.,...,...-,J.L,L, ~~~~~~~~~g·li ~~g:g~~ g~s -5.00% ~~~~~~~~~~~§~~~~~~~~ -IO.oo% ;.:; ;.:; r;:;;.:;;.:;;;:;;:;:;;.:;;:;:;;;;.:; r;:;;.:;;.:; ;:n;:;:;;:;:; (");:;:;;:;:; ~--------------------15.00% 00000000000 00 00000 0 00 -20.00% _._ ________________ _ 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2 .00% 1.00% 0.00% Actual Salary Increases "" .. I _I OrlNm~~~~~mOrlNm~~~~~mo mmmmmmmmmmoooooooooorl mmmmmmmmmmooooooooooo rlrlrlrlrlrlrlrlrlrlNNNNNNNNNNN ---------------------000000000000000000000 ~~~~~~~~~~~~~~~~~~~~~ mmmmmmmmmmmmmmmmmmmmm 000000000000000000000 -BASE PLAN -SUPPLEMENTAL PLAN -Supplemental Plan Assumed Investment Return --Base Plan Assumed Investment Return -BASE PLAN -SUPPLEMENTAL PLAN -Supplemental Plan Assumed Salary Growth --Base Plan Assumed Salary Growth FIRE AND POLICE PLAN MEMBERS 5 YEAR TREND ACTIVE VS. INACTIVE 2007 2008 2009 2010 2011 Active Members 482 487 478 468 457 Retirees & 463 493 506 505 524 Beneficiaries Disabled Members 61 62 62 59 56 DROP Members 48 46 66 67 66 Vested or 17 14 12 13 15 Dormant Total 1071 1102 1124 1112 1118 Budget Advisory Committee Pension Reform Report Page 9 34 Miami Beach Employees Retirement Plan Miami Beach Employees Retirement Plan (MBERP) History of Investment Returns and Salary Increases General Plan Unclassified Plan BASE PLAN SUPPLEMENTAL PLAN INVESTMENT RETURN SALARY INCREASES INVESTMENT RETURN SALARY INCREASES Year En di ng Actual Assumed Actual Assumed Actual Assumed Actual Assumed 09/30/1990 7.3% 8.5% 7.5% 6.00/o -2.3% 8.00/o 12.3% 6.00/o 09/30/1991 8.1% 8.5% 3.00/o 6.00/o 21.6% 8.5% 3.4% 6.00/o 09/30/1992 13.7% 8.5% 2.00/o 6.00/o 5.8% 9.00/o 2.4% 6.00/o 09/30/1993 11.4% 8.5% 3.1% 6.00/o 14.1% 9.00/o 6.3% 6.00/o 09/30/1994 6.8% 8.5% 3.9% 6.00/o 4.8% 9.0% 6.0% 6.0% 09/30/1995 11.4% 8.5% 8.8% 6.00/o 24.1% 9.00/o 7.6% 6.00/o 09/30/1996 15.3% 8.5% 4.2% 6.00/o 13.9% 9.0% 8.6% 6.00/o 09/30/1997 13.8% 8.5% 6.0% 6.00/o 19.1% 9.00/o 7.4% 6.00/o 09/30/1998 12.5% 8.5% 5.00/o 6.00/o 4.3% 9.00/o 4.1% 6.0% 09/30/1999 14.4% 8.5% 7.3% 6.00/o 18.8% 9.00/o 7.1% 6.00/o 09/30/2000 10.7% 8.5% 6.7% 6.00/o 16.5% 9.00/o 6.7% 6.0% 09/30/2001 7.2% 8.5% 9.3% 6.0% 9.7% 9.00/o 7.0% 6.00/o 09/30/2002 0.3% 8.5% 8.9% 6.00/o 1.7% 9.00/o 9.2% 6.00/o 09/30/2003 4.3% 8.5% 8.1% 6.00/o 4.6% 9.00/o 7.5% 6.00/o 09/30/2004 4.1% 8.5% 3.1% 6.00/o 9.7% 9.00/o 5.7% 6.00/o 09/30/2005 4.4% 8.5% 4.7% 6.00/o 10.7% 9.00/o 6.8% 6.00/o 09/30/2006 7.7% 8.5% 11.9% 6.00/o 10.2% 8.75% 7.9% 6.00/o 9/30/2007** 12.0% 8.75% -3.6% 6.00/o NA NA NA NA 9/30/2008** 5.2% 8.65% 11.3% 6.00/o NA NA NA NA 9/30/2009** 1.1% 8.50% 4.8% 6.00/o NA NA NA NA 9/30/2010** 5.0% 8.35% 2.5% 6.00/o NA NA NA NA Budget Advisory Committee Pension Reform Report Page 10 35 Miami Beach Employees Retirement Plan Actual Investment Return 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% ll II I ~·· ,;'\ I I ~ ~ I I I _.I I I I . I ~'b ~ ~'\ ~ !<Jo f;;j'"' f;;j\"' f;;j\"' <:,:,\"' <:,:,\"' <:.:>~ <:.:>~ <:.:>~ <:.:>~ (;;)~ !;;)~ !;;)<»~ !;;)<»~ l;;)o,~ (;;)<»~ !;;)<»~ (;:)<»~ (;:)<»~ !;;)<»~ !;;)<»~ <»fp\rvo,~l;;)~ "!t* L Qj ,0) ,0) ,0) ,0)· ,<;;:)' ~<;;)' .,<;;)' "'<;;)' <:> **Represents Investment Return for the total group -General Plan -Unclassified Plan -Unclassified Assumed Salary -General Plan Assumed Salary Actual Salary Increases 15.0% -.------------------- 10.0% +11---------------1--1--- **Represents Salary I ncr eases for the total group -General Plan -Unclassified Plan -Unclassified Assumed Salary --General Plan Assumed Salary MBERP MEMBERS 5 YEAR TREND ACTIVE VS. INACTIVE 2006 2007 2008 2009 2010 Active Members 1018 1061 1158 1154 1117 Retirees & 950 959 968 972 981 Beneficiaries Disabled 454 42 43 41 40 Members DROP Members N/A N/A N/A 35 49 Vested or 64 70 87 79 75 Dormant Total 2077 2132 2256 2281 2262 Budget Advisory Committee Pension Reform Report Page 11 36 In 2011, the Florida legislature mandated that the Florida Department of Management Services develop a plan to create a rating system for use in classifying the financial strength of all local government pension plans. As part of the recommendations contained in the report, the Department recommended the following percentage point system components (in conjunction with other components totaling to 1 00 percent) to evaluate the financial sustainability of a plan, for each component deriving a ratio by comparing the 5 year average of actual experience to the plan assumption, thereby emphasizing the importance of these assumptions. Rate of Return Ratio Salary Growth Ratio GT 1.0 5% LT 1.0 5% 0.75-0.99 3% 1.01 -1.33 3% 0.54-0.74 1% 1.34-1.66 1% LT 0.50 0% GT 1.67 0% RECENT CHANGES IN INVESTMENT RETURN ASSUMPTIONS IN OTHER PLANS Investment rates of return for the past decade have been essentially flat, resulting in the examination of the assumed rate of return for defined benefit pension plans, across several pension plans. The rate of return adopted and assumed by a pension board is a critical component to the actuarial calculations of payments and liabilities. If the assumed rate is higher than the actual rate, then the plan will require additional funds and the liability will increase. The rate of return adopted by the city's plans as of the 10/1/10 valuation reports were 8.2 percent for the Fire and Police Pension Plan and 8.25 percent for MBERP. California (CaiPERS) The California Public Employees' Retirement System (CaiPERS) manages retirement benefits for more than 1.6 million California public employees, retirees, and their families. As of June 30, 201 1, CaiPERS provided pension benefits to 1,1 03,426 active and inactive members and 536,234 retirees, beneficiaries, and survivors. CaiPERS membership is divided approximately in thirds among current and retired employees of the state, schools, and participating public agencies. CaiPERS is a defined benefit retirement plan. It provides benefits based on a member's years of service, age, and highest average compensation. In addition, benefits are provided for disability and death, with payments in some cases going to survivors or beneficiaries of eligible members. Approximately half of their members pay into Social Security. CaiPERS manages health benefits for more than 1 .3 million members and their families Budget Advisory Committee Pension Reform Report Page 12 37 In March 2012, the Staff administration recommended to reduce the discount rate for CaiPERS from 7.75 percent to 7.5 percent, even though this is projected to require an additional $303 million per year in pension fund contributions . Source: CaiPERS Local Florida Government Pension Plans The Florida Division of Retirement, a Division of the Florida Department of Management Services, is responsible for reviewing and commenting on actuarial valuations, impact statements and reports submitted by local governments, special districts and schools boards, as well as, determining if actuarial reports are timely, complete, and accurate and are based on reasonable assumptions. This is in addition to other responsibilities including; publishing the "Local Government Retirement Systems Annual Report," maintaining computerized data information of all public employee retirement systems in Florida, cooperating with local retirement systems on areas of mutual concerns and publishing fact sheets on each local government's defined benefit plan. As part of the recommendations contained in the Financial Rating of Local Government Defined Benefit Pension Plans Report prepared by the Florida Department of Management Services, the Department has recommended that the Legislature establish a standard rate after having evaluated the issue with feedback from interested parties. Further, the report noted that, as of September 30, 2011, the average (mean) rate of return assumption for local government pension plans in Florida is 7.78 percent and the median rate of return assumption is 8 percent. (Source: Financial Rating of Local Government Defined Benefit Pension Plans, Department of Management Services, January 25, 2012. In the meantime, given the poor investment return experience in recent years, the Florida Division of Management Services is already cautioning the local government pension plans regarding their assumed rate of return, as shown in the except below regarding the MBERP 10/1/2010 valuation. (2) Valuation Interest Assumption: The 10/1/2010 va.luation uses an 8.25% interes~ assumption to discount Plan liabilities . Plan annualized investment ·returns thr9 ugh 10/1/2010 were 3.75%, 6.14% and 5.58% per annum over the last three, five and eleven plan year periods respectively ending on 10/1/2010. We will continue to monitor these results infuture reports. Source: March 12, 2012 Department of Management Services letter to MBERP Budget Advisory Committee Pension Reform Report Page 13 38 CMB HISTORICAL PENSION COSTS AND UNFUNDED LIABILITY The following tables reflect the historical changes of annual required contributions, the unfunded actuarial accrued liability and the percent funded for each of the City of Miami Beach defined benefit pension plans. Pension Chart 70,000,000 ...---------------------- 60,000,000 +----------------------=- 50,000,000 +------------------------;.-... 40,000,000 -1-------------------------· 30,000,000 +-----------------11~------...... 20,000,000 +----------------=----------..... ..,~.-... 10,000,000 +ct-11-_.. .................... -~ ...... ..-----~_,..-n-................... ~~1-11- 0 +-~~~~~~~~~~~~~~~~~~~~ Total Unfunded Liability $100,000 000 • • I I I ~~ ~w. 1995 1996 1997 1990 1••• 2••• 2001 ·a ·13 ~ -$0 1$100.000.0001 - - 1~200,000,000) l$lOO .OOO,OOO) 1$400,000 000) 1$500,000,000) Budget Advisory Committee Pension Reform Report 39 ~ - • Pension Bond Payments • 401 Contributions • General Arc • Unclassified Arc •MBERPARC • Fire and Police ARC ~ ) -- •Fir.r: 11nd P"li"t: P~l'l~-;-n PI¥~ .MBEll~ Page 14 The Total Unfunded Actuarial Accrued Liability (UAAl) of City pension plans as of 10/1/10 was $441 million: Fire/Police: General: $291.9 million $148.8 million By law, the City is responsible for funding the UAAl-even if employees are transferred to other employers, and even if the current pension plans are closed, frozen or terminated. However, this also means that the combined assets of the plan today are almost $1 billion. Funded Status of Miami Beach Pension Plan as of 10/1/11 Fire and Police -ACT. ACCRUED liABiliTY: $818 MilliON -ACT. VALUE OF ASSETS: $531 MilliON -PERCENT FUNDED: 62.0% MBERP $580 MilliON $431 MilliON 74.4% The 2011 report prepared by the leroy Collins Institute at Florida State University for pension systems across Florida assigned the following grades to pension plans based on percent funded. GRADE PERCENT FUNDED A More than 90% funded B 80 to 90% funded c 70 to 80% funded D 60 to 70% funded F Less than 60% funded Based on this grading approach, the Fire and Police Pension Plan would receive a D rating while MBERP would receive a C rating as of 10/1/11. CMB BUDGET IMPACTS The total adopted General Fund Operating Budget is $244,336,740. Of note, the FY 2011/12 General Fund budget is only about $6.6 million (less than 3 percent) over the FY 2006/07 budget and the operating millage is 1 .2085 mills less than the FY 2006/07 budget despite pension increases of $24 million during that same period. At this point, pension costs alone represent $52.4 million (21 percent) of the total General Fund budget, with the Fire and Police Pension Plan representing approximately 16 percent and the MBERP representing approximately 5 percent. Budget Advisory Committee Pension Reform Report Page 15 40 The FY 2011/12 City contribution for the Fire and Police Pension Plan is $36.2 million (72.76% of Fire and Police Pension Plan members' payroll). The FY 2011/12 City contribution for the General Plan is $17.1 million (25.02% of MBERP members payroll), following collectively bargained benefit adjustments in 2010. Of note, while City contributions for the Fire and Police Plan are more than twice that of the General Plan, employee contributions for each are $7 million and $5 million, respectively. As part of the recommendations contained in the Financial Rating of local Government Defined Benefit Pension Plans Report prepared by the Florida Department of Management Services, the Department recommended the following percentage point system components (in conjunction with other components totaling to 1 00%) to evaluate the financial sustainability of a plan, for each component deriving a ratio by comparing the sponsor contributions as a percent of the valuation payroll. Percentage of Valuation Payroll LT 10% 5% 10-19.99% 3% 20-39.99% 1% GT = 40% 0% Based on this grading approach, the Fire and Police Pension Plan would receive Zero percentage points while MBERP would receive a 1-percentage point. Budget Advisory Committee Pension Reform Report Page 16 41 2. RECENT CHANGES TO PUBLIC PENSION PLANS CITY OF MIAMI BEACH The collective bargaining agreements entered into by the five bargaining units in the City of Miami Beach in 2010, included a series of changes to the both the Fire and Police Pension Plan and the Miami Beach Employees' Retirement Plan (MBERP). These changes are outlined below. Changes to the Fire and Police Pension Plan • All Employees • No retiree cost of living adjustment (COLA) for at least 2 years for participants entering the deferred retirement option plan (DROP) after 9/1/12 (Years 3 and 4 of DROP) • Off-duty compensation pensionable/sick leave sell back up to the overtime compensation cap • New Employees Only • Minimum retirement Age of 48 for Rule of 70 • Pushed back increase in multiplier from 3% to 4% so that it occurs in year 20 instead of year 15 • Final Average Monthly Earning (FAME) increased from highest or last 2 to highest or last 3 years • Retire COLA decreased from 2.5% to 1.5% The impacts estimated by Buck Consultants, the actuary for the Fire and Police Pension Plan for changes for existing Fire and Police Pension Plan employees were minimal, with an initial cost increase of $368,865 included in the actuarial impact statement, to be offset in the future by a savings of approximately $651,322. At this time, these changes have not been implemented pending litigation. The savings estimated by Actuarial Concepts Inc., the City's actuary, from these changes for new Fire and Police Pension Plan employees generates a Net Present Value of $32.8 million over 30 years; however, savings in the early years were minimal. Budget Advisory Committee Pension Reform Report Page 17 42 Changes to MBERP • Pension changes for all employees: • Increase employee pension contribution by 2% • 5 year final averaging period (phased in) • Additional reduced pension benefits for employees hired after 10/1 /10: • Increased normal retirement age • Reduced multiplier from 3% to 2.5% • Reduced retiree COLA from 2 .5% to 1.5% The savings estimated by Gabriel Roeder Smith and Company (GRS}, the actuary for MBERP, based on the changes to existing MBERP employees was $3.3 million in year one. The impact of the changes to new MBERP employees was estimated as $900,000 in the first year, and approximately $6 million per year after 1 0 years. Other Jurisdictions in Florida (Source: lewis longmen and Walker, P.A.) Many jurisdictions in Florida have also experienced similar changes to their defined benefit pension plans. Below are examples as of February 2012. Stuart (2007) -All Employees • All City pension plans terminated City joined Florida Retirement System (FRS) for all employees • City purchased past service credit under FRS for all employees Ft. lauderdale (2007) -General • Closed general employee defined benefit pension plan Set up defined contribution plan for new hires Coral Gables (2009) -Police • Increased employee contributions for police officers by 5% • Reduced pensionable earnings (excluded overtime in excess of 300 hrs. and lump sum payments for compensatory time) Naples (2009) -Fire "Stop & Restart" implemented; premium taxes that the City can use to offset City pension contributions increased from $77 6K to $1 . 67 million per year • "Share Plan" set up with excess premium tax revenues Budget Advisory Committee Pension Reform Report Page 18 43 Port Orange (20 1 0) -Fire [Not Yet Implemented]* • Reduced wages by 6% (imposed in lieu of increase in employee pension contribution) • Reduced pension benefits for current and future employees • Push back normal retirement date • Reduce pensionable earnings (exclude OT) • Extend final averaging period from 3 to 5 years • Reduce maximum benefit from 90% to 80% • Reduce COlA Reduce deferred retirement option plan (DROP) earnings * litigation pending Delay Beach (20 1 0) General Employees • Final average compensation period extended from 2 to 5 years • Normal retirement age delayed to age 62 (was 60) • Employee contributions raised from 2.5 to 3.05% • Standard benefit changed to single life annuity (was 60 & joint & survivor annuity) • Line of duty disability reduced from 75% to 65% Coral Gables (20 1 0) -General [Settlement approved by union members and City Commission in July 2011) • Pension benefits frozen; reduced benefits for future service • Pension changes for current and future employees: • Reduced multiplier for future service (from 3% to 2.25%) • Increase employee pension contribution by 5% (to 1 0%) • 5 year final averaging period (phased in from 3 year average) • Delay retirement age to age 65 or "Rule of 85" (from age 52 or "Rule of 70") • Reduced disability benefits • Future pension cost increases shared by City and employees • City may establish defined contribution plan in future for new hires Miami (2010)-Pension Changes (All Employees)* [Financial urgency declared-City Commission adopted wage and benefit reductions 8/31/1 0]: • Later normal retirement age (to "Rule of 70" with minimum age of 50 from Rule 64/68) • 5 year average final compensation (was highest single year) Reduce benefit formula for future service (to 3% from 3.5% after 15 years)) • Normal form of benefit: life and 1 0 years certain (PF); life annuity (General) • $100,000 cap on benefits * litigation pending Budget Advisory Committee Pension Reform Report 44 Page 19 Palm Bay (20 11) -Fire [Settlement approved 5/19/11; implemented March 2012]* • 3 year wage freeze • Reduction in pension benefits for current employees • Reduction in supplemental benefit !from $25 to $12 per month per year of service) • Reduce future pension benefits for future employees • Reduced multiplier-3.2% after 20 years (was 5 percent after 20) • 2% retiree COLA deferred 6 years (was 3%) • Line of duty disability benefit-66% (was 75%) • Stop/Restart -one-time transfer of excess premium tax reserve to reduce city's contribution; increase each year in "frozen amount" used to offset City annual contribution. As a result of the stop/restart, the City is able to use $825,000 in premium tax revenues each year to reduce the City's required pension contributions; and the City received a one-time transfer of $825,000 to reduce the City's contributions this year. Town of Palm Beach (2011)-Firefighter Pension Changes [Town Council imposed wage and benefit reductions; changes implemented in May 2012] • Pension benefits frozen; "Hybrid" plan implement • Pension changes for current and future employees: • Reduced multiplier for future service Ito 1 .25%) • Defined contribution plan on top of defined benefit plan, with Town contribution match Normal retirement under defined benefit plan delayed to age 65 (but defined contribution plan distributions may begin earlier) • Joint & Survivor Annuity abolished; replaced with life annuity (member may purchase survivor benefit) • No COLA • Town withdrew from participation inCh. 175/185 Florida Retirement System (20 11) * • 3% contribution effective 7/1/11 (was 0) • No retiree COLA for service after 7/1/11 (was 3%) • Delayed normal retirement age for members who join FRS on or after 7/1/11 • Regular: Age 65 or 33 years (was 62 or 30 years) • Special Risk: Age 60 or 30 years (was 55 or 25 years) • Average final compensation: highest 8 years for members who join FRS on or after 7/1/11 (was high 5) • 8 year vesting period for members who join FRS on or after 7/1/11 (was 6 years) DROP interest= 1.3% for members who enter DROP after 7/1/11 (was 6.5%) * litigation pending Budget Advisory Committee Pension Reform Report Page 20 45 Hollywood (20 11) -All Employees * [City declared financial urgency; pension changes approved by referendum on 9/13/11] • Pension benefits frozen for all employees Pension changes for current and future employees: • Delayed normal retirement date (Police/Fire-age 55 with 10 years or age 52 with 25 years; General -age 65 or age 62 with 25 years or age 60 with 30 years) • Reduced benefit multiplier 2.5% police/fire; 2.0%-general) • 5 year final averaging period (now 3 years) • No COLA for future service • No DROP • City will withdraw from participation in Chapter 175 and 185 * Litigation pending Sarasota (20 1 1) -Police [City Commission took final action to resolve impasse 10/17/11; not yet implemented] • Pension benefits frozen for all employees Pension changes for current and future employees: • 5 year final averaging period (now 3 years) • Reduce retiree COLA from 3.2% to 1.0% beginning at age 65 Overtime limited to 300 hours per year • Standard form of benefit: 1 0 years certain and life (now 2/3 automatic spouse survivor benefit for life of spouse) • Reduce DROP interest to 2.5% (now 6.5%) • City will withdraw from participation in Chapter 185 Other Jurisdictions Outside of Florida California (20 12) (Source Associated Press, March 13, 201 2) In March 2012, Governor Brown proposed changes for public employee pension benefits in California with the aim to replace about 75 percent of an employee's salary through retirement funds and Social Security for employees with at least 30 years of service. The proposed changes were estimated to save about $900 million annually. The proposed changes included: • Raising the retirement age to 67 for new employees who are not public safety workers • Requiring state and local workers to pay more toward their retirement Budget Advisory Committee Pension Reform Report Page 21 46 Creating a mandatory "hybrid" system in which future employees would get retirement from a guaranteed benefit and a 401 (k) style plan • Eliminating "spiking" (boosting payouts by including overtime and other benefits) and "air time" (buying additional service credits) • Mandating that that public employees pay an equal share of pension costs New York (20 12) (Source: msnbc.com staff and news services, March 30 2012, 8:14AM) In March 2012, changes for New York retirement benefits were approved by the legislature affecting future workers and reducing costs by approximately $80 billion over 30 years. The reform included the following changes among other measure: • Increases the amount higher-earning public employees contribute toward their retirement plans • Raises the retirement age by a year to 63 Texas (Source: WSJ.com -Opinion : Considering the Texas Alternative to Social Security* September 30, 2011) In the 1980s, Galveston, Texas pulled its employees out of Social Security and set up an alternate plan based on individual accounts. This plan has generated higher returns and benefits than Social Security. Budget Advisory Committee Pension Reform Report Page 22 47 3. CURRENT PLAN STATUS The following section provides an overview of the benefits provided to both the Fire and Police defined benefit pension plan and the MBERP pension plan, including an overview of current benefits, changes in benefits over the years, the plan status and projected costs of each defined benefit pension plan for the next five (5) years. It is important to note that City of Miami Beach employees do not participate in Social Security, a factor that should be taken into account when evaluating benefits received. FIRE AND POLICE PENSION PLAN Overview of Current Benefits Multiplier Norm. Ret. Date Final Avg. Comp. COLA DROP Share Plan Employee Cost City Cost Premium Tax Total Cost Social Security 3.0/4.0% (90% after 26 yrs) 3.0% (90% after 30 yrs) Age 50 w/10 yrs or Rule of 70 Age 55 w/6 yrs or 25 YOS or Age 52 w/25 Yrs include military: Hired after 7/1/11 Age 60 w/8 yrs or 30 YOS or Age 57 w/30 Yrs including military Highest 2 yrs High 8 2.5% annual None for benefits earned after 7/1/11 3 yrs/invested rate 5 yrs/1.3% Yes None 10% 3% as of 7/1/11 71.67% (79.8%nextyear) 14.1 (19.5%nextyear) 0.02% 87% (90% next year) 17.1% (22.5% next year) No Yes * These do not reflect changes negotiated in the last collective bargaining agreement, which are subject to litigation, as discussed in the prior section "2. Recent Changes to Public Pension Plans". **FRS changes implemented 7/1/11 subject to litigation Budget Advisory Committee Pension Reform Report Page 23 48 Premium Taxes/Share Plans Chapters 175 & 185, F.S. provide for a rebate of the state excise tax on property and casualty insurance premiums to cities with police and firefighter pension plans, known as "premium taxes". The premium tax monies must be used exclusively for firefighter and police pensions, and the local pension plan must comply with the requirements of Ch. 175 & 185. Premium taxes received in excess of the "frozen amount" must be used for extra benefits. In 2010 the City received a total of $3 million in premium tax revenues-about 3.87% of payroll, (approximately $2.4 million in Chapter 175 premium taxes for firefighters and approximately $525,000 in Chapter 185 premium taxes for police officers. The City is able to use $120,000 of the premium tax money received each year to offset the City's contributions to the pension plan. This is the "frozen amount." The rest of the premium tax money-$2.8 million last year-went to "share plans" for fire fighters and police officers. A "Share plan" is a defined contribution plan with individual accounts where a proportionate share of the premium tax proceeds based on tenure are deposited each year. The fire and police share plans provide a lump sum payout to retiring firefighters and police officers on top of their City pension benefit-this is an extra benefit. Typical benefits for those members who had the most years of service are $100,000 for fire fighters and $60,000 for police officers. Under current law and State non-rule policy, the "City" will lose premium tax monies if: The current plan is closed or terminated; or • The City joins FRS; or • Benefits are reduced below Ch. 175/185 minimums Also, any increase in employee contributions for police officers and firefighters under Chapter 175/185 must be agreed to by the police and fire unions. Any transfer of premium tax monies for the police and fire share plans to the City pension fund to reduce the City's required contributions must also be agreed to by the unions. (Reminder: only $120,000 is used to offset cost of the City's defined benefit plan for Police and Fire; while the balance of $1.9 million annually goes to share plans). Summary of Changes in Benefits Both, the Fire and Police Pension Plan and the Miami Beach Employees' Retirement Plan have evolved in Benefit changes over the years and details of these changes are provided in the Appendix. Budget Advisory Committee Pension Reform Report Page 24 49 In the Fire and Police Pension Plan, there are currently 34 members who were hired prior to October 1, 1989 (when the Plan's benefits were generally lower than they are today) who have not joined the Deferred Retirement Option Program (DROP). In 1989, the Supplemental Plan was introduced for Miami Beach Fire Fighters and Police Officers. This plan provided for benefits above the levels in the original Base Plan. For example, the multiplier of 2.5 percent for the first 25 years and 2 percent thereafter was modified to 3 percent for the first 15 years and 4 percent thereafter. In addition, benefit increases were also made to the retiree COLA, the maximum final average monthly earnings as a percent of salary, disability, beneficiary supplements and buyback of military time. However, at the same time, employee contributions were increased to 10 percent. In 1993, some of the benefits were reduced for new employees. For example, the multiplier was reduced to 3 percent for all years and there was a reduction in the retiree COLA. However, the employee contribution was maintained at 1 0 percent . There are currently 15 active members hired between October 1, 1989 and May 19, 1993, which have not joined the DROP. In 2000, the Base Plan and Supplemental Plan were merged and most benefits were returned to the 1989 levels for all employees. In addition, the retirement age benefit was changed to age 50 or the Rule of 70 and in 2009, a DROP benefit and a buyback provision were added. Budget Advisory Committee Pension Reform Report Page 25 50 Plan Status FIRE AND POLICE PENSION As of 10/1/10 Valuation (FY 2011/12 Budget) PLAN FY2010/11 ANNUAL CONTRIBUTION REQUIREMENTS (ARC)* $ 34,416,519 PENSION BOND PAYMENTS 4,495,500 401KMATCH TOTAL ANNUAL CITY PAYME NTS $ 38,912,019 GENERAL FUND COMPONENT ARC $ 33,748,250 PENSION BONDS 4,366,259 401K MATCH %OF GENERAL FUND BUDGET 16% FY2011/12 ANNUAL CONTRIBUTION REQUIREMENTS (ARC)* $ 36,175,910 PENSION BOND PAYMENTS 4,495,500 401K MATCH TOTAL ANNUAL CITY PAYMENTS $ 40,671,410 GENERAL FUND COMPONENT ARC $ 35,602,142 PENSION BONDS 4,366,259 401K MATCH %OF GENERAL FUND BUDGET 16% EMPLOYER ARC AS A% OF PAYROLL NORMAL COST* 32.59% AMORTIZATION OF UNFUNDED LIABILITY 40.17% TOTAL EMPLOYER% OF PAYROLL 72 .76% ANTICIPATED EMPLOYEE CONTRIBUTION $ 4,971,896 UNFUNDED LIABILITY AS OF 10/1/10 (UAAL) $ 291,931,506 FUNDED RATIO (Actuarial Value of Plan Assets less Accrued Laibility-Past Service) 64.3% PENSION PLAN MEMBERS ACTIVE 468 DROP 67 DISABLED 59 RETIRED & BENEFICIARIES 505 TERMINATED VESTED MEMBERS 13 TOTAL 1,112 Budget Advisory Committee Pension Reform Report Page 26 51 Plan Proiections The following projections were provided by the plan actuary, Buck Consultants, based on the 10/1/10 valuation data, which assumed that the assumed rate of return for FY 2010/11 would be 8.3 percent. The actual market rate of return was -0.58%. However, preliminary estimates for the increases in contribution requirements for the 10/1/10 valuation are between $3 million and $3.6 million, similar to those projected below. Valuation Date 2009 2010 2011 2012 2013 2014 20!1.5 10/1 Contribution for 2.011 201-6 FY Discount Rate 8.3% 8.2% 8.1% 8.0% 8.0% 8.0% 8.0% Salary Scale Current Bargaining Agreement ARC (in millions) 34.4 36.2 39.7 43.3 43.9 44.5 45.2 %of Payroll 66.66% 72.76% 77.22% 81.94% 81.76% 81.28% 81.05% MBERP Overview of Current Benefits Multiplier 3% priorto 1.6% 2.5% after 10/1/10 Norm. Ret. Date Age 55 30 years or 62 after 30 years or 62 after 10/1/10 Final Avg. Comp. Highest 5 yrs HighS Retiree COLA 2.5% None 1.5% after 10/1/10 DROP 3 yrs/i nvested rate 5 yrs/1.3% 5 years after 10/1/10 Employee Cost 12% 3% City Cost 25.54% 4.91% (6.58% next year) Total Cost 37.54% 7.91% (9.58% next year) Social Security No Yes Budget Advisory Committee Pension Reform Report Page 27 52 Summary of Changes in Benefits As noted previously, the details of benefit changes to the Miami Beach Employees' Retirement Plan over the years are provided in the Appendix. Between 1988 and 2006, the General Plan (Classified employees) and the Unclassified Plan were separate. The Unclassified Plan generally provided for higher benefits; however, required a higher member contribution. For example, the Unclassified Plan provided for a 4 percent multiplier, a normal retirement of age 50 with 5 years of service, 90 percent maximum pension benefit and a member contribution of 10 percent. The General Plan provided for a 2.75 multiplier for the first 25 years and 2 percent thereafter, a normal retirement age between 55 and 60 (depending on years of service), an 80 percent maximum pension benefit and a 6 percent member contribution. In the early 1990's both plans bifurcated, providing for different benefits in each of the plans for all new members. Upon implementation, the current active members of the General Plan (Classified employees) generally received higher benefits, while newly hired members of the General Plan received benefits that were similar to the newly hired members in the Unclassified Plan. In the Unclassified Plan, benefit levels for both, existing and new members were generally reduced. In 2006, the two plans were merged to create the Miami Beach Employees' Retirement Plan (MBERP) and some benefits were increased, for example: • Retiree COLA was increased from 1.5% simple to 2.5% compounding for all members • Retirement age became 50 with 5 years of creditable service for pre-bifurcation members (Unclassified employees received pre-bifurcation date benefits and Classified employees experienced increased benefits) • Retirement age was decreased for post-bifurcation members from 60 to 55 • Member contributions were reduced to 8 percent for post-bifurcation members Further reductions were implemented in 2010 for both, existing and new MBERP members, as presented in the prior section. Budget Advisory Committee Pension Reform Report Page 28 53 Plan Status As of 10/1/10 Valuation (FY 2011/U Budget) MtAMI BEACH EMPLOYEES RETIREMENT PENSION PLAN (FOR GENERAL EMPLOYEES) FY2010/11 ANNUAL CONTRIBUTION REQUIREMENTS (ARC)* $ PENSION BOND PAYMENTS 401K MATCH 14,474,678 499,500 TOTAL ANNUAL CITY PAYMENTS $ 14,974,178 ~--------~~~~ FY2011/U GENERAL FUND COMPONENT ARC $ PENSION BONDS 401K MATCH %OF GENERAL FUND BUDGET ANNUAL CONTRIBUTION REQUIREMENTS (ARC)* $ PENSION BOND PAYMENTS 401K MATCH 9,287,147 485,140 4% 17,116,313 499,500 TOTAL ANNUAL CITY PAYMENTS $ 17,615,813 ~--------~~~~ GENERAL FUND COMPONENT ARC $ PENSION BONDS 401K MATCH %OF GENERAL FUND BUDGET EMPLOYER ARC ASA% OF PAYROLL NORMAL COST* AMORTIZATION OF UNFUNDED LIABILITY TOTAL EMPLOYER% OF PAYROLL ANTICIPATED EMPLOYEE CONTRIBUTION UNFUNDED LIABILITY AS OF 10/1/10 (UAAL) FUNDED RATIO (Actuarial Value of Plan Assets less Accrued Laibility-Past Service) PENSION PLAN MEMBERS ACTIVE DROP DISABLED RETIRED & BENEFICIARIES TERMINATED VESTED MEMBERS TOTAL $ $ 10,964,684 485,140 5% 10.80% 14.22% 25 .02% 6,995,774 148,766,860 74.4% 1,117 49 40 981 75 2,262 Budget Advisory Committee Pension Reform Report 54 Page 29 Plan Proiections The following projections were provided by the plan actuary, GRS, based on the 10/1/10 valuation data, which assumed that the assumed rate of return for FY 2010/11 would be 8.25 percent. The actual market rate of return was ·1.2%. However, preliminary estimates for the increases in contribution requirements for the 10/1/10 valuation are still pending from the pension board. Valuation Date 2009 2.010 20!1 201'3 2015 10/1 Contr.lbutlonfor 2011 2012 FV: Discount Rate 8.25% 8.25% 8.25% 8.25% 8 .25% 8.25% 8.25% Salary Scale Current Bargaining Agreement ARC (in millions) 17.6* 21.8 25.8 27.7 29.0 29.6 28.2 %of Payroll 25.54% 30.76% 35.34% 36.87% 37.45% 37.12% 34.31% Budget Advisory Committee Pension Reform Report Page 30 55 4. RECOMMENDATIONS Through a series of meetings over the past 12 months, the Budget Advisory Committee (BAC) evaluated the options under consideration for changes to the Fire and Police Pension Plan over the course of several meetings. BAC MOTION RECOMMENDING PENSION REFORM On April 17, 2012, the BAC approved a motion for Fire and Police Plan pension reform combining a number of prior individual motions. The combined motion includes the following motion and vote counts for pension reform for the Fire and Police Pension Plan: • Recommending Options 11102 for new and non-vested Fire and Police Pension Plan employees shown in the table on the following page. Note: this portion of the motion was initially adopted as a separate motion by a 7-2 vote of the BAC. • Recommending that the City negotiate changes for vested Fire and Police Pension Plan employees to achieve thresholds in the policies and guidelines adopted by the BAC (see Section 4 on Policies and Guidelines). Note: this portion of the motion was initially adopted as a separate motion by unanimous vote of the BAC. Budget Advisory Committee Pension Reform Report Page 31 56 HYBRID OPTION IIID2 FOR NEW AND NON-VESTED EMPLOYEES Provide a defined benefit component for Police and Fire non-vested and new hire employees to equal the minimum benefits to receive Premium Taxes from the State as defined by F.S . Chapter175/185 and a defined contribution component of 11 percent funded by the City (with employees providing a matching 5% contribution). Multiplier Final Average Monthly Earnings (FAME) Calc-in years Retiree COLA* Normal Retirement Age %Employee Contribution to DB** % Employee Contribution to DC % City Contribution to Social Security %City Contribution to DC Share Plan DC (See Note Below) Social Security Beneficiaries 2% Highest 5 of last 10 0.0% 55&10 or 52&25 5.00% 5.00% 0.00% 11.00% Yes No 75% Joint & Survivor with 120 months guaranteed *Provided that the City Commission may periodically adjust the COlA up to 1 .5% compounded for a given year, and COLA resets to 0% for the following year unless the City Commission affirmatively votes to increase above 0% for the next fiscal year ** This represents a minimum consistent with F.S. 175/185 but the defined benefit employee contribution can be set at any level Note Premium tax revenues for Fire and Police Plans ore expected to continue . This results in reduction of pension benefits as a percentage of payroll to 21% over 30 years and a net present value (NPV) savings of $7 4 million over 30 years. In addition, year 1 savings are estimated at $2.5 million. While the savings can be achieved by other means, the reduction of risk through a hybrid plan is the key benefit to the City. The City will retain risk on the defined benefit portion of the pension; however, will have no risk on the defined contribution portion. In this regard, th e City's risk is reduced by 40-50 percent. The employees will have a new risk associated with the defined Budget Advisory Committee Pension Reform Report Page 32 57 contribution portions of this plan; however, (1) this is a risk of investment that a majority of the public faces (i.e., nearly all private sector employees have defined contribution plans), and (2) along with the risk comes the reward as well to the extent that the employee invests wisely. The reward potential exceeds the reward potential under the current defined benefit plan. NOTES ON RECOMMENDATION AND REASONS FOR NOT RECOMMENDING OTHER OPTIONS OPTION 1: Florida Retirement System (FRS)-The FRS was not recommended because the City's loss of control of expenses to Tallahassee, ongoing litigation regarding FRS pension changes implemented in 201 1, news of projected shortfalls and payment increases and loss of the premium insurance payments. OPTION II: Defined contribution similar to FRS, including a Social Security equivalent-Although this option eliminates risk, it was not recommended because of concerns with savings potential given the relatively early ages for retirement eligibility, the impact on morale for existing non- vested employees and the potential that this may prove to be unattractive to recruit police and fire employees in the future . OPTION Ill: Hybrid Plans -We recommend the City adopt a hybrid plan approach in Option 11102, and do not recommend the other hybrid plans because although they reduced the risk to the City, they did not generate the NPV savings of Option 11102. OPTION IV: Changes to the Existing Pension Plan -Past Service/Future Service Approach {with a combined benefit). Changes to the existing pension plan are recommended in regards to vested employees in order to meet the Policies and Guidelines identified in Section IV. However, they are not recommended for non-vested and new hire employees because although they can generate the NPV savings, they do not reduce the City's risk, and risk reduction was a key factor in the BAC's recommendation. Budget Advisory Committee Pension Reform Report Page 33 58 5. FACTORS FOR CONSIDERATION In developing recommendations for pension reform, several factors need to be taken into account. FINANCIAL AFFORDABILITY AND SUSTAINABILITY OF THE PLAN VS. PROVIDING APPROPRIATE BENEFITS AND ENSURING COMPETITIVENESS Financial stability and affordability, including the ability to reduce risk or share the risk with employees, is often contrary to providing appropriate benefits for employees and ensuring that these benefits are competitive with other jurisdictions in order to ensure that the City has the ability to recruit highly qualified employees. This trade-off was considered in developing recommended policies and guidelines as discussed in the following section and in evaluating pension reform alternatives. In addition, it is important to note that City of Miami Beach employees do not participate in Social Security, a factor that should be taken into account when evaluating benefits received. UNFUNDED LIABILITY-NO INSTANT FIX Under all scenarios, the City retains responsibility for funding the unfunded accrued actuarial liability (UAAL) of the plan. The UML is typically amortized over a period of up to 30 years and is only reduced (although usually not eliminated) through actuarial gains or benefit reductions. Therefore, under most scenarios, it will take at least 30 years to eliminate the current unfunded liability even while maintaining the assumption that there will be no further increases due to experience losses or assumption changes. In the City of Miami Beach Pension Plans, the payment for the UML each year amounts to approximately half of the City's annual required contribution. Therefore, in the short term, the ability to reduce costs is significantly limited. HOW MUCH RISK IS THE CITY WILLING TO TAKE? Risk in defined benefit pension plans results from the volatility of investment markets which impacts the City's required contribution rates. The City's risk can be reduced by: • Sharing risk with employees -For example, increasing employee contribution rates in some relationship to increases in City contribution rates. Budget Advisory Committee Pension Reform Report Page 34 59 Adopting a more conservative investment policy and reducing the associated assumed rate of return-However, this typically increases costs significantly in the short term. Converting a portion, or all, of the defined benefit plan to a defined contribution plan, because the defined contribution plan specifies the City's risk-free contribution rate, and the employees then assume the risk of their investments. LEGAL GUIDELINES (Source: Lewis Longman and Walker, P.A.) The following are legal guidelines that must be taken into account when considering potential pension reform: • Changes in retirement benefits and employee contributions are mandatory subjects of collective bargaining. As a result, any recommendations by the BAC must be bargained . Accrued pension benefits (benefits earned in the past) cannot be reduced or taken away. However, future benefits can be reduced for current employees who have not reached retirement status. The City is ultimately responsible for unfunded pension liabilities . What are Options to Reduce City Pension Costs? The options to reduce costs are as follows, each of which are discussed in the following section: • Terminate, freeze or close current pension plan (see definitions below), and set up a lower cost plan/benefit such as: • Florida Retirement System (FRS) Defined contribution plan Hybrid Plan • Keep current City pension plan, but: • Reduce benefits for new and/ or current employees • Increase employee contributions 11Ciose" -existing plan is closed to new members; current members stay in existing plan and will continue to accrue benefits, until they retire or leave the City; future employees join new plan. Budget Advisory Committee Pension Reform Report Page 35 60 11free:z:e" -accrued benefits of current employees in existing plan are "frozen" and paid out at retirement; all current and future employees join a new plan, or continue in current plan with reduced benefits. 11Terminate" -existing plan liquidated; accrued benefits paid out to plan members; City responsible for any deficit; all current and future employees join new plan. 20 11 State Legislation 2011 SB 1 128, revised the definition of pensionable compensation to exclude overtime pay in excess of 300 hours (and allows plans to exclude all overtime pay), and exclude payouts for accrued sick and annual leave. These changes must be implemented with the first collective bargaining agreement implemented after 7/1/11. EMPLOYEE GROUPS IMPACTED There are three groups of employees to consider when considering impacts -vested employees (having worked at least 1 0 years), non-vested employees (having worked less than 1 0 years) and new hires. Under the options evaluated, the impacts on the three groups of employees depend on the following scenarios: 1. Reduce benefits for new hires only • Reduces cost over time Current employees (vested and non-vested) keep current benefits No immediate savings -may take many years to achieve cost savings -savings are achieved only as new staff are hired • Creates lower level of benefits for new hires • New hires can be expected to eventually press for benefits similar to longer tenured employees Note: The City implemented a number of pension changes to the General Plan in 201 0. Modifications for the Fire and Police Pension Plan are pending implementation, subject to litigation . 2 . Reduce benefits for new hires and non-vested employees • Reduced cost over time • Some reductions to UAAL • Vested employees keep current benefits Some immediate savings -may take many years to achieve cost savings -immediate savings as applied to non -vested -savings for new staff are achieved only as they are hired Creates lower level of benefits for new hires and non-vested employees Budget Advisory Committee Pension Reform Report Page 36 61 • New hires and non-vested employees can be expected to eventually press for benefits similar to longer tenured employees 3. Reduce benefits for all employees (excluding those employees who have reached normal retirement age). • Immediate cost savings • Reduces UAAL Same benefits for all employees going forward • Reduces future benefits for current employees (employees keep what they have already earned) • Loss of premium tax revenues if Fire and Police Plan benefits are reduced below Chapter 175/185 minimums Note: The City implemented a two percent increase in employee pension contributions and increased the averaging period from three years to five years for all members of General Plan in 2010. Changes agreed to for the Fire and Police Pension Plan for existing employees were minimal and are pending implementation subject to litigation. Budget Advisory Committee Pension Reform Report Page 37 62 6. RECOMMENDED POLICIES AND GUIDELINES The Government Finance Officers Association (GFOA) recommends that state and local governments have a policy statement that will guide their on-going plan design decisions. This policy should encourage governments to provide sustainable and properly funded retirement plans, which will attract employees in a competitive labor market, facilitate effective management of the workforce and fulfill retirement needs. In developing a policy for retirement plan design, a state or local government should consider the following: • Purpose of the retirement plan (e.g., level of replacement income and purchasing power retention); • Ability of public retirees to contribute to the economic viability of their community and not become a financial liability to the community in which they live due to inadequate retirement income; • Organization's philosophy regarding employer and employee responsibilities in preparing for retirement; • Availability of Social Security, retiree medical benefits, disability and survivor benefits and supplemental (e.g. 457) savings plans; • Costs, including the employer's ability to sustain payments and perhaps increase benefits over time and cost predictability; • Labor market considerations such as competitive environment, workforce mobility, length of employee service and recruitment and retention of employees; • Investment risk and control, including how investment risk is allocated between employer and employee; • Portability of benefits; • A plan design that can be communicated to and understood by plan participants; • Employee educational efforts; and • Advantages of the different types of plans (e.g., defined benefit, defined contribution and hybrid). Source: GFOA Best Practices and Advisories, Developing a Policy for Retirement Plan Design Options ( 1999, 2007) (CORBA) Source: Florida Pensions, Volume 1, Issue 1, April 2012. Budget Advisory Committee Pension Reform Report Page 38 63 CITY OF MIAMI BEACH RECOMMENDED POUCIES AND GUIDEUNES As part of the evaluation for Pension Reform in the City of Miami Beach, the Budget Advisory Committee (BAC} is recommending policies for long term pension reform. The BAC is also recommending guidelines for the City to adopt which establish thresholds which if surpassed will require the City to take prompt and appropriate measures to meet the guideline criteria. The policies and guidelines address four perspectives: ( 1) Affordability and Sustainability, (2) Appropriate Benefits to Provide to Employees, (3) Recruitment and Retention, and (4) Management of Risk/Risk Sharing. These policies and guidelines were adopted unanimously by the BAC. AHordability and Sustainability • GUIDELINE STATEMENT: If the City's portion of the total annual cost of retirement benefits contribution exceeds 25 percent of payroll for general employees and 60 percent of payroll for high risk employees, the City should review and evaluate potential changes to the collective bargaining agreements between the City and the Unions, applicable towards the next contract negotiations, in order to identify potential approaches to reduce the contributions to these levels over the long term. • POLICY STATEMENT: The City shall fund at least the normal cost of pension. If this exceeds the amount of the actuarially determined annual required contribution, the excess should be placed in a pension stabilization fund, to be made available for future pension shortfalls. • POLICY STATEMENT: The City should strive to maintain a funded ratio of at least 80 percent for each of its defined benefit pension plans. • GUIDELINE STATEMENT: If the funded ratio {actuarial value of assets minus actuarial liabilities) of either of the City of Miami Beach's pension plans falls below 70 percent, the City should strive to implement approaches to increase the funded ratio to that level over five (5) years. • POLICY STATEMENT: Salary growth should not exceed the average actuarially assumed salary growth in each of the City's pension plans. Budget Advisory Committee Pension Reform Report Page 39 64 • POliCY STATEMENT: The City should require 5, 10 and 20 year projections of required pension contributions as part of the annual actuarial valuations for each of the City's pension plans. These projections shall be based on the current actuarial assumptions for each plan. The projections shall be updated to reflect the cost of any proposed benefit enhancement before the City Commission agrees to the enhancement. The cost of these studies shall be funded separately from the annual contribution to the pension plan. • POliCY STATEMENT: There shall be an experience study of each of the City's pension plan's actuarial assumptions performed by an actuary that is independent from the pension board. The experience study should be conducted at least once every three (3) years, to compare actual experience to the assumptions. The independent actuary shall make recommendations for any changes in assumptions based on the results of the experience study, and any deviations from those assumptions by the pension board shall be justified to the City Commission. • POliCY STATEMENT: Once pension reform is implemented, a 5/7th vote of the City Commission should be required for any further pension changes . Appropriate Benefits to Provide to Employees • POliCY STATEMENT: The City of Miami Beach should strive to provide a retirement benefit that provides for a replacement of salary at a level at least equivalent to Social Security plus a supplemental retirement benefit. • POliCY STATEMENT: The City of Miami Beach retirement benefits should be adjusted periodically after retirement to reflect the impacts of inflation, with rates no more than the Consumer Price Index for All Workers -CPI(W), that is subject to City Commission approval and with a maximum of 3 percent annually. Recruitment and Retention • POliCY STATEMENT: The City of Miami Beach should strive to provide retirement benefits that ensure that the City is competitive in the recruitment and retention of employees. Budget Advisory Committee Pension Reform Report Page 40 65 Management of Risk/Risk Sharing • POLICY STATEMENT: The City of Miami Beach should strive to share some portion of retirement benefit risk with employees. • GUIDELINE STATEMENT: If the City's contribution to a defined pension benefit plan exceeds 25 percent of payroll for general employees and 60 percent of payroll for high risk employees, the employee contribution should be reviewed. Budget Advisory Committee Pension Reform Report Page 41 66 7. OPTIONS EVALUATED Based upon the direction of the Mayor's Charge, as well as the condition of both plans, the Budget Advisory Committee (BAC) focused on recommending changes to the Fire and Police Pension Plan. Below are specifics on each of the options evaluated for the Fire and Police Pension Plan, including a table summarizing the results of the projected cost impact of each. Each of these options was evaluated on a macro level, as well as on a micro level, as to their impacts on the three aforementioned employee groups (i.e., vested, non-vested and new hire employees). The options that changed retirement benefits from the current plan to another plan were evaluated for new employees and for new and non-vested employees. These options include converting to the Florida Retirement System (FRS), converting to a defined contribution plan and converting to a hybrid plan. The options that evaluated changes in benefits for under the current defined benefit plan were evaluated for new employees and for all employees that have not yet reached normal retirement age. Legal note: City of Miami Beach employees who join the Miami Beach pension plan sign individual contracts, which state that the benefits cannot be reduced. Whether these contracts would prevail over changes implemented through the collective bargaining process is a potential legal issue that would likely result in litigation. A recommended approach to implement this option is to incentivize existing employees to voluntarily sign new contracts by offering them alternative reductions in other items not governed by the individual pension contract (e.g. salary and/or non -pension benefits). I. FRS + Social Security Issues to Consider: Reduced cost over time (FRS rates likely going up) Favorable employee contribution rate (FRS contribution is 3%) • City must join Social Security as a condition of joining FRS • Standardized FRS benefits • Portability -easier for City to attract employees from other FRS agencies (but also easier for other FRS agencies to hire employees away) City still must pay off current plan liabilities and may have to shorten amortization period, thereby increasing cost in the short-term • Lose premium tax revenues immediately • State legislature sets benefits and contributions (i.e., City loses control of benefits and contributions) Budget Advisory Committee Pension Reform Report Page 42 67 Legal note : The FRS statute requires that when a city joins FRS, all active members of the city pension plan be given an opportunity to individually elect to join FRS or continue participating in the city plan. The city would not be able to force non-vested employees to join FRS. It is possible to achieve this result by freezing benefits under the city plan for non-vested employees before joining FRS, but this could lead to Social Security issues. These issues are probably resolvable, but would be complicated to work out. The recommended approach to implement this option is to join FRS for new hires, while providing current employees with the option to elect either to stay in the city plan or to join FRS. Future benefit accruals under the city plan could be reduced to encourage more current employees to move to FRS. The BAC requested that this option be evaluated separately based on the option being applied to : A New employees, and B. Non-vested existing employees Multiplier 3.0% (90% after 30 yrs) Norm. Ret. Date Age 60 w/8 yrs or 30 YOS or Age 57 w/30 Yrs including military Final Avg. Comp. COLA DROP Share Plan Employee Cost City Cost Premium Tax Total Cost Social Security High 8 None 5 yrs/1.3% None 3% 19.5% No 22.5% Yes * Changes implemented 7/1/11 subject to litigation Budget Advisory Committee Pension Reform Report 68 Page 43 Results: This option results in a normal cost equivalent to approximately 25 percent of projected payroll, with a net present value of savings of approximately $22 million for only new employees and approximately $51 million for both, new and non-vested employees over the next 30 years. II. Defined Contribution + Social Security equivalent contribution This option eliminates the City's risk for any future benefits earned. The option could be implemented by participating in social security and having an additional defined contribution component, that together total to 24 percent as explained below; or by a defined contribution of 24 percent. Issues to Consider: Predictable employer costs-this is the standard pension in the private sector. • City does not bear investment risk -however, employees bear all risk, a particular concern since if the City does not participate in Social Security under this option • Appeals to younger, mobile employees • Portability -defined contribution account balance may be "rolled over" to an IRA or other retirement plan with another employer • lower administrative costs • No actuarial liabilities-Employees bear investment risk and reward • Possible that defined contribution benefits will run out while employee is still alive No inflation protection (Retiree COLA) loss of premium tax revenues for Fire and Police Plans Investment costs are higher for individual employees than for a pension plan • Benefit would have to exceed Social Security to be competitive The amount of the City's annual required contribution would be equivalent to the FRS amount of 17 percent employer contribution for the FRS investment plan for high risk employees, plus an additional seven (7) percent for a Social Security equivalent, thus representing a total employer contribution of 24 percent, along with an employee contribution of three (3) percent plus a Social Security equivalent of approximately six (6) percent, for a total employee contribution of nine (9) percent. The BAC requested that this option be evaluated separately based on the option being applied to: Budget Advisory Committee Pension Reform Report Page 44 69 A. New employees, and B. Non-vested existing employees Results: This option is designed to be similar in cost to FRS and thus results in a normal cost equivalent to approximately 25 percent of projected payroll, with a net present value of savings of approximately $22 million for only new employees and approximately $51 million for both, new and non-vested employees over the next 30 years. Ill. Hybrid Plans These options reduce but do not fully eliminate the City's risk for any future benefits earned. Issues to Consider: • Reduced cost over time • Sharing of risk between City and employees • Defined benefit base plan-guaranteed benefit • Defined contribution plan on top of defined benefit plan • Continuation of premium tax revenues for Fire and Police Plans, if requirements of F.S. 175 and 185 are met The BAC requested that this option be evaluated separately based on the option being applied to: 1 . New employees, and 2. Non-vested existing employees A. Replace one-half (1 /2) of the multiplier (1 and V2 percent for the first 20 years and 2 percent thereafter), with a defined contribution plan that provides matching requirements based on an actuarially equivalent value. The normal cost as of the 10/1/10 valuation was 32.59 percent, resulting in an actuarially equivalent value of 16.3 percent as the City's contribution. The employees would continue to have a defined benefit with a multiplier of l and Y2 percent for the first 20 years and 2 percent thereafter. Budget Advisory Committee Pension Reform Report Page 45 70 B. Replace one third of the multiplier (1 percent for the first 20 years and 1 and 1/3 percent thereafter} with a defined contribution plan that provides matching requirements based on an actuarially equivalent value. The normal cost as of the 10/1/10 valuation was 32.59 percent, resulting in an actuarially equivalent value of 10.86 percent as the City's contribution. The employees would continue to have a defined benefit with a multiplier of 2 percent for the first 20 years and 2 and 2/3 percent thereafter. C. Provide a defined benefit component equivalent to the minimum benefits for Police and Fire to receive premium taxes from the State as defined by F.S. Chapter175/185 (see Option V for additional details} and a defined contribution component so that the City's total normal costs are similar to FRS, resulting in a defined contribution component of 17.46 percent funded by the City. D. Provide a defined benefit component equivalent to the minimum benefits for Police and Fire to receive Premium Taxes from the State as defined by F.S . Chapter175/185 (see Option V for additional details} and a defined contribution component of 12.46 percent funded by the City (with employees providing a 5% contribution to the defined benefit plan and a matching contribution of 5 percent to the defined contribution component}. The amount of employee match for the defined contribution plan can be determined in collective bargaining negotiations, as it will not impact the City's cost. Results: Options A and B are designed to simply be a substitution of defined benefits with defined contributions without significantly impacting cost but substantially reducing risk, therefore the cost impacts for these are minimal. . In other words, the results are practically the same as the current defined benefit plan, but the risk is eliminated. Options C and D result in a range of normal cost equivalents that range between 20 and 25 percent of projected payroll, with a net present value savings over 30 years ranging between $18 million and $37 million if applied to new employees only; and between $43 million and $7 4 million if applied to both, new and non-vested current employees. Budget Advisory Committee Pension Reform Report Page 46 71 IV. Changes to the Existing Pension Plan -Past Service/Future Service Approach With a Combined Benefit): Issues to Consider: • Reduced cost over time (savings more significant if changes are made for all employees) • Can be designed to keep premium tax revenues-but requires agreement of union • Does nothing to deal with the risks the City assumes Potential items were previously identified by the City's Actuary as being the most significant drivers of cost proposed for either: 1 . New employees and those employees who have not yet vested in the retirement plan (less than 10 years of service); and 2. All employees who have not yet reached normal retirement age (Rule of 70). A Multiplier: Reduce to 3 percent (consistent with FRS but, FRS also has Social Security); B. Multiplier: Reduce to 2 percent (consistent with F.S . 175/185 minimum); C. Final Average Monthly Earnings (FAME): Highest 5 of last 10 years (consistent with F.S. 175/185 minimum and FRS); D. Retiree cost of living adjustment (COLA): Reduce to 1 .5 percent (consistent with general employees hired after 10/1/10 in the General Employee Retirement Plan -MBERP); E. Retiree COLA: Reduce to 0 percent (for prospectively earned benefits consistent with FRS); F. Change Normal Retirement Age: Age 55 with 1 0 years of service or age 52 with 25 years of service (consistent with F.S. 175/185 minimum and FRS); Beneficiaries: Change benefit to be consistent with FRS benefit; and G. Employee Contributions: Increase by 2 percent. Budget Advisory Committee Pension Reform Report Page 47 72 Results: The costs impacts vary significantly for each of the potential components as shown below . Net Present Value Savings (in $millions over 30 years} Normal Cost All Employees New Except Those at Employees Normal Retirement Age A 28.67% 19.5 34.4 B 19.41% 77.1 107.9 c 29.17% 14.4 19.8 D 28.10% 23.7 45.2 E 23.88% 53.7 100.6 F 27.20% 29.8 61.6 G 28 .97% 17.1 30.1 H 29.57% 11.5 15.7 Further, some of the options are mutually exclusive, and the impacts of all options are inter-related . Any recommendations will therefore need to be evaluated as a group in order to determine cost impacts. V. Changes to the Existing Pension Plan -11 Freeze" Current Plan Benefits for Past Accruals and Create a 11Minimum" Benefits Plan for Future Service This option reflects the minimum benefits required to receive State premium taxes as defined in Florida Statutes 175 and 185 (excluding employees who have already reached normal retirement age). This is essentially the most a City can save while still continuing to receive premium taxes . This option "freezes" the past service benefits based on current salaries. The accrued benefits do not continue to grow as salaries increase. • Retiree COLA : Reduce to 0 percent (for benefits based on future service consistent with FRS}; • Multiplier: Reduce to 2 percent per year for future service; • FAME: Highest 5 of last 10 years • Change Normal Retirement Age: Age 55 with 1 0 years of service or age 52 with 25 years of service; • Share Plan: Use 100% of future Chapter175/185 premium tax revenue towards benefits provided by the defined benefit pension plan (requires union agreement); Budget Advisory Committee Pension Reform Report Page 48 73 • Beneficiaries: Change automatic spousal benefit to 1 0 year certain benefit, and allow members to purchase other survivor options; and • Employee Contribution: Reduced from 10 percent to 5 percent. Results: This option results in a normal cost equivalent to approximately 12 percent of projected payroll, with a net present value of savings of approximately $167 million if applied to all new and existing employees who have not yet reached normal retirement age, over 30 years. It is important to note that this is a low normal cost for a plan for high-risk employees that do not include Social Security. VI. Changes to Existing Plan-Package of Items Incorporated Into the Collective Bargaining Agreements in 2010: (See list below) • All Employees • No retiree COLA for at least 2 years of 5-Year Deferred Retirement Option Plan (DROP) period (Years 3 and 4 of DROP) for participants entering DROP after 9/1/12; and • Off-duty compensation pensionable and Sick leave sell back up to the overtime compensation cap. • New Employees Only • Minimum retirement age of 48 for Rule of 70; • Pushed back the increase in multiplier from 3 percent to 4 percent so that, the multiplier increase from 3 percent to 4 percent occurs in year 20 instead of year 15; • FAME increased from 2 to 3 years; and • Retiree COLA decreased from 2 .5 percent to 1.5 percent. Results: This option results in a normal cost equivalent to approximately 23 percent of projected payroll, with a net present value of savings of approximately $33 million for new employees, over 30 years. In 2010, Buck Consultan ts, the actuary for the Fire and Police Pension Plan, estimated the impacts to existing employees to be minimal. Budget Advisory Committee Pension Reform Report Page 49 74 Additional Policy Changes The following were additional policy changes discussed by the Committee that could be implemented without the need for additional actuarial analyses: • Use 100% of 175/185 share plan monies towards benefits provided by the defined benefit pension plan (requires union agreement). • Eliminate the provision that allows for transfer of years of service from Miami Beach Employee Retirement Plan (MBERP) to Fire and Police Pension Plan (proposed by Fire and Police Pension Plan Administration). • Change purchase of service provisions to be based on full actuarial costs (Government Finance Officers Best Practice and Advisory Papers on Pension Reform). • Eliminate the use of sick and vacation hours that are currently used to increase "pensionable pay" (SB 1128 required by 2011 ). • Reduce the amount of annual overtime pay included in pensionable earnings to a maximum of 300 hours (SB 1128 required by 2011 ). Budget Advisory Committee Pension Reform Report Page 50 75 ...... 0) CITY OF MIAMI BEACH BUDGET ADVISORY COMMITTEE: PENSION REFORM SUMMARY COST IMPACTS OF POTENTIAL FIRE AND POLICE PENSION OPTIONS Employees to Which Applicable Multiplier Final Average Monthly Earnings (FAME) Calc -in years Retiree COLA Normal Retirement Age %City Contribution to Social Security % City Contribution to DB or DC+ Social Security Share Plan DC (See Note Below) Social Security Beneficiaries Employee Contribution • • Year 1 $Amount of City Contribution Year 31 $Amount of City Contribution Yr 1 % of Payroll Vr 31.% of Payroll City Year 1 Savings/( Cost) City 30 NPV Savlngs/(Cost) Notes: All analyses by Actuarial Concepts Inc. based onf 10/1/10 data DC= Defined Contribution DB = Defined Benefit, all DB plans assume 1.46% ad min costs NR = Normal Retirement Age All DB optoions are based on an assumed rate of return of 8.2% Share Plans!Use of5tateAuthorized "Premium Taxes" Chapters 175 and 185, F.S. provide for a rebate of the state excise tax on property and casualty insurance premiums to cities with local Police and Fire pension plans In 2008 the City received $2.3 million in premium tax revenues. But nearly all of this money went to separate fire and police "share plans," not to the City's pension fund for firefighters and police officers ($1.5 million to the fire share plan and $500K to the police share plan). Share plan distributions to retiring firefighters typically exceed $100,000. Share plan distributions to retiring police officers are typically in the $50,000 to $60,000 range. CURRENT PLAN All 3 first 15 years, then 4% 2 2.5% Ruleof70 0.00% 0.00% Yes No 75% Joint & Survivor with 120 months guarenteed 10% 35,439,063 42,349,557 74.14% 31.57% N/A N/A Option I OPTION II DC equiv to FRS lnv Plan -FRS 08+SS ELIMINATES RISK IA.New I 18. New/Non Vested IIA.New I 118. New/Non Vested 3% 3% 0 0 8 8 0 0 0 0 0 0 55&6 special risk YOS or 52&25 special risk YOS 55&6 special risk YOS or + military or 25 special 52&25 special risk YOS + risk YOS regardless of military or 25 special risk As Defined in the As Defined in the age YOS regardless of age Plan Plan 6.25% 6.25% 0.00% 0.00% 17.75% 17.75% 24.00% 24.00% No No No No Yes Yes TBD TBD Life Annuity Life Annuity Not Applicable Not Applicable 3% 3% 10% 10'Ai 35,559,519 33,612,185 35,559,519 33,612,185 34,156,148 34,156,148 34,156,148 34,156,148 74.39% 70.32% 74.39% 70.32% 25.46% 25.46% 25.46% 25.46% (120,456) 1,826,878 (120,456) 1,826,878 22,030,653 51,225.419 22,030,6.53 51,225,419 • FRS rates assume 4% increase for future-may change-litigation pending •• Employee Contributions in DC Option II may be changed without impact to City contribution requirements-reduced match for DC ...... ...... CITY OF MIAMI BEACH BUDGET ADVISORY COMMITTEE: PENSION REFORM SUMMARY COST IMPACTS OF POTENTIAL FIRE AND POLICE PENSION OPTIOI Employees to Which Applicable Multlplier Final Average Monthly Earnings (FAME) Calc -in years Retiree COlA Normal Retirement Age %City Contribution to Social Security %City Contribution to DB or DC+ Social Security Share Plan DC (See Note Below) Social Security Beneficiaries Employee Con.tribution r• Year 1 $Amount of City Contribution Year 31 $Amount of City Contribution Yr 1 % of Payroll Yr 31% of Payroll City Year 1 Savings/(Cost) City 30 NPV Savings/( Cost) Notes: All analyses by Actuarial Concepts Inc. based onf 10/1/10 data DC= Defined Contribution DB = Defined Benefit, all DB plans assume 1.46% admin costs NR = Normal Retirement Age All DB optoions are based on an assumed rate of return of 8.2% Share Plans/Use of State Authorized "Premium Taxes" CURRENT PLAN All 3 first 15 years, then 4% 2 2.5% Rule of70 0.00% 0.00% Yes No 7S%Jolnt & Survivor with 120 months guarenteed 10% 35,439,063 42,349,557 74.14% 31Sl% N/A N/A OPTION lilA Hybrid-Replaces 1/2 of DB with DC-REDUCES RISK IIIAl.New IIIIA2. New/Non Vested 11/2 first 15 11/2 first 15 years, then 2% years, then 2% 2 2 2.5% 2.5% Ruleof70 Ruleof70 0.00% 0.00% 16.00% 16.00% Yes Yes No No 75%Joint& 75%Joint& Survivor with 120 Survivor with 120 months months guarenteed guarenteed 10% 10% 35,439,063 35,718,266 43,354,448 43,354,448 74.14% 74.72% 32.31% 32.31% -(279,203) (2,839.080) (7,678,193) OPTION 1118 OPTION IIIC Hybrid-Replaces 1/3 of DB with DC-Hybrid -Minimum DB Benefits Per State REDUCES RISK Statute + 17.46% DC -REDUCES RISK IIIIB2. New/Non I IIIC2. New/Non IIIBl.New Vested IIIC1.New Vested 2% first 15 years, 2% first 15 years, then 2.66% then2.66% 2% 2% 2 2 Highest 5 of last 10 Highest 5 of last 10 2.5% 2.5% 0.0% 0.0% Ruleof70 Rule of70 55&10 or 52&25 55&10 or 52&25 0.00% 0.00% 0.00% 0.00% 10.00% 10.00% 16.00% 16.00% Yes Yes Yes Yes No No No No 75%Joint& 75%Joint & Survivor with 120 Survivor with 120 75% Joint & Survivor 75% Joint & Survivor months months with 120 months with 120 months guarenteed guarenteed guarenteed guarenteed 10% 10% 5% 5% 35,439,063 35,672,176 35,439,063 33,844,490 43,204,184 43,204,184 34,139,547 34,139,547 74.14% 74.63% 74.14% 70.80% 32.20% 32.20% 25.45% 25.45% -(233,113) -1,594,573 (2,414,,545) (4,2.18,739} 17,851,123 43,128,414 Chapters 175 and 18S, F.S. provide for a rebate of the state excise tax on property and casualty insurance premiums to cities with local Police and Fire pension plans •• Employee Contribitions in Hybrid Plan IIIC and liD may be rincreased without impacting City cost In 2008 the City received $2.3 million in premium tax revenues. But nearly all of this money went to separate fire and police "share plans," not to the City's pension fund for firefighters and police officers ($1.5 million to the fire share plan and $500K to the police share plan). Share plan distributions to retiring firefighters typically exceed $100,000. Share plan distributions to retiring police officers are typically in the $50,000 to $60,000 range. OPTION IIID Hybrid -Minimum DB Benefits Per State Statute+ 12.46% DC -REDUC£S RISK I 11102. New/Non IIIDl.New V6ted 2% 2% Highest 5 of last 10 Highest 5 of last 10 0.0% 0.0% 55&10 or 52&25 55&10 or 52&25 0.00% 0.00% 11.00% 11.00% Yes Yes I No No 75% Joint & Survivor 75% Joint & Survivor with 120 months with 120 months I guarenteed guarenteed I I 5% 5% 35,439,063 32,960,590 27,431,335 27,431,355 74.14% 68.96% 20.45% 20.45% 2,478,473 36,803,593 74,067.418 ...... 00 CITY OF MIAMI BEACH BUDGET ADVISORY COMMiffiE: PENSION REFORM SUMMARY COST IMPACTS OF POTENTIAL FIRE AND POLICE PENSION OPTIOI Employees to Which Applicable Multiplier Final Average Monthly Earnings (FAME) Calc-in years Retiree COLA Normal Retirement Age %City Contribution to Social Security %City Contribution to DB or DC+ Social Security Share Plan DC (See Note Below) Social Security Benefici~rles Employee Contn'bution r• Year 1 $Amount of City Contribution Year 31 $Amount of City Contribution Yr 1 % of Payroll Yr 31% of Payroll City Year 1 Savings/( Cost) I City 30 NPV Savings/( Cost) Notes: All analyses by Actuarial Concepts Inc. based onf 10/1/10 data DC = Defined Contribution DB = Defined Benefit, all DB plans assume 1.46% admin costs NR = Normal Retirement Age All DB optoions are based on an assumed rate of return of 8.2% Share Plans/Use of State Authorized "Premium Taxes• Chapters 175 and 185, F.S. provide for a rebate of the state excise tax on property and casualty insurance premiums to cities with local Police and Fire pension plans In 2008 the City received $2.3 million in premium tax revenues. But nearly all of this money went to separate fire and police "share plans," not to the City's pension fund for firefighters and police officers ($1.5 million to the fire share plan and $500K to the police share plan). Share plan distributions to retiring firefighters typically exceed $100,000. Share plan distributions to retiring police officers are typically in the $50,000 to $60,000 range. CURRENT PLAN All 3 first 15 years, the.n 4% 2 2.5% Ruleof70 0.00% 0.00% Yes No 75%Jolnt & Survivor with 120 months guarenteed 10% 35,439,063 42,349,557 74.14% 31-57% N/A N/A Option IVA 3% Multiplier All Years IVAl. New and I IVA2. All Non-Vested exceptNR No Other Changes 10% 10% 34,786,003 33,593,541 38,464,161 38,464,161 72.77% 70.28% 28.67%• 28.67% 653,060 1,845,522 19,448,159 34,362,906 OPTION IV CHANGES TO EXISTING PLAN Option IVB 2% Multiplier All Option IVC Change FAME to high Option IVD Change Existing COLA Years s to 1.5% IVBl. New and IIVB2. All except Non-Vested NR IVCl. New and IIVC2. All except Non-Vested NR IVD1. New and IIVD2. All except Non-Vested NR No Other Changes No Other Changes No Other Changes 10% 10% 10% 10% 10% 10% 33,205,899 30,523,193 35,002,758 34,552,299 34,636,516 32.932,490 I 26,043,236 26,043,236 39,137,666 39,137,666 37,694,058 37,694,058 69.47% 63.86% 73.23% 72.29% 72.46% 68.90% I 19.41% 19.41% 29.17% 29.17% 28.10% 28.10% I I 2,233,164 4,915,870 436,305 886,764 802,547 2,506,573' 77,134.350 107,938,123 14,415,514 19,762,321 23 737,63~ 4S,t9o,os3 I ...... CD CITY OF MIAMI BEACH BUDGET ADVISORY COMMITIEE: PENSION REFORM SUMMARY COST IMPACTS OF POTENTIAL FIRE AND POLICE PENSION OPTIOI Emp_l<>yees to Which Applicable Multiplier Final Average Monthly Earnings (FAME) Calc-in years Retiree COLA Normal Retirement Age %City Contribution to Social Security % City Contribution to DB or DC + Social Security Share Plan DC (See Note Below) Social Security Beneficiaries Employee Contribution .. Year 1 $Amount of City Contribution Year 31 $Amount of City Contribution Yr 1 % of Payroll Yr 31% of Payroll City Year 1 Savings/( Cost) City 30 Nf>V Savings/( Cost)~~~-Notes: All analyses by Actuarial Concepts Inc. based onf 10/1/10 data DC = Defined Contribution DB = Defined Benefit, all DB plans assume 1.46% admin costs NR = Normal Retirement Age All DB optoions are based on an assumed rate of return of 8.2% Share Plans/Use of State Authorized "Premium Taxes" Chapters 175 and 185, F.S. provide for a rebate of the state excise tax on property and casualty insurance premiums to cities with local Police and Fire pension plans In 2008 the City received $2.3 million in premium tax revenues. But nearly all of this money went to separate fire and police "share plans," not to the City's pension fund for firefighters and police officers ($1.5 million to the fire share plan and $500K to the police share plan). Share plan distributions to retiring firefighters typically exceed $100,000. Share plan distributions to retiring police officers are typically in the $50,000 to $60,000 range. CURRENT PLAN All 3 first 15 years, then 4% 2 2.5% Ruleof70 0.00% 0.00% Yes No 75% Joint & Survivor with 120 months guarenteed 10% 35,439,063 42,349,557 74.14% 31.57% N/A N/A Option IVE Change Existing Plan to No COLA IVEl. New and IIVE2. All except Non-Vested NR No Other Changes 10% 10% 33,660,923 29,889,218 32,040,378 32,040,378 70.42% 62.53% 23.88% 23.88% 1,778,140 5,549,845 53,673,164 100,633,984 OPTION IV CHANGES TO EXISTING PLAN (CONTINUED) Option IVH Change Existing Plan Option IVF Change Existing Plan Option IVG Change Existing Plan Increase Employee Contribution to 55&10 or 52&25 to Normal Form of Ufe Annuity by2% IVFl. New and IIVF2. All except Non-Vested NR IVGl. New and IIVG2. All except Non-Vested NR IVHl. New and I IVH2. All except Non-Vested NR , No Other Changes No Other Changes No Other Changes 10% 10% 10% 10% 12% 12% 34,450,821 32,003,876 34,863,363 33,746,253 35,085,376 34,597,069 36,487,922 36,847,922 38,868,451 38,868,451 39,666,273 39,666,273 72.07% 66.95% 72.94% 70.60% 73.40% 72.38% 27.20% 27.20% 28.97% 28.97% 29.57% 29.57% 988,242 3,435,187 575,700 1,692,810 353,687 841,994 ~9,833.132 61,555,U6 17,096,883 30,067,071 U,4n,osz 15,672,414 00 0 CITY OF MIAMI BEACH BUDGET ADVISORY COMMITTEE: PENSION REFORM SUMMARY COST IMPACTS OF POTENTIAL FIRE AND POLICE PENSION OPTIOI Employees to Which ApPUcable Multiplier Final Average Monthly Earnings (FAME) Calc -in years Retiree COLA Normal Retirement Age %City Contribution to Social Security % City Contribution to DB or DC+ Social Security Share Plan DC (See Note Below) Social Security Beneficiaries Employee Contribution•• Year 1 $Amount of City Contribution Year 31 $Amount of City Contribution Yr 1 %of Payroll Yr 31% of Payroll City Year 1 Savings/( Cost) City 30 NPV Savings/( Cost) --------Notes: All analyses by Actuarial Concepts Inc. based onf 10/1/10 data DC= Defined Contribution DB = Defined Benefit, all DB plans assume 1.46% admin costs NR = Normal Retirement Age All DB optoions are based on an assumed rate of return of 8.2% Share Plans/Use of State Authorized "Premium Taxes" Chapters 175 and 185, F.S. provide for a rebate of the state excise tax on property and casualty insurance premiums to cities with local Police and Fire pension plans In 2008 the City received $2.3 million in premium tax revenues. But nearly all of this money went to separate fire and police "share plans," not to the City's pension fund for firefighters and police officers ($1.5 million to the fire share plan and $500K to the police share plan). Share plan distributions to retiring firefighters typically exceed $100,000. Share plan distributions to retiring police officers are typically in the $50,000 to $60,000 range. CURRENT PLAN OPTION V STATE STATUTE 175/185 All Minimum Benefits 3 first 15 years, then 4% 2% 2 Highest 5 of last 10 2.5% 0% Ruleof70 55&10 or 52&25 0.00% 0.00% 0.00% 0.00% Yes Yes No No 75%Joint & Survivor with 120 months 10 Year Certain and Life, guarenteed thereafter annuity 10% 5% 35,439,063 24,259,101 42,349,557 30,858,185 74.14% 50.75% 31.57% 12.23% N/A 11,179,962 ____JI/A_ -167,331,205 OPTION VI 2010 Contract Changes (New Employees-see footnote• •• re existing employees) 3 first 20 years, then 4% 3 1.5% Deferred to 1 year after DROP Rule of 70-Minimum age of 48 0.00% 0.00% Yes No 75% Joint & Survivor with 120 months guarenteed 10% 35,439,063 30,722,497 74.14% 22.90% -32,849,516 --•••suck Consultant Estimated Impact for Existing Employees = $651,322 (in future) -$368,665 =$282,667 APPENDICES 81 DRAFT REPORT Table of Contents Section 1-Option IA: Florida Retirement System+Social Security (24%) for New Employees Section 2-Option IB: Florida Retirement System+Social Security (24%) for New and Non-vested Existing Employees Section 3-Option ITA: Defined Contribution+Social Security (24%) for New Employees Section 4-Option liB: Defined Contribution+Social Security (24%) for New and Non- vested Existing Employees Section 5-Option IIIA1: Hybrid Plan (1.5%/2%) with 16% DC for New Employees Section 6-Option IIIA2: Hybrid Plan (1.5%/2%) with 16% DC for New Employees and Non-vested Existing Employees Section 7-Option IIIB1: Hybrid Plan (2%/2.66%) with 10% DC for New Employees Section 8-Option IIIB2: Hybrid Plan (2%/2.66%) with 10% DC for New Employees and Non-vested Existing Employees Section 9-Option IIIC1 -Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 17.46% DC for New Employees Section 10-Option IIIC2 -Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 17.46% DC for New Employees and Non-vested Existing Employees Section 11 -Option IIID1 -Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 12.46% DC for New Employees Section 12-Option IIID2-Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 12.46% DC for New Employees and Non-vested Existing Employees Section 13-Option IV A1: Change Existing Plan to 3% Multiplier for all FS, Vested Employees Grandfathered Section 14-Option IV A2: CHange Existing Plan to 3% Multiplier for all FS, Employees Eligible for NR Grandfathered Section 15-Option IVB1: Change Existing Plan to 2% Multiplier for all FS, Vested Employees Grandfathered Section 16 -Option IVB2: Change Existing Plan to 2% Multiplier for all FS, Employees Eligible for NR Grandfathered Section 17-Option IVC1: CHange Existing Plan to FAME High 5 for all FS, Vested Employees Grandfathered Section 18-Option IVC2: Change Existing Plan to FAME High 5 for all FS, Employees Eligible for NR Grandfathered Section 19-Option IVD1: Change Existing Plan to 1.5% COLA, Vested Employees Grandfathered . . . . A;;tijCQJ~~~J:)tS 82 Section 20 -Option IVD2: Change Existing Plan to 1.5% COLA, Employees Eligible for NR Grandfathered Section 21-Option IVE1: Change Existing Plan to No COLA, Vested Employees Grandfathered Section 22 -Option IVE2: Change Existing Plan to No COLA, Employees Eligible for NR Grandfathered Section 23-Option IVF1: Change Existing Plan to 55&10 or 52&25, Vested Employees Grandfathered Section 24-Option IVF2: Change Existing Plan to 55&10 or 52&25, Employees Eligible for NR Grandfathered Section 25-Option IVG1: Change Existing Plan Normal Form to Life Annuity, Vested EE's Grandfathered Section 26 -Option IVG2: Change Existing Plan Normal Form to Life Annuity, EE's Eligible for NR Grandfathered Section 27-Option IVH1: Increase Existing Employee Contributions by 2%, Vested EE's Grandfathered Section 28 -Option IVH2: Increase Existing Employee Contributions by 2%, EE's Eligible for NR Grandfathered Section 29-Option V: Chapter Minimum-Freeze Current Plan Benefits, Implement Chapter Minimum Benefits Plan for all Future Service, Grandfather all Employees Eligible for NR Section 30 -Option VI: Reformed Plan for New Employees: Minimum Retirement Age 48,4% multiplier after 20 years,3 year FAME, 1.5% Retiree COLA . , . . A~t\J(~~~i~~ts 83 1-1 Section 1 Option IA: Florida Retirement System+Social Security (24%) for New Employees Miami Beach Police & Fire Plan Projected Cost in Dollars Option IA: Florida Retirement System+Social Security (24%) for New Employees 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -Option lA-$ A , • • t;.;;t~t~~~~2tS 84 1-2 80% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-% -No-Option !A-% 85 1-3 Option lA: Florida Retirement System+Social Security (24%) for New Employees Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option lA-$ Option lA-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 35,559,519 74.39% (120,456) (120,456) 2011 37,226,360 75.25% 37,293,728 75.38% (67,368) (62,262) 2012 37,981,309 74.18% 37,944,846 74.10% 36,463 31,146 2013 38,660,638 72.95% 38,468,359 72.59% 192,279 151,792 2014 40,013,760 72.95% 39,654,486 72.29% 359,274 262,130 2015 41,414,242 72.95% 40,893,091 72.03% 521,150 351,420 2016 42,863,740 72.95% 42,183,979 71.79% 679,761 423,636 2017 44,363,971 72.95% 43,518,681 71.56% 845,290 486,872 2018 45,916,710 72.95% 44,876,659 71.30% 1,040,051 553,652 2019 47,523,795 72.95% 46,224,799 70.96% 1,298,996 639,091 2020 49,187,128 72.95% 47,603,208 70.60% 1,583,920 720,213 2021 50,908,677 72.95% 49,031,793 70.26% 1,876,884 788,747 2022 52,690,481 72.95% 50,529,248 69.96% 2,161,233 839,410 2023 54,534,648 72.95% 52,105,048 69.70% 2,429,600 872,128 2024 56,443,360 72.95% 53,710,919 69.42% 2,732,441 906,503 2025 58,418,878 72.95% 55,347,114 69.11% 3,071,764 941,844 2026 60,463,539 72 .95% 57,064,064 68.85% 3,399,475 963,331 2027 62,579,763 72.95% 58,835,864 68.59% 3,743,899 980,530 2028 64,770,054 72.95% 60,642,991 68.30% 4,127,064 998,965 2029 67,037,006 72.95% 62,479,597 67.99% 4,557,409 1,019,530 2030 69,383,301 72.95% 64,402,151 67.71% 4,981,151 1,029,875 2031 69,868,207 70.98% 64,461,469 65.48% 5,406,738 1,033,149 2032 70,122,087 68.82% 64,270,583 63.08% 5,851,504 1,033,398 2033 66,721,958 63.27% 60,489,234 57.36% 6,232,724 1,017,304 2034 62,987,707 57.71% 56,395,736 51.67% 6,591,972 994,400 2035 65,472,079 57.96% 58,601,035 51.88% 6,871,044 957,946 2036 65,058,318 55.65% 57,926,472 49.55% 7,131,846 918,953 2037 63,213,581 52.24% 55,823,595 46.13% 7,389,986 880,050 2038 58,980,901 47.09% 51,332,265 40.99% 7,648,636 841,823 2039 45,863,374 35.38% 37,947,036 29.27% 7,916,338 805,256 2040 42,349,557 31.57% 34,156,148 25.46% 8,193,410 770,277 TotalAPV 22,030,653 a ' • • A~t1Jt~~~i~ts 86 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 10 11 Section2 Option IB: Florida Retirement System+Social Security (24%) for New and Non-vested Existing Employees 2-1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -OptioniB-$ 87 2-2 80% 75% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ....._Current Plan Cost (incl. expenses & Buyback)-% ~OptioniB-% 88 Option ffi: Florida Retirement System+Social Security (24%) for New and Non-vested Existing Employees Current Plan Cost Current Plan Cost (incl. expenses & (incl. expenses & Year Buyback)-$ Buyback)-% Optionffi-$ 2010 35,439,063 74.14% 33,612,185 2011 37,226,360 75.25% 35,258,369 2012 37,981,309 74.18% 35,820,049 2013 38,660,638 72.95% 36,260,618 2014 40,013,760 72.95% 37,361,347 2015 41,414,242 72.95% 38,512,858 2016 42,863,740 72.95% 39,715,055 2017 44,363,971 72.95% 40,962,964 2018 45,916,710 72.95% 42,231,195 2019 47,523,795 72.95% 43,496,664 2020 49,187,128 72.95% 44,794,698 2021 50,908,677 72.95% 46,146,149 2022 52,690,481 72.95% 47,572,655 2023 54,534,648 72.95% 49,080,189 2024 56,443,360 72.95% 50,672,140 2025 58,418,878 72.95% 52,312,751 2026 60,463,539 72.95% 54,035,571 2027 62,579,763 72.95% 55,867,606 2028 64,770,054 72.95% 57,818,725 2029 67,037,006 72.95% 59,842,380 2030 69,383,301 72.95% 61,936,864 2031 69,868,207 70.98% 62,161,144 2032 70,122,087 68.82% 62,145,277 2033 66,721,958 63.27% 58,465,960 2034 62,987,707 57.71% 54,442,749 2035 65,472,079 57.96% 56,628,047 2036 65,058,318 55.65% 55,904,745 2037 63,213,581 52.24% 53,739,633 2038 58,980,901 47.09% 49,175,365 2039 45,863,374 35.38% 35,714,644 2040 42,349,557 31.57% 34,156,148 89 2-3 Present Value Annual of Savings Optionffi-% Savings (Cost) (Cost) 70.32% 1,826,879 1,826,879 71.27% 1,967,991 1,818,846 69.96% 2,161,260 1,846,088 68.42% 2,400,020 1,894,668 68.11% 2,652,413 1,935,228 67.84% 2,901,384 1,956,451 67.59% 3,148,685 1,962,301 67.36% 3,401,007 1,958,920 67.09% 3,685,515 1,961,914 66.77% 4,027,131 1,981,301 66.43% 4,392,429 1,997,249 66.12% 4,762,528 2,001,417 65.86% 5,117,826 1,987,735 65.65% 5,454,458 1,957,930 65.49% 5,771,221 1,914,635 65.32% 6,106,127 1,872,220 65.19% 6,427,968 1,821,535 65.13% 6,712,156 1,757,918 65.12% 6,951,329 1,682,586 65.12% 7,194,626 1,609,497 65.12% 7,446,438 1,539,584 63.15% 7,707,063 1,472,707 60.99% 7,976,810 1,408,736 55.44% 8,255,999 1,347,543 49.88% 8,544,959 1,289,008 50.13% 8,844,032 1,233,016 47.82% 9,153,573 1,179,456 44.41% 9,473,948 1,128,223 39.26% 9,805,536 1,079,215 27.55% 10,148,730 1,032,336 25.46% 8,193,410 770,277 TotalAPV 51,225,419 . . . A~t~t~~~~2tS 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 3-1 Section3 Option ITA: Defined Contribution+Social Security (24%) for New Employees Miami Beach Police & Fire Plan Projected Cost in Dollars Option ITA: Defined Contribution+Social Security (24%) for New Employees 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -OptionllA-$ 90 80% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 3-2 I Miami Beach Police & Fire Plan Projected Cost in Percentages Option IIA: Defined Contribution+Social Security (24%) for New Employees 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl . expenses & Buyback)-% ~Option ITA-% 91 3-3 Option ITA: Defined Contribution+Social Security (24%) for New Employees Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option IIA-$ Option IIA-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 35,559,519 74.39% (120,456) (120,456) 2011 37,226,360 75.25% 37,293,728 75.38% (67,368) (62,262) 2012 37,981,309 74.18% 37,944,846 74.10% 36,463 31,146 2013 38,660,638 72.95% 38,468,359 72.59% 192,279 151,792 2014 40,013,760 72.95% 39,654,486 72.29% 359,274 262,130 2015 41,414,242 72.95% 40,893,091 72.03% 521,150 351,420 2016 42,863,740 72.95% 42,183,979 71.79% 679,761 423,636 2017 44,363,971 72.95% 43,518,681 71.56% 845,290 486,872 2018 45,916,710 72.95% 44,876,659 71.30% 1,040,051 553,652 2019 47,523,795 72.95% 46,224,799 70.96% 1,298,996 639,091 2020 49,187,128 72.95% 47,603,208 70.60% 1,583,920 720,213 2021 50,908,677 72.95% 49,031,793 70.26% 1,876,884 788,747 2022 52,690,481 72.95% 50,529,248 69.96% 2,161,233 839,410 2023 54,534,648 72.95% 52,105,048 69.70% 2,429,600 872,128 2024 56,443,360 72.95% 53,710,919 69.42% 2,732,441 906,503 2025 58,418,878 72.95% 55,347,114 69.11% 3,071,764 941,844 2026 60,463,539 72.95% 57,064,064 68.85% 3,399,475 963,331 2027 62,579,763 72.95% 58,835,864 68.59% 3,743,899 980,530 2028 64,770,054 72.95% 60,642,991 68.30% 4,127,064 998,965 2029 67,037,006 72.95% 62,479,597 67.99% 4,557,409 1,019,530 2030 69,383,301 72.95% 64,402,151 67.71% 4,981,151 1,029,875 2031 69,868,207 70.98% 64,461,469 65.48% 5,406,738 1,033,149 2032 70,122,087 68.82% 64,270,583 63.08% 5,851,504 1,033,398 2033 66,721,958 63.27% 60,489,234 57.36% 6,232,724 1,017,304 2034 62,987,707 57.71% 56,395,736 51.67% 6,591,972 994,400 2035 65,472,079 57.96% 58,601,035 51.88% 6,871,044 957,946 2036 65,058,318 55.65% 57,926,472 49.55% 7,131,846 918,953 2037 63,213,581 52.24% 55,823,595 46.13% 7,389,986 880,050 2038 58,980,901 47.09% 51,332,265 40.99% 7,648,636 841,823 2039 45,863,374 35.38% 37,947,036 29.27% 7,916,338 805,256 2040 42,349,557 31.57% 34,156,148 25.46% 8,193,410 770,277 TotalAPV 22,030,653 92 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 Section 4 Option liB: Defined Contribution+Social Security (24%) for New and Non-vested Existing Employees Miami Beach Police & Fire Plan Projected Cost in Dollars Option ITB: Defined Contribution+Social Security {24%) for New and Non-vested Existing Employees 4-1 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 .....,._Current Plan Cost (incl. expenses & Buyback)-$ -Option liB-$ 93 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 10 11 12 13 Miami Beach Police & Fire Plan Projected Cost in Percentages Option llB: Defined Contribution+Social Security (24%) for New and Non-vested Existing Employees 4-2 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 -&-Current Plan Cost (incl. expenses & Buyback)-% .....,_Option liB-% . . . . A;::t~c~:~~ts 94 Option liB: Defined Contribution+Social Security (24%) for New and Non-vested Existing Employees Current Plan Cost Current Plan Cost (incl. expenses & (incl. expenses & Year Buyback)-$ Buyback)-% Option liB-$ 2010 35,439,063 74.14% 33,612,185 2011 37,226,360 75.25% 35,258,369 2012 37,981,309 74.18% 35,820,049 2013 38,660,638 72.95% 36,260,618 2014 40,013,760 72.95% 37,361,347 2015 41,414,242 72.95% 38,512,858 2016 42,863,740 72.95% 39,715,055 2017 44,363,971 72.95% 40,962,964 2018 45,916,710 72.95% 42,231,195 2019 47,523,795 72.95% 43,496,664 2020 49,187,128 72.95% 44,794,698 2021 50,908,677 72.95% 46,146,149 2022 52,690,481 72.95% 47,572,655 2023 54,534,648 72.95% 49,080,189 2024 56,443,360 72.95% 50,672,140 2025 58,418,878 72.95% 52,312,751 2026 60,463,539 72.95% 54,035,571 2027 62,579,763 72.95% 55,867,606 2028 64,770,054 72.95% 57,818,725 2029 67,037,006 72.95% 59,842,380 2030 69,383,301 72.95% 61,936,864 2031 69,868,207 70.98% 62,161,144 2032 70,122,087 68.82% 62,145,277 2033 66,721,958 63.27% 58,465,960 2034 62,987,707 57.71% 54,442,749 2035 65,472,079 57.96% 56,628,047 2036 65,058,318 55.65% 55,904,745 2037 63,213,581 52.24% 53,739,633 2038 58,980,901 47.09% 49,175,365 2039 45,863,374 35.38% 35,714,644 2040 42,349,557 31.57% 34,156,148 95 4-3 Present Value Annual of Savings Option liB-% Savings (Cost) (Cost) 70.32% 1,826,879 1,826,879 71.27% 1,967,991 1,818,846 69.96% 2,161,260 1,846,088 68.42% 2,400,020 1,894,668 68 .11% 2,652,413 1,935,228 67.84% 2,901,384 1,956,451 67.59% 3,148,685 1,962,301 67.36% 3,401,007 1,958,920 67.09% 3,685,515 1,961,914 66.77% 4,027,131 1,981,301 66.43% 4,392,429 1,997,249 66.12% 4,762,528 2,001,417 65.86% 5,117,826 1,987,735 65.65% 5,454,458 1,957,930 65.49% 5,771,221 1,914,635 65.32% 6,106,127 1,872,220 65.19% 6,427,968 1,821,535 65.13% 6,712,156 1,757,918 65.12% 6,951,329 1,682,586 65.12% 7,194,626 1,609,497 65.12% 7,446,438 1,539,584 63.15% 7,707,063 1,472,707 60.99% 7,976,810 1,408,736 55.44% 8,255,999 1,347,543 49.88% 8,544,959 1,289,008 50.13% 8,844,032 1,233,016 47.82% 9,153,573 1,179,456 44.41% 9,473,948 1,128,223 39.26% 9,805,536 1,079,215 27.55% 10,148,730 1,032,336 25.46% 8,193,410 770,277 TotalAPV 51,225,419 .. ' . . A.~t'J(~~~~~()tS 5-1 SectionS Option IIIAl: Hybrid Plan (1.5%/2%) with 16% DC for New Employees 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 -+-Current Plan Cost (incl. expenses & Buyback)-$ -Option ITIAl-$ 96 80% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% Miami Beach Police & Fire Plan Projected Cost in Percentages Option IllA1: Hybrid Plan (1.5%/2%) with 16% DC for New Employees 5-2 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-% 97 5-3 Option IllA1: Hybrid Plan (1.5%/2%) with 16% DC for New Employees Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option IllA1-$ Option IIIA1-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 35,439,063 74.14% 2011 37,226,360 75.25% 37,233,110 75.26% (6,750) (6,238) 2012 37,981,309 74.18% 38,000,802 74.21% (19,493) (16,651) 2013 38,660,638 72.95% 38,699,016 73.02% (38,378) (30,297) 2014 40,013,760 72.95% 40,072,358 73.06% (58,598) (42,754) 2015 41,414,242 72.95% 41,492,477 73.09% (78,235) (52,755) 2016 42,863,740 72.95% 42,961,247 73.12% (97 ,507) (60,767) 2017 44,363,971 72.95% 44,481,585 73.14% (117,614) (67,744) 2018 45,916,710 72.95% 46,057,896 73.17% (141,186) (75,158) 2019 47,523,795 72.95% 47,696,135 73.21% (172,340) (84,789) 2020 49,187,128 72.95% 49,393,705 73.26% (206,577) (93,931) 2021 50,908,677 72.95% 51,150,462 73.30% (241,784) (101,608) 2022 52,690,481 72.95% 52,966,482 73.33% (276,002) (107,197) 2023 54,534,648 72.95% 54,843,010 73.36% (308,362) (110,689) 2024 56,443,360 72.95% 56,788,169 73.40% (344,809) (114,392) 2025 58,418,878 72.95% 58,804,458 73.43% (385,580) (118,224) 2026 60,463,539 72.95% 60,888,550 73.46% (425,012) (120,438) 2027 62,579,763 72.95% 63,046,204 73.49% (466,441) (122,161) 2028 64,770,054 72.95% 65,282,518 73.53% (512,464) (124,043) 2029 67,037,006 72.95% 67,601,081 73.56% (564,075) (126,188) 2030 69,383,301 72.95% 69,998,241 73.60% (614,940) (127,142) 2031 69,868,207 70.98% 70,534,264 71.65% (666,056) (127,274) 2032 70,122,087 68.82% 70,841,553 69.53% (719,466) (127,060) 2033 66,721,958 63.27% 67,487,385 64.00% (765,427) (124,933) 2034 62,987,707 57.71% 63,796,544 58.45% (808,837) (122,013) 2035 65,472,079 57.96% 66,314,920 58.71% (842,841) (117,507) 2036 65,058,318 55.65% 65,933,051 56.39% (874,733) (112,711) 2037 63,213,581 52.24% 64,119,934 52.99% (906,353) (107,935) 2038 58,980,901 47.09% 59,918,977 47.84% (938,076) (103,246) 2039 45,863,374 35.38% 46,834,283 36.13% (970,908) (98,761) 2040 42,349,557 31.57% 43,354,448 32.31% (1,004,890) (94,471) TotalAPV (2,839,080) 98 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 Section6 Option ITIA2: Hybrid Plan (1.5%/2%) with 16% DC for New Employees and Non-vested Existing Employees 6-1 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ..,._Current Plan Cost (incl. expenses & Buyback)-$ -OptionlliA2-$ 99 6-2 80% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ,..._Current Plan Cost (incl. expenses & Buyback)-% _,._Option IITA2-% ~ -.._ __ --~-: -------·--~== ~~c~~~~P-tS 100 Option IllA2: Hybrid Plan (1.5%/2%) with 16% DC for New Employees and Non-vested Existing Employees Current Plan Cost Current Plan Cost (incl. expenses & (incl. expenses & Year Buyback)-$ Buyback)-% Option IIIA2-$ Option IIIA2-% 2010 35,439,063 74.14% 35,718,266 74.72% 2011 37,226,360 75.25% 37,736,065 76.28% 2012 37,981,309 74.18% 38,535,477 75.26% 2013 38,660,638 72.95% 39,259,056 74.08% 2014 40,013,760 72.95% 40,658,303 74.12% 2015 41,414,242 72.95% 42,104,230 74.16% 2016 42,863,740 72.95% 43,598,586 74.20% 2017 44,363,971 72.95% 45,141,526 74.23% 2018 45,916,710 72.95% 46,741,166 74.26% 2019 47,523,795 72.95% 48,395,625 74.29% 2020 49,187,128 72.95% 50,105,957 74.31% 2021 50,908,677 72.95% 51,871,229 74.33% 2022 52,690,481 72.95% 53,689,172 74.33% 2023 54,534,648 72.95% 55,563,680 74.33% 2024 56,443,360 72.95% 57,462,748 74.27% 2025 58,418,878 72.95% 59,416,732 74.20% 2026 60,463,539 72.95% 61,435,330 74.12% 2027 62,579,763 72.95% 63,483,192 74.00% 2028 64,770,054 72.95% 65,542,546 73.82% 2029 67,037,006 72.95% 67,648,469 73.61% 2030 69,383,301 72.95% 69,842,351 73.43% 2031 69,868,207 70.98% 70,178,052 71.29% 2032 70,122,087 68.82% 70,274,686 68.97% 2033 66,721,958 63.27% 66,763,850 63.31% 2034 62,987,707 57.71% 62,938,247 57.67% 2035 65,472,079 57.96% 65,389,080 57.89% 2036 65,058,318 55.65% 64,959,051 55.56% 2037 63,213,581 52.24% 63,105,231 52.15% 2038 58,980,901 47.09% 58,868,759 47.00% 2039 45,863,374 35.38% 45,747,307 35.29% 2040 42,349,557 31.57% 43,354,448 32.31% 101 6-3 Present Value Annual of Savings Savings (Cost) (Cost) (279,202) (279,202) (509,704) (471,076) (554,168) (473,355) (598,418) (472,414) {644,543) (470,265) (689,988) (465,270) (734,846) (457,966) (777,555) (447,858) (824,455) (438,883) (871,830) (428,930) {918,829) {417,794) (962,552) (404,505) (998,691) (387,886) (1,029,032) (369,381) (1,019,387) (338,187) (997,854) (305,955) (971,791) (275,383) (903,429) (236,609) (772,492) (186,983) (611,463) (136,789) (459,050) (94,911) (309,844) (59,207) (152,599) {26,950) (41,891) (6,837) 49,460 7,461 82,999 11,572 99,267 12,791 108,350 12,903 112,142 12,343 116,067 11,806 (1,004,890) (94,471) TotalAPV (7,678,193) 7-1 Section 7 Option IIIB1: Hybrid Plan (2%/2.66%) with 10% DC for New Employees 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl . expenses & Buyback)-$ -OptioniiiBl-$ 102 80% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% Miami Beach Police & Fire Plan Projected Cost in Percentages Option IIIB1: Hybrid Plan (2%/2.66%) with 10% DC for New Employees 7-2 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 -&-Current Plan Cost (incl. expenses & Buyback)-% 103 7-3 Option IIIB1: Hybrid Plan (2%/2.66%) with 10% DC for New Employees Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option IIIB1-$ Option IIIB1-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 35,439,063 74.14% 2011 37,226,360 75.25% 37,232,100 75.26% (5,740) (5,305) 2012 37,981,309 74.18% 37,997,887 74.21% (16,578) (14,161) 2013 38,660,638 72.95% 38,693,277 73.01% (32,639) (25,767) 2014 40,013,760 72.95% 40,063,596 73.04% (49,836) (36,361) 2015 41,414,242 72.95% 41 ,480,778 73 .07% (66,536) (44,866) 2016 42,863,740 72.95% 42,946,667 73 .09% (82,926) (51,681) 2017 44,363,971 72 .95% 44,463,998 73 .11% (100,027) (57,614) 2018 45,916,710 72.95% 46,036,784 73.14% (120,074) (63,919) 2019 47,523,795 72.95% 47,670,364 73.17% (146,570) (72,110) 2020 49,187,128 72.95% 49,362,815 73.21% (175,687) (79,885) 2021 50,908,677 72.95% 51,114,307 73.24% (205,630) (86,414) 2022 52,690,481 72.95% 52,925,211 73.27% (234,730) (91,168) 2023 54,534,648 72.95% 54,796,899 73.30% (262,252) (94,138) 2024 56,443,360 72.95% 56,736,609 73.33% (293,249) (97,287) 2025 58,418,878 72.95% 58,746,801 73.36% (327,923) (100,546) 2026 60,463,539 72.95% 60,824,997 73.39% (361,459) (102,429) 2027 62,579,763 72.95% 62,976,455 73.41% (396,693) (103,894) 2028 64,770,054 72.95% 65,205,888 73.44% (435,833) (105,495) 2029 67,037,006 72.95% 67,516,733 73.47% (479,727) (107,319) 2030 69,383,301 72.95% 69,906,288 73.50% (522,986) (108,130) 2031 69,868,207 70.98% 70,434,666 71.55% (566,459) (108,242) 2032 70,122,087 68.82% 70,733,969 69.42% (611,882) (108,061) 2033 66,721,958 63.27% 67,372,929 63.89% (650,970) (106,251) 2034 62,987,707 57.71% 63,675,596 58.34% (687,889) (103,768) 2035 65,472,079 57.96% 66,188,888 58.59% (716,809) (99,936) 2036 65,058,318 55.65% 65,802,250 56.28% (743,932) (95,857) 2037 63,213,581 52.24% 63,984,405 52.88% (770,824) (91,795) 2038 58,980,901 47.09% 59,778,704 47.73% (797,803) (87,808) 2039 45,863,374 35.38% 46,689,100 36.02% (825,726) (83,993) 2040 42,349,557 31.57% 43,204,184 32.20% (854,626) (80,345) TotalAPV (2,414,545) 104 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 Section 8 Option IIIB2: Hybrid Plan (2%/2.66%) with 10% DC for New Employees and Non-vested Existing Employees 8-1 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -Option 1Iffi2-$ 105 80% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% Miami Beach Police & Fire Plan Projected Cost in Percentages Option TIIB2: Hybrid Plan (2%/2.66%) with 10% DC for New Employees and Non-vested Existing Employees 8-2 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ...,_Current Plan Cost (incl. expenses & Buyback)-% ...._OptionlliB2-% 106 Option IllB2: Hybrid Plan (2%/2.66%) with 10% DC for New Employees and Non-vested Existing Employees Current Plan Cost Current Plan Cost (incl. expenses & (incl. expenses & Year Buyback)-$ Buyback)-% Option IllB2-$ 2010 35,439,063 74.14% 35,672,176 2011 37,226,360 75.25% 37,484,576 2012 37,981,309 74.18% 38,269,463 2013 38,660,638 72.95% 38,979,195 2014 40,013,760 72.95% 40,364,104 2015 41,414,242 72.95% 41,795,658 2016 42,863,740 72.95% 43,275,602 2017 44,363,971 72.95% 44,804,661 2018 45,916,710 72.95% 46,389,538 2019 47,523,795 72 .95% 48,029,870 2020 49,187,128 72.95% 49,726,382 2021 50,908,677 72.95% 51,478,665 2022 52,690,481 72.95% 53,285,377 2023 54,534,648 72.95% 55,149,811 2024 56,443,360 72.95% 57,050,021 2025 58,418,878 72.95% 59,008,714 2026 60,463,539 72.95% 61,032,876 2027 62,579,763 72.95% 63,097,868 2028 64,770,054 72.95% 65,191,763 2029 67,037,006 72.95% 67,340,889 2030 69,383,301 72.95% 69,575,282 2031 69,868,207 70.98% 69,950,391 2032 70,122,087 68.82% 70,088,644 2033 66,721,958 63.27% 66,605,531 2034 62,987,707 57.71% 62,801,769 2035 65,472,079 57.96% 65,257,208 2036 65,058,318 55.65% 64,826,506 2037 63,213,581 52.24% 62,969,701 2038 58,980,901 47.09% 58,728,486 2039 45,863,374 35.38% 45,602,125 2040 42,349,557 31.57% 43,204,184 107 8-3 Present Value Annual of Savings Option IIIB2-% Savings (Cost) (Cost) 74.63% (233,113) (233,113) 75.77% (258,216) (238,647) 74.74% (288,154) (246,133) 73.55% (318,557) (251,481) 73.59% (350,344) (255,614) 73.62% (381,416) (257,195) 73.65% (411,862) (256,678) 73.67% (440,690) (253,830) 73.70% (472,828) (251,701) 73.73% (506,075) (248,983) 73.75% (539,254) (245,200) 73.77% (569,987) (239,533) 73.77% (594,896) (231,054) 73.77% (615,164) (220,819) 73.73% (606,660) (201,263) 73.69% (589,836) (180,852) 73.64% (569,338) (161,337) 73.55% (518,105) (135,692) 73 .42% (421,709) (102,076) 73.28% (303,883) (67,981) 73.15% (191,981) (39,693) 71.06% (82,183) (15,704) 68.79% 33,443 5,906 63.16% 116,427 19,003 57.54% 185,939 28,049 57.77% 214,871 29,957 55.45% 231,812 29,869 52.04% 243,880 29,043 46.89% 252,415 27,781 35.18% 261,250 26,575 32.20% (854,626) (80,345) TotalAPV (4,218,739) . . . . .:. ..-:::;.:;.; • .=.=• .:=.: --· ......... . :-:.~ ~~-=~ =~= Conc~P-tS 9-1 Section 9 Option lliC1 -Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 17.46% DC for New Employees 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 Miami Beach Police & Fire Plan Projected Cost in Dollars Option IIIC1: Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 17.46% DC for New Employees t- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -OptioniiiCl-$ .. ' . . .;?..-;t~t~~~~2tS 108 9-2 Miami Beach Police & Fire Plan Projected Cost in Percentages OptionillC1: Hybrid Plan(Chapter Minimum with5% Employee Contribution) with 17.46% DC 80% for New Employees 75%~::~~~~~8§~~~;j~~~~~~:::;~~~~~~================== 70% - 65% 60% 55% 50% 45% 40% 35 % 30% 25% 20% 15% 10% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ..,.._Current Plan Cost (incl. expenses & Buyback)-% . . . . ~ .=.:.;:.:.==~= ~==;. ~c~~~=~P-tS 109 9-3 Option ITIC1: Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 17.46% DC for New Employees Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option ITIC1-$ Option IDC1-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 35,439,063 74.14% 2011 37,226,360 75.25% 37,184,359 75.16% 42,001 38,818 2012 37,981,309 74.18% 37,860,005 73.94% 121,304 103,615 2013 38,660,638 72.95% 38,421,816 72.50% 238,822 188,535 2014 40,013,760 72.95% 39,649,111 72.28% 364,649 266,052 2015 41,414,242 72.95% 40,927,397 72.09% 486,844 328,287 2016 42,863,740 72.95% 42,256,970 71.92% 606,770 378,147 2017 44,363,971 72.95% 43,632,075 71.75% 731,896 421,559 2018 45,916,710 72.95% 45,038,130 71.55% 878,580 467,695 2019 47,523,795 72.95% 46,451,349 71.30% 1,072,446 527,631 2020 49)87)28 72.95% 47,901,631 71.04% 1,285,497 584,519 2021 50,908,677 72 .95% 49,404,090 70.79% 1,504,587 632,292 2022 52,690,481 72.95% 50,972,965 70.57% 1,717,516 667,073 2023 54,534,648 72.95% 52,615,759 70.38% 1,918,889 688,804 2024 56,443,360 72.95% 54,297,667 70.18% 2)45,693 711,846 2025 58,418,878 72.95% 56,019,472 69.95% 2,399,406 735,690 2026 60,463,539 72.95% 57,818,755 69.76% 2,644,783 749,469 2027 62,579,763 72.95% 59,677,171 69.57% 2,902,592 760,191 2028 64,770,054 72.95% 61,581,071 69.36% 3,188,983 771,901 2029 67,037,006 72.95% 63,526,856 69.13% 3,510,151 785,250 2030 69,383,301 72.95% 65,556,623 68.93% 3,826,678 79U83 2031 69,868,207 70.98% 65,723,440 66.76% 4)44,767 792,005 2032 70)22,087 68.82% 65,644,959 64.43% 4,477,128 790,678 2033 66,721,958 63.27% 61,958,823 58.76% 4,763,135 777,438 2034 62,987,707 57.71% 57,954,440 53.10% 5,033,268 759,269 2035 65,472,079 57.96% 60,227,205 53.32% 5,244,874 731,229 2036 65,058,318 55.65% 59,614,984 50.99% 5,443,334 701,385 2037 63,213,581 52.24% 57,573,481 47.58% 5,640)00 671,662 2038 58,980,901 47.09% 53,143,398 42.43% 5,837,503 642,486 2039 45,863,374 35.38% 39,821,558 30.72% 6,041,816 614,578 2040 42,349,557 31.57% 34,139,547 25.45% 8,210,011 771,838 TotalAPV 17,851,123 .. . . . A~t~(~~~i~ts 110 10-1 Section 10 Option IIIC2 -Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 17.46% DC for New Employees and Non-vested Existing Employees 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 Miami Beach Police & Fire Plan Projected Cost in Dollars Option IIIC2: Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 17.46% DC for New Employees and Non-vested Existing Employees 1---- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -Option IITC2-$ . . . . --.._ __ ----. ----------· --....... ·-.. ~~ ~~CoM:tP-ts 111 10-2 Miami Beach Police & Fire Plan Projected Cost in Percentages Option IIIC2: Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 17.46% DC 80% -for New Employees and Non-vested Existing Employees 75% 70% ~~::~~~~~~~~~~~~~~~~~~~~~~~~================ 65% - 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-% -M-OptionillC2-% 112 10-3 Option illC2: Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 17.46% DC for New Employees and Non-Vested Existing Employees Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option illC2-$ Option illC2-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 33,844,490 70.80% 1,594,574 1,594,574 2011 37,226,360 75.25% 35,524,864 71.81% 1,701,496 1,572,547 2012 37,981,309 74.18% 36,134,081 70.57% 1,847,228 1,577,851 2013 38,660,638 72.95% 36,631,553 69.12% 2,029,085 1,601,838 2014 40,013,760 72.95% 37,792,461 68.90% 2,221,299 1,620,682 2015 41,414,242 72.95% 39,002,630 68.70% 2,411,611 1,626,189 2016 42,863,740 72.95% 40,262,368 68.52% 2,601,372 1,621,209 2017 44,363,971 72.95% 41,567,488 68.35% 2,796,483 1,610,725 2018 45,916,710 72.95% 42,901,146 68.16% 3,015,564 1,605,279 2019 47,523,795 72.95% 44,244,120 67.92% 3,279,675 1,613,561 2020 49,187,128 72.95% 45,624,078 67.67% 3,563,050 1,620,128 2021 50,908,677 72.95% 47,056,527 67.43% 3,852,150 1,618,838 2022 52,690,481 72.95% 48,557,017 67.23% 4,133,464 1,605,414 2023 54,534,648 72.95% 50,131,402 67.06% 4,403,246 1,580,587 2024 56,443,360 72.95% 51,768,524 66.91% 4,674,836 1,550,903 2025 58,418,878 72.95% 53,452,607 66.75% 4,966,271 1,522,725 2026 60,463,539 72.95% 55,213,445 66.62% 5,250,094 1,487,753 2027 62,579,763 72.95% 57,056,905 66.51% 5,522,857 1,446,440 2028 64,770,054 72.95% 58,982,770 66.43% 5,787,285 1,400,826 2029 67,037,006 72.95% 60,968,721 66.35% 6,068,286 1,357,526 2030 69,383,301 72.95% 63,030,125 66.27% 6,353,176 1,313,547 2031 69,868,207 70.98% 63,223,732 64.23% 6,644,476 1,269,662 2032 70,122,087 68.82% 63,174,942 62.01% 6,947,146 1,226,893 2033 66,721,958 63.27% 59,483,257 56.41% 7,238,702 1,181,500 2034 62,987,707 57.71% 55,456,935 50.81% 7,530,772 1,136,018 2035 65,472,079 57.96% 57,664,462 51.05% 7,807,617 1,088,521 2036 65,058,318 55.65% 56,971,860 48.73% 8,086,458 1,041,956 2037 63,213,581 52.24% 54,841,758 45.32% 8,371,823 996,974 2038 58,980,901 47.09% 50,316,065 40.17% 8,664,837 953,668 2039 45,863,374 35.38% 36,895,268 28.46% 8,968,106 912,242 2040 42,349,557 31.57% 34,139,547 25.45% 8,210,011 771,838 TotalAPV 43,128,414 .. . . . A~tiJCg~~~i2tS 113 11-1 Section 11 Option IIID1 -Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 12.46% DC for New Employees Miami Beach Police & Fire Plan Projected Cost in Dollars Option IIID1: Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 12.46% DC 75,000,000 ---1 for New Employees - 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -Option IIIDl-$ 114 11-2 Miami Beach Police & Fire Plan Projected Cost in Percentages Option IIID1: Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 12.46% DC 80% for New Employees 75% =~~~~::::~~~~::==~==== 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ...,._CUirentPlan Cost (incl. expenses & Buyback)-% ......,.OptioniiiDl-% 115 11-3 Option IIID1: Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 12.46% DC for New Employees Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option lllD1-$ Option IIID1-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 35,439,063 74.14% 2011 37,226,360 75.25% 37,139,302 75.07% 87,059 80,461 2012 37,981,309 74.18% 37,729,876 73.68% 251,433 214,767 2013 38,660,638 72.95% 38,165,620 72.02% 495,017 390,786 2014 40,013,760 72.95% 39,257,934 71.57% 755,826 551,459 2015 41,414,242 72.95% 40,405,135 71.17% 1,009,107 680,457 2016 42,863,740 72.95% 41,606,057 70.81% 1,257,683 783,804 2017 44,363,971 72.95% 42,846,933 70.45% 1,517,038 873,787 2018 45,916,710 72.95% 44,095,633 70.06% 1,821,077 969,416 2019 47,523,795 72.95% 45,300,882 69.54% 2,222,913 1,093,647 2020 49,187,128 72.95% 46,522,613 69.00% 2,664,514 1,211,561 2021 50,908,677 72.95% 47,790,043 68.48% 3,118,635 1,310,583 2022 52,690,481 72.95% 49,130,498 68.02% 3,559,982 1,382,677 2023 54,534,648 72.95% 50,557,269 67.63% 3,977,379 1,427,718 2024 56,443,360 72.95% 51,995,873 67.20% 4,447,488 1,475,479 2025 58,418,878 72.95% 53,445,507 66.74% 4,973,371 1,524,902 2026 60,463,539 72.95% 54,981,561 66.34% 5,481,977 1,553,464 2027 62,579,763 72.95% 56,563,413 65.94% 6,016,350 1,575,686 2028 64,770,054 72.95% 58,160,086 65.50% 6,609,968 1,599,958 2029 67,037,006 72.95% 59,761,338 65.03% 7,275,668 1,627,627 2030 69,383,301 72.95% 61,451,550 64.61% 7,931,751 1,639,925 2031 69,868,207 70.98% 61,277,138 62.25% 8,591,070 1,641,628 2032 70,122,087 68.82% 60,842,115 59.72% 9,279,972 1,638,879 2033 66,721,958 63.27% 56,849,165 53.91% 9,872,793 1,611,436 2034 62,987,707 57.71% 52,554,997 48.15% 10,432,710 1,573,776 2035 65,472,079 57.96% 54,600,762 48.34% 10,871,317 1,515,656 2036 65,058,318 55.65% 53,775,642 45.99% 11,282,676 1,453,796 2037 63,213,581 52.24% 51,523,058 42.58% 11,690,523 1,392,188 2038 58,980,901 47.09% 46,881,210 37.43% 12,099,691 1,331,714 2039 45,863,374 35.38% 33,340,194 25.72% 12,523,180 1,273,867 2040 42,349,557 31.57% 27,431,335 20.45% 14,918,222 1,402,488 TotalAPV 36,803,593 . . . . ::. .:..:..; =~==-=-= --....... ·-.. ~"-==: ':i'="~= ~-== Conc~P-ts 116 12-1 Section 12 Option IllD2-Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 12.46% DC for New Employees and Non-vested Existing Employees 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 Miami Beach Police & Fire Plan Projected Cost in Dollars Option ITID2: Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 12.46% DC for New Employees andNon-vested Existing Employees 1--- 35,000,000 ~~ ..... !!!t!l=~------------------------\--- 30,000,000 25,000,000 20,000,000 15,000,000 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ....,_Current Plan Cost (incl. expenses & Buyback)-$ -OptionTIID2-$ 117 12-2 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-% 118 12-3 Option IIID2: Hybrid Plan (Chapter Minimum with 5% Employee Contribution) with 12.46% DC for New Employees and Non-Vested Existing Employees Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option ITID2-$ Option IIID2-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 32,960,590 68.96% 2,478,473 2,478,473 2011 37,226,360 75.25% 34,549,349 69.84% 2,677,012 2,474,133 2012 37,981,309 74.18% 35,026,618 68.41% 2,954,691 2,523,816 2013 38,660,638 72.95% 35,357,071 66.72% 3,303,566 2,607,962 2014 40,013,760 72.95% 36,340,969 66.25% 3,672,791 2,679,706 2015 41,414,242 72 .95% 37,377,567 65.84% 4,036,674 2,721,995 2016 42,863,740 72 .95% 38,465,825 65.46% 4,397,915 2,740,838 2017 44,363,971 72.95% 39,596,320 65.11% 4,767,651 2,746,083 2018 45,916,710 72.95% 40,730,878 64.71% 5,185,832 2,760,580 2019 47,523,795 72.95% 41,830,709 64.21% 5,693,085 2,800,931 2020 49,187,128 72.95% 42,949,796 63.70% 6,237,332 2,836,131 2021 50,908,677 72.95% 44,118,521 63.22% 6,790,156 2,853,513 2022 52,690,481 72.95% 45,367,879 62.81% 7,322,602 2,844,057 2023 54,534,648 72.95% 46,706,798 62.48% 7,827,850 2,809,882 2024 56,443,360 72.95% 48,125,099 62.20% 8,318,261 2,759,630 2025 58,418,878 72.95% 49,577,154 61.91% 8,841,724 2,710,991 2026 60,463,539 72.95% 51,117,333 61.67% 9,346,206 2,648,495 2027 62,579,763 72.95% 52,770,874 61.52% 9,808,889 2,568,954 2028 64,770,054 72.95% 54,543,387 61.43% 10,226,667 2,475,389 2029 67,037,006 72.95% 56,373,960 61.35% 10,663,046 2,385,412 2030 69,383,301 72.95% 58,274,547 61.27% 11,108,754 2,296,784 2031 69,868,207 70.98% 58,301,709 59.23% 11,566,498 2,210,189 2032 70,122,087 68.82% 58,080,648 57.01% 12,041,439 2,126,565 2033 66,721,958 63.27% 54,210,663 51.41% 12,511,296 2,042,092 2034 62,987,707 57.71% 49,999,800 45.81% 12,987,907 1,959,228 2035 65,472,079 57.96% 52,016,328 46.05% 13,455,751 1,875,972 2036 65,058,318 55.65% 51,126,041 43.73% 13,932,277 1,795,202 2037 63,213,581 52.24% 48,791,335 40.32% 14,422,246 1,717,500 2038 58,980,901 47.09% 44,053,877 35.17% 14,927,024 1,642,895 2039 45,863,374 35.38% 30,413,904 23.46% 15,449,470 1,571,531 2040 42,349,557 31.57% 27,431,335 20.45% 14,918,222 1,402,488 TotalAPV 74,067,418 119 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 Section 13 Option IV Al: Change Existing Plan to 3% Multiplier for all FS, Vested Employees Grandfathered 13-1 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ --Option IV Al-$ 120 13-2 80% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ....,_Current Plan Cost (incl. expenses & Buyback)-% ~OptionN Al-% 121 13-3 Option IV A1: Change Existing Plan to 3% Multiplier for all FS, Vested EE's Grandfathered Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option IV A1-$ Option IV A1-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 34,786,003 72.77% 653,061 653,061 2011 37,226,360 75.25% 36,523,174 73.82% 703,186 649,895 2012 37,981,309 74.18% 37,207,793 72.67% 773,516 660,716 2013 38,660,638 72.95% 37,798,145 71.32% 862,493 680,885 2014 40,013,760 72.95% 39,057,080 71.21% 956,680 698,003 2015 41,414,242 72.95% 40,364,647 71.10% 1,049,595 707,759 2016 42,863,740 72.95% 41,721,804 71.01% 1,141,936 711,669 2017 44,363,971 72.95% 43,127,226 70.92% 1,236,745 712,343 2018 45,916,710 72.95% 44,572,807 70.81% 1,343,903 715,401 2019 47,523,795 72.95% 46,049,469 70.69% 1,474,326 725,351 2020 49,187,128 72.95% 47,572,622 70.55% 1,614,506 734,120 2021 50,908,677 72.95% 49,151,396 70.43% 1,757,281 738,484 2022 52,690,481 72.95% 50,795,013 70.33% 1,895,468 736,189 2023 54,534,648 72.95% 52,507,508 70.24% 2,027,140 727,661 2024 56,443,360 72.95% 54,284,920 70.16% 2,158,440 716,075 2025 58,418,878 72.95% 56,119,413 70.08% 2,299,465 705,047 2026 60,463,539 72.95% 58,027,521 70.01% 2,436,018 690,310 2027 62,579,763 72.95% 60,014,389 69.96% 2,565,374 671,873 2028 64,770,054 72.95% 62,081,599 69.92% 2,688,455 650,747 2029 67,037,006 72.95% 64,217,948 69.88% 2,819,058 630,647 2030 69,383,301 72.95% 66,431,836 69.85% 2,951,466 610,229 2031 69,868,207 70.98% 66,781,358 67.84% 3,086,849 589,852 2032 70,122,087 68.82% 66,894,568 65.66% 3,227,519 569,992 2033 66,721,958 63.27% 63,358,949 60.08% 3,363,009 548,910 2034 62,987,707 57.71% 59,488,975 54.51% 3,498,732 527,784 2035 65,472,079 57.96% 61,844,717 54.75% 3,627,362 505,719 2036 65,058,318 55.65% 61,301,404 52.43% 3,756,914 484,086 2037 63,213,581 52.24% 59,324,086 49.02% 3,889,495 463,188 2038 58,980,901 47.09% 54,955,274 43.88% 4,025,627 443,068 2039 45,863,374 35.38% 41,696,851 32.17% 4,166,524 423,822 2040 42,349,557 31.57% 38,464,161 28.67% 3,885,396 365,273 TotalAPV 19,448,159 a ' • • A,.;;t;;(~~~!~P-tS 122 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 Section 14 Option IV A2: CHange Existing Plan to 3% Multiplier for all FS, Employees Eligible for NR Grandfathered Miami Beach Police & Fire Plan Projected Cost in Dollars Option IV A2: Change Existing Plan to 3% Multiplier for all FS, BE's Eligible for NR Grandfathered 14-1 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -Option IV A2-$ 123 Option IV A2: Change Existing Plan to 3% Multiplier for all FS, EE's Eligible for NR Grandfathered Current Plan Cost Current Plan Cost (incl. expenses & (incl. expenses & Year Buyback)-$ Buyback)-% Option IV A2-$ Option IV A2-% 2010 35,439,063 74.14% 33,593,541 70.28% 2011 37,226,360 75.25% 35,294,056 71.34% 2012 37,981,309 74.18% 35,950,252 70.21% 2013 38,660,638 72.95% 36,529,504 68.93% 2014 40,013,760 72.95% 37,785,784 68.89% 2015 41,414,242 72.95% 39,092,844 68.86% 2016 42,863,740 72.95% 40,448,344 68.84% 2017 44,363,971 72.95% 41,852,398 68.82% 2018 45,916,710 72.95% 43,304,690 68.80% 2019 47,523,795 72.95% 44,803,780 68.77% 2020 49,187,128 72.95% 46,354,396 68.75% 2021 50,908,677 72.95% 47,959,507 68.72% 2022 52,690A81 72.95% 49,622,366 68.70% 2023 54,534,648 72.95% 51,345,330 68.68% 2024 56,443,360 72.95% 53,126,918 68.66% 2025 58A18,878 72.95% 54,969,207 68.64% 2026 60,463,539 72.95% 56,877,685 68.62% 2027 62,579,763 72.95% 58,852,593 68.60% 2028 64,770,054 72.95% 60,894,750 68.58% 2029 67,037,006 72.95% 63,006,014 68.56% 2030 69,383,301 72.95% 65)92,692 68.54% 2031 69,868,207 70.98% 65,513,305 66.55% 2032 70)22,087 68.82% 65,596,841 64.38% 2033 66,721,958 63.27% 62,025,956 58.82% 2034 62,987,707 57.71% 58,117,448 53.25% 2035 65,472,079 57.96% 60,427,969 53.49% 2036 65,058,318 55.65% 59,836,240 51.18% 2037 63,213,581 52.24% 57,808,132 47.77% 2038 58,980,901 47.09% 53,386,261 42.63% 2039 45,863,374 35.38% 40,072,922 30.91% 2040 42,349,557 31.57% 38,464,161 28.67% 124 14-3 Present Value Annual of Savings Savings (Cost) (Cost) 1,845,523 1,845,523 1,932,304 1,785,863 2,031,057 1,734,873 2,131,134 1,682,399 2,227,976 1,625,554 2,321,398 1,565,356 2,415,396 1,505,306 2,511,573 1,446,622 2,612,020 1,390,460 2,720,015 1,338,215 2,832,732 1,288,050 2,949,170 1,239,367 3,068,115 1)91,639 3)89,318 U44,836 3,316,442 1,100,248 3,449,671 1,057,715 3,585,853 1,016,147 3,727,170 976,148 3,875,304 938,027 4,030,992 901,766 4,190,609 866A27 4,354,902 832,158 4,525,246 799,176 4,696,003 766,481 4,870,259 734,679 5,044,110 703,239 5,222,078 672,875 5,405,449 643,718 5,594,640 615,756 5,790A52 589,009 3,885,396 365,273 TotalAPV 34,362,906 Detail of Actuarial Studies 125 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 Section 15 Option IVB1: Change Existing Plan to 2% Multiplier for all FS, Vested Employees Grandfathered 15-1 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -Option IVBl-$ 126 15-2 Miami Beach Police & Fire Plan Projected Cost in Percentages Option IVB1: Change Existing Plan to 2% Multiplier for all FS, Vested EE's Grandfathered 80% 75% r•~ * * * * * * 70% ~~-=~----------------------------------------------~~-------------------- 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-% ......,_OptioniVBl-% 127 15-3 Option IVB1: Change Existing Plan to 2% Multiplier for all FS, Vested EE's Grandfathered Current Plan Cost Current Plan Cost (incl. expenses & (incl. expenses & Year Buyback)-$ Buyback)-% Option IVB1-$ 2010 35,439,063 74.14% 33,205,899 2011 37,226,360 75.25% 34,782,499 2012 37,981,309 74.18% 35,231,589 2013 38,660,638 72.95% 35,518,353 2014 40,013,760 72.95% 36,455,234 2015 41,414,242 72.95% 37,446,857 2016 42,863,740 72.95% 38,491,611 2017 44,363,971 72.95% 39,577,204 2018 45,916,710 72.95% 40,657,731 2019 47,523,795 72.95% 41,684,271 2020 49,187,128 72.95% 42,722,625 2021 50,908,677 72.95% 43,809,100 2022 52,690,481 72.95% 44,980,424 2023 54,534,648 72.95% 46,247,534 2024 56,443,360 72.95% 47,589,820 2025 58,418,878 72.95% 48,956,969 2026 60,463,539 72.95% 50,416,999 2027 62,579,763 72.95% 51,992,008 2028 64,770,054 72.95% 53,683,842 2029 67,037,006 72.95% 55,424,301 2030 69,383,301 72.95% 57,236,170 2031 69,868,207 70.98% 57,174,234 2032 70,122,087 68.82% 56,860,057 2033 66,721,958 63.27% 52,910,309 2034 62,987,707 57.71% 48,624,307 2035 65,472,079 57.96% 50,582,540 2036 65,058,318 55.65% 49,637,805 2037 63,213,581 52.24% 47,249,221 2038 58,980,901 47.09% 42,457,788 2039 45,863,374 35.38% 28,761,953 2040 42,349,557 31.57% 26,043,236 128 Option IVB1-% 69.47% 70.31% 68.81% 67.02% 66.46% 65.96% 65.51% 65.08% 64.59% 63.99% 63.36% 62.78% 62.27% 61.86% 61.51% 61.13% 60.83% 60.61% 60.46% 60.31% 60.18% 58.08% 55.81% 50.17% 44.55% 44.78% 42.46% 39.05% 33.90% 22.19% 19.41% Present Value Annual of Savings Savings (Cost) (Cost) 2,233,165 2,233,165 2,443,861 2,258,652 2,749,720 2,348,735 3,142,284 2,480,640 3,558,526 2,596,337 3,967,385 2,675,273 4,372,129 2,724,767 4,786,767 2,757,093 5,258,979 2,799,519 5,839,524 2,872,977 6,464,503 2,939,426 7,099,577 2,983,545 7,710,057 2,994,542 8,287,114 2,974,739 8,853,540 2,937,212 9,461,909 2,901,148 10,046,540 2,846,953 10,587,755 2,772,940 11,086,212 2,683,444 11,612,706 2,597,858 12,147,132 2,511,473 12,693,974 2,425,633 13,262,030 2,342,126 13,811,649 2,254,335 14,363,400 2,166,721 14,889,539 2,075,868 15,420,513 1,986,964 15,964,360 1,901,146 16,523,113 1,818,564 17,101,422 1,739,569 16,306,321 1,532,986 TotalAPV 77,134,350 ..:. -...__---~-: ---··--·--· ~\:;.~c~~~~P-ts 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 Section 16 Option IVB2: Change Existing Plan to 2% Multiplier for all FS, Employees Eligible for NR Grandfathered Miami Beach Police & Fire Plan Projected Cost in Dollars Option IVB2: Change Existing Plan to 2% Multiplier for all FS, 16-1 -----1 EE's Eligible for NR Grandfathered t--------- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buy back)-$ -OptioniVB2-$ 129 16-2 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ..,._Current Plan Cost (incl. expenses & Buyback)-% ~OptioniVB2-% 130 Option IVB2: Change Existing Plan to 2% Multiplier for all FS, EE's Eligible for NR Grandfathered Current Plan Cost Current Plan Cost (incl. expenses & (incl. expenses & Year Buyback)-$ Buyback)-% Option IVB2-$ 2010 35,439,063 74.14% 30,523,193 2011 37,226,360 75.25% 32,011,324 2012 37,981,309 74.18% 32,393,548 2013 38,660,638 72.95% 32,674,494 2014 40,013,760 72.95% 33,643,225 2015 41,414,242 72.95% 34,681,817 2016 42,863,740 72.95% 35,773,102 2017 44,363,971 72.95% 36,906,993 2018 45,916,710 72.95% 38,065,664 2019 47,523,795 72.95% 39,220,133 2020 49,187,128 72.95% 40,402,940 2021 50,908,677 72.95% 41,629,047 2022 52,690,481 72.95% 42,913,887 2023 54,534,648 72.95% 44,264,302 2024 56,443,360 72.95% 45,642,795 2025 58,418,878 72.95% 47,050,090 2026 60,463,539 72.95% 48,525,227 2027 62,579,763 72.95% 50,047,907 2028 64,770,054 72.95% 51,603,084 2029 67,037,006 72.95% 53,186,372 2030 69,383,301 72.95% 54,841,961 2031 69,868,207 70.98% 54,622,106 2032 70,122,087 68 .82% 54,143,220 2033 66,721,958 63.27% 50,046,337 2034 62,987,707 57.71% 45,618,468 2035 65,472,079 57.96% 47,457,231 2036 65,058,318 55.65% 46,397,118 2037 63,213,581 52.24% 43,892,594 2038 58,980,901 47.09% 38,983,680 2039 45,863,374 35.38% 25,166,250 2040 42,349,557 31.57% 26,043,236 131 16-3 Present Value Annual of Savings Option IVB2-% Savings (Cost) (Cost) 63.86% 4,915,870 4,915,870 64.70% 5,215,036 4,819,812 63.26% 5,587,761 4,772,910 61.65% 5,986,144 4,725,691 61.34% 6,370,535 4,648,008 61.09% 6,732,424 4,539,784 60.88% 7,090,638 4,418,977 60.69% 7,456,978 4,295,088 60.48% 7,851,046 4,179,357 60.20% 8,303,662 4,085,303 59.92% 8,784,188 3,994,193 59.65% 9,279,630 3,899,696 59.41% 9,776,594 3,797,173 59.21% 10,270,346 3,686,640 58.99% 10,800,566 3,583,149 58.75% 11,368,788 3,485,822 58.55% 11,938,312 3,383,037 58.34% 12,531,855 3,282,101 58.12% 13,166,971 3,187,096 57.88% 13,850,635 3,098,502 57.66% 14,541,341 3,006,486 55.49% 15,246,102 2,913,308 53.14% 15,978,867 2,821,930 47.46% 16,675,622 2,721,793 41.80% 17,369,239 2,620,152 42.01% 18,014,848 2,511,592 39.68% 18,661,200 2,404,533 36.27% 19,320,987 2,300,876 31.13% 19,997,222 2,200,931 19.41% 20,697,124 2,105,326 19.41% 16,306,321 1,532,986 TotalAPV 107,938,123 .. . -. A;::t~C~;:~2t5 25,000,000 Section 17 Option IVC1: Change Existing Plan to FAME High 5 for all FS, Vested Employees Grandfathered 17-1 I Miami Beach Police & Fire Plan Projected Cost in Dollars Option IVC1: Change Existing Plan to FAME High 5 for all FS, Vested EE's Grandfathered I 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -OptioniVCl-$ 132 80% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 17-2 I Miami Beach Police & Fire Plan Projected Cost in Percentages Option NC1: Change Existing Plan to FAME High 5 for all FS, Vested EE's Grandfathered 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-% 133 ~OptionNCl-% . . . . ----------. ---------· ~=== ;.~c~~~~~P-ts 17-3 Option IVC1: Change Existing Plan to FAME High 5 for all FS, Vested EE's Grandfathered Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option IVC1-$ Option IVC1-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 35,002,758 73.23% 436,305 436,305 2011 37,226,360 75.25% 36,754,876 74.29% 471,484 435,752 2012 37,981,309 74.18% 37,458,587 73.16% 522,722 446,495 2013 38,660,638 72.95% 38,071,141 71.84% 589,497 465,372 2014 40,013,760 72.95% 39,353,443 71.75% 660,317 481,774 2015 41,414,242 72.95% 40,684,145 71.66% 730,096 492,316 2016 42,863,740 72.95% 42,064,334 71.59% 799,406 498,200 2017 44,363,971 72.95% 43,492,989 71.52% 870,982 501,671 2018 45,916,710 72.95% 44,964,454 71.44% 952,257 506,916 2019 47,523,795 72.95% 46,470,974 71.33% 1,052,821 517,975 2020 49,187,128 72.95% 48,025,626 71.23% 1,161,502 528,138 2021 50,908,677 72.95% 49,635,985 71.13% 1,272,692 534,840 2022 52,690,481 72.95% 51,309,533 71.04% 1,380,948 536,352 2023 54,534,648 72.95% 53,050,222 70.96% 1,484,426 532,849 2024 56,443,360 72.95% 54,850,695 70.89% 1,592,666 528,376 2025 58,418,878 72.95% 56,708,409 70.81% 1,710,469 524,453 2026 60,463,539 72.95% 58,638,512 70.75% 1,825,027 517,170 2027 62,579,763 72.95% 60,640,826 70.69% 1,938,937 507,809 2028 64,770,054 72.95% 62,714,471 70.63% 2,055,583 497,559 2029 67,037,006 72.95% 64,854,716 70 .57% 2,182,290 488,196 2030 69,383,301 72.95% 67,074,021 70.52% 2,309,281 477,454 2031 69,868,207 70.98% 67,429,978 68.50% 2,438,229 465,910 2032 70,122,087 68.82% 67,549,576 66.30% 2,572,512 454,316 2033 66,721,958 63.27% 64,025,618 60.72% 2,696,340 440,096 2034 62,987,707 57.71% 60,169,968 55.13% 2,817,739 425,056 2035 65,472,079 57.96% 62,546,458 55.37% 2,925,621 407,884 2036 65,058,318 55.65% 62,026,409 53.05% 3,031,909 390,668 2037 63,213,581 52.24% 60,073,922 49.64% 3,139,659 373,892 2038 58,980,901 47.09% 55,731,354 44.50% 3,249,547 357,651 2039 45,863,374 35.38% 42,500,093 32.79% 3,363,281 342,115 2040 42,349,557 31.57% 39,137,666 29.17% 3,211,892 301,956 TotalAPV 14,415,514 . . . . A~t"c~~~~ts 134 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 Section 18 Option IVC2: Change Existing Plan to FAME High 5 for all FS, Employees Eligible for NR Grandfathered Miami Beach Police & Fire Plan Projected Cost in Dollars Option IVC2: Change Existing Plan to FAME High 5 for all FS, 18-1 -----t EE'sEligible for NR Grandfathered 1---------- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan C ost (incl. expenses & Buyback )-$ -Opti oniVC2-$ . . . . A;:t""c~~~~~t s 135 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 _._Current Plan Cost (incl. expenses & Buyback)-% ....,_OptionNC2-% 136 Option IVC2: Change Existing Plan to FAME High 5 for all FS, EE's Eligible for NR Grandfathered Current Plan Cost Current Plan Cost (incl. expenses & (incl. expenses & Year Buyback)-$ Buyback)-% Option IVC2-$ 2010 35,439,063 74.14% 34,552,299 2011 37,226,360 75.25% 36,296,527 2012 37,981,309 74.18% 36,997,364 2013 38,660,638 72.95% 37,612,058 2014 40,013,760 72.95% 38,897,735 2015 41,414,242 72.95% 40,230,900 2016 42,863,740 72.95% 41,612,545 2017 44,363,971 72.95% 43,042,380 2018 45,916,710 72.95% 44,517,935 2019 47,523,795 72.95% 46,034,417 2020 49,187,128 72.95% 47,600,832 2021 50,908,677 72.95% 49,222,440 2022 52,690,481 72.95% 50,904,347 2023 54,534,648 72.95% 52,649,972 2024 56,443,360 72.95% 54,452,014 2025 58,418,878 72.95% 56,312,304 2026 60,463,539 72.95% 58,242,097 2027 62,579,763 72.95% 60,238,453 2028 64,770,054 72.95% 62,299,695 2029 67,037,006 72.95% 64,426,773 2030 69,383,301 72.95% 66,632,345 2031 69,868,207 70.98% 66,974,029 2032 70,122,087 68.82% 67,078,874 2033 66,721,958 63.27% 63,539,275 2034 62,987,707 57.71% 59,667,269 2035 65,472,079 57.96% 62,026,391 2036 65,058,318 55.65% 61,488,236 2037 63,213,581 52.24% 59,516,953 2038 58,980,901 47.09% 55,154,892 2039 45,863,374 35.38% 41,903,454 2040 42,349,557 31.57% 39,137,666 137 18-3 Present Value Annual of Savings Option IVC2-% Savings (Cost) (Cost) 72.29% 886,764 886,764 73.37% 929,833 859,365 72.25% 983,945 840,458 70.97% 1,048,580 827,789 70.91% 1,116,025 814,263 70.86% 1,183,342 797,947 70.82% 1,251,195 779,761 70.78% 1,321,591 761,213 70.73% 1,398,775 744,611 70.66% 1,489,378 732,756 70.60% 1,586,295 721,293 70.53% 1,686,237 708,629 70.48% 1,786,134 693,724 70.43% 1,884,676 676,522 70.38% 1,991,346 660,640 70.32% 2,106,574 645,904 70.27% 2,221,442 629,504 70.22% 2,341,310 613,191 70.17% 2,470,359 597,956 70.11% 2,610,234 583,931 70.06% 2,750,956 568,772 68.04% 2,894,178 553,035 65.84% 3,043,213 537,443 60.25% 3,182,684 519,477 54.67% 3,320,439 500,889 54.91% 3,445,688 480,390 52.59% 3,570,082 460,012 49.18% 3,696,628 440,220 44.04% 3,826,010 421,098 32.33% 3,959,920 402,806 29.17% 3,211,892 301,956 TotalAPV 19,762,322 19-1 Section 19 Option IVD1: Change Existing Plan to 1.5% COLA, Vested Employees Grandfathered 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 30,000,000 25,000,000 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -OptionNDl-$ 138 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 19-2 o;:a,o.-~ 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 -.Po Current Plan Cost (incl. expenses & Buyback)-% 139 19-3 Option IVD1: Change Existing Plan to 1.5% COLA, Vested EE's Grandfathered Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option IVD1-$ Option IVD1-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 34,636,516 72.46% 802,547 802,547 2011 37,226,360 75.25% 36,361,093 73.50% 865,268 799,693 2012 37,981,309 74.18% 37,028,447 72.32% 952,862 813,908 2013 38,660,638 72.95% 37,597,627 70.94% 1,063,011 839,182 2014 40,013,760 72.95% 38,834,182 70.80% 1,179,578 860,632 2015 41,414,242 72.95% 40,119,717 70.67% 1,294,525 872,919 2016 42,863,740 72.95% 41,455,037 70.55% 1,408,703 877,922 2017 44,363,971 72.95% 42,838,287 70.44% 1,525,684 878,767 2018 45,916,710 72.95% 44,258,813 70.32% 1,657,897 882,550 2019 47,523,795 72.95% 45,705,490 70.16% 1,818,305 894,585 2020 49,187,128 72.95% 47,196,654 70.00% 1,990,474 905,073 2021 50,908,677 72.95% 48,743,162 69.85% 2,165,515 910,042 2022 52,690,481 72.95% 50,356,065 69.72% 2,334,415 906,674 2023 54,534,648 72.95% 52,039,683 69.61% 2,494,965 895,592 2024 56,443,360 72.95% 53,791,198 69.52% 2,652,162 879,870 2025 58,418,878 72.95% 55,598,625 69.43% 2,820,253 864,727 2026 60,463,539 72.95% 57,480,983 69.35% 2,982,555 845,186 2027 62,579,763 72.95% 59,446,698 69.30% 3,133,064 820,552 2028 64,770,054 72.95% 61,498,607 69.26% 3,271,448 791,862 2029 67,037,006 72.95% 63,620,261 69.23% 3,416,746 764,354 2030 69,383,301 72.95% 65,818,506 69.20% 3,564,795 737,037 2031 69,868,207 70.98% 66,151,580 67.20% 3,716,628 710,193 2032 70,122,087 68.82% 66,247,851 65.02% 3,874,236 684,205 2033 66,721,958 63.27% 62,693,121 59.45% 4,028,838 657,586 2034 62,987,707 57.71% 58,802,660 53.88% 4,185,047 631,315 2035 65,472,079 57.96% 61,135,347 54.12% 4,336,732 604,618 2036 65,058,318 55.65% 60,567,612 51.80% 4,490,706 578,637 2037 63,213,581 52.24% 58,564,781 48.40% 4,648,799 553,611 2038 58,980,901 47.09% 54,169,394 43.25% 4,811,507 529,563 2039 45,863,374 35.38% 40,883,464 31.54% 4,979,910 506,560 2040 42,349,557 31.57% 37,694,058 28.10% 4,655,499 437,672 TotalAPV 23,737,634 140 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 Section20 Option IVD2: Change Existing Plan to 1.5% COLA, Employees Eligible for NR Grandfathered 20-1 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -OptioniVD2-$ 141 20-2 I Miami Beach Police & Fire Plan Projected Cost in Percentages Option IVD2: Change Existing Plan to 1.5% COLA, EE's Eligible for NR Grandfathered 80% 65% 60% 55% 50% 45% 40 % 35% 30% 25% 20 % 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 _....Current Plan Cost (incl. expenses & Buyback)-% ...,.._.OptionND2-% . ' . . A~tijc~~~~~~t s 142 20-3 Option IVD2: Change Existing Plan to 1.5% COLA, EE's Eligible for NR Grandfathered Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option IVD2-$ Option IVD2-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 32,932,490 68.90% 2,506,573 2,506,573 2011 37,226,360 75.25% 34,600,649 69.94% 2,625,711 2,426,720 2012 37,981,309 74.18% 35,222,147 68.79% 2,759,162 2,356,800 2013 38,660,638 72.95% 35,771,601 67.50% 2,889,037 2,280,717 2014 40,013,760 72.95% 37,002,084 67.46% 3,011,676 2,197,350 2015 41,414,242 72.95% 38,285,916 67.44% 3,128,326 2,109,482 2016 42,863,740 72.95% 39,618,302 67.43% 3,245,438 2,022,599 2017 44,363,971 72.95% 40,999,307 67.42% 3,364,664 1,937,987 2018 45,916,710 72.95% 42,429,416 67.41% 3,487,294 1,856,396 2019 47,523,795 72.95% 43,908,425 67.40% 3,615,370 1,778,719 2020 49,187,128 72.95% 45,439,275 67.39% 3,747,853 1,704,158 2021 50,908,677 72.95% 47,023,887 67.38% 3,884,790 1,632,554 2022 52,690,481 72.95% 48,664,744 67.38% 4,025,737 1,563,573 2023 54,534,648 72.95% 50,363,689 67.37% 4,170,959 1,497,206 2024 56,443,360 72.95% 52,121,732 67.36% 4,321,628 1,433,725 2025 58,418,878 72.95% 53,941,061 67.36% 4,477,817 1,372,958 2026 60,463,539 72.95% 55,824,635 67.35% 4,638,903 1,314,556 2027 62,579,763 72.95% 57,774,031 67.35% 4,805,732 1,258,624 2028 64,770,054 72.95% 59,791,126 67.34% 4,978,929 1,205,161 2029 67,037,006 72.95% 61,878,150 67.34% 5,158,856 1,154,079 2030 69,383,301 72.95% 64,038,650 67.33% 5,344,651 1,105,030 2031 69,868,207 70.98% 64,331,515 65.35% 5,536,693 1,057,981 2032 70,122,087 68.82% 64,386,547 63.19% 5,735,540 1,012,919 2033 66,721,958 63.27% 60,782,179 57.64% 5,939,780 969,490 2034 62,987,707 57.71% 56,837,240 52.08% 6,150,468 927,799 2035 65,472,079 57.96% 59,105,387 52.32% 6,366,692 887,631 2036 65,058,318 55.65% 58,468,389 50.01% 6,589,929 849,126 2037 63,213,581 52.24% 56,392,836 46.60% 6,820,745 812,261 2038 58,980,901 47.09% 51,921,430 41.46% 7,059,471 776,978 2039 45,863,374 35.38% 38,556,821 29.74% 7,306,553 743,228 2040 42,349,557 31.57% 37,694,058 28.10% 4,655,499 437,672 TotalAPV 45,190,053 io • • • A~tij(~~~~~ts 143 21-1 Section 21 Option IVE1: Change Existing Plan to No COLA, Vested Employees Grandfathered 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl . expenses & Buyback)-$ -Option !VEl-$ . . . . ft.(;ilj(~~~~2tS 144 21-2 I Miami Beach Police & Fire Plan Projected Cost in Percentages Option IVE1: Change Existing Plan to No COLA, Vested EE's Grandfathered 80% 75% ,p--~~---------------------------------------------------------------------- 70% ~~~~--------------------------------------------~~=-------------------- 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 -&--Current Plan Cost (incl. expenses & Buyback)-% ~Option !VEl-% . . . . A~!Yc~~~~ts 145 21-3 Option IVE1: Change Existing Plan to No COLA, Vested EE's Grandfathered Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option IVE1-$ Option IVE1-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 33,660,923 70.42% 1,778,141 1,778,141 2011 37,226,360 75.25% 35,299,960 71.35% 1,926,400 1,780,407 2012 37,981,309 74.18% 35,847,513 70.01% 2,133,796 1,822,630 2013 38,660,638 72.95% 36,267,156 68.43% 2,393,482 1,889,506 2014 40,013,760 72.95% 37,345,450 68.08% 2,668,310 1,946,826 2015 41,414,242 72.95% 38,475,324 67.77% 2,938,918 1,981,760 2016 42,863,740 72.95% 39,656,434 67.49% 3,207,306 1,998,834 2017 44,363,971 72.95% 40,882,548 67.22% 3,481,423 2,005,238 2018 45,916,710 72.95% 42,124,964 66.93% 3,791,746 2,018,465 2019 47,523,795 72.95% 43,356,181 66.55% 4,167,614 2,050,417 2020 49,187,128 72.95% 44,616,640 66.17% 4,570,488 2,078,213 2021 50,908,677 72.95% 45,929,736 65.81% 4,978,941 2,092,363 2022 52,690,481 72.95% 47,319,564 65.51% 5,370,917 2,086,034 2023 54,534,648 72.95% 48,792,975 65.27% 5,741,673 2,061,029 2024 56,443,360 72.95% 50,348,623 65.07% 6,094,737 2,021,964 2025 58,418,878 72.95% 51,948,892 64.87% 6,469,986 1,983,784 2026 60,463,539 72.95% 53,633,284 64.71% 6,830,255 1,935,534 2027 62,579,763 72.95% 55,427,209 64.61% 7,152,554 1,873,258 2028 64,770,054 72.95% 57,338,778 64.58% 7,431,276 1,798,758 2029 67,037,006 72.95% 59,318,480 64.55% 7,718,527 1,726,698 2030 69,383,301 72.95% 61,369,529 64.52% 8,013,773 1,656,883 2031 69,868,207 70.98% 61,550,088 62.53% 8,318,119 1,589,471 2032 70,122,087 68.82% 61,488,563 60.35% 8,633,524 1,524,714 2033 66,721,958 63.27% 57,769,504 54.78% 8,952,455 1,461,218 2034 62,987,707 57.71% 53,708,514 49.21% 9,279,193 1,399,768 2035 65,472,079 57.96% 55,863,522 49.45% 9,608,557 1,339,605 2036 65,058,318 55.65% 55,111,531 47.14% 9,946,787 1,281,664 2037 63,213,581 52.24% 52,917,847 43.73% 10,295,734 1,226,087 2038 58,980,901 47.09% 48,324,817 38.58% 10,656,085 1,172,828 2039 45,863,374 35.38% 34,834,327 26.87% 11,029,048 1,121,883 2040 42,349,557 31.57% 32,040,378 23.88% 10,309,180 969,184 TotalAPV 53,673,164 146 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 Section22 Option IVE2: Change Existing Plan to No COLA, Employees Eligible for NR Grandfathered Miami Beach Police & Fire Plan Projected Cost in Dollars 22-1 Option IVE2: Change Existing Plan to No COLA, EE's Eligible for NR Grandfathered 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -OptionNE2-$ 147 22-2 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ....,.Current Plan Cost (incl. expenses & Buyback)-% -...OptionNE2-% 148 22-3 Option IVE2: Change Existing Plan to No COLA, EE's Eligible for NR Grandfathered Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option IVE2-$ Option IVE2-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 29,889,218 62.53% 5,549,845 5,549,845 2011 37,226,360 75.25% 31,393,688 63.46% 5,832,672 5,390,639 2012 37,981,309 74.18% 31,828,575 62.16% 6,152,734 5,255,494 2013 38,660,638 72.95% 32,202,550 60.76% 6,458,088 5,098,262 2014 40,013,760 72.95% 33,273,998 60.66% 6,739,762 4,917,400 2015 41,414,242 72.95% 34,412,270 60.62% 7,001,971 4,721,544 2016 42,863,740 72.95% 35,600,498 60.59% 7,263,242 4,526,546 2017 44,363,971 72.95% 36,836,118 60.57% 7,527,853 4,335,911 2018 45,916,710 72.95% 38,118,193 60.56% 7,798,517 4,151,394 2019 47,523,795 72.95% 39,444,201 60.55% 8,079,594 3,975,065 2020 49,187,128 72.95% 40,817,541 60.54% 8,369,587 3,805,673 2021 50,908,677 72.95% 42,239,399 60.53% 8,669,278 3,643,200 2022 52,690,481 72.95% 43,712,500 60.52% 8,977,981 3,486,997 2023 54,534,648 72.95% 45,237,982 60.51% 9,296,666 3,337,128 2024 56,443,360 72.95% 46,816,849 60.51% 9,626,511 3,193,650 2025 58,418,878 72.95% 48,451,346 60.50% 9,967,532 3,056,178 2026 60,463,539 72.95% 50,143,715 60.50% 10,319,823 2,924,395 2027 62,579,763 72.95% 51,895,236 60.49% 10,684,527 2,798,284 2028 64,770,054 72.95% 53,707,644 60.49% 11,062,411 2,677,683 2029 67,037,006 72.95% 55,582,960 60.49% 11,454,046 2,562,365 2030 69,383,301 72.95% 57,524,250 60.48% 11,859,051 2,451,911 2031 69,868,207 70.98% 57,590,178 58.50% 12,278,030 2,346,152 2032 70,122,087 68.82% 57,410,348 56.35% 12,711,739 2,244,943 2033 66,721,958 63.27% 53,562,562 50.79% 13,159,396 2,147,875 2034 62,987,707 57.71% 49,365,535 45.23% 13,622,172 2,054,907 2035 65,472,079 57.96% 51,372,378 45.48% 14,099,701 1,965,750 2036 65,058,318 55.65% 50,464,811 43.16% 14,593,507 1,880,403 2037 63,213,581 52.24% 48,109,169 39.76% 15,104,412 1,798,737 2038 58,980,901 47.09% 43,347,835 34.61% 15,633,066 1,720,604 2039 45,863,374 35.38% 29,683,151 22.90% 16,180,224 1,645,864 2040 42,349,557 31.57% 32,040,378 23.88% 10,309,180 969,184 TotalAPV 100,633,984 .. . . . ::.. .::..:.; •.=...=-~= ---········-·· ~~':;;;~~= ~-=~ Conc~P-tS 149 70,000,000 60,000,000 55,000,000 40,000,000 35,000,000 25,000,000 Section23 Option IVF1: Change Existing Plan to 55&10 or 52&25, Vested Employees Grandfathered 23-1 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -OptionNFl-$ 150 23-2 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ._....Current Plan Cost (incl. expenses & Buyback)-% ~OptionNFl-% 151 23-3 Option IVF1: Change Existing Plan to 55&10 or 52&25, Vested EE's Grandfathered Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option IVF1-$ Option IVF1-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 34,450,821 72.07% 988,242 988,242 2011 37,226,360 75.25% 36,158,400 73.09% 1,067,960 987,024 2012 37,981,309 74.18% 36,801,453 71.87% 1,179,856 1,007,800 2013 38,660,638 72.95% 37,339,806 70.46% 1,320,832 1,042,716 2014 40,013,760 72.95% 38,543,699 70.27% 1,470,061 1,072,572 2015 41,414,242 72.95% 39,797,136 70.10% 1,617,106 1,090,441 2016 42,863,740 72.95% 41,100,672 69.95% 1,763,068 1,098,767 2017 44,363,971 72.95% 42,451,434 69.80% 1,912,537 1,101,587 2018 45,916,710 72.95% 43,835,033 69.64% 2,081,677 1,108,142 2019 47,523,795 72.95% 45,236,612 69.44% 2,287,182 1,125,267 2020 49,187,128 72.95% 46,679,335 69.23% 2,507,793 1,140,300 2021 50,908,677 72.95% 48,176,709 69.03% 2,731,968 1,148,089 2022 52,690,481 72.95% 49,742,499 68.87% 2,947,982 1,144,980 2023 54,534,648 72.95% 51,381,643 68.73% 3,153,005 1,131,802 2024 56,443,360 72.95% 53,090,425 68.62% 3,352,936 1,112,355 2025 58,418,878 72.95% 54,852,235 68.50% 3,566,643 1,093,581 2026 60,463,539 72.95% 56,690,857 68.40% 3,772,682 1,069,089 2027 62,579,763 72.95% 58,617,096 68.33% 3,962,667 1,037,825 2028 64,770,054 72.95% 60,634,222 68.29% 4,135,832 1,001,088 2029 67,037,006 72.95% 62,719,688 68.25% 4,317,319 965,820 2030 69,383,301 72.95% 64,880,928 68.22% 4,502,373 930,885 2031 69,868,207 70.98% 65,175,971 66.21% 4,692,236 896,618 2032 70,122,087 68.82% 65,232,792 64.03% 4,889,295 863,468 2033 66,721,958 63.27% 61,638,872 58.45% 5,083,086 829,661 2034 62,987,707 57.71% 57,708,584 52.87% 5,279,123 796,356 2035 65,472,079 57.96% 60,001,974 53.12% 5,470,105 762,630 2036 65,058,318 55.65% 59,394,150 50.80% 5,664,168 729,840 2037 63,213,581 52.24% 57,350,071 47.39% 5,863,510 698,267 2038 58,980,901 47.09% 52,912,169 42.25% 6,068,732 667,936 2039 45,863,374 35.38% 39,582,236 30.54% 6,281,138 638,922 2040 42,349,557 31.57% 36,487,922 27.20% 5,861,635 551,063 TotalAPV 29,833,132 . . . . A;:;~iJ(~~~~~ts 152 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 Section24 Option IVF2: Change Existing Plan to 55&10 or 52&25, Employees Eligible for NR Grandfathered 24-1 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ..._Current Plan Cost (incl. expenses & Buyback)-$ ~Option NF2-$ 153 24-2 Miami Beach Police & Fire Plan Projected Cost in Percentages Option IVF2: Change Existing Plan to 55&10 or 52&25,EE's Eligible for NR Grandfathered 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ...,_Current Plan Cost (incl. expenses & Buyback)-% -Moo-Option IVF2-% . ' . . AeWC{;~~~~2tS 154 24-3 Option IVF2: Change Existing Plan to 55&10 or 52&25, EE's Eligible for NR Grandfathered Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option IVF2-$ Option IVF2-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 32,003,876 66.95% 3,435,188 3,435,188 2011 37,226,360 75.25% 33,627,022 67.97% 3,599,338 3,326,560 2012 37,981,309 74.18% 34,198,513 66.79% 3,782,796 3,231,160 2013 38,660,638 72.95% 34,700,788 65.48% 3,959,850 3,126,057 2014 40,013,760 72.95% 35,887,691 65.43% 4,126,069 3,010,422 2015 41,414,242 72.95% 37,130,672 65.40% 4,283,570 2,888,481 2016 42,863,740 72.95% 38,422,173 65.39% 4,441,567 2,768,042 2017 44,363,971 72.95% 39,761,753 65.38% 4,602,218 2,650,796 2018 45,916,710 72.95% 41,149,801 65.38% 4,766,909 2,537,574 2019 47,523,795 72.95% 42,585,948 65.37% 4,937,847 2A29,362 2020 49,187,128 72.95% 44,072,811 65.36% 5,114,316 2,325,493 2021 50,908,677 72.95% 45,611,939 65.36% 5,296,738 2,225,915 2022 52,690,481 72.95% 47,205,675 65.36% 5,484,806 2,130,267 2023 54,534,648 72.95% 48,855,607 65.35% 5,679,041 2,038,546 2024 56,443,360 72.95% 50,563,275 65.35% 5,880,085 1,950,752 2025 58,418,878 72.95% 52,330,887 65.35% 6,087,991 1,866,659 2026 60,463,539 72.95% 54,160,703 65.35% 6,302,836 1,786,076 2027 62,579,763 72.95% 56,054,519 65.34% 6,525,244 1,708,965 2028 64,770,054 72.95% 58,014,405 65.34% 6,755,649 1,635,221 2029 67,037,006 72.95% 60,042,616 65.34% 6,994,390 1,564,703 2030 69,383,301 72.95% 62,141,989 65.34% 7,241,313 1,497,173 2031 69,868,207 70.98% 62,371,434 63.36% 7,496,774 1,432,524 2032 70,122,087 68.82% 62,360,877 61.21% 7,761,210 1,370,660 2033 66,721,958 63.27% 58,687,691 55.65% 8,034,267 1,311,352 2034 62,987,707 57.71% 54,67U09 50.09% 8,316,598 1,254,560 2035 65,472,079 57.96% 56,864,012 50.34% 8,608,067 1,200,118 2036 65,058,318 55.65% 56,148,806 48.02% 8,909,512 1,148,009 2037 63,213,581 52.24% 53,992,167 44.62% 9,221,414 1,098,149 2038 58,980,901 47.09% 49,436,738 39.47% 9,544,163 1,050,448 2039 45,863,374 35.38% 35,985,165 27.76% 9,878,209 1,004,819 2040 42,349,557 31.57% 36,487,922 27.20% 5,861,635 551,063 TotalAPV 61,555,116 155 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 25-1 Section25 Option IVGl: Change Existing Plan Normal Form to Life Annuity, Vested EE's Grandfathered 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 .,._Current Plan Cost (incl. expenses & Buyback)-$ -Option IVGl-$ .. . . . Aetuc':~~~~ts 156 25-2 I Miami Beach Police & Fire Plan Projected Cost in Percentages Option IVG1: Change Existing Plan Normal Form to Life Annuity, Vested BE's Grandfathered 80% 75% 70% 65% 60 % 55% 50% 45% 40 % 35% 30% 25 % 20 % 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 _,._.Current Plan Cost (incl . expenses & Buyback)-% ~OptioniVGl-% . ' . . A~i~C~~~~2t s 157 25-3 Option IVG1: Change Existing Plan Normal Form to Life Annuity, Vested EE's Grandfathered Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option IVG1-$ Option IVG1-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 34,863,363 72.94% 575,701 575,701 2011 37,226,360 75.25% 36,606,489 73.99% 619,871 572,894 2012 37,981,309 74.18% 37,299,544 72.84% 681,765 582,345 2013 38,660,638 72.95% 37,900,660 71.52% 759,978 599,956 2014 40,013,760 72.95% 39,170,996 71.41% 842,764 614,890 2015 41,414,242 72.95% 40,489,808 71.32% 924,434 623,361 2016 42,863,740 72.95% 41,858,141 71.24% 1,005,599 626,702 2017 44,363,971 72.95% 43,275,062 71.16% 1,088,909 627,192 2018 45,916,710 72.95% 44,733,653 71.07% 1,183,057 629,778 2019 47,523,795 72.95% 46,226,224 70.96% 1,297,571 638,390 2020 49,187,128 72.95% 47,766,506 70.84% 1,420,622 645,960 2021 50,908,677 72.95% 49,362,756 70.73% 1,545,922 649,662 2022 52,690,481 72.95% 51,023,326 70.64% 1,667,155 647,513 2023 54,534,648 72.95% 52,752,002 70.56% 1,782,646 639,898 2024 56,443,360 72.95% 54,545,831 70.50% 1,897,530 629,516 2025 58,418,878 72.95% 56,398,036 70.43% 2,020,842 619,617 2026 60,463,539 72.95% 58,323,328 70.37% 2,140,210 606,485 2027 62,579,763 72.95% 60,326,781 70.32% 2,252,982 590,057 2028 64,770,054 72.95% 62,410,234 70.29% 2,359,821 571,200 2029 67,037,006 72.95% 64,563,975 70.26% 2,473,031 553,237 2030 69,383,301 72.95% 66,795,418 70.23% 2,587,883 535,056 2031 69,868,207 70.98% 67,162,842 68.23% 2,705,365 516,956 2032 70,122,087 68.82% 67,294,670 66.05% 2,827,418 499,333 2033 66,721,958 63.27% 63,776,689 60.48% 2,945,270 480,726 2034 62,987,707 57.71% 59,924,243 54.90% 3,063,465 462,124 2035 65,472,079 57.96% 62,296,215 55.15% 3,175,864 442,772 2036 65,058,318 55.65% 61,769,123 52.83% 3,289,195 423,819 2037 63,213,581 52.24% 59,808,351 49.42% 3,405,230 405,518 2038 58,980,901 47.09% 55,456,489 44.28% 3,524,413 387,903 2039 45,863,374 35.38% 42,215,607 32.57% 3,647,767 371,053 2040 42,349,557 31.57% 38,868,451 28.97% 3,481,106 327,265 TotalAPV 17,096,883 158 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 Section 26 Option IVG2: Change Existing Plan Normal Form to Life Annuity, EE's Eligible for NR Grandfathered Miami Beach Police & Fire Plan Projected Cost in Dollars 26-1 Option IVG2: Change Existing Plan Normal Form to Life Annuity, EE's Eligible for NR ---1 Grandfathered ...----- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -OptionNG2-$ 159 80% 75% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 26-2 Miami Beach Police & Fire Plan Projected Cost in Percentages Option IVG2: Change Existing Plan Normal Form to Life Annuity, BE's Eligible for NR Grandfa thered 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-% ~OptionNG2-% 160 26-3 Option IVG2: Change Existing Plan Normal Form to Life Annuity, EE's Eligible for NR Grandfathered Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option IVG2-$ Option IVG2-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 33,746,253 70.60% 1,692,810 1,692,810 2011 37,226,360 75.25% 35,467,274 71.69% 1,759,086 1,625,773 2012 37,981,309 74.18% 36,150,496 70.60% 1,830,813 1,563,830 2013 38,660,638 72.95% 36,755,633 69.35% 1,905,005 1,503,884 2014 40,013,760 72.95% 38,033,831 69.34% 1,979,929 1,444,577 2015 41,414,242 72.95% 39,358,845 69.33% 2,055,397 1,385,988 2016 42,863,740 72.95% 40,731,111 69.32% 2,132,630 1,329,082 2017 44,363,971 72.95% 42,151,708 69.31% 2,212,263 1,274,225 2018 45,916,710 72.95% 43,621,493 69.30% 2,295,217 1,221,815 2019 47,523,795 72.95% 45,140,895 69.29% 2,382,900 1,172,359 2020 49,187,128 72.95% 46,713,008 69.28% 2,474,119 1,124,988 2021 50,908,677 72.95% 48,340,232 69.27% 2,568,445 1,079,370 2022 52,690,481 72.95% 50,025,079 69.26% 2,665,402 1,035,227 2023 54,534,648 72.95% 51,769,744 69.25% 2,764,903 992,489 2024 56,443,360 72.95% 53,574,699 69.24% 2,868,662 951,695 2025 58,418,878 72.95% 55,442,050 69.23% 2,976,828 912,735 2026 60,463,539 72.95% 57,375,522 69.22% 3,088,017 875,071 2027 62,579,763 72.95% 59,376,500 69.22% 3,203,263 838,937 2028 64,770,054 72.95% 61,446,663 69.21% 3,323,391 804,435 2029 67,037,006 72.95% 63,588,209 69.20% 3,448,797 771,525 2030 69,383,301 72.95% 65,805,397 69.19% 3,577,904 739,747 2031 69,868,207 70.98% 66,157,091 67.21% 3,711,117 709,140 2032 70,122,087 68.82% 66,272,959 65.05% 3,849,128 679,771 2033 66,721,958 63.27% 62,732,503 59.49% 3,989,455 651,158 2034 62,987,707 57.71% 58,854,136 53.92% 4,133,571 623,550 2035 65,472,079 57.96% 61,192,296 54.17% 4,279,783 596,678 2036 65,058,318 55.65% 60,628,097 51.86% 4,430,221 570,843 2037 63,213,581 52.24% 58,628,031 48.45% 4,585,550 546,079 2038 58,980,901 47.09% 54,234,857 43.30% 4,746,044 522,358 2039 45,863,374 35.38% 40,951,219 31.59% 4,912,156 499,668 2040 42,349,557 31.57% 38,868,451 28.97% 3,481,106 327,265 TotalAPV 30,067,071 . . . . A~t¥JC~~~~2ts 161 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 Section27 Option IVHl: Increase Existing Employee Contributions by 2%, Vested BE's Grandfathered 27-1 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -OptioniVHl-$ 162 27-2 Miami Beach Police & Fire Plan Projected Cost in Percentages Option IVH1: Increase Existing Employee Contributions by 2%, Vested EE's Grandfathered 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 -+-Current Plan Cost (incl. expenses & Buyback)-% ..,.._OptioniVHl-% . . . . A~t~t~~~i~ts 163 27-3 Option IVH1: Increase Existing Employee Contributions by 2%, Vested EE's Grandfathered Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option IVH1-$ Option IVH1-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 35,085,376 73 .40% 353,688 353,688 2011 37,226,360 75.25% 36,843,702 74.47% 382,659 353,659 2012 37,981,309 74.18% 37,556,886 73.35% 424,423 362,531 2013 38,660,638 72.95% 38,182,354 72.05% 478,284 377,575 2014 40,013,760 72.95% 39,478,383 71.97% 535,377 390,616 2015 41,414,242 72.95% 40,822,628 71.91% 591,613 398,935 2016 42,863,740 72.95% 42,216,298 71.85% 647,442 403,494 2017 44,363,971 72.95% 43,659,049 71.79% 704,923 406,023 2018 45,916,710 72.95% 45,146,556 71.73% 770,154 409,977 2019 47,523,795 72.95% 46,673,356 71.64% 850,439 418,406 2020 49,187,128 72.95% 48,250,106 71.56% 937,021 426,066 2021 50,908,677 72.95% 49,883,289 71.48% 1,025,389 430,912 2022 52,690,481 72.95% 51,579,394 71.41% 1,111,086 431,540 2023 54,534,648 72.95% 53,341,885 71.35% 1,192,763 428,154 2024 56,443,360 72.95% 55,167,146 71.30% 1,276,215 423,392 2025 58,418,878 72.95% 57,052,342 71.24% 1,366,537 418,998 2026 60,463,539 72.95% 59,009,447 71.20% 1,454,092 412,055 2027 62,579,763 72.95% 61,040,673 71.16% 1,539,090 403,089 2028 64,770,054 72.95% 63,146,857 71.12% 1,623,197 392,899 2029 67,037,006 72.95% 65,323,323 71.08% 1,713,684 383,365 2030 69,383,301 72.95% 67,578,516 71.05% 1,804,785 373,147 2031 69,868,207 70.98% 67,970,661 69.05% 1,897,546 362,593 2032 70,122,087 68.82% 68,128,029 66.87% 1,994,058 352,158 2033 66,721,958 63.27% 64,637,329 61.30% 2,084,630 340,253 2034 62,987,707 57.71% 60,813,496 55.72% 2,174,212 327,980 2035 65,472,079 57.96% 63,216,075 55.96% 2,256,004 314,527 2036 65,058,318 55.65% 62,720,961 53.65% 2,337,357 301,173 2037 63,213,581 52.24% 60,793,412 50.24% 2,420,169 288,210 2038 58,980,901 47.09% 56,476,026 45.09% 2,504,875 275,691 2039 45,863,374 35.38% 43,270,829 33.38% 2,592,546 263,716 2040 42,349,557 31.57% 39,666,273 29.57% 2,683,285 252,260 TotalAPV 11,477,082 .. . . . A~~~c@~~~i~ts 164 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 Section28 Option IVH2: Increase Existing Employee Contributions by 2%, EE's Eligible for NR Grandfathered Miami Beach Police & Fire Plan Projected Cost in Dollars Option IVH2: Increase Existing Employee Contributions by 2%, EE 's Eligible for NR 28-1 -----1 Grandfathered 1----- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ......,. Current Plan Cost (incl. expenses & Buyback)-$ -Option NH2-$ 165 28-2 80% 70% 65% 60% 55% 50% 45% 40 % 35% 30% 25% 20 % 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 _,._Current Plan Cost (incl . expenses & Buyback)-% ...,.._OptionNH2-% 166 28-3 Option IVH2: Increase Existing Employee Contributions by 2%, BE's Eligible for NR Grandfathered Current Plan Cost Current Plan Cost (incl. expenses & (incl. expenses & Year Buyback)-$ Buyback)-% Option IVH2-$ 2010 35,439,063 74.14% 34,597,069 2011 37,226,360 75.25% 36,343,498 2012 37,981,309 74.18% 37,051,952 2013 38,660,638 72.95% 37,685,072 2014 40,013,760 72.95% 38,994,181 2015 41,414,242 72.95% 40,352,707 2016 42,863,740 72.95% 41,760,135 2017 44,363,971 72.95% 43,217,458 2018 45,916,710 72.95% 44,725,644 2019 47,523,795 72.95% 46,285,257 2020 49,187,128 72.95% 47,899,194 2021 50,908,677 72.95% 49,569,713 2022 52,690,481 72.95% 51,299,280 2023 54,534,648 72.95% 53,090,042 2024 56,443,360 72.95% 54,942,933 2025 58,418,878 72.95% 56,860,154 2026 60,463,539 72.95% 58,845,065 2027 62,579,763 72.95% 60,899,324 2028 64,770,054 72.95% 63,024,853 2029 67,037,006 72.95% 65,223,979 2030 69,383,301 72.95% 67,500,586 2031 69,868,207 70.98% 67,913,670 2032 70,122,087 68.82% 68,093,113 2033 66,721,958 63.27% 64,617,809 2034 62,987,707 57.71% 60,806,584 2035 65,472,079 57.96% 63,213,476 2036 65,058,318 55.65% 62,720,185 2037 63,213,581 52.24% 60,793,412 2038 58,980,901 47.09% 56,476,026 2039 45,863,374 35.38% 43,270,829 2040 42,349,557 31.57% 39,666,273 167 Option IVH2-% 72.38% 73.46% 72.36% 71.11% 71.09% 71.08% 71.07% 71.06% 71.06% 71.05% 71.04% 71.03% 71.02% 71.02% 71.01% 71.00% 71.00% 70.99% 70.98% 70.98% 70.97% 68.99% 66.83% 61.28% 55.71% 55.96% 53.65% 50.24% 45.09% 33.38% 29.57% Present Value Annual Savings (Cost) 841,994 882,862 929,357 975,565 1,019,579 1,061,535 1,103,605 1,146,513 1,191,066 1,238,538 1,287,933 1,338,964 1,391,201 1,444,605 1,500,427 1,558,724 1,618,474 1,680,438 1,745,201 1,813,027 1,882,716 1,954,538 2,028,974 2,104,149 2,181,123 2,258,603 2,338,133 2,420,169 2,504,875 2,592,546 2,683,285 TotalAPV .. . . . --..__-----. -------·--· ---· ·········· of Savings (Cost) 841,994 815,953 793,831 770,149 743,895 715,810 687,781 660,371 634,042 609,346 585,627 562,690 540,334 518,555 497,775 477,926 458,637 440,108 422,430 405,589 389,260 373,484 358,325 343,439 329,023 314,890 301,273 288,210 275,691 263,716 252,260 15,672,414 ~~~~coM=~P-ts 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 29-1 Section29 Option V: Chapter Minimum-Freeze Current Plan Benefits, Implement Chapter Minimum Benefits Plan for all Future Service, Grandfather all Employees Eligible for NR 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-$ -Option Chapter Minimum Benefits-$ 168 75% 70% 65% 60% 55% 45% 40% 35% 30% 25% 20% 15% 10% 5% 29-2 Miami Beach Police & Fire Plan Projected Cost in Percentages Option V: Chapter Minimum-Freeze Current Plan Benefits, Implement Chapter Minimum Benefits Plan for all Future Service, Grandfather all Employees Eligible for NR 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-% -Option Chapter Minimum Benefits-% 169 Option V: Chapter Minimum-Freeze Current Plan Benefits, Implement Chapter Minimum Benefits Plan for all Future Service, Grandfather all Employees Eligible for NR Current Plan Cost Current Plan Cost Option Chapter Option Chapter (incl. expenses & (incl. expenses & Minimum Benefits-Minimum Benefits-Annual Year Buyback)-$ Buyback)-% $ % Savings (Cost) 2010 35,439,063 74.14% 24,259,101 50.75% 11,179,963 2011 37,226,360 75.25% 25,337,626 51.69% 11,888,734 2012 37,981,309 74.18% 25,346,200 50.05% 12,635,109 2013 38,660,638 72.95% 25,487,439 47.65% 13,173,199 2014 40,013,760 72.95% 26,456,302 46.36% 13,557,458 2015 41,414,242 72.95% 27,578,105 45.18% 13,836,137 2016 42,863,740 72.95% 28,769,052 44.15% 14,094,688 2017 44,363,971 72.95% 30,032,923 43.18% 14,331,048 2018 45,916,710 72.95% 31,407,521 42.15% 14,509,189 2019 47,523,795 72.95% 32,950,145 40.91% 14,573,650 2020 49,187,128 72.95% 34,587,965 39.72% 14,599,163 2021 50,908,677 72.95% 36,281,112 38.67% 14,627,565 2022 52,690,481 72.95% 37,999,766 37.81% 14,690,715 2023 54,534,648 72.95% 39,726,301 37.12% 14,808,347 2024 56,443,360 72.95% 41,567,659 36.40% 14,875,701 2025 58,418,878 72.95% 43,531,437 35.68% 14,887,441 2026 60,463,539 72.95% 45,516,209 35.08% 14,947,330 2027 62,579,763 72.95% 47,581,427 34.52% 14,998,335 2028 64,770,054 72.95% 49,774,818 33.95% 14,995,236 2029 67,037,006 72.95% 52,115,704 33.36% 14,921,303 2030 69,383,301 72.95% 54,493,144 32.85% 14,890,157 2031 69,868,207 70.98% 54,983,090 31.31% 14,885,117 2032 70,122,087 68.82% 55,251,157 29.74% 14,870,931 2033 66,721,958 63.27% 51,700,023 26.50% 15,021,935 2034 62,987,707 57.71% 47,735,519 23.39% 15,252,188 2035 65,472,079 57.96% 49,787,333 23.48% 15,684,746 2036 65,058,318 55.65% 48,867,152 22.24% 16,191,166 2037 63,213,581 52.24% 46,473,580 20.42% 16,740,001 2038 58,980,901 47.09% 41,655,001 17.68% 17,325,901 2039 45,863,374 35.38% 27,931,067 11.46% 17,932,307 2040 42,349,557 31.57% 30,858,185 12.23% 11,491,373 TotalAPV 170 29-3 Present Value of Savings (Cost) 11,179,963 10,987,739 10,792,560 10,399,428 9,891,661 9,329,933 8,783,991 8,254,431 7,723,694 7,170,063 6,638,277 6,147,127 5,705,790 5,315,599 4,935,098 4,564,688 4,235,722 3,928,074 3,629,632 3,338,019 3,078,606 2,844,329 2,626,264 2,451,878 2,300,795 2,186,734 2,086,264 1,993,515 1,906,920 1,824,087 1,080,324 167,331,205 85,000,000 80,000,000 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 30-1 Section30 Option VI: Reformed Plan for New Employees: Minimum Retirement Age 48, 4% multiplier after 20 years, 3 year FAME, 1.5% Retiree COLA 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ....,.Current Plan Cost (incl. expenses & Buyback)-$ -Option VI-$ 171 30-2 90% 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ~Current Plan Cost (incl. expenses & Buyback)-% ~Option VI-% 172 30-3 Option VI: Reformed Plan for New Employees: Minimum Retirement Age 48, 4% multiplier after 20 years, 3 year FAME, 1.5% Retiree COLA Current Plan Cost Current Plan Cost Present Value (incl. expenses & (incl. expenses & Annual of Savings Year Buyback)-$ Buyback)-% Option VI-$ Option VI-% Savings (Cost) (Cost) 2010 35,439,063 74.14% 35,439,063 74.14% 2011 37,226,360 75.25% 37,148,265 75.09% 78,096 72,177 2012 37,981,309 74.18% 37,755,762 73.74% 225,547 192,656 2013 38,660,638 72.95% 38,216,584 72.11% 444,054 350,553 2014 40,013,760 72.95% 39,335,749 71.71% 678,011 494,684 2015 41,414,242 72.95% 40,509,026 71.35% 905,216 610,402 2016 42,863,740 72.95% 41,735,540 71.03% 1,128,200 703,109 2017 44,363,971 72.95% 43,003,118 70.71% 1,360,853 783,827 2018 45,916,710 72.95% 44,283,119 70.35% 1,633,591 869,611 2019 47,523,795 72.95% 45,529,738 69.89% 1,994,056 981,052 2020 49,187,128 72.95% 46,796,935 69.40% 2,390,193 1,086,827 2021 50,908,677 72.95% 48,111,117 68.94% 2,797,560 1,175,654 2022 52,690,481 72.95% 49,497,011 68.53% 3,193,470 1,240,325 2023 54,534,648 72.95% 50,966,754 68.18% 3,567,893 1,280,730 2024 56,443,360 72.95% 52,453,757 67.79% 3,989,603 1,323,573 2025 58,418,878 72.95% 53,957,533 67.38% 4,461,345 1,367,908 2026 60,463,539 72.95% 55,545,950 67.02% 4,917,588 1,393,529 2027 62,579,763 72.95% 57,182,817 66.66% 5,396,945 1,413,463 2028 64,770,054 72.95% 58,840,606 66.27% 5,929,448 1,435,237 2029 67,037,006 72.95% 60,510,394 65.85% 6,526,612 1,460,057 2030 69,383,301 72.95% 62,268,152 65.47% 7,115,149 1,471,088 2031 69,868,207 70.98% 62,161,619 63.15% 7,706,589 1,472,617 2032 70,122,087 68.82% 61,797,521 60.65% 8,324,566 1,470,151 2033 66,721,958 63.27% 57,865,604 54.87% 8,856,354 1,445,533 2034 62,987,707 57.71% 53,629,082 49.14% 9,358,626 1,411,750 2035 65,472,079 57.96% 55,720,003 49.33% 9,752,076 1,359,614 2036 65,058,318 55.65% 54,937,233 46.99% 10,121,085 1,304,122 2037 63,213,581 52.24% 52,726,639 43.57% 10,486,942 1,248,857 2038 58,980,901 47.09% 48,126,916 38.43% 10,853,985 1,194,609 2039 45,863,374 35.38% 34,629,500 26.71% 11,233,874 1,142,718 2040 42,349,557 31.57% 30,722,497 22.90% 11,627,060 1,093,080 TotalAPV 32,849,516 a . • • : ..;;.:;; :.=..==~= ~~~~c~~~~=~P-ts 173 Survey of Comparative Jurisdictions 174 ..a. ....... (11 Number of General Employees Number of High Risk Employees Type of Plan Social Secu %of Payroll-General Employees % of Payroll -High Risk Employees UAAL -General Employees UAAL-High Risk Employees Nonnal Cost -General Employees Nonna.l Cost -High Risk Employees Funded Ratio -General Employees Funded Ratio -High Risk Employees Pension stablllz:atlon Fund % of Salary at Retirement General Employees % of Salary at Retirement-High Risk Em lo ees Period Adjus1ments C1ty of Miami Beach 1,503 466 DC -64 High Risk; DB = remainder No 25.54% 66.66%. 13.85% 35.21% 11.69% 31.45% 74.40% 66% Yes 80-90% 90% Annually 2.5% General Plan City of Miami Beach Multi-Jurisdiction Pension Plan and Benefits Survey* FRS** Boca Raton Coral Gables Coral Springs Ft. Lauderdale••• 655,367 approx. (265,602 854 424 917 1,385 count/municipal); 182 municipalities, 231 special districts N/A 403 308 Police= 188; 875 Fire= 155 DB -85.1% of members; DC -112 General; DB OB DC -160; DC= 14.9% of members DB = 640 General; DB = 1 ,227 General/ 352 High Risk 802 High Risk Yes Yes Yes Yes Yes N/A 19.81% 49.10% N/A 32.75% N/A 52.72% Police= 87.98%; 49% Fire = 28.02% 49.10% 45.46% N/A N/A 18.91% 299.14% N/A Police= 18.25%; NIA Fire= 5.64% 9.84% 16.48% N/A N/A 19.31% 22.34% 29.78% N/A Police= 69.73%; N/A Fire = 22.38% N/A 91.38% 57.50% N/A 70.70% N/A 70.26% 57.50% Police= 77.77%; 77.40% Fire = 79.65% No No No No No N/A 60-100% N/A N/A N/A N/A Policde-70-87.5% N/A N/A N/A Fire= 68-100% N/A Annually N/A N/A No N/A N/A N/A N/A No Hialeah 608 656 {377 Police 279 Fire) DB Yes 32.59% 3.2.59% 16.98% 16.98",{, N/A N/A 75.03% 75.03% No 75% 75% No No ..a. ....... en Number of General Employees Number of High Risk Employees Type of Plan Social secu %ofPayroll-General Employees % of Payroll -High Risk Employees UAAL -General Em lo ees UAAL -High Risk Employees Normal Cost-General Employees Normal Cost-High Risk Employees Funded Ratio -General Employees Funded Ratio -High Risk Employees Pension Stabilization Fund % of Salary at Retirement General Employees % of Salary at Retirement -High Risk Em lo Period Adjustments Hollywood···· 690 507 DB Yes 36.14% Police-64.41%; Fire = 127.03% 28.16% Police-50.16%; Fire =70.793% 7.98% Police-31.20%; Fire =43.22% 63.78% Police= 53.5%; Fire = 37.6% No 81% Police-80%; Fire =86% Annu;i~lly City of Miami Beach Multi-Jurisdiction Pension Plan and Benefits Survey* Miami Shores North Miami North Miami Beach Pompano 71 ;296 427 575 26 119 Police-97; 195 Fire = contracted DB DB DC (for 1 managmeent DB employee); DB (411 employees), FRS (7 elected officials) Yes Yes Yes Yes 4.14% 32.14% 25% 21.39% 40.65% 30.21% 55.30% 38.59% N/A 16.56% 12.40% 160.20% N/A 12.01% 33.90% 436.40% N/A 15.58% 16.60% 11.06% N/A 18.20% 33.20% 21.76% 100.80% 75.60% 70.30% 74.20% 73% 68.60% 61.60% 69.80% N/A No No Yes - 3 years smoothing 60% Average= 41.4% N/A 60% 60% Average -95.3% N/A 80% N/A Annually N/A Yes N/A 1.92% -3.00% N/A Fire-2% fixed COLA w/1% variance; General = Tier 1 or 2 Tamarac 161 Police -contracted; Fire= 69 DB Yes 26.60% 55.45% 7.30% 20.70% 21.50% 34.30% 77.96% 63.03% No N/A N/A Annually Fire-2.13% ..a. ....... ....... NameOfPtan VHtlng MultlpUor Final Average Monthly Earnings (FAME) Normal Retirement Age Retirement COLA DROPYea.n~ OT Pensionable Pensionable Earnings Member Contrlbutlon flV of M1ami Beach Mloml Beach EmpJoyHS Reflreme.nt Plan 5Years Employeils hired prior to 10(1/10 =3%; Employees hired after 10/1/10 = 2..5% 5 Highest Hi.red p,;or to ea~y 1990s -Age 50: Hired between ear1y 1990's and 10/1/10 =Age 55; Hired on or atler 1011110 =Age 62 w/5 Years ol Service or Age 55 With 30 Years of Service 2.5% for employees hired prior to 1011110; 1.5% for employees hired on or after 10/1/10 5 Years Only Tier A With max of 10% Ba'se a(od lnoentlve Pays Tler A-12%; Tier B= 10%; all those hired after 10/1/10 = 10% City of Miami Beach Multi-Jurisdiction Pension Plan and Benefits Survey* FRS'' Boca oral Gables oral Spr'rnQs Flortda Reflrem<mt System City of Boca Raton General City of Coral Gables General City of Coral Springs Pollee Employees Pension Plan Retirement System Pension Plan 8 Yea-s as of 7/1/11 10 years 10 years 10 years (prevjously 6 Years) N/A Plan A and Plan B -3%; Plan General Employees until 3.50% C = 1.75%; Altemale 9/30/10 = 3%; After Multipliers for Ea~y 9/30/10 = 2.25% Retirement N/A 5 Highest of last 15 5 Highest Top (3) of last (10) 62 or30YCS Age 65; Age 55 w/20 YCS: 65 or Rule of 70 55w/10YCS; 50w/10YCS Age 53 w/30 YCS; Age 50 and 20 YCS, reduced 5% Per Year; Rule of 68 Min Age 50 wf15 YCS; Age 55 w/15 YCS Allemale Previsously 3%, NOW NONE Not Required -Reviewed ~ the lnveslmenls make over 2.5% (Jan 1st after retirement Every Odd Year in June 10% as of 9/30 of any fiscal from plan) year then the cost of living Would be 112 the CPl. If the inveSiments do not make 10% as of 9/30 of any fiscal year than there is no cost of living hawevljll' there is a catch-up clause that is maxed at 8% for a cost of living N/A 5Years 5 Years 5 Years N/A Not Required -Reviewed None 14.50% Every Odd Year in June N/A Base and Longevity Base; Shift Differential and Base Special Assignment (Excludes OT and all other Payments) 3% as of711111 Pian A and B-9.65~: Plan As of .9/3012010 General 9.88% C=6% employees 5%; Excluded employees 10%; appointed 5%; elected 5% Wtlton Manbts s w~h lower beneli!s bec3me ellecllve 10/1111 .... iafeah City of Ft Lauderdale City Of Hialeah Employees' General Employees Retirement System Reflrement stem 5 years 10 years 3% lor first 25 and 2.5% 2% for Vested and 3% for beyond· Max Acaual 90% Normal 2 Hlghesl 6.5Hlghest (78 pay periods) 55 or 30 YCS; 50 w/15 YCS 55 Very infrequent· appoval by 2%for10Years CC only if Actual Investment Earnings for FY>Actuarial Interest Rate Assumption 3 Year Declining Balance 3Years DROP NO No Base, Assignment Pay, Shift An excluding Overtime Pay, Academic Incentive Pay and Longevity 6% 0% (7'4 deducted but placed in annuity that is returned with Interest upon retirement) ..a. ....... co Name of Plan Vesting Multiplier Final Average Monthly Earnings (FAME) Norma.l Retirement Age Retirement COLA DROP Years OT Pensionable Pensionable Earnings Member 1-tollvwooct·· .. City of Hollywood General Pension Plan General Fund - 7 Years; Enterprise Flmd = 5 Years General Fund EE = 2%: Enlerprise Fund= 3% hired prior to 7/15/09; and 2.5% hired on or aller 7/15/09 General Fund = 5 ~hesl Consewtive of Last 1 0; Enterprise Fund hired prior to 7/15109 = Highest 3 consecutive; hired after 7/15/09 = Highest 4 Consecutive General Fund EE -Age 65 wn YCS, Age 62 w/25 YCS, Age 60 w/30 YCS; Enterprise Fund = hired before 7/15/0 9= Age 55 w/5 YCS, 25 YCS at any age; Enterprise Fund Hired after 7/15/09 = Age 57 w/25 YCS, Age 60 wn YCS or 30 YCS at any age . Only for Enterprise Fund hired before 7/15/09 Only for Enterprise Fund hired before 7115/09 Enterprise Fund hired before 7/15/09-Yes, No Cap Gef1eral Fund and Enterprise Fund hlfed before 7/15109 have cap on arotuaJ payouts; General Fund and Enterprise Fund hired aller 7/15/09 = Base Pay Only 9% City of Miami Beach Multi-Jurisdiction Pension Plan and Benefits Survey* Moamo Shores North M.amo North Moamo Beach Pompano General Employees Clair T Singerman Employee General Employees General Employees Retirement Plan Retirement System Retirement Plan 10years 10 years 6years Toer1-10years; Tier 2 = 10 years 2% 3% B% Tier 1 -2.75%; Tier 2-2% N/A 2 Highest of last 10 5 Highest of last 10 years Tier 1 -3 Highest; Tier 2 = 5Highest 62 55 w/20 YCS; Age 62 w/10 62 or 55 w/ 20 YCS; Age 55 w/20 YCS; Age 50 w/20 YCS; 14 YCS Regardless of YCS or Age 62 w/3 YCS Age None 1.92",{, w/1year Elimination 2.25% every Oct. 1st Tier 1 -2%; Tier 2 = 5 Year Period OR 2.5% w/3 Year wailing period tiered 0-2% Elimination Period; OR 3% w/5 based on Age Year Elimination Period 5 No 5 Years 5Yel!rs No No No No Yes Base, Holiday, Certificate and Only base pay Base Longevity 6% 7% 7% Tier 1 10%; Tier2 7% ris v.ilh loY.w benefits became eft'ective 10/1111 Tamarac City ol Tamarac GoMral Employees' Pension Trust Fund !iyears 2.60'*' 5 Hlghesl 62 or Age 55 w/30 YCS; 55 wl10 YCS 2% fun:led solely by actuarial gains from corresponding year No 7% ..a. ....... <D City of Miami Beach Multi-Jurisdiction Pension Plan and Benefits Survey* ' ,, -,..._ ol Plan City Pension Fund for Fintfighters Florida Re'd~m.nLSystam City of Boca Raton Police and City ol Coral Gobles Pol!-'1'1"' City of Coral Springs Fh'efight&~' and Police Officers In the City of firefighter Pension Plan Retinlment Systom Pension Plan Miami Beach Ves!ina 10.,..., NIA 10years 10)'08 .. 10v•oro M<llllpiOt ~-15;~%1hllfOIII!otlllth90% N/A Ponce., 3.5%; Fire-3,4% PoloeandFire• Ruloof70 ~% Mm; if hired prior to 10/1/10; 3% first 20 and 4% thereafter ~h 90% max if blrad on or after 10/1/10 Final Average 2 Hgho<;t hlmd prior lo 101111 O; 3 Nil! 2 Highest (consecutive) 3 Year Average for Police and Fire; 3 Highest of last 10 Monthly Earnings Highasl hired on or after 1BI1ft0 General Employees-3 Year average (FAME) capped as of 9/29/10 for vested and excluded employees; 5 Year average for general and excluded not vested as of 9/29/10. Norqlol RoUmmonl Age 00 or Rule of 70 Nih mnirrun 55; or 52 with 25 w/25 YCS; or 30 20 YCS; Age 55 and 10 YCS Rule of7C)forPci«> end Flro: 65 w/1 0 YCS, or 52 w/20 YCS; 50 w1 /lfje/Ear1y ~48 YCS at any age General Employees -Rule of 70, Rotiromonl RuJt of 80, Age 60 and 10 years or Age 65 and 6 yeaiS for general & exolu®d' employees who were vested as of 912912010; Rule of 80, 1\Qe-60 and 10 yea IS or Age 65 and 6 yeous for general & excluded ~oes-wbO were not vested as of 9/2912010 Rotiromenl COLA 2.5% if hired prior to 10/1/10; 1.5% Previsously 3%, NOW NONE Police= 2%; lrthe lnv0$t1n0nt& rnaka ovot tO% as 1% (commence date.., 5 years after deferred to 1 year after DROP if hired Fire=3% of 9130 of any fiscal year then the retirement from plan) on or after 10/1/10 cost of living would be 1/2 the CPl. If the investments do not make 10% as of 9/30 of any fiscal year then there is no -or livlou ,_orthore l> a catch-\.lp clause that is maxed at 8% for a cost of living OROPYoats J years It Join pd<r<lo10M/10; 5 years N/A Syears 6 Yearn for lirefightern and 5 years 5years wi"th mandatory 2 DROP COLA's for for police Y'eBtS 3 and 4 of DROP if join on or oftOt1011110 OT Pel\sj-1118 Polja! • cappad a1 70% o1anmmllzed N/A None Max 300 hours None f»GY rate for next highest rank; Fire = capped at % of highest annualized P'lY rate of next highest rank Pon'!l<>nabl• Ba:.1111, Allewta!'llt=CI$ and Ovolfflif'l\ll_ NIA Police = Base, Assignment, crash-Base; Shift Differential and Special Base Eamlr,go Lonvl' Payments are NOT free bonus, longevity and up to 300 Assignment-Excludes OT and all ponolonllblo. overtime hours in 12 month period other Payments for last 2 Years; Fire= Base, Paramedic Certification, Fire lnspetion, Hazardous Material Cerl, Assignment Pay, Acting in Higher Capacity and Longevity Pay. Member Contribution 10% NIA 10.20% POOce"' 5%; 9% Fire= 5% • All data provided dlrootJy_!f'tjy_riscficllons thr""_lll!_"""'IIY adlrinlslbfed ~~Y· ol Mloni Booob Lllbo< Ro1a6ontln 2011 -FRS . COCOhut Crook Cooper Citv. Miami Goldens. Miami LBl<o5 Miami-Dodo Countv. ~ Wilton Manors ••• FL Lauderdale· PIM cloood !o<G<Inorlll El!ll'!<!l'""" Now Hhs·AIIor IM/071 Y..I08 Hole¥wood-Pln:nsar·o norwfrozon for Polieelfko Md Gonllllt81 Fvi'td Em~ and NtJWd&M w.ith lownrbtJneTI'ts bec:Bme arfadlvill tOf'l/11 DB • Oeft'Dad 8eno6 • DC • OU"nad ContributiiXI" YCS * ofC!'<Wli1ableseM<:e Polk• and Fl"'rtghtors NIA Rot!tomontSyslom to...,.,. NIA ~.-(In>• accrual • 81Y.) N/A 2 Highest N/1<. 20 YCS; Age 55 w/10 CS NIA: None N/A 20<22 YCS • 6 Years; 22<23 NIA YCS = 7 Years; 23<23.96 YCS..,BYears Pollee Only up to 40 Hours NIA Per Year (as additional funding becomes available, up to 300 hours will be included for Police) ~.Assignment Pay, NIA loogovlly Puy, Aeodorrio Pay, T omp Upgn!de Puy, SilO~ Pay,.C.rti~oalion Pay, 1st Responder Pay (FF) Hred SGJoro •118110 • N/A 8~16; Hired After 4118110 = ...lo. (X) c Name of Plan F"mal Average Monthly Earnings {F~E) Normal Retirement Age{Ear1y Retirement Retirement COLA DROP Years OT PensiOnable Pensionable Earnings Member Contribution Hollvwood-· City of Hollywood Police/City of Holl od Fire 5 Highest of last 1 0 Age 55 w/1 0 YCS or Alje 52 w/25 YCS for both Police and Fine No No No Pofce -Salary, Assignment Pays. longevity -excludes overtime and accrual payouts; Fire = Fixed Montly compensation -excludes overtime and accrual outs City of Miami Beach Multi-Jurisdiction Pension Plan and Benefits Survey* Miami Shores Nonh Miam• Nonh M•am• Beach Pompano Pollee Officers Retirement Plan North Miami Police Pension Police Officers and Firefighters Pompano Fire Fighters Pension Plan Retirement Plan Plan 10 ears 10 ears 10 ·ars 10 ears 2% 3% prior to 1999: 3% 2.5% for first 10 years; 3% 3.5% after 1999 for years 11-20; and 4%foryears 21-25 N/A p Highest of last 10 hired prior 5 Highest of last 1 0 3 years to 2006; 2 Highest of 10 hired after 2006 ,25YCS 50 w/20 YCS; 55 w/10 YCS; Age 52 or 20 YCS Age 47 w/20 YCS; Age 50 w~h 25 50w/10YCS YCS 1.50% 1.92% w/1 Yr Eliminination 2.5% every Oct 1st, starting after 2010 Fixed 1% Variable Period; OR 2.5% w/ 3 Yr 3rd yr of retirement Elimination Period; OR 3% w/5 Year Elimination Period 5years No 8 years Syears No No Yes, not capped (until next No contract negotiation caps ~at 300 hours) Yes Base; Holiday; Education Base pay, all forms of overtime Base, Incentive Pays; Lump Sum Incentive Pay and Longevity pay, all salary differentials and payments Pay Incentive pays 9% 11.51% OR 9.51% (if plan 11% 11.60%' outperforms range) Tamarac City of Tamarac Firefighters Pension Trust Fund 10 ears 3% for first 15 years; 4% for next 1 0 years; and 3% thereafter 5 Highest 55 w/ 5 YCS or 25 YCS regardless of Age; 50 w/10 YCS Employees retiring Before 311/07 -2% after being retired for at least 3 years; Employees retiring After 3(1)/)7 = 2.25% after being relined for at least 3 years. 5years N/A N/A 9% Supporting Rationale and Data for Proposed Guidelines and Policy Statements 181 City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements AFFORDABILJTY AND SUSTAINABILITY GUIDELINE STATEMENT: • If the City's portion of the total annual cost of retirement benefits contribution exceeds 25 percent of payroll for general employees and 60 percent of payroll for high risk employees, the City should review and evaluate potential changes to the collective bargaining agreements between the City and the Unions, applicable towards the next contract negotiations, in order to identify potential approaches to reduce the contributions to these levels over the long term. POLICY STATEMENT: • The City shall fund at least the normal cost of pension. If this exceeds the amount of the actuarially determined annual required contribution, the excess should be placed in a pension stabilization fund, to be made available for future pension shortfalls. Background/Rationale: Pension plans require annual contributions from plan sponsors (i.e., municipal governments) and participants in order to maintain their funding levels. Ideally, those contributions are only necessary to pay for future benefits that were earned by participants in the current year. That amount is referred to as the normal contribution. Normal contributions increase as plans provide more generous benefits, make benefits available to more individuals and reduce the number of years someone needs to work or lower the age when the plan will begin to pay benefits. Underfunded pension plans require an additional contribution in order to eventually eliminate their unfunded liabilities. When pension plans are underfunded, annual contributions need to include the normal contribution and an additional contribution to pay down the unfunded portion of the liability. Therefore, if two pension plans have equal benefit policies and equal employee characteristics but one is 75 percent funded and the other is 100 percent funded, the plan that is 75 percent funded will require a larger annual contribution in order to pay down its unfunded liability. Plan sponsors do not have to make up the entire unfunded portion of the liability in a single year. In most cases, that amount would be too costly for governments to pay in full. Instead, a professional actuary establishes a payment schedule that allows the sponsor to pay off the unfunded portion of the liability over as many as 30 years. In short, plans with large unfunded liabilities will pay more in annual pension costs. The combination of the normal cost funding requirement and the payment for amortization of the unfunded liability results in a combined annual required contribution (ARC) that the City is required to pay to each pension plan for the next fiscal year . Typically, this is expressed as a percent of the payroll applicable to the particular pension plan to allow comparability from year to year, as well as, to other pension plans. 1 182 Current Conditions: City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements The City of Miami Beach pension contributions as a percent of payroll as of the 1 0/1/1 0 valuation reports: Fire and Police Pension Plan: 72.76%% Miami Beach Employees Retirement Plan: 25.02% Fire and Police Pension Plan Normal Cost: 32.59%% Miami Beach Employees Retirement Plan Normal Cost: 10.80% At this time, the negotiated changes to the Fire and Police Pension Plan are under litigation. However, the projections provided by the Fire and Police Pension Plan actuary regarding the impact of changes collectively bargained for new employees were minimal. In addition, assuming all actuarial projections were met from FY 2010/11 forward, the ARC as a percent of payroll is projected to increase to 81.05% by Fiscal Year 2017 contribution. The Miami Beach Employees Retirement Plan (MBERP) Actuary projected that the 2010 changes to the plan for new employees would decrease the unfunded liability payment by approximately $6 million - 5. 78% of payroll after 10 years. Even with this decrease, and assuming all actuarial projections were met from FY 2010/11 forward, the ARC as a percent of payroll is projected to increase to 37.12% by Fiscal Year 2017, declining each year thereafter. Comparison to Florida Retirement System and Comparative Local Jurisdictions: T t I o a annua employer cos t f f o re 1remen t b ft t "b f t f ene 1 s conn u 1on as a percen o payro II Jurisdiction High Risk Employees General Employees Boca Raton 52.72% 19.81% Coral Gables 49 .1% Coral Springs Police: 87.98% Fire 28.02% Fort Lauderdale 49% 32.75% Plan closed for new hires 1 0/1/2007-3/5/2008 Now defined contribution Hialeah 32.59% Hollywood Police: 84.41% 36.14% Fire 127.03% (Plans are now frozen for (Plans are now frozen and new General Fund Employees and plans with lower benefits new plans with lower benefits became effective 1 0/1/11) became effective 10/1/11) 2 183 North Miami North Miami Beach Pompano Tamarac FRS (Includes Coconut City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements 30.21% 32.14% 55.3% 25% 38.59% 21.39% 55.45% 28.8% 14.1%7/1/11 4.91%7/1/11 Creek, 19.56% 7/1/12 6.58% 7/1/12 Cooper City, Miami Gardens, Miami-Dade County, Miami Lakes, Pinecrest and Wilton Manors) 3 184 City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements POLICY STATEMENT: • The City should strive to maintain a funded ratio of at least 80 percent for each of its defined benefit pension plans. GUIDELINE STATEMENT(S): • If the funded ratio (actuarial value of assets minus actuarial liabilities) of either of the City of Miami Beach's pension plans falls below 70 percent, the City should strive to implement approaches to increase the funded ratio to that level over five (5) years. Background/Rationale: Each year, the City receives independent actuarial reports for each of the City's two pension plans. The actuarial valuation of the pension plan is a mathematical determination of the financial condition of the plan, which includes: the computation of the present monetary value of benefits payable to present members, the present monetary value of future employer and employee contributions, considering the expected mortality rates among employees and retirees, rates of disability, retirement age, withdrawal from service, salary increases, investment earnings and value of assets. As part of the annual actuarial valuation for each plan based on plan data as of October 1, the Actuary evaluates how the actual data for the preceding year compared to the actuarial valuation for that year. Any differences are reflected as gains or losses in unfunded liability. The unfunded liability for a plan is the difference between the benefits earned (accrued) and the assets of the plan on a given date, and is typically amortized and funded over 30 years. The amortization methodology varies by plan. In the Fire and Police Pension Plan, the amortization is based on increased payments in proportion to assumed future payroll growth. In the MBERP, an assumption of level amortization payments is used. The unfunded liability of the plan is the actuarial accrued liability less the plan actuarial assets. This amount is expected to have year-by-year fluctuations; however, if the plan's assumptions are consistent with the plans long-term experience, the changes in the unfunded liability should be offsetting over the life of the plan. In contrast to the market value of the pension plan assets, the actuarial value of the pension plan assets is equal to the market value of the assets at a specific data, adjusted to reflect a five-year phase-in (or smoothing) of any asset experience gain or loss. The five-year smoothing of pension plan asset value means that only 20 percent of the experience gain or loss that the fund experiences in any one year is recognized immediately for the purpose of detennining the actuarial value of the plan and the annual required contribution. The percent of the actuarial accrued liability funded is a measure of a pension fund's fiscal health. It compares assets to pension obligations. A percentage over 1 00% means that the fund has more money than it needs to meet its obligations at that point in time. 4 185 Current Conditions: City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements City of Miami Beach funding levels as of the 10/1/10 valuation reports : Fire and Police Pension Plan: 64.3% Miami Beach Employees Retirement Plan: 7 4.4% Comparison to Florida Retirement System and Comparative Local Jurisdictions: Funded Ratio Jurisdiction High Risk Employees General Employees Boca Raton 70.26% 91.38% Coral Gables 57.5% Coral Springs Police 77.77% Fire: 79.65% Fort Lauderdale 77.4% 70.7% Plan closed for 1 0/1/2007-3/5/2008 new Now defined contribution Hialeah 75.03% 75.03% Hollywood Police 53.5% 63.78% Fire 37.6% (Plans are now frozen hires for (Plans are now frozen and new General Fund Employees and plans with lower benefits new plans with lower benefits became effective 1 0/1/11) became effective 1 0/1/11) North Miami 68.6% 75.6% North Miami Beach 61.6% 70.3% Pompano 69.8% 74.2% Tamarac 63.3% 77.96% FRS (Includes Coconut Creek, 87.1% Cooper City, Miami Gardens, (7/1/11) Miami-Dade County, Miami Lakes, Pinecrest and Wilton Manors) Other Information: The United States Postal Service Office of the Inspector General (June 18, 2010) concluded that 80 percent prefunding of pensions is reasonable based on the following: • The Standard and Poor's companies' (S&P 500) median prefunding level for pensions in 2009 was 79 percent of liabilities. From 2001 through 2009, S&P 500's pension median prefunding ranged from 73 to 112 percent. 5 186 City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements • The aggregate prefunding for states' pensions in 2008 was also 79 percent. From 2001 through 2009, state governments' aggregate pension prefunding ranged from 59 to 90 percent. The Government Accountability Office (GAO) reported that many experts consider at least 80 percent prefunding to be sound for government pensions. (Source: The GAO's State and Local Government Retiree Benefits Current Funded (5); The GAO's State and Local Government Retiree Benefits Current Funded Status of Pension and Health Benefits, January 2008.) The Pension Protection Act of 2006 considers pensions prefunded at less than 70 percent as being "at risk" and attempts to protect such plans by commencing restrictions on corporate pension funds only when prefunding is below 80 percent. The 2011 report prepared by the Leroy Collins Institute at Florida State University for pension systems across Florida assigned the following grades to pension plans based on percent funded. GRADE PERCENT FUNDED A More than 90% funded B 80 to 90% funded c 70 to 80% funded D 60 to 70% funded F Less than 60% funded The following cities scored an "F" grade, according to the institute's study: Boynton Beach, Cooper City, Fort Myers, Hollywood, Homestead, Jacksonville, Miramar, Oakland Park, Ocala, Oviedo, Palm Beach Gardens, Panama City, Parkland, Plant City, Port Orange, Tamarac, Temple Terrace, Venice and Winter Haven. The highest rated was Melbourne's general employee plan with 190.1 percent funding, while Cooper City's general employee and police pension fund sat at the bottom with 35.48 percent funding. Pension funds that exceeded the 100% funded mark --Tallahassee's general, Clearwater's firefighters, Gainesville's general, Key West's general, Palm Coast's firefighters, Plantation's firefighters and Rockledge's general and police funds --have more than enough money in the bank to cover projected payouts to former and current employees. The federal government has funded its combined Civil Service Retirement System (CSRS) and Federal Employee Retirement System (FERS) pension obligations at only 41 percent of liabilities and the military's prefunding for pensions is only 24 percent (Source: US Postal Service Office of The Inspector General Report of Pension Funding, 201 0). 6 187 City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements POLICY STATEMENT(S): • Salary growth should not exceed the average actuarially assumed salary growth in each pension plan. Background/Rationale: Each year, the City receives independent actuarial reports for each of the City's two pension plans. The actuarial valuation of the pension plan is a mathematical determination of the financial condition of the plan, which includes: the computation of the present monetary value of benefits payable to present members, the present monetary value of future employer and employee contributions, considering the expected mortality rates among employees and retirees, rates of disability, retirement age, withdrawal from service, salary increases, investment earnings and value of assets. Each year, experience "gains" in the prior year reduces the actuarial accrued liability. Experience "losses" for the prior year, conversely, increases the actuarial accrued liability. To the extent that salary growth is more than the actuarial assumption for the plan, this would result in an experience "loss" and add to the unfunded liability of the plan. Salary growth can result from merit increases, automatic step adjustments to salaries annually, cost of living adjustments impacting all employees or subsets or employees (COLA's), adjustments to salary ranges based on compensation studies, etc. Current Conditions: Projected salary rate increases vary by age. For the Fire and Police Pension Plan, the average long-term assumption across all ages is 6 percent per year. For the Miami Beach Employees Retirement Plan, the assumed increases are as follows: Years of Service Merit and Seniority Base (Economic) Total Increase 1 4.0% 4.0% 8.0% 2 3.9% 4.0% 7.9% 3 3.8% 4.0% 7.8% 4 3.7% 4.0% 7.7% 5 3.6% 4.0% 7.6% 6 3.5% 4.0% 7.5% 7 3.0% 4.0% 7.0% 8 2.9% 4.0% 6.9% 9 2.8% 4.0% 6.8% 10 2.7% 4.0% 6.7% 11 2.6% 4.0% 6.6% 12 2.5% 4.0% 6.5% 13 2.4% 4.0% 6.4% 7 188 14 15 16 17 18 19 20 21+ City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements 2.3% 4 .0% 2.2% 4.0% 2.1% 4.0% 2.0% 4.0% 1.9% 4.0% 1.8% 4.0% 1.7% 4.0% 1.5% 4.0% 6.3% 6.2% 6.1% 6.0% 5.9% 5.8% 5.7% 5.5% The pension board for MBERP recently approved a decrease in the salary growth assumption for the 10/11/11 valuation to reflect the downturn in the economy and the lower economic increases in recent years and likely into the future. Comparison to Florida Retirement System and Comparative Local Jurisdictions: Not Applicable 8 189 City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements POLICY STATEMENT(S): • The City should require 5, 10 and 20 year projections of required pension contributions as part of the annual actuarial valuations for each of the City's pension plans. These projections shall be based on the current actuarial assumptions for each plan. The projections shall be updated to reflect the cost of any proposed benefit enhancement, before the City Commission agrees to the enhancement. The cost of these studies shall be funded separately from the annual contribution to the pension plan. • There shall be an experience study of each of the City's pension plan's actuarial assumptions performed by an actuary that is independent from the pension board . The experience study should be conducted at least once every three (3) years, to compare actual experience to the assumptions. The independent actuary shall make recommendations for any changes in assumptions based on the results of the experience study, and any deviations from those assumptions by the pension board shall be justified to the City Commission. • Once pension reform is implemented, a 5/ih vote of the City Commission should be required for further pension changes. Background/Rationale: Changes to plan benefits can affect the actuarial accrued liability of a plan, either positively or negatively. If plan benefits are increased , the mathematical calculations will result in more benefits anticipated to be paid to plan members in the future, which will need to be recognized all at once , although payments would be amortized over the long-term. Conversely, if plan benefits are reduced, with all else being equal, the plan will see a reduction in the actuarial accrued liability. Current Conditions: Not Applicable Comparison to Florida Retirement System and Comparative Local Jurisdictions: Not Applicable 9 190 City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements POLICY STATEMENT(S): • The City should require 5, 10 and 20 year projections of required pension contributions as part of the annual actuarial valuations for each of the City's pension plans. These projections shall be based on the current actuarial assumptions for each plan. The projections shall be updated to reflect the cost of any proposed benefit enhancement, before the City Commission agrees to the enhancement. The cost of these studies shall be funded separately from the annual contribution to the pension plan. • There shall be an experience study of each of the City's pension plan's actuarial assumptions performed by an actuary that is independent from the pension board. The experience study should be conducted at least once every three (3) years, to compare actual experience to the assumptions. The independent actuary shall make recommendations for any changes in assumptions based on the results of the experience study, and any deviations from those assumptions by the pension board shall be justified to the City Commission. • Once pension reform is implemented, a 5/th vote of the City Commission should be required for further pension changes. Background/Rationale: Changes to plan benefits can affect the actuarial accrued liability of a plan, either positively or negatively. If plan benefits are increased, the mathematical calculations will result in more benefits anticipated to be paid to plan members in the future, which will need to be recognized all at once, although payments would be amortized over the long-term. Conversely, if plan benefits are reduced, with all else being equal, the plan will see a reduction in the actuarial accrued liability. Current Conditions: Not Applicable Comparison to Florida Retirement System and Comparative Local Jurisdictions: Not Applicable 9 191 City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements APPROPRIATE BENEFITS TO PROVIDE TO EMPLOYEES DRAFT POLICY STATEMENT(S): • The City of Miami Beach should strive to provide a retirement benefit that provides for a replacement of salary at a level at least equivalent to Social Security plus a supplemental retirement benefit. Background/Rationale: In the United States, 96 percent of workers are covered by Social Security. The benefit payment is based on how much is earned during your working career. Higher lifetime earnings result in higher benefits. If there were some years when you did not work or had low earnings, your benefit amount may be lower than if you had worked steadily. Social Security replaces about 40 percent of preretirement income for the average worker. The average replacement rate for lower-paid workers equals about 55 percent of their pre-retirement earnings. The average replacement rate for highly paid workers is about 25 percent. Windfall Elimination Provision Before 1983, people who worked mainly in a job not covered by Social Security had their Social Security benefits calculated as if they were long-term, low-wage workers. They had the advantage of receiving a Social Security benefit representing a higher percentage of their earnings, plus a pension from a job where they did not pay Social Security taxes. Congress passed the Windfall Elimination Provision to remove that advantage. Government Pension Offset If you receive a pension from a federal, state or local government based on work where you did not pay Social Security taxes, your Social Security spouse's or widow's or widower's benefits may be reduced by two-thirds of your government pension. (Source: Social Security website: http://www.ssa.gov/pubs/10035.html http://www.ssa.gov/pubs/1 0045.html http://www.ssa.gov/pubs/1 0007.html } Current Conditions: The City of Miami Beach currently does not participate in Social Security. In evaluating proposed changes to the City's pension plans, the fact that the City does not participate in Social Security must be taken into account. 10 192 City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements Comparison to Florida Retirement System and Comparative Local Jurisdictions: a ICipa 10n In OCia ecumy P rf · f · S · I S "t Jurisdiction General Em~o_yees Boca Raton Yes Coral Gables Yes Coral Springs Yes Fort Lauderdale Yes Hialeah Yes Hollywood Yes North Miami Yes North Miami Beach Yes Pompano Yes Tamarac Yes FRS Yes (includes Miami Dade County, Miami Lakes, Pinecrest, Wilton Manors) 11 193 City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements POLICY STATEMENT(S): • City of Miami Beach retirement benefits should be adjusted periodically after retirement to reflect the impacts of inflation, with rates no more than the Consumer Price Index for All Workers (CPI- W), subject to Commission approval, and with a maximum of 3 percent annually. Background/Rationale: Most people are aware that there are annual increases in Social Security benefits to offset the effects of inflation on fixed incomes. These increases, now known as cost-of-living adjustments (COLAs), are such an accepted feature of the program that it is difficult to imagine a time when there were no COLAs. Before 1975, beneficiaries had to await a special act of Congress to receive a benefit increase. Beginning in 1975, Social Security started automatic annual COLAs. The change was enacted by legislation that ties COLAs to the annual increase in the CPI-W. (Source: Social Security website: http://www.ssa.gov/pubs/1 0035.html http://www.ssa.gov/pubs/1 0045.html http://www.ssa.gov/pubs/1 0007.html) Current Conditions: Fire and Police Pension Plan Employees hired before 10/1/10-2.5% Employees hired on or after 10/1/10 -1.5% with first adjustment deferred to 1 year after the end of DROP or 2 mandatory 0 DROP COLAs* Miami Beach Employees Pension Plan Employees hired before 10/1/10-2.5% Employees hired on or after 10/1/10-1.5% *Subject to current litigation 12 194 City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements Comparison to Florida Retirement System and Comparative Local Jurisdictions: C t f L" . Ad" t OS 0 IVInQ IJustmen s Jurisdiction High Risk Employees General Employees Boca Raton Not required -reviewed every Not required -reviewed every odd year odd year Coral Gables If investment returns are over 10%, then equal to half of CPI - catch-up clause capped at 8% Coral Springs 2 .5% 1% commences 5 years after retirement or DROP entry Fort Lauderdale COLA .. repealed Very Infrequent -only if actual prOVISIOn 7/15/2008 investment earnings exceed assumptions Plan closed for new hires 1 0/1/2007-3/5/2008 Now defined contribution Hialeah 2% for 1 0 years Hollywood Police : None Only Enterprise employees Fire None hired prior to 7/15/2009 (Plans are now frozen and new (Plans are now frozen for plans with lower benefits General Fund Employees and became effective 1 0/1/11) new plans with lower benefits became effective 10/1/11) North Miami 1.92% with 1 year elimination 1.92% with 1 year elimination period or 3% with 5 year period or 3% with 5 year elimination period elimination period North Miami Beach 2.5% Annually after 3 Years of 2.25% Annually Retirement Pompano 2% fixed Tier 1 2% 1% variable Tier 2 5 year waiting period tiered 0-2% based on age Tamarac Employees retiring before Up to 2% -solely funded from 3/1/07 = 2% after 3 years of actuarial gains retirement After 3/1/07 -2.25%. after 3 years of retirement FRS (Includes Coconut Creek, 3% for benefits earned prior to 7/1/11 Cooper City, Miami Gardens, None for benefits earned thereafter Miami-Dade County, Miami Lakes, Pinecrest and Wilton Manors) 13 195 City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements RECRUITMENT AND RETENTION POLICY STATEMENT(S): • The City of Miami Beach should strive to provide retirement benefits that ensure that the City is competitive in recruitment and retention of employees. Background/Rationale: Salary ranges for job classifications in City of Miami Beach are periodically reviewed to ensure internal equity and external competitiveness. Internal equity refers to the relationships (duties, level of responsibilities, salary, tenure, etc.) between positions within the same organization. External equity refers to the relationships (duties, level of responsibilities, salary, tenure, etc.) between positions to the external labor market, in both, the public and private sectors. Benefits, including pension, are also periodically reviewed. Current Conditions: In the past, particularly during periods of low unemployment rates when competition for employees has been tight, the City has targeted to set salaries in the 75th percentile of neighboring jurisdictions, and to provide benefits similar to neighboring jurisdictions. Comparison to Florida Retirement System (FRS) and Comparative Local Jurisdictions: See survey of pension benefits provided by neighboring jurisdictions In addition, the 2009 Classification and Compensation Study prepared by Condrey and Associates for the City of Miami Beach concluded that "the City's retirement benefit, while generous, appears appropriate considering the employee 8 percent contribution to the fund (based on a comparison to other jurisdictions locally and throughout Florida). 14 196 City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements MANAGEMENT OF RISK/RISK SHARING POLICY STATEMENT(S): • The City of Miami Beach should strive to share some portion of retirement benefit risk with employees. GUIDELINE STATEMENT(S): • If the City's contribution to a defined pension benefit plan exceeds 25 percent of payroll for general employees and 60 percent of payroll for high-risk employees, the employee contribution should be reviewed. Background/Rationale: With the City of Miami Beach's two pension plans, the City bears 100 percent of the risk of the volatility of the equity market; whereas, with private sector pension plans, the risk is born by the employee. Current Conditions: Fire and Police Pension Plan: Employee Contribution Rates - 1 0% Miami Beach Employees Retirement Plan Employee Contribution Rates for employees hired prior to early 1990's -12% Employee Contribution Rates for employees hired after early 1990's -10% Comparison to Florida Retirement System and Comparative Local Jurisdictions: mp1oyee on n UIOn a es E C t 'b t' R t Jurisdiction High Risk Employees General Employees Boca Raton 10.2% Plans A&B 9.65% Plan C 6% Coral Gables 5% 5-10% Coral Springs Police 9.875% Fire 8.75% Fort Lauderdale Hired before 4-18-10 8.25% 6% Plan closed for new hires Hired after 4-18-10 8.5% 1 0/1 /2007-3/5/2008 Now defined contribution Hialeah 0% 15 197 Hollywood North Miami North Miami Beach Pompano Tamarac FRS (Includes Coconut Creek, Cooper City, Miami Gardens, Miami-Dade County, Miami Lakes, Pinecrest and Wilton Manors) City of Miami Beach Budget Advisory Committee Pension Reform: Policy and Guideline Statements Police 9.25% 9% Fire 7.5%-8% (Plans are now frozen for (Plans are now frozen and new General Fund Employees and plans with lower benefits became new plans with lower benefits effective 10/1/11) became effective 10/1/11) 11.51% or 9.51% 7% 12% 7% 11.6% Tier 1 10% Tier 2 7% 9% 7% 3% 3% Note: Employees 1n Soc1al Secunty also contnbute to Soc1al Secunty. See page 1 for additional comparatives related to percent of payroll. 16 198 Presentations by: City Pension Counsel/Actuary and Pension Plan Administrators 199 N 0 0 City of Miami Beach Private Industry Pensions Other Public Pension Plans Conceptual Plan Changes August 30, 2011 James W. Linn Lewis, Longman & Walker, P.A. Michael J. Tierney Actuarial Concepts N 0 ~ City of Miami Beach Private Industry Pensions Changes to other pension plans Conceptual Potential Retirement Program Changes August 30, 2011 James W. Linn Lewis, Longman & Walker, P.A. Michael J. Tierney Actuarial Concepts Private Sector Retirement Plans • About 50% of employees in the private sector in the U.S. participate in an employer sponsored retirement plan. • More than 80% of these employees participate in ~ defined contribution (DC) plans. N • Less than 20% of these employees participate in defined benefit (DB) plans. • The average employer contribution to a U.S. private sector defined contribution (401K) plan is 3% of payroll. Sources: U.S. Government Accountability Office Report on Private Pensions, March 2011; 50th Annual Survey of Profit Sharing and 401K Plans, 401K Coucil of America, 2007. 3 N 0 (..) Pension Reform: What Other Florida Cities Have Done Stuart (2007)-All Employees • All City pension plans terminated • City joined FRS for all employees • City purchased past service credit under FRS for all employees 4 N 0 ,J:I. Pension Reform: What Other Florida Cities Have Done Ft. Lauderdale {2007) -General • Closed general employee pension plan • Set up defined contribution plan for new hires {9% City contribution; no employee contribution) 5 N 0 (11 Pension Reform: What Other Florida Cities Have Done Coral Gables (2009) -Police • Increased employee contributions by police officers byS% • Reduced pensionable earnings {exclude OT in excess of 300 hrs. and lump sum payments for camp. time) 6 N 0 en Pension Reform: What Other Florida Cities Have Done Naples {2009) -Fire • 11Stop & Restart" implemented; premium taxes City can use to offset City pension contributions increased from $776K to $1. 67 million per year • 11Share Plan" set up with excess premium tax revenues 7 N 0 ...... Pension Reform: What Other Florida Cities Have Done Hollywood (2009) -Fire • Reduced 13th check benefit for current employees • Reduced pensionable earnings for current employees (exclude camp. time and blood time payouts; 70% cap on vacation leave payouts; no OT in excess of 300 hrs. over 3 year average) • Reduced benefits and employee contributions for new hires (2 tier plan) • "Share Plan" for all employees funded with increases in premium tax revenues 8 N 0 00 Pension Reform: What Other Florida Cities Have Done Port Orange (2010)-Fire [Not Yet Implemented]* • Reduced wages by 6% (imposed in lieu of increase in employee pension contribution) • Reduced pension benefits for current and future employees ~ Push back normal retirement date ~ Reduce pensionable earnings (exclude OT) ~ Extend final averaging period from 3 to 5 years ~ Reduce maximum benefit from 90% to 80% ~ Reduce COLA ~ Reduce DROP earnings * litigation pending 9 N 0 <D Pension Reform: What Other Florida Cities Have Done Miami {2010) -Pension Changes (All Employees)* [Financial urgency declared-City Commission adopted wage and benefit reductions 8/31/10]: • Later normal retirement age • 5 year average final compensation • Reduce benefit formula for future service {3%) • Normal form of benefit: life and 10 years certain {PF); life annuity {General) • $100,000 cap on benefits * litigation pending 10 N ~ c Pension Reform: What Other Florida Cities Have Done Town of Palm Beach (2011)-Fire [Town Council imposed wage and benefit reductions 4/21/11]: • Pension benefits frozen • Pension changes for current and future employees: );> Reduced multiplier for future service (to 1.25%) );> Defined contribution plan on top of DB plan );> Normal retirement under DB plan delayed to age 65 (but DC plan distributions may begin earlier) );> Joint & Survivor Annuity abolished; replaced with life annuity (member may purchase survivor benefit) );> No COLA );> Town will withdraw from participation inCh. 175 11 N ....a. ....a. Pension Reform: What Other Florida Cities Have Done Palm Bay (2011)-Fire [Settlement Approved 5/19/11] • 3 year wage freeze • Reduction in pension benefits for current employees: ~ Reduction in supplemental benefit (from $25 to $12 per month per year of service) • Reduction in pension benefits for future employees: ~ Reduced multiplier-3.2% after 20 yrs (was 5% after 20 yrs) ~ 2% COLA deferred 6 yrs (was 3%) ~ Line of duty disability benefit-66% (was 75%) • Stop/Restart-$BOOK one-time transfer from excess premium tax reserve to reduce city's contribution; $125K increase each year in "frozen amount" 12 N ~ N Pension Reform: What Other Florida Cities Have Done Coral Gables (2011)-General [Settlement approved by union members and City Commission in July 2011] • Pension benefits frozen • Pension changes for current and future employees: ~ Reduced multiplier for future service (2.25%) ~ Increase employee pension contribution by 5% (to 10%) ~ 5 year final averaging period (phased in) ~ Delay retirement age to age 65 or Rule of 85 ~ Reduced disability benefits • Future pension cost increases shared by City and employees • City may establish DC plan in the future for new hires. 13 N ~ (..) Pension Reform: Work in Progress Sarasota (2011)-Police [City proposal at impasse; Special Magistrate hearing held in June 2011] • Pension benefits to be frozen for illJ. employees • Pension changes for vested current employees: ~ 5 year final averaging period (now 3 years) ~ Reduce COLA from 3.2% to 2.0% beginning at age 67 ~ Overtime limited to 300 hours per year ~ Standard form of benefit: 10 years certain & life (now 60% automatic spouse survivor benefit for life of spouse) ~ Reduce DROP interest to 2.0% (now 6.5%) • DC plan for non-vested current and future employees (maximum combined City+ employee contribution = 32%) • City will withdraw from participation in Ch. 185 14 1\,) Pension Reform: Work in Progress Hollywood (2011)-All Employees [City declared financial urgency; pension changes to be submitted to referendum if agreement with unions not reached by September 1] • Pension benefits to be frozen for .illl employees • Pension changes proposed for current employees: ~ );> Delayed normal retirement date (Police/Fire-age 55 w/10 yrs or age 52 w/25 yrs; General -age 65 or age 62 w/25yrs or age 60 w/30yrs) );> Reduced benefit multiplier (2.5%-police/fire; 2.0%-general) );> 5 year final averaging period (now 3 years) );> No COLA for future service );> No DROP • City will withdraw from participation in Ch. 175 & 185 15 City Pension Contributions This Year (FV2010-11) • General Plan: $14.5M {20.65% of payroll)* ~ • Fire/Police Plan: $34.4M {66.66% of payroll) Total Annual City Cost: $48.9 million Increase over prior year: $8.5 million (+21%) [General Plan decreased $2.6 million; Fire/Police Plan increased $11.1 million] * Following collectively bargained benefit adjustments in 2010 16 City Pension Contributions Next Year (FY2011-12) • General Plan: $17.5M (25.54% of payroll) ~ • Fire/Police Plan: $36.2M (72.76% of payroll) Total Annual City Cost: $53.79 million Increase over prior year: $4.8 million (+10%) [General Plan increased $3.0 million; Fire/Police Plan increased $1.8 million] 17 N ~ ...... Funded Status • Actuarial Value of Assets I Actuarial Accrued Liability (value of current benefits). • Provides a measure of how much of current benefits (earned and projected) are funded at a specific point in time. • Funded Status of City Pension Plans as of 10/1/10 (per GASB 25): Fire/Police General -Act. Accrued Liability: $822 million $580 million -Act. Value of Assets: $526 million $431 million -Percent Funded: 64.0% 74.4% 18 1\.) ~ co City Pension Cost-Next 5 Years Fire/Police Discount Rate Salary Scale ARC (in millions) %of Payroll 2009 29!,1 2011 II 2012· II 2013 8.3% 8.2% 8.1% 8.0% 8.0% 8.0% 8.0% Current Bargaining Agreement 34.4 36.2 39.7 43.3 43.9 44.5 45.2 66.66% 72.76% 77.22% 81.94% 81.76% 81.28% 81.05% 19 N ~ CD City Pension Cost-Next 5 Years Fire/Police Discount Rate Salary Scale ARC (in millions) %of Payroll lOtS 2012 12013 201:5 8.3% 8.3% 8.3% 8.3% 8.3% 8.3% 8.3% Current Bargaining Agreement 34.4 35.8 37.7 40.1 41.5 42.1 45.2 66.66% 72.04% 73.33% 76.05% 76.32% 75.83% 75.54% 20 N N c City Pension Cost-Next 5 Years Fire/Police Corttr.ib(ltionJor: f\1 Discount Rate Salary Scale ARC (in millions) %of Payroll !009· Jr2'Cft:e· 11:2011 2913 8.3% 8.3% 8.3% 8.3% 8.3% 8.3% 8.3% Current Bargaining Agreement, Experience Study after 2014 34.4 37.6 40.9 43.7 44.8 45.4 46 .. 0 66.66% 75.72% 79.51% 82.79% 83.55% 82.93% 82.43% 21 QJ ~ N N Vl '-- :::J ro +-' :::J u. ~ +-' ro a..n -c QJ ......, -c ·-X QJ > 0 ~ z -a.. I ro QJ tlO '--..c c ·-......, Vl QJ ~ +-' 0 c QJ u QJ I QJ ~~ c (.!) ro 0 ::l ·-+-' Vl u <! c QJ E 0 a.. ~ u. > tlO ......, c ·-·-u -c c Q) a.. 221 N N N Pension Legacy Cost -The UAAL Issue • Total Unfunded Actuarial Accrued Liability (UAAL) of City pension plans as of 10/1/10 was $445 million: > Fire/Police: $296 million >General: $149 million • By law the City is responsible for funding the UAAL-even if employees are transferred to other employers, and even if the current pension plans are closed, frozen or terminated. • Annual UAAL payment is approximately half of the annual required contribution in each plan -these do not go away/could increase due to plan closure, etc. 23 N N (..) Key Concepts • 11Ciose" -existing plan closed to new members; current members stay in existing plan until they retire or leave the City; future employees join new plan. • 11Freeze" -accrued benefits of current employees in existing plan 11frozen" and paid out at retirement; all current and future employees join new plan. • 11Terminate" -existing plan liquidated; accrued benefits paid out to plan members; City responsible for any deficit; all current and future employees join new plan. 24 1\,) 1\,) ,J:o. Legal Guidelines • Changes in retirement benefits and employee contributions are mandatory subjects of collective bargaining. • Accrued pension benefits (benefits earned in the past) cannot be reduced or taken away. • Future benefits can be reduced for current employees who have not reached retirement status. • City is ultimately responsible for unfunded pension liabilities. 25 -Social Security • City currently does not participate in Social Security. ~ • In evaluating proposed changes to the City's pension pl-ans, the fact that the City does not participate in Social Security must be taken into account. 26 N N en Pension Reform Options • Join FRS • Reduce Benefits for New Hires {2 Tier) • Reduce Benefits for All Employees • Set up Defined Contribution {DC) plan • Set up Hybrid DB + DC plan 27 Join FRS for New Hires Issues to Consider • No immediate savings--may take many years to achieve cost savings; City still must pay off current plan liabilities and may shorten amortization period, thereby increasing cost in the short-term ~ • City must join Social Security as a condition of joining FRS • Standardized FRS benefits • Portability-easier for City to attract employees from other FRS agencies (but also easier for other FRS agencies to hire employees away) • Lose police/fire premium tax revenues immediately • State legislature sets benefits and contributions 28 Join FRS for All Employees Issues to Consider • May reduce City cost in shorter period -but City still must pay off unfunded liabilities, and may require shorter amortization period, thereby increasing cost in the short-term • City must join Social Security as a condition of joining FRS ~ • Current City plan can be closed, frozen or terminated co • Standardized FRS benefits • Portability-easier for City to attract employees from other FRS agencies (but also easier for other FRS agencies to hire employees away) • Lose police/fire premium tax revenues immediately • State legislature sets benefits and contributions 29 Reduce Benefits for New Hires (2 Tier Plan) Issues to Consider • No immediate savings--may take many years to achieve cost savings-savings are achieved only as new staff are hired ~ • Current employees keep current benefits • Creates lower level of benefits for new hires • New hires can be expected to eventually press for benefits similar to longer tenured employees Note: Miami Beach implemented 2 Tier pension plans for General employees in 2010 -Fire and Police plan implementation pending litigation 30 N (.,) c Reduce Benefits for All Employees Issues to Consider • Immediate cost savings • Reduces unfunded liabilities, because future benefits are reduced for all • Same level of benefits for all employees going forward • Reduces future benefits for current employees (employees keep what they have already earned) • Loss of premium tax revenues if Fire and Police Plan benefits reduced below Ch. 175/185 minimums Note: City implemented increase in employee contributions and 5 yr. averaging period for all members of General Plan in 2010. 31 Defined Contribution Plan Issues to Consider • Predictable City costs • Investment risk shifts from City to employees • Appeals to younger, mobile employees ~ • Portability-DC account balance may be II rolled over" to an IRA or ..a. other retirement plan with another employer • Lower administrative costs • No actuarial liabilities-Employees bear investment risk • Possible that DC benefits will run out while employee is still alive • No inflation protection (COLA) • Loss of premium tax revenues for Fire and Police Plans • Benefit would have to exceed social security to be competitive • No Florida City has implemented DC plan for police or fire (yet) 32 Hybrid Plan • Hybrid DB I DC plans combine: ~ Base DB plan-guaranteed benefit ~DC plan (with matching employer & employee ~ contributions) on top of DB plan • Hybrid plans are attractive because they provide: ~Shared risk ~Shared cost ~Some level of guaranteed benefit • Social Security issue 33 Police/Fire Benefit Comparison 3.0/4.0% (90% after 2.0% (90% after 45 3.0% (90% after 30 26 yrs) yrs) yrs) Norm. Ret. Date Age 50 w/10 yrs or Age 55 w/10 yrs or Age 60 w/8 yrs or Rule of 70 age 52 w /25 yrs 30 yrs service Final Avg. Comp. Highest 2 yrs High 5 of last 10 yrs High 8 1\,) COLA 2.5% annual None None w w DROP 3 yrs/i nvested rate None 5 yrs/1.3% Share Plan Yes None None Employee Cost 10% 5% 3% City Cost 71.67% ? 14.1 (19.5% next year) Premium Tax 0.02% 0 -· ---Total Cost 87% ? 17.1% (22.5% next year) ..L ....I Ch. 175/185 Premium Taxes • Chapters 175 & 185, F.S. provide for a rebate of the state excise tax on property and casualty insurance premiums to cities with police and firefighter pension plans. ~ • The premium tax monies must be used exclusively for firefighter and police pensions, and the local pension plan must comply with the requirements of Ch. 175 & 185. • Premium taxes received in excess of the "frozen amount" must be used for extra benefits. 35 Ch. 175/185 Premium Taxes • In 2010 the City received a total of $2 million in premium tax (PT) revenues -about 3.87% of payroll. (Fire-$1.46M; Police -$603K) ~ • The City is able to use $120K of the premium tax money received each year to offset the City's contributions to the pension plan. This is the 11frozen amount." • The rest of the PT money --$1.9 million last year -went to 11Share plans" for firefighters and police officers. 36 1\,) w en Ch. 175/185 Premium Tax Issues • Under current law and State non-rule policy, the "City" will lose PT monies if: -~The current plan is closed, frozen or terminated; or ~The City joins FRS; or ~ Benefits are reduced below 1999 level • Increase in member contributions requires collective bargaining and benefit increase. (Reminder: only $120,000 is used to offset cost of the City's Defined Benefit Plan for Police and Fire; balance of $1.9 million annually goes to share plans). 37 1\,) w ...... Pension Reform: What Miami Beach Has Done Miami Beach (2010) -General Employees • Wage freeze • Pension changes for all employees: ~ Increase employee pension contribution by 2% ~ 5 year final averaging period (phased in) • Additional reduced pension benefits for employees hired after 10/1/10: ~ Increased Normal Retirement Age ~ Reduced Multiplier from 3% to 2.5% ~ Reduced Retiree COLA from 2.5% to 1.5% 38 N (.,) 00 Pension Reform: What Miami Beach Has Done Miami Beach (2010) -Fire and Police* • Reduced wage growth --no COLA's for 2.5 years • Pension changes for all employees: > No retiree COLA for at least 2 years for DROP participants > Off-Duty compensation pensionable > Sick leave sell back • Additional reduced pension benefits for hires after 10/1/10 > Established Minimum Retirement Age > Pushed back higher multiplier (increase from 3% to 4%) to year 20 instead of year 15 ~ Final Averaging period increased from 2 to 3 years ~ Retiree COLA decreased from 2.5% to 1.5% * litigation pending 39 Pension Reform: Next Steps • mployee Perspectives -0 arO aininO 0 roupOeaders mployees • Committee isioninD Pension Reform Parameters ~ • Potentia I Pension Recommendations CD • mpact of Potential Pension Recommendations 0 y City s Actuary • Final Pension Recommendations 40 [=:::J 0 ·-[=:::J "' cu 240 I u <( u.J co -~ - ~ ~ Q) r---·-> r--- '--0 e111 Q) ('J > 0 ... ('J ('J c: ....c: 0 u L-·-U) 0 c: ~ Q) CL 241 N ~ N Defined Contribution (DC) Plan Certain amount or percentage of money is set aside each year by a company for the benefit of the employee. There are restrictions as to when and how you can withdraw these funds without penalties (e.g. 401 plans) N ~ (..) Defined Benefit (DB) Plan An employer-sponsored retirement plan where employee benefits are determined based on a formula using factors such as salary history and duration of employment. Investment risk and portfolio management are under the control of the plan. There are also restrictions on when and how you can withdraw these funds without penalties. (e.g. City pension plans) Example of Benefit Years of service X Annual Multiplier X Final Average Monthly Earning 30 years X 3o/o per year X Average of the last 5 years 30 X 3o/o X $4,000 per month 1\,) :t $3,600 per month = $43,200 per year Other considerations: Employee Contributions Retirement Age Cap on maximum 0/o of salary What type of pay is considered salary Cost of Living Adjustments after Retirement Deferred Retirement Option Plan (DROP) N ~ en POTENTIAL FACTORS TO CONSIDER REGARDING THE HEALTH OF A DEFINED-BENEFIT PLAN Percent Funded ARC* as a 0/o of payroll ARC* as a percent of Budget Experience Gains and Losses Trends *Annual Contribution Requirement N ~ en • There are two City of Miami Beach Pension Plans: • Pension Fund for Firefighters and Police Officers in the City of Miami Beach (Fire and Police Pension), and • Miami Beach Employees' Retirement Plan (MBERP)-provides pension benefits for almost all other full-time employees • Approximately 50 active employees participate in a defined contribution 401 Plan which is no longer offered to new employees. -these employees do not participate in the defined benefit plan N ~ ...... Each Pension Plan is governed by a Board of Trustees • Fire and Police Pension Plan • 3 elected from Fire Department sworn employees • 3 elected from Police Department sworn employees • 3 appointed by the Mayor • MBERP • 3 members elected by members of the plan • 2 retirees elected by retired members of the plan • 4 appointed by the City Manager • Typical Functions and Responsibilities of Board Trustees ~ • Establish investment policy and procedure 00 • Adopt Actuarial standards • Approve methods for internal reporting and controls • Insure overall compliance with appropriate governing conditions 1'1.) .,::... U) PENSION PLAN MEMBERS AS OF 10/1/09 ACTIVE DROP DISABLED RETIRED & BENEFICIARIES TERMINATED VESTED MEMBERS TOTAL --~ ---··----I FIRE AND POLICE I PENSION MBERP I I 478 1,154 I 66 35 62 41 506 972 12 79 1,124 2,281 ----------~ - SOC AL SECUR TY CONS DE RATIONS The City does not participate in social security IMPACTS TO CITY • The City does not incur the expense of the 6.2o/o contribution ~ IMPACTS TO EMPLOYEE • The employee does not incur the expense of the 6.2°/o contribution • The employee does not earn social security benefits while working for the City-for long term employees, the City's pension may be the only benefits they get • For employees that have worked elsewhere with Social Security, they lose 5°/o per year of social security benefits for each year they have less than 30 years of "credible" service with social security • Some or all of their Social Security spouse's, widow's or widower's benefit also may be offset due to receipt of the City pension "0 Q) CJ) CJ) ::J (.) CJ) ·-"0 Q) ..c 0 +-' Q) -a. E co X w 251 N (11 N • Each year, the City receives from each pension plan administrator independent actuarial reports for each of the plans • These reports specify the City's annual required contribution (ARC) for the upcoming fiscal year as of the prior October 1 valuation date • The ARC is determined by each pension plan actuary, in accordance with State Statutes, and is based on various assumptions established by each pension plan Board of Trustees in consultation with the pension plan Actuary and Investment Consultant • Under State Statute, the City is required to fully fund the ARC • The valuation is based on wage data as of 1 0/1 and important assumptions include: • mortality rates • retirement ages ~ • future salary increases • pension plan expenses • investment performance assumptions • These assumptions should mirror the actual plan experience over the long term. N (11 ,J:I. ANNUAL ACTUARIAL VALUATION • The market value of the plan is the total value of all plan investments as of a given point in time based on current market value on that date. • The actuarial value of the pension plan assets is equal to the market value of the assets at a specific date, adjusted to reflect a 5-year phased-in (or smoothing) of any asset experience gain or loss • only 20°/o of the experience gain or loss that the fund experiences in any one ( 1) year is recognized • Using the actuarial value methodology allows the pension plan to spread the annual investment experience over a period of time (5 years). N (J1 (J1 --m ·----=--= -·· .._ ---. 1\;:::.Ci. ~-'-~U-.. -'·.1A~·!JQ.~.~1· "~'~ A?t·~.~tJ1 ... U' l~'J .. D·-.IIII!.i-~ILIAB I LITY M·_. ·-~~~t~~·-~ :1 .<r :.\~,;·H.~ -~'~J~f!R' •. -· +·~ -~(. I • The actuarial accrued liability reflects a snapshot at a point in time based on plan benefits and assumptions • The actuarial accrued liability generally represents the portion of the Present Value of Fully Projected Benefits attributable to service earned (or accrued) as of the valuation date-i.e. those benefits which will be paid out over the life of the participants • The unfunded liability for a plan is the difference between the benefits earned (accrued) and the assets of the plan on a given date, and is typically amortized and funded over 30 years Example: • Accrued Actuarial Liability • Actuarial Value of Assets • Unfunded Liability • Percent Funded • Market Value of Assets $600 million $500 million $100 million 83°/o $550 million EXPERIENCE GA N OR LOSS • As part of the annual actuarial valuation, the Actuary evaluates how the actual data for the preceding year compares to the actuarial valuation for that year--Any differences are reflected as gains or losses in unfunded liability ~ • Experience "gains" in the prior year reduces the actuarial accrued liability Examples of experience gains include: • Investment earnings for the prior year in excess of plan assumptions • employees retiring later than assumed • salary growth less than assumed, etc. • Experience "losses" for the prior year, conversely, increases the actuarial accrued liability • These aains or losses are amortized over 30 • Changes to plan benefits can also affect the actuarial accrued liability of a plan, either positively or negatively ~ • If plan benefits are increased, the mathematical calculations will result in more benefits anticipated to be paid to plan members in the future, which will need to be recognized all at once, although payments would be amortized over the long term • If plan benefits are reduced, all else being equal, the plan will see a reduction in the actuarial accrued liability N (J1 co • The investment rate of return is significant as this affects the calculation of present value of the plan benefits • How much the plan should have on hand today, which together with investment earnings (the investment rate of return), employer contributions, and employee contributions, should be sufficient to fund the plan in the future N (11 CD • MBERP has had an average actuarial rate of return of 8.5o/o since September 30, 1989 through September 30, 2010 Prior to March 18, 2006, there were two separate pension plans for civilian employees: one for General (Classified) Employees and the other for Unclassified Employees-the Unclassified Plan had an average actuarial rate of return of 11.0o/o from September 30, 1989 through September 30, 2006 • The Fire and Police pension plan returns from September 1989 through September 2010 average 8.52o/o (Base Plan). •Prior to 2000, the Fire and Police Plan had a separate supplemental component. The returns for the Supplemental Plan for the nine (9) years that it was in existence averaged 11 o/o 1\,) en 0 FY 2009/10 Assumed Rate of Return FY 2009/10 Actual Rate of return ----·--FIRE AND POLICE PENSION MBERP I I 8.3% 8.35% 10.85% 11.2% I N c:.n ..a. !' -. -~ -----~-.=-;;o,.<., -~-.... --- - -. --.. ---. _-. .----... -·· .. ;;-_ ___:::--~---~ --=;;;---··---...... """'" ... ::-1 ~.~~.S~#a'fi;us: a.J' ~:~i~.~ .. ~A~~·~~~r~:oJ0.:"_ssHY;I: -.~.;·Recommended::· j Ill -I • -. • -I 1;1:, .• • -. ·p··· :8. -··.···~ n ~~e...-~;;l·r~a· ·~~~!·f iR-~ffa-~~·r: C h 0 n g e S --: [I I •. J, I!' .. IIU I ! j ,~U~I'~IYth, I i -.,. _---.J • .,·_·. --•••• -.... =.-· • . -• ll._ ___ . :___ __ _ ________ 1.. _ :....____ ~ •• .;.&.. -I • ~-· •. • ~ MBERP-New Employees Normal retirement: Age 55 + 30 years of service or 62 + 5 years of Service Early Retirement: "Rule of 75", Minimum Age 55 FAME Period: 5 years Formula: 2.5% average earnings time service Annuity form: member's lifetime Status Complete Complete Complete Complete COLA: decrease from 2.5o/o to 1.5°/o annual increase, deferred Complete to end of DROP DROP: 5-year maximum Complete Pre-retirement 5 year vesting -Benefit deferred to Age 62 Complete Death & disability benefits: unchanged No change Employee contribution: 1 0°/o Complete N (7) N Status of Previous y Recommended Pension Pan Changes MBERP -Current Employees FAME Period: 5 years Additional 2°/o employee contribution: From 8 to 1 0°/o for most employees Status Complete Complete The actuarial impact of these changes for current employees were $3,297,614 or 4.7°/o of non-DROP payroll Impact of changes for new MBERP employees: -Estimated $1 million in savings (1.25°/o of payroll) -Increasing to $6 million in 10 years N c:.n (..) Fire and Police -New Employees Normal retirement: "Rule of 70" with minimum age 50 Formula: 3o/o average earnings times service FAME Period: 2 years (unchanged) Annuity form: lifetime COLA: decrease from 2.5°/o to 1.5°/o annual increase, deferred to end of DROP Status Minimum Age 48 3o/o first 20 year, 4 °/o thereafter 3 years No change 1.5°/o, 2 years no retiree COLA if participates in DROP DROP: 5-year maximum As of 9/30/12 Preretirement termination 10 years vesting, benefit deferred to No change age 55 Death & disability benefits: unchanged No change N (7) ~ Status of Previous y Recommended Pension P on Changes Fire and Police -Current Employees Normal retirement: "Rule of 70" with minimum age 50 Annuity form: lifetime COLA: decrease from 2.5°/o to 2.0°/o annual increase, deferred to end of DROP DROP: 5-year maximum Status No Minimum Age No change 2.5°/o, 2 years no retiree COLA As of 9/30/12 In addition, the adopted pension plan ordinance provides for off-duty as pensionable pay and allows for sell back of sick leave to reach the maximum for both new and current employees PENSION PLAN CHANGES FOR POLICE AND FIRE OCURRED AFTER THE ARC DOES NOT INCLUDE PENSION PLAN CHANGES FOR POLICE AND FIRE-ESTMATED AS OF 9/19/2010 N 1 2 YR NO COLA IF IN DROP $ (651,322) c:.n en CHANGE IN PENSIONABLE PAY $ 368,665 NET $ (282,657} 1\,) en en ANNUAL CONTRIBUTION REQUIREMENTS (ARC) PENSION BOND PAYMENTS TOTAL ANNUAL CITY PAYMENTS GENERAL FUND COMPONENT ACTUAL ARC PAYMENT PENSION BONDS %OF GENERAL FUND BUDGET $ $ $ $ FIRE AND POLICE PENSION MBERP 34,416,519 $ 14,474,678 4,495,500 499,500 38,912,019 $ 14,974,178 33,748,250 $ 9,287,147 4,366,259 $ 485,140 16% 4% N (7) ...... FY 20 l 0/ l l PLAN STATISTICS FIRE AND POLICE PENSION MBERP ' EMPLOYER ARC AS A% OF PAYROLL NORMAL COST 35.21% 10.02% AMORTIZATION OF UNFUNDED LIABILITY 31.45% 10.20% TOTAL EMPLOYER% OF PAYROLL 66.66% 20.22% ANTICIPATED EMPLOYEE CONTRIBUTION $ 5,163,607 $ 7,146,837 UNFUNDED LIABILITY AS OF 10/1/09 (UAAL) $ 266,792,988 $ 126,143,247 FUNDED RATIO (Actuarial Value of Plan Assets less Accrued Laibility-Past Service) 66.0% 76.9% N (7) co PENSION REFORM SAMPLE WORK PLAN Agenda Item Pension Plan Overview & Alternatives Pension Plan Status Potential Pension Plan Changes Presenter( s) City s Pension Attorney Pension Plan Administrators City s Actuary Employee Perspective Bargaining Group Leaders/Employees Potential Recommendations Committee Impact of Potential Recommendations City s Actuary Final Recommendations Committee V) Q) Q) rc > L.. L.. 0 c QJ 0 ro > ....., -·-rc a.-Cl: L.. ....., E~ ~ Vl u ·-c ·-w c Cl: ·-E Q) > ..c "'0 ..c u E "'0 <( ro Q) QJ c Q) '--....., 0 c ·-co ·-Vl .1-J QJ c Q) Vl QJ ·-QJ E a:: L.. a.. a.. ro ·-~ 269 Historical Information • A Retirement System for General Employees of the City of Miami Beach was created by authority of Chapter 18691, Laws of Florida, Acts of 1937 ~ • January 1, 1955-Agreement between CMB and Federal Gov't, Social Security Administration, exempting City employees from paying Social Security Taxes • In March 1988 the Unclassified & Elected Officials Retirement System was created H istorica I Information (continued) • In March 2006 the General Employees Retirement System and the Unclassified & Elected Officials Retirement System merged to ~ create the Miami Beach Employees' Retirement Plan (MBERP) • Also, at this time approximately 300 employees migrated from the City's defined contribution retirement plan into MBERP 1\,) ....... 1\,) Board of Trustees • MBERP is a Plan and shall be construed as a Trust and Administered by the Board • Nine (9) Trustees: -Three (3) Members of the Plan elected by Employee members; -Two (2) Retirants elected by the retired members of the Plan; -Four (4) persons appointed by the City Manager Duties of the Board of Trustees • Hold regular meetings • Establish rules and regulations to implement provisions of the pension ordinance, and ~ formulate policy for the proper administration of the Plan • Consider all applications, lump sums, expenses • Hire Actuary, Board legal counsel, Investment Consultant, Investment Managers N ........ ,J:I. Duties of Board of Trustees (Continued) • Legal Custodian of all cash & securities of the Plan • Appoint an Administrator • Cause an audit of the Plan annually by an independent CPA • Issue annually an Employee Benefit Statement to each Member 1\,) ....... en Duties of the Pension Administrator • The administration of the Plan. Responsibilities include: -Establish and maintain records on all members -Verify employee contributions -Receive and compute applications, credit interest -Notify Board of any new members, applicants -Maintain numerous records including City contributions, investment returns and other financial records the Board deems necessary N ........ en MBERP's Vendors • Board's Legal Counsel -Steve Cypen, Cypen & Cypen • Plan Actuary-Steve Palmquist, Gabriel Roeder Smith Inc. • Plan's external Auditor-Goldstein Schechter Koch • Fund's Investment Consultant-Bill Cottle, Milliman Inc. 1\,) ....... ....... Investment details of the Plan • Index Managers • Rhumbline Advisers • Strategies: -S&P 500, Large Cap Equity -S&P 400, Mid Cap Equity -S&P 600, Small Cap Equity -Barclays aggregate bond fund -ADR lnt'llndex • Active Managers • ICC-Large Cap Value Manager • Wentworth Hauser Violich-ADR International Manager • Wellington -Core bond fund manager 100% -r------90% -+------80% -+------70% -+------60% -1-----1 50% -+-----~ 40% ~----~ 30% -t----1 20% -+-----~ 10% -+----1 0% -+----1 Index/Active Equity/Fixed Income N ........ 00 Investment details of the Plan Actual Asset Allocation 12/31/2010 • Large Cap Equity-40.1% • Mid Cap Equity-9.0% • Small Cap Equity-4.4% • Fixed Income-26.9% • lnt'l Equity-19.5% • Cash-.1% N ........ CD Investment details of the Plan Market Value 500000000 450000000 400000000 1 ~<t.Lo,;,o::>,o::u..uu $426,959,551.90 ..c: ...... ~zt-ztdq.oo 350000000 300000000 250000000 200000000 150000000 100000000 50000000 0 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ § ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ v ~ ~ ~ ~ ~ v ~ ~ ~ ~ ~ v ~ ~ ~ ~ ~ v ~ ~ ~Series2 ~Series1 09/30/00 09/30/01 N (X) 09/30/02 c 09/30/03 09/30/04 09/30/05 09/30/06 09/30/07 09/30/08 09/30/09 09/30/10 Recent Historical Investment Rate of Return 10.8% 10.7% 11.5% (7.4%) 7.2% (8.1%) (5.9%) 0.3% {9.8%) 17.4% 4.3% 16.9% 11.4% 4.1% 13.0% 12.8% 4.4% 13.8% 7.4% 7.7% 7.5% 15.3% 12.0% NA {13.6%) 5.2% NA (0.8%) 1.1% NA 11.3% 5.0% NA 16.5% 9.7% 1.7% 4.6% 9.7% 10.7% 10.2% NA NA NA NA 1\,) co ~ Fund Performance current fiscal year 10-01-10 TO 9-30-11 3 Months ending 12-31-10 ICC LARGE CAP VALUE 7.1% Rhumbline S&P 500 Index 5.9% Rhumbline S&P 400 Index 9.4% Rhumbline S&P 600 Index 7.7% WHV lnt'l ADR portfolio 5.7% Rhumbline ADR lnt'llndex 4.1% Rhumbline Barclay's Agg Index .4% Wellington Core bond fund .9% Fund Benchmark 4.1% 6 Months ending 03-31-11 19.7% 17.3% 24.2% 25.1% 21.2% 11.9% (.9%) .4% 11.1% Period Total Fund N co Ranking N vs. Total Funds Fund Benchmark Ranking vs. Total Funds Cumulative Fund Performance @ 12/31/2010 last last last 3 last Qtr 2 Qtr Year Qtr 8.0% 17.9 9.1% 14.5% % 8 9 34 16 6.7% 17.0 8.8% 13.6% % 23 15 39 26 last 2 last 3 last 4 last 5 last 7 last Years Years Years Years Years 10 Yrs 19.6% 1.9% 3.5% 5.1% 6.1% 5.1% 16 35 28 28 23 28 17.5% 1.4% 2.6% 4.3% 5.1% 4.3% 34 44 47 53 55 57 N (X) (..) Schedule of Investment Expenses @ 09/30/2010 INVESTMENT EXPENSES WHV 80-100 basis pts on MV $275,645 Wellington Management 25 basis pts on MV $170,961 ICC Capital Management 35 basis pts on MV $166,767 Rhumbline Advisers 3 -5 basis pts on MV $ 69,809 Total Mngr. Expenses $683,182 Consultant Fees-Milliman $68,900 Custodial Fees-FTI $39,339 Total Investment Expenses $791,421 AVG Basis Pts. Paid by PLAN Key Actuarial Statistics Recent History of Actual Contributions Valuation Date EOY which Val. applies Actual ER Contrib. %of Payroll 10-01-98 09-30-00 $666,897 2.66% 10-01-99 09-30-01 0 0 10-01-00 09-30-02 0 0 10-01-01 09-30-03 0 0 1\,) 10-01-02 09-30-04 $2,476,702 8.16% co ,J:o. 10-01-03 09-30-05 $5,082,595 14.74% 10-01-04 09-30-06 $5,500,329 15.89% 10-01-05 09-30-07 $13,053,231 23.11% 10-01-06 09-30-08 $13,911,545 24.24% 10-01-07 09-30-09 $12,863,823 21.57% 10-01-08 09-30-10 $17,137,394 25.20% 10-01-09 09-30-11 $14,474,678 20.65% 10-01-10 09-30-12 $17,517,836 25.54% AVG% of PR 13.78% 0 ·-+-' ro a: -c OJ -c c ~ L..L. ?fl. ?fl. ?fl. ?fl. 0 0 0 0 N 0 00 \.0 ~ ~ 285 ""C QJ ""C ""C c QJ ~ ""C c c ::::> ~ • • ?fl. 0 q- 01 Ol/1 /01 * 600l/1/01 800l/1/01 LOOl/1/01 900l/1/01 SOOl/1/01 1700l/1/01 EOOl/1/01 lOOl/1/01 100l/1/01 OOOl/1/01 6661/1/01 8661/1/01 ?fl. ?fl. 0 0 N N (X) en Summary of Changes of Plan Net Assets Contributions: Members $6,414,743 $6,820,064 Members-Additional 2% $ 431,769 City $17,137,394 $12.863,823 Total contributions $23,983,906 $19,683,887 Investment Income: Net Appreciation in FMV $35,791,125 ($6,201,923) Interest and Dividends $ 3,930,461 $3,760,663 Other S58~580 m299 Total investment income $39,780,166 ($3,019,825) Less: Investment Expenses ($791,421) ($656,864) Net Investment Income (loss) $38,988,745 ($3,019,825) Total additions $62,972,651 $16,664,062 Summary of Changes of Plan Net Assets (continued) Pension benefits paid $31,872,195 $29,346,790 Refund of Contributions $579,709 $752,415 Transfer out, net $408,164 $57,999 N Administrative Expenses $705,482 $675,590 (X) ...... Total deductions $33,565,550 $30,832,794 Net increase (decrease} $29,407,101 ($14,168,732) Net assets held in Trust for benefis Beginning of year $349,416,064 $363,584,796 End of year $378,823,165 $349,416,064 1\,) co co Key Statistics of Particioant Data Number (Non-DROP) Covered Annual Non-DROP Payroll Average Annual Non-DROP Pay Total Covered Annual Payroll Average Annual Pay Average Age Average Past Service Average Age at Hire Number Annual Benefits Average Annual Benefit Average Age 1,117 $68,586,818 $61,403 $72,159,221 $61,886 44.1 8.8 35.3 49 $2,505,713 $51,137 58.6 N (X) CD Number Annual Benefits Average Annual Benefit Average Age Number Annual Benefits Average Annual Benefit Average Age Key Statistics of Participant Data 981 $29,224,108 $29,790 71.3 40 $947,329 $22,838 66.7 Summary of MBERP Benefits Members 121 1069 20 Normal Retirement Age 55 with 30 yrs or Date Age 50 with 5 years Age 55 with 5 years 62 with 5 yrs Min. age 50, rule of Min. age 55, rule of 1\,) Early Retirement* N/A 75 75 <D 0 FAME Highest 2 - 5 years Highest 2-5 years Highest 5 years Benefit Multiplier 3% 3% 2.50% Maximum %accrued 90%/80% 80% 80% Min. age 55 w/ 30 DROP Min. age 50, 3yr Max Min. age 55, 3yr Max yes, 5 yr Max COLA for retirees 2.50% 2.50% 1.50% employee contribution % 12% 10% 10% * subject to actuarial calculation