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September 4, 2009
Mr. Pedro G. Hernandez
City Manager
City of Miami
3500 Pan American Drive
Miami, Florida 33133-5595
GESE - ADJUSTMENT TO CONTRIBUTION REQUIREMENTS FOR FISCAL YEAR
2009-2010
Dear Mr. Hernandez:
You have requested verification of what reduction in contribution requirements would
be applicable should the proposed amendments to actuarial methods and procedures
contained in the proposed ordinance be implemented.
The following changes are proposed:
• Adoption of a 5 -year asset averaging method (with partial phase in starting
October 1, 2007)
• Revision to the actuarial cost method from aggregate entry age to individual
entry age
• Adoption of a 3% payroll growth amortization assumption (level percent
amortization) for unfunded actuarial accrued liabilities (URAL) amortizations
• Amortization period of 15 years for future additions to the UAAL due to benefit
improvements, changes in assumptions and/or methods, and actuarial gains and
losses (using remaining applicable periods for current UAAL bases)
The effect of these changes would result in amortization payments estimated to be
$5.6 million or 7% of payroll, applicable to the 2009-2010 fiscal year.
Note the current ordinance draft does not specify the level percentage to be used for the
level percentage amortization; I suggest adding the phrase "not to exceed 3%" after
"...shall be amortized as a level percentage..." in Section 40-246(b)(2)a.
Sincerely,
mlaa&t7*m44�,
Michael J. Tierney
3020 Hard -y Pd. 6uite 250. Jadsonillc, TL 32257
Pham (904) 262-3020. fm (9034) 26&3374
E-mail: sc oaduarialconcept&coa