HomeMy WebLinkAboutActuarial Impact 12-17-09 FR/SRbuckccnsultants A
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October 8, 2007
Mr. Charles Slavin, Actuary
Bureau of Local Retirement Systems
State of Florida, Div. of Retirement
Cedars Executive Center
2639-C North Monroe Street
Tallahassee, Florida 32399-1560
City of Miami General Employees' and Sanitation Employees' Retirement Trust
Actuarial Impact Statement for Proposed Plan Changes
Dear Mr. Slavin:
We are writing to provide an Actuarial Impact Statement for benefit changes related to the
amount of optional allowances and the actuarial equivalence factors for nonspouse beneficiaries
under the City of Miami General Employees' and Sanitation Employees' Retirement Trust. Our
determination of the cost of the benefit changes has been made on a sound actuarial basis in
compliance with Section 14, Article X of the State Constitution and with Florida Statutes,
Chapter 112.64.
Amount of Optional Allowances
The ordinance constituting the legal text of the plan provides for stated benefit reduction factors
of 10% for Option 2 (equal payment survivor annuity) and 2% for Option 3 (one-half payment
survivor option) when the member designates his or her spouse as beneficiary. These reduction
factors are applied to the normal form of payment, which provides for 40% continuation to a
surviving spouse. At its meeting on September 28, 2007, the Board adopted a change in these
benefit reduction factors from 10% to 5% for Option 2 and from 2% to 1% for Option 3 effective
October 1, 2007. It is my understanding that the City Commission will consider adopting a
change in the ordinance reflecting these proposed benefit reduction factors later this month.
Based on the participant census data and actuarial assumptions used in the October 1, 2006,
actuarnal valuation oTtheTnist; we have-oalculated the cost oft is -plan change as-f6_11ows:
• Increase in Normal Cost
• Increase in Unfunded Actuarial Accrued Liability
• Increase in Amortization of Unfunded Actuarial Accrued Liability
(based on 30 -year amortization)
• Increase in Contribution
200 Galleria Parkway MW, Suite 19!10 • Atlanta, GA 30339.5945
770.955,2488.770.933.8336 (fax)
$ 41,000
691,000
62,000
Mr. Charles Slavin
October 8, 2007
Page 2
Note that for purposes of this calculation, we assumed that 30% of retiring members would elect
Option 2 (based on information provided by the fund office that 30% of members retiring in the
past five years have elected either Option 2 or 3).
A copy of the ordinance implementing this benefit change is attached.
Actuarial Equivalence Factors for Nonspouse Beneficiaries
Benefits for retiring members who select Option 2 or 3, but name a nonspouse beneficiary, are
subject to an actuarial equivalent adjustment. The table of actuarial equivalent factors currently
in use was adopted by the Board in 1990. At its meeting of September 28, the Board adopted a
resolution defining actuarial equivalence in terms of the interest and mortality assumptions
underlying the most recent actuarial valuation. The change in actuarial equivalence factors
became effective on October 1, 2007.
Since the new actuarial equivalence factors are based on the same interest and mortality basis
underlying the valuation, this benefit change has no impact on contribution amounts.
Please call me if you have any questions or comments.
7ame
truly yours,
s J. Donofrio, FSA, EA
Principal
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Copy to: Sandra Elenberg — City of Miami GESE Retirement Trust
Micki Taylor — Buck Consultants
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