HomeMy WebLinkAboutLetterStanley,
Holcombe
& Associates, Inc.
April 24, 2008
(Via e-mail)
Board of Trustees
City of Miami Firefighters' and
Police Officers' Retirement Trust
1895 SW 3rd Avenue
Miami, FL 33129.1456
Actuarial Impact Statement:
Ordinance Amendment to
Extend Maximum DROP
Participation Period for Police Officers
Dear Board Members:
The purpose of this letter is to provide the Actuarial Impact Statement for the proposed
ordinance amendment to extend the maximum period for participation in DROP from 4 years
to 7 years for members of the police department,
A separate Actuarial Impact Statement will apply for this proposed change for firefighters.
An actuarial impact is created when benefits are changed, leading to a measurable cost
difference, with no changes in actuarial assumptions. An actuarial impact is also created
when a change in ordinance provisions leads to a change in actuarial assumptions and an
impact on funding requirements. An actuarial impact is not created when a change is made
which is not covered by the actuarial assumptions, and for which a change in assumptions is
not dictated.
The DROP provision is intended to be cost neutral. Our actuarial cost calculations for
determining funding requirements are based on assumed retirement dates (or DROP entry
dates). Therefore, the maximum DROP period has no measurable direct impact on the
funding of the Retirement System, unless a change in the DROP provisions can be expected
to alter the future patterns of DROP entries.
2000 RiverLdge Parkway/Suite .540 * Atlanta, GA 30:128
t7761 933-1933 * (770) 93341910 * K'ww5tanleyhnttoitibe.cnni
Board of Trustees
City of Miami Firefighters' and
Police Officers' Retirement Trust
April 24, 2008
Page Two
Following the most recent Triennial Experience Study, the retirement assumptions were refined,
beginning with the October 1, 2006 Actuarial Valuation. The revised assumptions include
retirement decrements for police officers after eligibility for Rule of 64 Retirement, for each year
of service between 20 years and 32 years,
If the expanded DROP participation period were expected to resultin earlier DROP entry dates
(in conjunction with an unchanged or earlier DROP exit date), there would be an actuarial
impact. However, based on data provided on 183 police officers who have entered and exited
DROP since its inception, the average DROP participation period has been 1.7 years. Only 22
members have participated for 3 or more years, of which only 1 participated for 4 years.
Therefore, in our opinion, the expansion from 4 to 7 years is unlikely to have any measurable
impact on DROP entries and System costs.
If this ordinance change does result in any acceleration of DROP entries, a future additional
refinement may be desirable, However, the magnitude of any such adjustment will be known
only after sufficient experience has emerged, Therefore, in our judgment there is no immediate
or quantifiable actuarial impact due to this change.
In our opinion these changes are in compliance with Section 14, Article X of the State
Constitution and with Section 112.64, Florida Statutes.
Respectfully submitted,
Stanley, Holcombe & Associates, Inc.
Wo___
Randall L. Stanley, F.S.A., M.A.A.A., F.A.
Consulting Actuary and Principal
RLS/FS/d i
ittiami0l-50B