pension report

8/3/2019 Pension Report

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MEMORANDUMTo: Mayor and CouncilorsThru: Edward Lavallee, City Manager I:.J- \From: Laura Sitrin, Director of F i n a n c e ~ /Date: December 1, 2011RE: Police and Fire Pension ValuationsAttached please find the July 1, 2011 police and fire pension valuations. I stronglyrecommend that the Council consider having a jointworkshop with the Trust andInvestment Commission where the actuaries from Buck Consultants come andexplain the valuations and funding levels. There are significant changes in pensionreporting on theway including having to record the entire liability on our statementof net assets. There has also been constant media and public focus on the localplans. The actuaries may be able to address some of the concerns and questions.We have made a couple of changes in assumptions this year in preparation ofGASBproposed new pension accounting and reporting standards. The actuarial fundingmethod was changed from Projected Unit Credit to individual Entry Age Normal.This actually helped us a little. We eliminated the five-year smoothing of assets andwent with market value. Mortality assumptions were revised because the actuariesinsisted on changing them.Two new tables have been included in the report which you may find helpful. Thefirst is an appropriation forecast showing bothwhat the City's annUlil requiredcontribution will be plus the funded status of the plan. This report can be found onpage 7 of the valuations. The second table is on page 8 and shows the major reasonsfor changes in the liability during the last year.The police pension shows a total liability of $76,570,775 ofwhich $43,693,248 isfunded. The unfunded liability is $32,877,527 and the plan is 57.1% funded. Theannual required contribution for the FY13 budget is increasing by $562,393. 'The fire pension shows a total liability of $82,907,130. There are total assets of$32,832,334 leaving an unfunded liability of $50,074,796 (a decrease from the prioryear). The City is 39.6% funded in the fire pension and the annual contribution fo rFY13 is increasing by $261,970.


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buckconsultants AXerox Company

The City ofNewport, Rhode IslandPolice Pension System

Actuarial Valuation Report

Prepared as ofJuly 1,2011

November 2011

IblUlckconsultants'


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THE CITY OF NEWPORT, RHODE ISLANDPOLICE PENSION SYSTEM

Report of the July 1,2011, Actuarial Valuation

TABLE OF CONTENTSPage

I. Purpose and Summary III. Membership Data IIll. Plan Provisions 2IV. Assets 2V. Actuarial Methods and Assumptions 2VI. Funding Policy 2VII. Analysis ofValuation Results 3

TablesIA Valuation Results 5IB Schedule ofFunding Progress 6IC Appropriation Forecast 71D Changes in Unfunded Liability for Fiscal Year Ending June 30, 2011 8IE Development ofNPO for Fiscal Year Ending June 30, 2011 92A Distribution ofActiveMembers as ofJuly I, 20II 102B Distribution ofRetired Members and Beneficiaries as of July 1,2011 II3 Actuarial Methods and Assumptions 124 Outline ofPrincipal Plan Provisions 155 Glossary ofTerms 18


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Page ITHE CITY OF NEWPORT, RHODE ISLAND

POLICE PENSION SYSTEMReport of the July 1,2011, Actuarial Valuation

I. Purpose and SummaryThis report presents the results of our July I, 20II, actuarial valuation of the City of Newport, RhodeIsland Police Pension System. The valuation was performed at the request of the City of Newport forpurposes of determining annual contribution levels for the City and to develop information regardingactuarial liabilities required for the City's financial disclosures.

In summary, the recommended City contribution for the 2012-2013 fiscal year is $3,461,972, ifdeposited in one lump sum on June 30, 2013. This contribution has been developed based on a 20-,year amortization of the unfunded actuarial liability. I f the City would prefer to make monthlycontributions at the end of each month, it should contribute $279,031.

The development of the valuation results is shown in Tables IA through 5 and described in more detail onthe following pages.

The valuation reflects combined results for police hired before and after July I, 1984. It is ourunderstanding that prior to July I, 1998, these groups were segregated with separate actuarial valuationsperformed in alternate years.

II. Membership DataThe City furnished data for active and retired members as of July I, 20 II . Although we did not audit thisdata, we did review it for reasonableness and consistency. Table 2A provides a distribution by age andservice for active members. Table 2B provides a distribution by age and gender for retired members andbeneficiaries.


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Page 2THE CITY OF NEWPORT, RHODE ISLAND

POLICE PENSION SYSTEMReport of the July 1,2011, Actuarial Valuation

III. Plan ProvisionsA summary of the principal benefit provisions recognized for purposes of the valuation is provided inTable 4. This summary reflects our understanding of the System's benefit provisions based uponinformation provided to us by the City.

IV. AssetsThe City provided us with the asset information used for purposes of this valuation. According to thisinformation, the market value of assets attributable to this plan was $43,69,3,248 as of July I, 2011,compared to $35,525,199 as of July 1,2010. For valuation purposes, assets are valued at market value. It isour understanding that there are no contributions due for the fiscal year ending June 30, 20 II, which wereaccrued as of June 30, 2011.

V. ActuarialMethods and AssumptionsThe actuarial methods and assumptions employed in this valuation are outlined in Table 3. Primaryeconomic assumptions include 7.50% investment return (net of expenses) and 3.50% weighted-averagesalary increases. The individual Entry Age Normal actuarial cost method has been used to determineliabilities for funding purposes and to determine liabilities for financial disclosure purposes as required byaccounting standards. The mortality assumption uses mortality tables prescribed by the IRS for nongovernmental pension plans, as specified in IRS Regulation 1.430(h)(3)-I. The mortality tables are appliedon a fully generational basis, meaning that continued mortality improvement is reflected. The assumed ratefor Cost ofLivingAdjustments is 3.00%.


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POLICE PENSION SYSTEMReport of the July 1,2011,ActuarialValuation

VI. Funding PolicyI t is our understanding that, beginning with the 1996-1997 fiscal year, the City adopted a funding policydesigned to include in its annual contribution an amount that reflects the amortization of the unfundedactuarial accrued liability over a 30-year period. Beginning with the July I, 2002 valuation, the 30-yearperiod was reduced by one year and is being stepped down by one year for each valuation going forward.This policy is intended to satisfy the requirements ofGASB Statement No. 27.

Our recommended contribution for 2012-2013 is developed as the 20-year contribution for the fiscal yearof the valuation (2011-2012), projected forward with expected growth in covered payroll.

VII. Analysis ofValuation ResultsValuation results are summarized in Table lA, including a comparison to prior valuation results. Assetsare currently about 57% of accrued liabilities.

The Plan realized an actuarial gain of approximately $5.6 million for the Plan year. Liabilities had a loss of$0.3 million, which was completely offset by a $5.9 million gain in assets. The Plan's gains and losses areillustrated with more detail in Table ID.

In addition, several changes were implemented since the last valuation. The actuarial funding method waschanged from Projected Unit Credit to individual Entry Age Normal, and the asset method was changedfrom 5 year smoothed actuarial value of assets to market value of assets. In addition, the mortalityassumptions were revised. The net effect of these changes was a $4,055,043 decrease in unfunded liabilityand $416,886 increase in normal cost.

The normal cost illustrated in Table IA reflects the long-term cost of the plan absent underfunding. Thiscost is about 23.5% ofcurrent payroll.


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THE CITY OF NEWPORT, RHODE ISLAND

Date

Page 4

Report of the July 1,2011, Actuarial Valuatiou

This report fairly represents the actuarial position of the City of Newport Police Pension System as ofJuly 1, 2011, in accordance with generally accepted actuarial principles applied consistently with thepreceding valuation. In our opinion, the actuarial assumptions used to compute actuarial accrued liabilityand normal cost are reasonably related to plan experience and to reasonable expectations, and represent ourbest estimate of anticipated plan experience.

POLICE PENSION SYSTEM

Daniel Sherman is an Associate of the Society of Actuaries, a Member of the American Academy ofActuaries and meets the Qualification Standards of the Academy to render the actuarial opinions containedherein. This report has been prepared in accordance with all applicable Actuarial Standards ofPractice, andwe are available to answer questions concerning it.

Respectfully Submitted,

BUCK CONSULTANTS, LLC

Robert P. LessardConsultant

Daniel W. Sherman, ASA, MAAA, EADirector, Consulting Actuary


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Page 5TABLEIA

THE CITY OFNEWPORT, RHODE ISLAND POLICE PENSION SYSTEMVALUATION RESULTSA. Membership Data July I , 2010' July I, 2011

I, Active Membersa, Number 78 77b. Expected covered payroll for fiscalyear beginning on the valuation date $ 4,972,175 $ 5,048,815c. Average pay $ 63,746 $ 65,569d, Average age 42.5 42,7e. Average service 15.4 15,1

2. Retired members and beneficiariesa, Number 116 118b. Aggregate annual pensiou $ 3,789,778 $ 4,088,826c, Average annual pension $ 32,670 $ 34,651d. Average age 67,8 67.7

3, Deferred vested membersa. Number 0 Ib. Aggregate annual pension N/A $ 24,240c. Average annual pension N/A $ 24,240d, Averageage N/A 42.9

B. Basic Valuation ResultsI , Normal cost' $ 778,731 (15,7%) $ 1,185,085 (23.5%)2. Actuarial accmed liabilitya. Active members $ 28,157,259 $ 25,743,812b. Retirees and Beneficiaries 46,709,589 50,575,217c. Deferredvested 0 251,746

d. Total $ 74,866,848 $ 76,570,7753. Valuation assets $ 42,240,992 $ 43,693,2484. Unfunded actuarial accrued liability $ 32,625,856 $ 32,877,527

July 1,2011 to July 1,2012 toC, Development ofContribution June 30, 2012 June 30, 20131. Contribution for fiscal year ofvaluation

a, Normal cost with interest $ 866,436 $ 1,318,555b. Amortization of unfunded actuarialaccrued liability 2,460,279 2,560,548

2c. Anticipated employee contributionswith interest (427,136) (417,131)d, City contribution

assumed deposited June 30 $ 2,899,579 $ 3,461,9722. Monthly City contributionbeginning July 31 $ 233,703 $ 279,031

1Percentages in parentheses represent amounts as percentages of covered payroll.2 Amortized over 20 years from the valuation date, with one-year interest adjustment, as a level percentage of payroll,


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Page 6TABLElB

THE CITYOF NEWPl>RT, RHODE ISLAND POLICE PENSION SYSTEMSCHEDULEOF FUNDING PROGRESS(I) (2) (3) (4) (5) (6) (7)

Unfunded UAALasaActuarial Actuarial Actuarial PercentageValuation Value of Accrued Accrued Funded Covered of CoveredDate Assets Liability Liability Status Payroll Payroll

(2) - (3) (2) / (3) (4)/(6)June 30, 2002 28,060,710 65,986,217 (37,925,507) 42.53% 3,775,389 (100455%)June 30, 2003 29,217,703 67,277,252 (38,059,549) 43.43% 4,007,324 (949.75%)June 30, 2004 33,645,290 58,014,568 (24,369,278) 57.99% 4,383,668 (555.91%)June 30, 2005 36,209,737 61,626,704 (25,416,967) 58.76% 4,527,283 (561.42%)June 30, 2006 39,118,1 17 62,635,048 (23,516,931) 62.45% ,4,757,61 I (494.30%)June 30, 2007 44,288,895 70,038,232 (25,749,337) 63.24% 4,752,900 (541.76%)June 30, 2008 41,952,553 68,177,847 (26,225,294) 61.53% 5,129,935 (511.22%)June 30, 2009 37,852,800 73,443,988 (35,591,188) 51.54% 4,990,094 (713.24%)June 30, 2010 42,240,992 74,866,848 (32,625,856) 56.42% 4,972,175 (656.17%)June 30, 201 I 43,693,248 76,570,775 (32,877,527) 57.06% 5,048,815 (65I.I9%)


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The following exhibit forecasts the Annual Required Contribution and Funding Ratio under the adoptedfunding schedule.Note that the forecast is based upon an "open group" method. This method assumes that sufficientemployees will be hired each year to keep the number constant. The total payroll of the system is expectedto increase 3.5%per year. Payments are assumed to be made at the end of each year.The employer total cost is expected to increase until the unfunded accrued liabilities are completely paidof f in 2032, at which time only the normal costwill remain.

Anticipated AnnualFiscal Year Amortization Employee Required Benefit FundeEnding In Normal Cost ofVAL Contributions Contribution Payments Ratio %2013 1,318,555 2,560,548 (417,I31) 3,461,972 4,399,231 59.7%2014 1,364,704 2,650,167 (431,731) 3,583,140 4,642,386 61.1%2015 1,412,469 2,742,923 (446,842) 3,708,550 4,953,343 62.4%2016 1,461,905 2,838,925 (462,481) 3,838,349 5,217,463 63.8%2017 1,513,072 2,938,287 (478,668) 3,972,691 5,450,968 65.3%2018 1,566,030 3,041,127 (495,421) 4,111,736 5,679,598 66.8%2019 1,620,841 3,147,566 (512,761) 4,255,646 5,899,783 68.4%2020 1,677,570 3,257,731 (530,708) 4,404,593 6,134,563 70.1%2021 1,736,285 3,371,752 (549,283) 4,558,754 6,351,594 71.9%2022 1,797,055 3,489,763 (568,508) 4,718,310 6,576,303 73.7%2023 1,859,952 3,611,905 (588,406) 4,883,451 6,808,962 75.7%2024 1,925,050 3,738,322 (609,000) 5,054,372 7,049,852 77.8%2025 1,992,427 3,869,163 (630,315) 5,231,275 7,299,265 80.1%2026 2,062,162 4,004,584 (652,376) 5,414,370 7,557,501 82.4%2027 2,134,338 4,144,744 (675,209) 5,603,873 7,824,873 85.0%2028 2,209,040 4,289,810 (698,841) 5,800,009 8,101,705 87.7%2029 2,286,356 4,439,953 (723,300) 6,003,009 8,388,330 90.5%2030 2,366,378 4,595,351 (748,616) 6,213,113 8,685,096 93.6%2031 2,449,201 4,222,044 (774,818) 5,896,427 8,992,361 96.9%2032 2,534,923 (801,937) 1,732,986 9,310,496 100.0%2033 2,623,645 (830,005) 1,793,640 9,639,886 100.0%

TABLEIC

THE CITY OF NEWPORT, RHODE ISLANDPOLICE PENSION SYSTEMAPPROPRIATION FORECAST

Page 7


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TABLElDPage 8

THE CITY OF NEWPORT, RHODE ISLAND POLICE PENSIONSYSTEMCHANGES IN UNFUNDED LIABILITY FOR FISCALYEAR ENDING JUNE 30, 2011

($5,9I8,226)446,16976,229

(I I 1,352)(258,217)(122,990)388,524320,782(451,702)($5,630,783)

InvestmentSalary IncreasesNew ParticipantsContinuing ActivesActive - RetirementsActive - TerminationsActive - MortalityActive - DisabilitiesInactive - Mortality and data adjustmentsTotal (gain)/Ioss

In performing the actuarial valuation, various assumptions are made regarding such factors as mortality,retirement, disability and withdrawal rates as well as payroll, salary increases and investment returns. Acomparison of the current valuation and the prior valuation is made to determine how closely actualexperience corresponded to anticipated occurrences. This analysis of the system provides insight into theoverall quality ofthe actuarial assumptions and helps explain any change in the annual appropriation.During the last year, the total unfunded actuarial accrued liability increased by 0.8% to $32,877,527.However, the plan experienced a gain of approximately $5.6 million. The main cause for the gain was thatinvestment returns exceeded expectations. The sources of the (gain)/Ioss are as follows:

In addition, changes in the actuarial funding method, asset funding method and mortality assumptions leadto a $4,055,043 decrease in unfunded liability and $416,886 increase in normal cost.


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u

-Page 9TABLE IETHE CITY OF NEWPORT, RHODE ISLAND POLICE PENSION SYSTEMDEVELOPMENT OF NPO FORFISCAL YEAR ENDING JUNE 30, 2011

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)Annual AnnualRequired Pension Cost Increase in End ofYearVal. Int. Amortization Amortization Contribution Actual City Beginning of [(5)+(7)*(2)- NPO NPO

Fiscal Year Rate Years Factor' (ARC) Cont. yearNPO (7)/(4)] [(8)-(6)] [(7)+(9)]1991-1992 8.00% 30 22.7490 1,638,878 1,858,911 (370,266) 1,625,533 (233,378) (603,644)1992-1993 8.00% 30 22.7490 1,671,097 1,930,973 (603,644) 1,649,341 (281,632) (885,276)1993-1994 8.00% 30 22.7490 1,823,577 2,136,173 (885,276) 1,791,670 (344,503) (1,229,779)1994-1995 8.25% 30 18.4393 2,103,989 2,226,085 (1,229,779) 2,069,225 (156,860) (1,386,639)1995-1996 8.25% 30 18.4393 2,279,943 2,322,898 (1,386,639) 2,240,745 (82,153) (1,468,792)1996-1997 8.25% 30 18.4393 2,426,242 1,793,369 (1,468,792) 2,384,722 591,353 (877,439)1997-1998 8.25% 30 18.4393 2,547,554 2,759,907 (877,439) 2,522,750 (237,157) (1,114,596)1998-1999 825% 30 18.4393 2,274,548 3,137,686 (1,114,596) 2,243,040 (894,646) (2,009,242)1999-2000 8.25% 30 18.4393 2,094,752 2,510,675 (2,009,242) 2,037,954 (472,721) (2,481,963)2000-2001 8.25% 30 20.1557 1,696,189 2,703,167 (2,481,963) 1,614,567 (1,088,600) (3,570,563)2001-2002 825% 30 20.1557 1,985,197 2,273,062 (3,570,563) 1,867,775 (405,287) _(3,975,850)2002-2003 8.25% 30 - 20.1557 2,099,345 2,698,300 (3,975,850) 1,968,594 (729,706) (4,705,556)2003-2004 8.25% 29 19.6866 3,247,875 3,247,875 (4,705,556) 3,098,690 (149,185) (4,854,741)2004-2005 8.25% 28 19.2064 3,389,486 3,889,486 (4,854,741) 3,241,737 (647,749) (5,502,490)2005-2006 8.25% 27 15.8723 2,440,649 2,440,649 (5.,502,490) 2,333,367 (107,282) (5,609,772)2006-2007 8.25% 26 15.5296 2,385,996 2,440,649 (5,609,772) 2,284,421 (156,228) (5,766,000)2007-2008 8.25% 25 14.8848 2,272,177 2,272,049 (5,766,000) 2,183,857 (88,192) (5,854,192)2008-2009 8.25% 24 14.5315 2,406,091 2,472,177 (5,854,192) 2,325,982 (146,195) (6,000,387)2009-2010 8.25% 23 14.1638 2,470,822 2,670,822 (6,000,387) 2,399,432 (271,390) (6,271,777)2010-2011 7.50% 22 14.1447 3,116,642 3,116,642 (6,271,777) 3,089,660 (26,982) (6,298,759)

3 Amortization factors used for periods prior to 2000-2001 did not r e t l ~ e t future longevity or promotion pay increases.


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TABLE2ATHE CITY OF NEWPORT, RHODE ISLAND POLICE PENSION SYSTEMDISTRIBUTION OF ACTIVE MEMBERS AS OF JULY 1,2011

Page 10

Completed Years ofServiceIAge Under 1 1 2 3 4 5t09 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 & un Total

No. No. No. No. No. No. No. No. No. No. No. No. No. No.!under 25~ to 29 2 4 I 7GO to 34 I 2 3 I 7~ to 39 I 7 3 I I140 to 44 2 8 8 2 205to49 I 3 10 I 15

50 to 54 I I 5 6 13~ to 59 I 1 260 to 64 1 I65 to 69170 & up I Ih-otal 4 7 13 13 12 19 8 I 77

Average: AgeService 42.6615.09 Number of participants: VestedNon-vested 5324


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Page 11TABLE2B

THE CITYOF NEWPORT, RHODE ISLAND POLICE PENSION SYSTEMDISTRIBUTION OF RETIREDMEMBERS AND BENEFICIARIES AS OF JULY 1, 2011Men WomenAge Number Amount Number Amount

Under40 1 $8,94240-44 2 84,839 1 $43,02245-49 4 180,948 1 8,85950-54 2 113,30455-59 19 789,221 4 74,48560-64 15 652,352 4 86,25465-69 14 648,834 4 60,49470-74 12 476,874 2 51,71275 1 66,106 1 25,23276 1 41,76877 1 38,964 1 11,1837879 2 42,76280 2 12,2668182 3 48,6988384 2 95,160 3 41,71685 1 43,12286 1 12,06887 4 134,077 1 17,41588 3 66,55789 2 53,514909192 1 28,991939495 1 3,26096 1 21,10297 1 4,7259899100

84 $3,499,778 34 $589,048

There is one member entitled to a deferred vested benefit.


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THE CITY OF NEWPORT, RHODE ISLANDPOLICE PENSION SYSTEMACTUARIALMETHODS AND ASSUMPTIONS

Actuarial Cost Method:

Asset Valuation Method:

Actuarial Assumptions:1. Interest

2. Salary Increases

3. Cost afLiving Increase

Page 12TABLE 3

Individual Entry Age Normal actuarial cost method: Under thismethod, the actuarial present value of the projected benefits of eachindividual included in the valuation is allocated as a level percentageof the individual's projected compensation between entry age andassumed exit. The normal cost is the portion of the actuarial presentvalue allocated to the valuation year. For inactive members, theactuarial present value of projected benefits is equal to the PresentValue ofBenefits. Inactive members do not have a normal cost. Theportion of this actuarial present value not provided for at thevaluation date by the sum of the actuarial value of the assets andactuarial present value of future normal costs is the unfundedactuarial accrued liability. The unfunded actuarial accrued liabilityrepresents the excess of the total actuarial accrued liability over thevaluation assets. .The prior valuation used the Projected Unit Credit actuarial costmethod.

Market value, as reported by theCityThe prior valuation reflected the 5 year smoothed actuarial value ofassets.

7.50% per year, net of investment expenses

3.00% per year plus longevity increases of 3.00% after seventh yearof employment and 0.50% for each year of employment thereafterthrough the thirty-first year of employment. No longevity increasesare assumed after the thirty-first year of employment.

3.00%


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The 1985 Wyatt Pension Disability Table (unisex rates)

Assumed to be paid by the plan sponsor outside the trust

Page 13

Probability ofDisability0.17%0.290.721.21

Probability ofWithdrawal3.00%2.252.001.751.501.251.000.750.500.250.00

Probability ofRetirement5%240

20100

Years ofServiceless than I

I2345678910 or more

AttainedAge25354555

TABLE 3(continued)

Rates ofdisability are based on an employee's age. Selected ages arelisted below. 100% of disabilities are assumed to be non-servicerelated.

The RP-2000 Combined Mortality Table was the mortalityassumption in the prior valuation.

Mortality tables prescribed by the IRS for non-governmental plans,as specified in IRS Regulation 1.430(h)(3)-I , applied on a fullygenerational basis

Rates ofwithdrawal are based on an employee's length of service, asfollows:

Years ofService2021-242526-34

35 or more

b. Disabled Members

4. Mortalitya. Healthy Members

5. Disability

6. Withdrawal

7. RetirementAge

8. Administrative Expenses


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9. Benefit andCompensation Limits

10. Marriage / Dependents

II . Valuation Date

Page 14TABLE 3(continued)

Benefit limits under Section 415 and compensation limits underSection 401(a)(l7) of the Internal Revenue Code are assumed tohave no impact on benefits earned under this plan.

75% of active police are assumed to be married. For all participants,wives are assumed to be three years younger than their husbands.For purposes of valuing the death benefit, unmarried members areassumed to have no dependent children at death.

July 1,2011


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THE CITY OF NEWPORT, RHODE ISLAND POLICE PENSION SYSTEMOUTLINE OF PRINCIPAL PLAN PROVISIONS

TABLE 4

July I, 1995

Members who have completed 20 years of service may retire.

Benefit as a Percentageofannual Salary50%52.55557.560

62.56465.56768.570

Years ofService2021222324252627282930 or more

All members of the police department who contribute to thepension fund

Page 15

The annual benefit at retirement is equal to the percentage of annualsalary specified in the table below, plus $100 per year for each yearof service over 25 (maximum $1,000). For pension purposes, annualsalary includes regular and longevity pay.

Retirement benefits commence as of the first payroll period afterretirement.The annual benefit calculated in accordance with the formula In (b)above is payable monthly for the remainder of the retired member'slife, with 67.5% of the member's benefit payable for the lifetime ofhis surviving spouse.

b. Benefit Formula

Most Recent Amendment

a. Eligibility

d. Form of Payment

c. Commencement Date

2. Eligibility'

3. Retirement

1. EffectiveDates


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4. Vested Terminationa. Eligibility

b. Benefit Fonnula

c. Commencement Dated. Fonn ofPayment

5. Disability Retirementa. Eligibility

I. Non-Service Related

2. Service Relatedb. Benefit Fonnula

I. Non-Service Related2. ServiceRelated


6. Non-vested TerminationofEmployment


Upon tennination of employment after i0 years of service a memberis eligible for a benefit deferred to retirement age.2.5% of annual salary multiplied by full years of service attelmination20th anniversary ofemploymentSame as retirement

No benefit prior to completion of 7 years of service. A memberwhois disabled with between 7 and 20 years of service is eligible toreceive disability retirement benefits.Retirement because of a job related mental or physical incapacity

50% of annual salary66-2/3% of annual salaryBenefits commence as of the first payroll period after disability.Same as retirement

A member who leaves employment prior to completjng 10 years ofservice will receive a lump sum payment of his accumulatedcontributions.


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7. Death beforeRetirement- Survivor AnnuityBenefitsa. Eligibilityb. Benefit Formula

c. Commencement Dated. Form of Payment

8. Retiree Cost ofLiving Increase

9. Employee Contributions


Death while actively employedSurviving spouse (or ifnone, dependent children) receives benefit of67.5% of annual salary, reduced pro rata if deceased member hadless than 20 years of service.Benefits commence as of the first payroll period after death.Monthly life annuity

Pensions for retirees (but not disabled retirees or beneficiaries) areindexed to the negotiated pay increases'for active police. Terminatedvested members receive 3% annual increases after benefitcommencement.

8% of salary


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THE CITY OF NEWPORT, RHODE ISLAND POLICE PENSION SYSTEMGLOSSARYOF TERMS

1. Present Value ofBenefits

2. Actuarial CostMethod

3. ActuarialAssumptions

4. ActuarialAccruedLiability

5. Normal Cost

6. Assets

7. UnfundedActuarialAccruedLiability

Page 18TABLES

Represents the dollar value today of all benefits expected to beearned by current members if all actuarial assumptions are exactlyrealized.

The procedure that is used to allocate the present value of benefitsbetween the liability that is attributable to past service (ActuarialAccrued Liability) and that attributable to future service.

Estimates made as to the occurrence of certain events that determinethe level of benefits to be provided and how long they will beprovided. The more important actuarifll assumptions include theinvestment return on assets, salary increases and the rates ofturnover, disability, retirement and mortality.

The Present Value ofBenefits reduced by the present value of futureNormal Costs.

That portion of the Present Value of Benefits that is attributable tobenefits to be earned in the coming year.

Market value of assets of the funds set aside though City andmember contributions to provide for benefits.In the prior valuation, this value was represented by the actuarialvalue of assets, which creates a smoothed value of the market valueofassets by spreading asset returns over the last 5 years.

That portion of the Actuarial Accrued Liability not covered byAssets.


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buckconsultants' A Xerox Company

The City ofNewport, Rhode IslandFire Pension SystemActuarial Valuation ReportPrepared as of july 1,2011

November 2011

blUlckconsultants


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THE CITY OF NEWPORT, RHODE ISLANDFIRE PENSION SYSTEM

Report of the July 1,2011, Actuarial Valuation

TABLE OF CONTENTSPage

I. Purpose and Summary III. Membership Data IIII. Plan Provisions 2IV. Assets 2V. Actuarial Methods and Assumptions 2VI. Funding Policy 2VII. Analysis ofValuation Results 3

TablesIA Valuation Results 5

IB Schedule ofFunding Progress 6;IC Appropriation Forecast 7

1D Changes in Unfunded Liability for Fiscal Year Ending June 30, 2011 8IE Development ofNPO for Fiscal Year Ending June 30, 2011 92A Distribution ofActive Members as of July 1,2011 102B Distribution ofRetired Members and Beneficiaries as of July 1,2011 II3 Actuarial Methods and Assumptions...... 124 Outline ofPrincipal Plan Provisions 155 Glossary of Terms 18


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Page 1THECITYOF NEWPORT, RHODE ISLAND

FIRE PENSION SYSTEMReport ofthe July 1,2011, Actuarial Valuation

I. Purpose and SummaryThis report presents the results of our July 1,2011, actuarial valuation of the City of Newport, RhodeIsland Fire Pension System. The valuation was performed at the request of the City of Newport forpurposes of determining annual contribution levels for the City and to develop information regardingactuarial liabilities required for the City's financial disclosures.

In summary, the recommended City contribution for the 2012-2013 fiscal year is $4,822,711, if.deposited in one lump sum on June 30, 2013. This contribution has been developed based on a 20-year amortization of the unfunded actuarial liability. I f the City would prefer to make monthlycontributious at the end of each month, it should contribute $388,705 ou July 31,2012 and on thelast day of each of the next eleven months.

The development of the valuation results is shown in Tables lA through 5 and is described in more detailon the following pages.

The valuation reflects combined results for firefighters hired before and after July 1, 1984. It is ourunderstanding that prior to July 1, 1998, these groups were segregated with separate actuarial valuationsperformed in alternate years.

IL Membership DataThe City furnished data for active and retired members as of July I, 2011. Although we did not audit thisdata, we did review it for reasonableness and consistency. Table 2A provides a distribution by age andservice for active members. Table 2B provides a distribution by age and gender for retired members andbeneficiaries.


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FIRE PENSION SYSTEMReport ofthe July 1,2011, Actuarial Valuation

III . Plan ProvisionsA summary of the principal benefit provisions recognized for purposes of the valuation is provided inTable 4. This' summary reflects our understanding of the System's benefit provisions based uponinformation provided to us by the City.

IV. AssetsThe City provided us with the asset information used for purposes of this valuation. According to thisinformation, the market value of assets attributable to this plan was $32,832,334 as of July I, 2011,compared to $27,072,586 as ofJuly 1,2010. For valuation purposes, assets are valued atmarket value. It isour understanding that there are no contributions due for the fiscal year ending June 30, 2011, which wereaccrued as of June 30, 2011.

V. Actuarial Methods and AssumptionsThe actuarial methods and assumptions employed in this valuation are outlined in Table 3. Primaryeconomic assumptions include 7.50% investment return (net of expenses) and 3.20% weighted-averagesalary increases. The individual Entry Age Normal actuarial cost method has been used to determineliabilities for funding purposes and to determine liabilities for financial disclosure purposes as required byaccounting standards. The mortality assumption uses mortality tables prescribed by the IRS for nongovernmental pension plans, as specified in IRS Regulation 1.430(h)(3)-I. The mortality tables are appliedon a fully generational basis, meaning that continued mortality improvement is reflected. The assumed ratefor Cost of Living Adjustments for those retired prior to August 26, 2011 is 3.00%. For those that retire onor after August 26, 2011, the annual Cost of Living Adjustment will equal the Bureau of Labor StatisticsCPI for Northeast UrbanWage Earners but will not exceed 3.00% nor be lower than 0.50%.


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FIRE PENSION SYSTEMReport of the July 1,2011,Actuarial Valuatiou

VI. Funding PolicyIt is our understanding that, beginning with the 1996-1997 fiscal year, the City adopted a funding policydesigned to include in its annual contribution an amount that reflects the amortization of the unfundedactuarial accrued liability over a 30-year period. Beginning with the July 1, 2002 valuation, the 30-yearperiod was reduced by one year and is being stepped down by one year for each valuation going forward.This policy is intended to satisfy the requirements ofGASB StatementNo. 27.

Our recommended contribution for 2012-2013 is developed as the 20-year contribution for the fiscal yearof the valuation (2011-2012), projected forward with expected growth in covered payroll.

VII. Analysis ofValuation ResultsValuation results are summarized in Table lA, including a comparison to prior valuation results. Assetsare currently about 40% of accrued liabilities.

The Plan realized an actuarial gain of approximately $5.6 million for the Plan year. Liabilities had a gainof $2.1 million, while assets accounted for a $3.5 million gain. The Plan's gains and losses are illustratedwith more detail in Table lD.

In addition, several changes were implemented since the last valuation. The actuarial funding method waschanged from Projected Unit Credit to individual Entry Age Normal, and the asset method was changedfrom 5 year smoothed actuarial value of assets to market value of assets. Also, the employee contributionrate and retirement eligibility changed for all actives, and the cost of living adjustment was changed formembers retiring on or after August 26, 2011. In addition, the mortality assumptions were revised. The neteffect of these changes was a $2,784,952 decrease in unfunded liability and $183,706 increase in normalcost.

The normal cost illustrated in Table IA reflects the long-term cost of the plan absent underfunding. Thiscost is about 23.9% of current payroll.


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DateJ l / J 4 f 1 0 U ~

Page 4

is report fairly represents the actuarial position of the City of Newport Fire Pension System as of July I,in accordance with generally accepted actuarial principles applied consistently with the preceding

luation. In our opinion, the actuarial assumptions used to compute actuarial accrued liability and normalost are reasonably related to plan experience and to reasonable expectations, and represent our best

ofanticipated plan experience.

THE CITY OF NEWPORT, RHODE ISLANDFIRE PENSION SYSTEM

ectfully Submitted,

niel Sherman is an Associate of the Society of Actuaries, a Member of the American Academy oftuaries and meets the Qualification Standards of the Academy to render the actuarial opinions contained

erein. This report has been prepared in accordance with all applicable Actuarial Standards ofPractice, andare available to answer questions concerning it.

Report of the July I , 20II,Actuarial Valuation

CONSULTANTS, LLC

bert P. Lessard

aniel W. Sherman, ASA, MAAA, EAector, Consulting Actuary


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THE CITY OF NEWPORT, RHODE ISLAND FIRE PENSION SYSTEMVALUATION RESULTSA. Membership Data July I. 2010 July 1,2011

I. Active Membersa. Number 88 84b. Expected covered payroll for fiscalyear beginning on the valuation date $ 4,996,160 $ 4,891,283c, Average pay $ 56,775 $ 58,230d. Average age 43.1 43.6e. Average service 13.6 14.0

2. Retired members and beneficiariesa. Number 114 117b. Aggregate auuual pension $ 4,494,909 $ 4,657,455c. Average annual pension $ 39,429 $ 39,807d. Average age 67.5 67.5

3, Deferred vested membersa. Number 1 1b. Aggregate auuual pensiou $ 18,456 $ 18,456c. Average annual pension $ 18,456 $ 18,456d. Average age 50.8 51.8

B. Basic ValuationResults1. Normal cose $ 938,485 (18.8%) $ 1,167,259 (23.9%)2. Actuarial accrued liability

8. Active members $ 24,432,727 $ 22,242,609b. Retirees and Beneficiaries 57,476,525 60,531,947c. Deferred Vesteds 121.704 132,574d. Total $ 82,030,956 $ 82,907,130

3. Valuation assets $ 30,820,663 $ 32,832,3344. Unfunded actuarial accrued liability $ 51,210,293 $ 50,074,796

July 1,2011 to July 1,2012 toC. Developmeut ofContribution June 30, 2012 June 30. 2013

I. Contribution for fiscal year ofvaluationa. Normal costwith interest $ 1,041,155 $ 1,294,957b. Amortization ofunfuuded actuarialaccrued liability 3,947,536 3,982,3092c. Anticipated employee coutributionswith interest (427,950) (454,555)d. City contributiouassumed deposited June 30 $ 4,560,741 $ 4,822,711

2. Monthly City coutributionbegiuuing July 31 $ 367,591 $ 388,705

TABLEIA

I Percentages in parentheses represent amounts as percentages of covered payroll.2 Amortized over 20 years from the valuation date, with oue-year interest adjustment, as a level percentage ofpayroll.

PageS


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Page 6TABLEIB

THE ClTY OFNEWPORT, RHODE ISLAND FffiE PENSION SYSTEMSCHEDULE OF FUNDING PROGRESS

(1) (2) (3) (4) (5) (6) (7)Unfunded UAALasaActuarial Actuarial Actuarial PercentageValue of Accrued Accrued Funded Covered of CoveredValuation Date Assets Liability Liability Status Payroll Payroll(2) - (3) (2) / (3) (4)/(6)

June 30, 2002 15,992,660 57,208,592 (41,215,932) 27.95% 4,639,918 (888.29%)June 30, 2003 17,726,942 61,509,869 (43,782,927) 28.82% 4,763,438 (919.15%)June 30, 2004 21,427,871 64,260,714 (42,832,843) 33.35% 4,957,989 (863.92%)June 30, 2005 24,426,065 66,806,255 (42,380,190) 36.56% 4,922,941 (860.87%)june 30, 2006 27,413,402 68,671,042 (41,257,640) 39.92% 4,827,849 (854.58%)June 30, 2007 31,256,401 72,036,981 (40,780,580) 43.39% 5,224,518 (780.56%)June 30, 2008 29,605,715 74,885,370 (45,279,655) 39.53% 4,967,895 (911.45%)June 30, 2009 27,980,459 78,870,565 (50,890,106) 35.48% 4,910,434 (1036.37%)June 30, 2010 30,820,663 82,030,956 (51,210,293) 37.57% 4,996,160 (1024.99%)June 30, 2011 32,832,334 82,907,130 (50,074,796) 39.60% 4,891,283 (1023.76%)


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TABLEICPage 7

THE CITYOF NEWPORT, RHODE ISLAND FiRE PENSION SYSTEMAPPROPRIATION FORECAST

The following exhibit forecasts the Annual Required Contribution and Funding Ratio under the adoptedfunding schedule.

FundRatio43.144.946.948.951.053.255.557.960.463.165.968.972.075.378.982.686.790.995.5

100.0100.0

BenefitPayments4,941,4455,141,7955,388,3495,559,3865,728,2145,957,9196,212,7406,433,3966,668,3146,890,2527,138,9117,443,4537,728,4977,971,9268,223,0228,482,0288,749,1919,024,7709,309,0289,602,2409,904,687

AnnualRequiredContribution

4,822,7114,977,0385,136,3045,300,6655,470,2865,645,3355,825,9866,012,4176,204,8146,403,3686,608,2766,819,7417,037,9737,263,1887,495,6107,735,4707,983,0058,238,4627,918,4071,528,9791,577,906

AnticipatedEmployeeContributions(454,555)(469,101)(484,112)(499,604)(515,591)(532,090)(549,117)(566,689)(584,823)(603,537)(622,850)(642,781)(663,350)(684,577)(706,483)(729,090)(752,421)(776,498)(801,346)(826,989)(853,453)

AmortizationofVAL

3,982,3094,109,7434,241,2554,376,9754,517,0384,661,5834,810,7544,964,6985,123,5685,287,5225,456,7235,631,3385,811,5415,997,5106,189,4306,387,4926,591,8926,802,8336,436,838

Normal Cost1,294,9571,336,3961,379,1611,423,2941,468,8391,515,8421,564,3491,614,408 '1,666,0691,719,3831,774,4031,831,1841,889,7821,950,2552,012,6632,077,0682,143,5342,212,1272,282,9152,355,9682,431,359

Note that the forecast is based upon an "open group" method. This method assumes that sufficientemployees will be hired each year to keep the number constant. The total payroll of the system is expectedto increase 3.2% per year. Payments are assumed to be made at the end of each year.

Fiscal YearEnding In201320142015201620172018201920202021202220232024202520262027202820292030203120322033

The employer total cost is expected to increase until the unfunded accrued liabilities are completely paidof f in 2032, at which time only the normal cost will remain.


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TABLElDPage 8

THE CITY OF NEWPORT, RHODE ISLAND FIRE PENSION SYSTEMCHANGES IN UNFUNDED LIABILITY FOR FISCALYEARENDING JUNE 30, 2011

In addition, changes in the actuarial funding method, asset funding method, employee contribution rate,retirement eligibility, cost of living increase and mortality assumptions lead to a $2,784,952 decrease inunfunded liability and $183,706 increase in normal cost.

($3,495,446)(227,824)o

(13)441,264(37,920)678,333(192,802)

(2.807,811)($5,642,219)

InvestmentSalary IncreasesNew ParticipantsContinuing ActivesActive - RetirementsActive - TenninationsActive - MortalityActive - DisabilitiesInactive - Mortality and data adjustmentsTotal (gain)/loss

In perfonning the actuarial valuation, various assumptions are made regarding such factors as mortality,retirement, disability and withdrawal rates as well as payroll, salary increases and investment returns. Acomparison of the current valuation and the prior valuation is made to determine how closely actualexperience c o ~ e s p o n d e d to anticipated occurrences. This analysis of the system provides insight into theoverall quality of the actuarial assumptions and helps explain any change in the annual appropriation.During the last year, the total unfunded actuarial accrued liability decreased by 2.2% to $50,074,796. Amajor cause for the decrease was that investment returns exceeded expectations. The sources of the(gain)/Ioss are as follows:


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~ ~ ~ ~ - - - - - - - - - - - - - - - - - - - - - - - _Page 9TABLE IE

THE CITY OF NEWPORT, RHODE ISLAND FIRE PENSION SYSTEMDEVELOPMENT OFNPO FOR FISCAL YEAR ENDING JUNE 30, 2011(I ) (2) (3) (4) (5) (6) (7) (8) (9) (10)

Annual AnnualRequired Pension Cost Increase in End ofYearVal. Int. Amortization Amortization .Contribution Actual City Beginning of [(5)+(7)*(2)- NPO NPOFiscal Year Rate Years Factor' (ARC) Cont yearNPO (7)/(4)] [(8)-(6)] [(7)+(9)]1991-1992 8.00% 30 22.7490 1,877,443 1,106,106 2,713,605 1,975,246 869,140 3,582,7451992-1993 8.00% 30 22.7490 2,059,946 1,384,427 3,582,745 2,189,076 804,649 4,387,3941993-1994 8.00% 30 22.7490 2,225,668 1,551,116 4,387,394 2,383,799 832,683 5,220,0771994-1995 8.25% 30 18.4393 2,576,363 1,736,686 5,220,077 2,723,925 987,239 6,207,3161995-1996 8.25% 30 18.4393 2,709,621 1,990,018 6,207,316 2,885,090 . 895,072 7,102,3881996-1997 8.25% 30 18.4393 2,919,663 2,760,163 7,102,388 3,120,434 360,271 7,462,6591997-1998 8.25% 30 18.4393 3,065,646 3,032,805 7,462,659 3,276,601 243,796 7,706,4551998-1999 8.25% 30 18.4393 2,961,385 3,189,318 7,706,455 3,179,231 (10,087) 7,696,3681999-2000 8.25% 30 18.4393 3,003,673 3,860,777 7,696,368 3,221,234 (639,543) 7,056,8252000-2001 8.25% 30 20.1557 3,281,802 3,567,527 7,056,825 3,513,874 (53,653) 7,003,1722001-2002 8.25% 30 20.1557 3,106,881 3,977,470 7,003,172 3,337,189 (640,281) 6,362,8912002-2003 8.25% 30 20.1557 3,285,527 4,062,000 6,362,891 3,494,779 (567,221) 5,795,6702003-2004 8.25% 29 15.7354 3,317,767 3,317,767 5,795,670 3,427,590 109,823 5,905,4932004-2005 8.25% 28 15.4540 4,118,543 5,118,543 5,905,493 4,223,612 (894,931) 5,010,5622005-2006 8.25% 27 15.0842 3,543,234 3,543,235 5,010,562 3,624,432 81,197 5,091,7592006-2007 8.25% 26 14.7817 3,352,662 3,543,234 5,091,759 3,428,268 (114,966) 4,976,7932007-2008 8.25% 25 14.4659 3,291,226 3,291,234 4,976,793 3,357,775 66,541 5,043,3342008-2009 8.25% 24 14.1363 3,310,557 3,491,226 5,043,334 3,369,867 (121,359) 4,921,9752009-2010 8.25% 23 13.7923 3,781,258 3,981,258 4,921,975 3,830,457 (150,801) 4,771,1742010-2011 7.50% 22 13.7826 4,359,109 4,359,109 4,771,174 4,370,773 11,664 4,782,838

, Amortization factors used for periods prior to 2000-200I did not reflect future longevity or promotion pay increases.


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Page 10TABLE2ATHE CITY OF NEWPORT, RHODE ISLAND FIRE PENSION SYSTEMDISTRIBUTION OF ACTIVE MEMBERS AS OF JULY I, 2011

Completed Years ofServiceAe:e Under 1 1 2 3 4 5 t0 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 & UlJ Total

No. No. No. No. No. No. No. No. No. No. No. No. No. No.~ n d e r 2 5 .~ to29 2 1 3~ O t 0 3 4 3 4 3 10~ to39 I 4 7 12'10 to44 2 I 2 10 5 20'15 to49 I 2 3 6 4 1650 to54 I 3 5 5 I IS55 to 59 2 2 I I 660 to 64 I I 205 to 69rO&uptrotal 4 7 13 26 18 11 2 2 1 84

Average: AgeService

43.6314.04

Number of participants: VestedNon-vested

6024


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Page 11TABLE2B

THE CITY OF NEWPORT, RHODE ISLAND FIRE PENSIONSYSTEMDISTRIBUTIONOF RETIREDMEMBERSAND BENEFICIARIES AS OF JULY 1,2011Men Women

Age Number Amount Number AmountUnder 4040-44 1 $36,735 1 $30,42445-4950-54 6 294,37055-59 15 735,903 1 26,12360-64 25 1,172,970 2 44,00765-69 24 1,004,608 4 79,39570-74 6 262,002 1 21,81575 1 55,68476 2 33,6697778 3 125,647 1 21,72979 1 6,65580 2 102,648 1 28,09081 1 60,463 1 24,93282 1 34,93683 2 94,985 2 58,31484 2 70,640 3 64,71385 2 68,953 2 10,00086 1 28,59487 2 42,03388899091 1 16,4189293949596979899100

92 $4,149,138 25 $508,317

There is one member entitled to a deferred vested benefit.


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THE CITY OF NEWPORT, RHODE ISLAND FIRE PENSION SYSTEMACTUARIAL METHODS AND ASSUMPTIONS

Actuarial Cost Method:

Asset Valuation Method:

Actuarial Assumptions:1. Interest

2. Salary Increases

3. Cost ofLivingIncrease

Page 12TABLE 3

Individual Entry Age Normal actuarial cost method: Under thismethod, the actuarial present value of the projected benefits of eachindividual included in the valuation is allocated as a level percentageof the individual's projected compensation between entry age andassumed exit. The normal cost is the portion of the actuarial presentvalue allocated to the valuation year. For inactive members, theactuarial present value of projected benefits is equal to the PresentValue ofBenefits. Inactive members do not have a normal cost. Theportion of this actuarial present value not provided for at thevaluation date by the sum of the actuarial value of the assets andactuarial present value of future normal costs is the unfundedactuarial accrued liability. The unfunded actuarial accrued liabilityrepresents the excess of the total actuarial accrued liability over thevaluation assets.The prior valuation used the Projected Unit Credit actuarial costmethod.

Market value, as reported by the CityThe prior valuation reflected the 5 year smoothed actuarial value ofassets.

7.50% peryear, net of investment expenses

3.00% per year plus longevity increases of 3.00% after seventh yearof employment and 0.50% for each year of employment thereafterthrough the thirty-first year of employment. No longevity increasesare assumed after the thirty-first year of employment.

Members retired priorto August 26, 2011: 3.00%Members retired on or after August 26, 2011: Bureau of LaborStatistics CPI for Northeast Urban Wage Earners, not exceeding3.00% or less than 0.50%The increase assumption for all members was 3.00% in the priorvaluation.


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The 1985 Wyatt Pension Disability Table (unisex rates)

Assumed to be paid by the plan sponsor outside the trust


Probability ofDisability0.17%0.290.721.21

Probability ofWithdrawal3.00%2.252.001.751.501.251.000.750.500.250.00

Probability ofRetirement5%24020100

Years ofServkeless than 1123456789

10 or more

Years ofService2021-242526-3435 or more

AttainedAge25354555

Mortality tables prescribed by the IRS for non-governmental plans,as specified in IRS Regulation 1.430(h)(3)-I, applied on a fullygenerational basis

Rates ofdisability are based on an employee's age. Selected ages arelisted below. 90% ofdisabilities are assumed to be service related.

The RP-2000 Combined Mortality Table was the mortalityassumption in the prior valuation.

Rates ofwithdrawal are based on an employee's length of service, asfollows:

a. Healthy Members

b. Disabled Members

4. Mortality

5. Disability

6. Withdrawal

7. Retirement Age

8. Administrative Expenses


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9. Benefit andCompensation Limits

10. Marriage / Dependents

II. Valuation Date


Benefit limits under Section 415 and compensation limits underSection 401(a)(l7) of the Internal Revenue Code are assumed tohave no impact on benefits earned under this plan.

90% of active firefighters are assumed to be married. For allparticipants, wives are assumed to be three years younger than theirhusbands. For purposes of valuing the death benefit, unmarriedmembers are assumed to have no dependent children at death.

July I, zon


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THE CITY OF NEWPORT, RHODE ISLAND FffiE PENSIONSYSTEMOUTLINE OF PRINCIPAL PLAN PROVISIONS

TABLE 4

July 1,2002

All firefighters who contribute to the pension fund

Benefit as a PercentageofannualSalary50%52545658656667686970

Years ofService2021222324252627282930 or more

Members retired prior to July I, 20 II : 20 years of service

In the prior valuation, retirement eligibility for all members was 20years of service.

Members retired on or after July I, 20 II : earlier of attainment of age58 or completion of 30 years of service

Page 15

The annual benefit at retirement is equal to the percentage of annualsalary specified in the table below, plus $100 per year for each yearof service over 25 (maximum $1,000). For pension purposes, annualsalary includes regular and longevity pay.

Retirement benefits commence as of the first payroll period afterretirement.The armuaI benefit calculated in accordance with the formula in (b)above is payable monthly for the remainder of the retired member'slife, with 67.5% of the member's benefit payable for the lifetime ofhis surviving spouse.

Most Recent Amendment

b. Benefit Formula

a. Eligibility

d. Form ofPaymentc. CommencementDate

2. Eligibility .

1. Effective Dates

3. Retirement


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4. Vested Terminationa. Eligibilityb. Benefit Fonnula

c. CommencementDated. Fonn ofPayment

5. Disability Retirementa. Eligibility

b. Benefit Fonnula1. Non-Service Related

2. Service Related3. Regular Retirement

c. CommencementDated. Fonn ofPayment

6. Non-vested TerminationofEmployment


Upon tennination of employment after 10 years of service a memberis eligible for a benefit deferred to retirement age.2.5% of annual salary multiplied by full years of service attennination25th anniversary ofemploymentSame as retirement

A member who is retired because ofmental or physical incapacity iseligible to receive disability retirement benefits.

If a member has fewer than 10 years of service, benefit is 25% ofannual salaty. If a member has more than 10 years of service,benefit is 25% of annual salary plus an additional 2.5% of salary foreachyear over 10, up to a maximum of62.5% of salary.Benefit is 66-2/3% of annual salaryIf an employee has 25 or more years of service at disability, hispension will be the greater of the disability or retirement pension.Benefits commence as of the first payroll period after disability.Same as retirement

A member who leaves employment prior to completing 10 years ofservice will receive a lump sum payment of his accumulatedcontributions.


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7. Death beforeRetirement- SurvivorAnnuity Benefitsa. Eligibilityb. Benefit Fonnula


8. Retiree Cost ofLiving Increase

9. Employee Contributions


Death while actively employedSurviving spouse (or if none, dependent children) receives benefit of67.5% of annual salary, reduced pro rata if deceased member hadless than 20 years of service.Benefits commence as of the first payroll period after death.Monthly life annuity

Members retired prior to August 26, 201l:Pensions for retirees anddisabled retirees (but not beneficiaries) are indexed to the negotiatedpay increases for active firefighters. Tenninated vested membersreceive 3% annual increases after benefit commencement.The above provision was in place for all members in the priorvaluation.Members retired on or after August 26, 20II : For those entitled toannual increases, they will equal the Bureau of Labor Statistics CPIfor Northeast Urban Wage Earners but will not exceed 3% nor belower than 0.5%.

9% of salaryThe rate of employee contributions in the prior valuation was 8%.


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THE CITYOF NEWPORT, RHODE ISLAND FmE PENSION SYSTEMGLOSSARY OF TERMS

1. Present Value ofBenefits

2. Actuarial CostMethod

3. ActuarialAssumptions

4. ActuarialAccruedLiability

5. Normal Cost

6. Assets

7. UnfundedActuarialAccruedLiability

Page 18TABLES

Represents the dollar value today of all benefits expected to beearned by current members if all actuarial assumptions are exactlyrealized.

The procedure that is used to allocate the present value of benefitsbetween the liability that is attributable to past service (ActuarialAccrued Liability) and that attributable to future service.

Estimates made as to the occurrence of certain events that detenninethe level of benefits to be provided and how long they will beprovided. The more important actuarial assumptions include theinvestment return on assets, salary increases and the rates ofturnover, disability, retirement andmortality.

The Present Value ofBenefits reduced by the present value of futureNormal Costs.

That portion of the Present Value of Benefits that is attributable tobenefits to be earned in the coming year.

Market value of assets of the funds set aside though City andmember contributions to provide for benefits.In the prior valuation, this value was represented by the actuarialvalue of assets, which creates a smoothed value of the market valueof assets by spreading asset returns over the last 5 years.

That portion of the Actuarial Accrued Liability not covered byAssets.

pension report

Documents