HomeMy WebLinkAboutOrdinance 6676113 West Mountain Street Fayetteville, AR 72701 (479) 575-8323 Ordinance: 6676 File Number: 2023-942 FAYETTEVILLE FIRE RELIEF AND PENSION PROGRAM CONSOLIDATION (LOPFI): AN ORDINANCE TRANSFERRING ADMINISTRATION OF RETIREMENT COVERAGE FOR ELIGIBLE MEMBERS OF THE FAYETTEVILLE FIRE RELIEF AND PENSION FUND TO THE ARKANSAS LOCAL POLICE AND FIRE RETIREMENT SYSTEM (LOPFI) AND AUTHORIZING THE MAYOR TO ENTER INTO AN IRREVOCABLE AGREEMENT WITH LOPFI WHEREAS, the Board of Trustees of the Fayetteville Fire Relief and Pension Fund (Local Plan) has elected to have its Local Plan administered by LOPFI as stated by Resolution approved and signed on July 10, 2023 (even though mistakenly dated August 10, 2023); and WHEREAS, the Board of Trustees has requested through that Resolution that the City of Fayetteville, Arkansas act as its agent henceforth and agree by this ordinance to assign the Fayetteville Fire Relief and Pension Fund to be administered by the Arkansas Local Police and Fire Retirement System. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: SECTION 1. If accepted by Arkansas Local Police and Fire Retirement System (LOPFI), the City Council of the City of Fayetteville hereby determines that administration of the Fayetteville Fire Relief and Pension Fund (Local Plan) shall be transferred to LOPFI under authority of Arkansas Code Annotated 24-10-101, et. seq., as amended. Such transfer shall mean the administration of the Local Plan only and not a change in the Local Plan's benefit program unless a benefit increase is formally approved by the City Council of the City of Fayetteville, Arkansas, by ordinance. SECTION 2. The City Council of the City of Fayetteville hereby authorizes Mayor Jordan to enter into an irrevocable Administrative Services Agreement which uses a fifteen (15) year amortization schedule and empowers LOPFI to administer the Local Plan as stated in Section 1 hereof. SECTION 3. The City Council of the City of Fayetteville hereby determines that the provisions of this Ordinance prior to this section shall be codified into the Fayetteville Code of Ordinances as § 33.051 Local Fire and Relief Plan Consolidated with LOFI as part of Article V Fire Department. PASSED and APPROVED on August 15, 2023 Page 1 Ordinance: 6676 File Number.' 2023-942 Attest: .,, i �&o-,-7 &A41-1 ton, City Cl- Treasurer Page 2 CITY OF FAYETTEVILLE ARKANSAS MEETING OF AUGUST 15, 2023 TO: Mayor Jordan and City Council THRU: CITY COUNCIL MEMO 2023-942 FROM: Paul Becker, Chief Financial Officer DATE: SUBJECT: Request by the Local Firemen's Pension and Relief Fund Board of Trustees for the City Council to approve the Consolidation of the Local Plan with LOPFI. RECOMMENDATION: The Administration recommends the City Council approve to consolidate the Local Firemen's Pension and Relief Fund with LOPFI. BACKGROUND: For over 15 years the Pension Review Board has reported the Local Fire Pension Fund to be actuarially unsound based on annual reports conducted by the firm of Osborn, Carreiro & Associates. Until recently, interest earnings and revenue sources, including a dedicated property tax approved by the citizens of Fayetteville, provided sufficient resources to pay pensioners the total amount of current pension benefits. However, available assets have been decreasing as benefit payments have exceeded investment earnings. In 2021 the assets available in the Local Fire Pension Fund fell below $2,000,000, placing additional legal restrictions on investments. It is clear that in the near future, current pension benefits cannot be maintained due to reduced assets and restrictions on investment options. The Mayor reports the status of the Local Pension Funds to the City Council annually as required by law. The Mayor indicated during this year's report that he would continue to monitor the conditions of the funds. At the April 27, 2023 meeting of the Local Fire Pension Board, the feasibility of consolidation was reviewed, and the Trustees voted to pay for an actuarial study to be performed by the LOPFI actuaries (which is a required first step in the process) and to consider consolidation based on that study. That study was completed and discussed at a subsequent meeting of the Local Fire Pension Board which took place on July 15, 2023. At that meeting, the Board unanimously voted to request the City Council approve a consolidation with LOPFI. The actuarial report that was conducted indicated that if the consolidation is approved, the current revenues remitted to the City could pay the full costs of the plan in 2024. This is because the actuarial report is based on a 15-year amortization period and the LOPFI investment earning that the Local Fund would earn is projected at 7.25%. DISCUSSION: Mailing address: 113 W. Mountain Street www.fayetteville-ar.gov Fayetteville, AR 72701 If the plan is sent to LOPFI for administration, full irrevocable control of the plan would be assumed by LOPFI This is a risk since LOPFI may not earn the projected investment earnings which would result in the City having to pay amounts over the current revenue stream being earned by the Local Fire Pension Fund. However, consolidation would guarantee pension benefits to the pension members and administration tasks would be transferred to LOPFI. Based on the actuarial report, the administration is recommending this consolidation be approved. At this time, current pension amounts are being requested without an automatic COLA (there is no COLA at this time for Fayetteville Local Plans). This is to ensure that current revenues are sufficient to pay current benefits. In the future, if the costs of the plan are sufficiently covered, a COLA can be considered based on plan performance. BUDGET/STAFF IMPACT: Based on the actuarial study no additional costs would be incurred in 2024. ATTACHMENTS: 2023-942 SRF, Administrative Services Agreement for consolidation from LOPFI, Board of Trustees Resolution for consolidation, Actuarial Report for Firemen's Pension and Relief Fund, Mayor's report of Local Pension Report 2022 given Jan 2023 Mailing address: 113 W. Mountain Street www.fayetteville-ar.gov Fayetteville, AR 72701 City of Fayetteville, Arkansas 113 West Mountain Street Fayetteville, AR 72701 (479) 575-8323 Legislation Text File #: 2023-942 Request by the Local Firemen's Pension and Relief Fund Board of Trustees for the City Council to approve the Consolidation of the Local Plan with LOPFI. AN ORDINANCE TRANSFERRING ADMINISTRATION OF RETIREMENT COVERAGE FOR ELIGIBLE MEMBERS OF THE FAYETTEVILLE FIRE RELIEF AND PENSION FUND TO THE ARKANSAS LOCAL POLICE AND FIRE RETIREMENT SYSTEM (LOPFI) AND AUTHORIZING THE MAYOR TO ENTER INTO AN IRREVOCABLE AGREEMENT WITH LOPFI WHEREAS, the Board of Trustees of the Fayetteville Fire Relief and Pension Fund (Local Plan) has elected to have its Local Plan administered by LOPFI as stated by Resolution approved and signed on July 10, 2023 (even though mistakenly dated August 10, 2023); and WHEREAS, the Board of Trustees has requested through that Resolution that the City of Fayetteville, Arkansas act as its agent henceforth and agree by this ordinance to assign the Fayetteville Fire Relief and Pension Fund to be administered by the Arkansas Local Police and Fire Retirement System. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: SECTION 1. If accepted by Arkansas Local Police and Fire Retirement System (LOPFI), the City Council of the City of Fayetteville hereby determines that administration of the Fayetteville Fire Relief and Pension Fund (Local Plan) shall be transferred to LOPFI under authority of Arkansas Code Annotated 24-10-101, et. seq., as amended. Such transfer shall mean the administration of the Local Plan only and not a change in the Local Plan's benefit program unless a benefit increase is formally approved by the City Council of the City of Fayetteville, Arkansas, by ordinance. SECTION 2. The City Council of the City of Fayetteville hereby authorizes Mayor Jordan to enter into an irrevocable Administrative Services Agreement which uses a fifteen (15) year amortization schedule and empowers LOPFI to administer the Local Plan as stated in Section 1 hereof. SECTION 3. The City Council of the City of Fayetteville hereby determines that the provisions of this Ordinance prior to this section shall be codified into the Fayetteville Code of Ordinances as § 33.051 Local Fire and Relief Plan Consolidated with LOFI as part of Article V Fire Department. Page 1 Paul Becker Submitted By City of Fayetteville Staff Review Form 2023-942 Item ID 8/15/2023 City Council Meeting Date - Agenda Item Only N/A for Non -Agenda Item 7/20/2023 CHIEF FINANCIAL OFFICER (110) Submitted Date Division / Department Action Recommendation: The Administration recommends the City Council approve to consolidate the Local Firemen's Pension and Relief Fund with LOPFI. Account Number Project Number Budgeted Item? No Does item have a direct cost? No Is a Budget Adjustment attached? No Purchase Order Number: Change Order Number: Original Contract Number: Comments: Budget Impact: Fund Project Title Total Amended Budget $ - Expenses (Actual+Encum) $ - Available Budget Item Cost $ - Budget Adjustment $ - Remaining Budget V20221130 Previous Ordinance or Resolution # Approval Date: A� LOPFI �OQi ADMINISTRATIVE SERVICES AGREEMENT This Administrative Services Agreement (Agreement) is entered into by and between the ARKANSAS LOCAL POLICE AND FIRE RETIREMENT SYSTEM (LOPFI) and the CITY OF FAYETTEVILLE for the benefit of its FIRE Relief and Pension Fund (Local Plan). PARTIES The City of FAYETTEVILLE, a political subdivision, currently has and administers a Local Plan. LOPFI is an agency created by statute (Arkansas Code Annotated 24-10-101, et. seq., as amended) for the purpose of providing a statewide retirement system with pooled administration. The Mayor and City Council of FAYETTEVILLE desire to enter into an irrevocable Agreement with LOPFI to administer its Local Plan and in consideration of the mutual obligations hereinafter enumerated the parties agree to all of the following: This Agreement is made pursuant to the authority of A.C.A. 24-10-101, et. seq., as amended. 2. This Agreement shall be effective and permanent upon the executed date entered Con page two of this Agreement. a M_ 3. This Agreement is for the administration of the Local Plan and its benefit OJ structure shall not change unless a benefit increase is formally approved by the City of FAYETTEVILLE by Ordinance. 4. The actuaries for LOPFI have computed the initial employer contribution rate(s) to be paid by the City of FAYETTEVILLE to support the benefits paid by the Local Plan. The City of FAYETTEVILLE agrees to always remit payment at the level established by the actuaries for LOPFI and in the monthly timeframe set by LOPFI. 5. Benefits and any member refunds shall be paid effective the first business day of each month and in accordance with LOPFI procedures and guidelines. 6. LOPFI covenants and agrees to provide the following services: a. investment of Local Plan assets and the award of annual interest to the employer reserve account at the end of each fiscal year consistent with the interest awarded to other LOPFI employer accounts; b. process retirement applications including determination of eligibility, calculation of service credit and benefit payment amounts, payment of benefits to eligible benefit recipients, and satisfaction of state and federal tax withholding requirements, all in accordance with LOPFI procedures and guidelines; and /y O^ a0� LOPFI `�a �O11 LOPFI lOAk r O M 22 City of FAYETTEVILLE Page 2 of 2 The City of FAYETTEVILLE covenants and agrees as follows: a. upon execution of this Agreement all Local Plan assets and records shall be promptly transferred to LOPFI. In the sole discretion of LOPFI certain investments may be allowed to mature to avoid penalties; b. all employer and applicable employee contributions shall be remitted to LOPFI in time to be recorded by the tenth (101h) day of each month for each reporting period. Remittance shall be made in the manner and amounts prescribed by LOPFI, which shall include the use of LOPFI's electronic reporting and LOPFI's e-Payment; c. the City of FAYETTEVILLE shall execute all documents required by LOPFI to aid in the administrative process; d. all members and beneficiaries of the Local Plan have been deemed eligible pursuant to the standards prevailing at the time of the determination of eligibility. The parties agree that LOPFI is bound by any determination of eligibility or ineligibility made by the board of trustees of the Local Plan as long as such determination(s) conform to state law. The Local Plan and the City of FAYETTEVILLE indemnify and hold LOPFI harmless for any eligibility decisions made by the Local Plan. the City of FAYETTEVILLE has disclosed to LOPFI all pending claims, actions, suits, and threatened liabilities to the Local Plan. 8. FAYETTEVILLE Fire Relief and Pension Fund board of trustees' Resolution dated �,,�. %M , 2023, and Ordinance No. 6676 , dated 2023, of the City of FAYETTEVILLE, are incorporated by refere ce herein as though set forth word for word. This irrevocable Agreement is executed this 1_T)_ day of , 2023. CITY OF FAYETTEVILLE, ARKAN . BY: / Mayor eld Jordan ATTEST: City Clerk Trea rer Kara P torl' r LOPFI BOLD O'F•TkUSTEES ATTEST: (/ BY: /'2W,�� �-> PFI Board Chairman a O J LOPFI Resolution to Assign Local Plan Administration to LOPFI Whereas, the Board of Trustees (the Board) of the FAYETTEVILLE FIRE Relief and Pension Fund (Local Plan), desires to assign administration of the Local Plan to the Arkansas Local Police and Fire Retirement System (LOPFI) pursuant to Arkansas Code Annotated 24-10-101, et. seq., as amended; and Whereas, such action shall not change the benefit structure unless a benefit increase is formally approved by the governing body of FAYETTEVILLE, Arkansas, by Ordinance; and Whereas, the Board received and reviewed the latest actuarial report from LOPFI, which states the initial required employer contribution rate(s); and Whereas, the Board finds it is in the best interest of the Local Plan and its participants to have LOPFI administer the Local Plan; therefore, BE IT RESOLVED, the Board hereby elects to assign administration of the Local Plan to LOPFI. BE IT FURTHER RESOLVED the Board requests the CITY OF FAYETTEVILLE, a political subdivision of the State of Arkansas, to act as its agent henceforth. BE IT FURTHER RESOLVED the Board understands any agreement to administer the Local Plan by LOPFI shall be entered into by and with the governing body of FAYETTEVILLE, Arkansas, as the Board's agent, and that such agreement shall dissolve said Board. CERTIFICATION � tip We certify this Resolut' curately states the action of said Board. Approved this day of LiAiJA.L 1 .2023/ 1 Sec/Treasurer Member Member 'Ale Member Member Member �Li GRS May 10, 2023 Mr. David B. Clark, Executive Director Arkansas Local Police and Fire Retirement System 620 West 3rd, Suite 200 Little Rock, Arkansas 72201-2212 Re: Actuarial Analysis of Proposed Contribution Rates for the Fayetteville Firemen's Pension and Relief Fund Dear Mr. Clark: 800.521.0498 1 P:248.799.9000 1 www,grsconsulting.com As requested, enclosed are the results of actuarial valuations which determine the employer contribution rates which would result from having the Fayetteville Fire Pension and Relief Fund administered by the Arkansas Local Police and Fire Retirement System (LOPFI). Please call if you have any questions or comments. Respectfully submitted, Gabriel, Roeder, Smith & Company "� t:� 6WA" , Heidi G. Barry, ASA, FCA, MAAA Casey T. Ahlbrandt-Rains, ASA, MAAA H G B/CTA:sc Enclosure Arkansas Local Police and Fire Retirement System Fayetteville Firemen's Pension and Relief Fund Actuarial Valuation of Proposals Under Consideration as of December 31, 2022 Requested By: Mr. David B. Clark, Executive Director Arkansas Local Police and Fire Retirement System Date: May 10, 2023 Submitted By: Heidi G. Barry, ASA, FCA, MAAA and Casey T. Ahlbrandt-Rains, ASA, MAAA Gabriel, Roeder, Smith & Company Submitted in this report are the results of actuarial valuations which determine the employer contribution rates which would result from having the Fayetteville Firemen's "closed plan" (the Local Pension and Relief Fund) administered by the Arkansas Local Police and Fire Retirement System (LOPFI). The date of the study was as of December 31, 2022. This supplemental valuation does not predict the result of the December 31, 2023 valuation or of any other future actuarial valuations. (Future activities can affect future valuation results in an unpredictable manner.) Rather, the supplemental valuation gives an indication of the probable effect of the proposed changes on future valuations without comment on the complete end result of the future valuations. In accordance with LOPFI Board policy, the employer contribution rates established by this valuation report are valid for purposes of joining the System until October 31, 2023. This report is intended to describe the financial effect of the proposed plan changes. No statement in this report is intended to be interpreted as a recommendation in favor of the changes, or in opposition to them. GRS is not responsible for unauthorized use of this report. Heidi G. Barry and Casey T. Ahlbrandt-Rains are Members of the American Academy of Actuaries (MAAA) and meet the Qualification Standards of the American Academy of Actuaries required to render the actuarial opinions contained herein. The signing actuaries are independent of the plan sponsor. The calculations are based upon assumptions regarding future events, which may or may not materialize. They are also based upon present and proposed plan provisions that are outlined in the report. If you have reason to believe that the assumptions that were used are unreasonable, that the plan provisions are incorrectly described, that important plan provisions relevant to this proposal are not described, or that conditions have changed since the calculations were made, you should contact the authors of this report prior to relying on information in the report. This report was prepared using our proprietary valuation model and related software which, in our professional judgment, has the capability to provide results that are consistent with the purposes of the valuation, and has no material limitations or known weaknesses. We performed tests to ensure that the model reasonably represents that which is intended to be modeled. 4G R S 5/10/2023 1 Arkansas Local Police and Fire Retirement System Fayetteville Firemen's Pension and Relief Fund Actuarial Valuation of Proposals Under Consideration as of December 31, 2022 If you have reason to believe that the information provided in this report is inaccurate, or is in any way incomplete, or if you need further information in order to make an informed decision on the subject matter of this report, please contact the authors of the report prior to making such decision. In the event that more than one plan change is being considered, it is very important to remember that the results of separate actuarial valuations cannot generally be added together to produce a correct estimate of the combined effect of all of the changes. The total can be considerably greater than the sum of the parts due to the interaction of various plan provisions with each other, and with the assumptions that must be used. 4G w 5/10/2023 Arkansas Local Police and Fire Retirement System Fayetteville Firemen's Pension and Relief Fund Actuarial Valuation of Proposals Under Consideration as of December 31, 2022 The actuarial methods and assumptions were the same as those in use for the regular valuation as of December 31, 2022. In particular, the economic assumptions used in the supplemental actuarial valuation were net investment return of 7.25% per year, wage inflation of 3.00% per year, and price inflation of 2.25% per year. Member information is summarized in the following table: December 31, 2022 Valuation Data Paid Volunteer Members: Retired Lives: Number 38 2 Total Monthly Benefits $100,966 $219 Active Members: Number 0 0 Average Age N/A N/A Average Service N/A N/A Major Local Fund Benefit Provisions: Voluntary Retirement— Eligibility at 20 years of service regardless of age. Paid base benefit: 90% of Final Salary per year (minimum $4,200 per month); 10-Year DROP Volunteer base benefit: $1,200 per year. Member Contributions— Member contribution rate 6% of pay for paid members and $12 per year for volunteer members. Member contributions are refundable without interest if termination of employment occurs before monthly benefits are payable. Automatic Post -Retirement Benefit Increases — None. Death Benefit— None. 4G R S 5/10/2023 3 Arkansas Local Police and Fire Retirement System Fayetteville Firemen's Pension and Relief Fund Actuarial Valuation of Proposals Under Consideration as of December 31, 2022 Paid Results Asset Information: Asset information for the Fayetteville Firemen's Pension and Relief Fund was derived from the Fund's annual financial report provided to us. The date of the report was December 31, 2022. The reported market value of assets $1,702,542 for the Local Fund, as of December 31, 2022, was used in computing the employer contribution rates. For the purposes of our calculation, we assumed the $1,702,542 Local Fund balance was $1,700,153 for paid members and $2,389 for volunteer members. The computed employer contribution rates are sensitive to changes in overall asset value. The actual amount transferred to LOPA will depend on the market value of Local Fund assets when they are actually liquidated and may differ substantially from the value as of December 31, 2022. This will likely impact the actual rate computed in the next valuation of the combined plans. Results: No COLA 3% COLA Actuarial Accrued Liabilities (AAL) Active Members $ - $ - Benefit Recipients 11,458,453 14,700,533 Total AAL $ 11,458,453 $ 14,700,533 Assets Available to Fund AAL $ 1,700,153 $ 1,700,153 Member DROP Balance - - Total Assets $ 1,700,153 $ 1,700,153 Unfunded AAL $ 9,758,300 $ 13,000,380 4G; 5/10/2023 Arkansas local Police and Fire Retirement System Fayetteville Firemen's Pension and Relief Fund Actuarial Valuation of Proposals Under Consideration as of December 31, 2022 Paid Results If the Local Fund becomes administered by LOPFI, the monthly employer contribution for calendar years 2023 and 2024 would be as follows: Computed Employer Contribution (15-Year Amortization) COLA 2023 2024 0.00% $69, 243 $71, 320 3.00 % $93, 354 $96,155 These monthly contributions are in addition to the contribution determined for LOPFI members only. These are the estimated contributions needed to pay off the unfunded accrued liability associated with Closed Plan benefits and would be deposited in the Local Fund Employer Accumulation Account. The contributions are assumed to increase with 3.00% wage inflation annually. The Plan received $788,720 from Local Millage Tax, $217,164 from State Insurance Premium Tax, and $108,582 in additional state allocations. The total from these revenue sources was split for this valuation such that $1,112,902 was allocated to paid members and $1,564 was allocated to volunteer members. It is expected that similar future inflows will partially or fully offset employer contributions. Readers of this report may have an expectation that the contribution shown above will be paid for 15 years and the employer will be relieved of all liability at that time. That is not the case; as long as benefits are payable, there is a possibility that employer contributions will be needed. 4G R S 5/10/2023 Arkansas Local Police and Fire Retirement System Fayetteville Firemen's Pension and Relief Fund Actuarial Valuation of Proposals Under Consideration as of December 31, 2022 No COLA, 15-Year Amortization of UAL Projected Cash Flow - Paid Members Year Ended December 31 Benefits Contributions' Investment Earnings Assets (MV)Z 2022 $ 1,700,153 2023 $ 1,204,248 $ 948,410 $ 114,149 1,558,464 2024 1,188,043 855,843 101,157 1,327,421 2025 1,169,709 881,518 85,974 1,125,204 2026 1,149,113 907,964 72,989 957,044 2027 1,126,149 935,203 62,585 828,682 2028 1,100,734 963,259 55,183 746,391 2029 1,072,822 992,157 51,240 716,965 2030 1,042,412 1,021,921 51,250 747,725 2031 1,009,559 1,052,579 55,742 846,487 2032 974,379 1,084,156 65,280 1,021,544 2033 937,051 1,116,681 80,460 1,281,634 2034 897,797 1,150,181 101,907 1,635,926 2035 856,874 1,184,687 130,280 2,094,019 2036 814,555 1,220,227 166,265 2,665,956 2037 771,101 1,256,834 210,582 3,362,271 2038 726,768 1,294,539 263,986 4,194,028 2039 681,803 - 279,784 3,792,009 2040 636,442 252,253 3,407,820 2041 590,940 226,020 3,042,901 2042 545,562 201,180 2,698,518 2043 500,590 177,814 2,375,742 2044 456,318 155,989 2,075,413 2045 413,045 135,757 1,798,125 2046 371,065 117,148 1,544,208 2047 330,657 100,178 1,313,730 2048 292,066 84,843 1,106,507 2049 255,521 71,121 922,107 2050 221,245 58,973 759,835 2051 189,451 48,341 618,725 2052 160,324 39,147 497,548 2053 134,007 31,299 394,840 2054 110,565 24,688 308,964 2055 89,983 19,195 238,176 2056 72,177 14,697 180,696 2057 57,005 11,070 134,761 2058 44,278 8,193 98,676 2059 33,777 5,951 70,850 2060 25,268 4,237 49,819 2061 18,508 2,953 34,263 2062 13,251 2,012 23,025 C;S 5/10/2023 6 Arkansas Local Police and Fire Retirement System Fayetteville Firemen's Pension and Relief Fund Actuarial Valuation of Proposals Under Consideration as of December 31, 2022 No COLA, 15-Year Amortization of UAL Projected Cash Flow — Paid Members (Concluded) Projected Year Ended Investment December3l Benefits Contributions' Earnings Assets(MV)Z 2063 $ 9,263 $ $ 1,339 $ 15,101 2064 6,313 870 9,658 2065 4,191 - 551 6,018 2066 2,707 340 3,651 2067 1,700 204 2,155 2068 1,036 - 119 1,238 2069 614 68 692 2070 352 38 378 2071 197 - 20 201 2072 107 - 11 105 2073 56 6 54 2074 30 - 3 27 2075 15 - 1 14 2076 8 1 7 2077 4 - - 3 2078 2 1 2079 1 2080 - - - 1 Local Plan contributions only; $69,243 monthly in 2023 in addition to the LOPFI rate (assumed to increase yearly by 3.00% wage inflation thereafter). The first -year contribution assumes that the City will be under LOPFI administration for the last seven (7) months of 2023. The last year contribution, based on a 15-year amortization schedule, would be applied to calendar year 2038. 2 Reported market value of assets. Assets are projected at the assumed rate of return of 7.25% per year. Note: The actual future contributions for this group are affected by investment return, number of active members and life expectancy. This projection does not show the effect on future employer contributions of differences between actual and assumed future experience. These differences can have a significant effect on these results. 4 G V 5/10/2023 7 Arkansas local Police and Fire Retirement System Fayetteville Firemen's Pension and Relief Fund Actuarial Valuation of Proposals Under Consideration as of December 31, 2022 3% COLA, 15-Year Amortization of UAL Projected Cash Flow - Paid Members Projected Year Ended Investment December 31 Benefits Contributions' Earnings Assets (MV)2 2022 $ 1,700,153 2023 $ 1,222,311 $ 1,117,191 $ 119,517 1,714,550 2024 1,242,040 1,153,861 121,164 1,747,535 2025 1,259,558 1,188,477 124,165 1,800, 619 2026 1,274,502 1,224,132 128,751 1,879,000 2027 1,286,503 1,260,855 135,314 1,988,666 2028 1,295,193 1,298,681 144,303 2,136,457 2029 1,300,221 1,337,642 156,226 2,330,103 2030 1,301,266 1,377,771 171,657 2,578,265 2031 1,298,062 1,419,104 191,235 2,890,542 2032 1,290,414 1,461,677 215,664 3,277,469 2033 1,278,207 1,505,527 245,713 3,750,502 2034 1,261,402 1,550,693 282,215 4,322,008 2035 1,240,024 1,597,214 326,067 5,005,265 2036 1,214,143 1,645,130 378,232 5,814,485 2037 1,183,855 1,694,484 439,737 6,764,850 2038 1,149,266 1,745,319 511,681 7,872,584 2039 1,110,505 - 531,211 7,293,290 2040 1,067,722 490,736 6,716,303 2041 1,021,126 450,564 6,145,741 2042 970,996 410,983 5,585,729 2043 917,684 372,281 5,040,326 2044 861,619 334,736 4,513,443 2045 803,309 298,614 4,008,749 2046 743,315 264,161 3,529,594 2047 682,239 231,597 3,078,952 2048 620,693 201,118 2,659,377 2049 559,319 172,884 2,272,942 2050 498,820 147,022 1,921,145 2051 439,951 123,614 1,604,807 2052 383,482 102,691 1,324,016 2053 330,150 84,233 1,078,098 2054 280,568 68,169 865,700 2055 235,190 54,387 684,897 2056 194,310 42,735 533,321 2057 158,068 33,036 408,289 2058 126,458 25,097 306,928 2059 99,363 18,713 226,279 2060 76,564 13,678 163,393 2061 57,760 9,789 115,422 2062 42,598 6,851 79,675 4 G V 5/10/2023 Arkansas Local Police and Fire Retirement System Fayetteville Firemen's Pension and Relief Fund Actuarial Valuation of Proposals Under Consideration as of December 31, 2022 3% COLA, IS -Year Amortization of UAL Projected Cash Flow — Paid Members (Concluded) Year Ended December3, Benefits Contributions' Investment Earnings Assets(MV)Z 2063 $ 30,669 $ - $ 4,684 $ 53,690 2064 21,531 - 3,126 35,285 2065 14,721 - 2,034 22,598 2066 9,794 - 1,290 14,093 2067 6,334 - 796 8,555 2068 3,979 - 479 5,055 2069 2,426 - 280 2,909 2070 1,436 - 160 1,633 2071 825 - 89 897 2072 462 - 49 483 2073 252 - 26 257 2074 136 - 14 135 2075 73 - 7 69 2076 38 - 4 35 2077 20 - 2 17 2078 10 - 1 7 2079 5 - 3 2080 2 - 1 2081 1 - 2082 1 Local Plan contributions only; $93,354 monthly in 2023 in addition to the LOPFI rate (assumed to increase yearly by 3.00% wage inflation thereafter). The first -year contribution assumes that the City will be under LOPFI administration for the last seven (7) months of 2023. The last year contribution, based on a 15-year amortization schedule, would be applied to calendar year 2038. 2 Reported market value of assets. Assets are projected at the assumed rate of return of 7.25% per year. Note: The actual future contributions for this group are affected by investment return, number of active members and life expectancy. This projection does not show the effect on future employer contributions of differences between actual and assumed future experience. These differences can have a significant effect on these results. 4 G V 5/10/2023 9 Arkansas Local Police and Fire Retirement System Fayetteville Firemen's Pension and Relief Fund Actuarial Valuation of Proposals Under Consideration as of December 31, 2022 Volunteer Results Asset Information: Asset information for the Fayetteville Firemen's Pension and Relief Fund was derived from the Fund's annual financial report provided to us. The date of the report was December 31, 2022. The reported market value of assets $1,702,542 for the Local Fund, as of December 31, 2022, was used in computing the employer contribution rates. For the purposes of our calculation, we assumed the $1,702,542 Local Fund balance was $1,700,153 for paid members and $2,389 for volunteer members. The computed employer contribution rates are sensitive to changes in overall asset value. The actual amount transferred to LOPFI will depend on the market value of Local Fund assets when they are actually liquidated and may differ substantially from the value as of December 31, 2022. This will likely impact the actual rate computed in the next valuation of the combined plans. Results: No COLA 3% COLA Actuarial Accrued Liabilities (AAL) Active Members $ - $ - Benefit Recipients 16,101 18,651 Total AAL $ 16,101 $ 18,651 Assets Available to Fund AAL $ 2,389 $ 2,389 Member DROP Balance - - Total Assets $ 2,389 $ 2,389 Unfunded AAL $ 13,712 $ 16,262 4;v 5/10/2023 10 Arkansas Local Police and Fire Retirement System Fayetteville Firemen's Pension and Relief Fund Actuarial Valuation of Proposals Under Consideration as of December 31, 2022 Volunteer Results If the Local Fund becomes administered by LOPFI, the monthly employer contribution for calendar years 2023 and 2024 would be as follows: Computed Employer Contribution (15-Year Amortization) COLA 2023 2024 0.00% $102 $105 3.00% $122 $125 These monthly contributions are in addition to the contribution determined for LOPFI members only. These are the estimated contributions needed to pay off the unfunded accrued liability associated with Closed Plan benefits and would be deposited in the Local Fund Employer Accumulation Account. The contributions are assumed to increase with 2.25% price inflation annually. The Plan received $788,720 from Local Millage Tax, $217,164 from State Insurance Premium Tax, and $108,582 in additional state allocations. The total from these revenue sources was split for this valuation such that $1,112,902 was allocated to paid members and $1,564 was allocated to volunteer members. It is expected that similar future inflows will partially or fully offset employer contributions. Readers of this report may have an expectation that the contribution shown above will be paid for 15 years and the employer will be relieved of all liability at that time. That is not the case; as long as benefits are payable, there is a possibility that employer contributions will be needed. 4G v 5/10/2023 11 Arkansas Local Police and Fire Retirement System Fayetteville Firemen's Pension and Relief Fund Actuarial Valuation of Proposals Under Consideration as of December 31, 2022 No COLA, 15-Year Amortization of UAL Projected Cash Flow — Volunteer Members Projected Year Ended Investment December 31 Benefits Contributions' Earnings Assets (MV)Z 2022 $ 2,389 2023 $ 2,574 $ 1,368 $ 130 1,313 2024 2,465 1,255 52 155 2025 2,339 1,283 (26) (927) 2026 2,197 1,312 (99) (1,911) 2027 2,038 1,341 (163) (2,771) 2028 1,866 1,372 (219) (3,484) 2029 1,684 1,402 (263) (4,029) 2030 1,496 1,434 (294) (4,385) 2031 1,307 1,466 (312) (4,538) 2032 1,122 1,499 (316) (4,476) 2033 947 1,533 (304) (4,194) 2034 784 1,567 (276) (3,686) 2035 637 1,603 (233) (2,954) 2036 506 1,639 (174) (1,995) 2037 393 1,676 (99) (811) 2038 298 1,713 (8) 596 2039 221 - 35 410 2040 159 24 276 2041 112 16 180 2042 76 10 114 2043 50 6 70 2044 33 4 41 2045 20 2 24 2046 12 1 13 2047 7 1 7 2048 4 3 2049 2 1 2050 1 2051 1 The Local Plan contributions only; $102 monthly in 2023 in addition to the LOPFI rate (assumed to increase yearly by 2.25% price inflation thereafter). The first -year contribution assumes that the City will be under LOPFI administration for the last seven (7) months of 2023. The last year contribution, based on a 15-year amortization schedule, would be applied to calendar year 2038. 2 Reported market value of assets. Assets are projected at the assumed rate of return of 7.25% per year. Assets are projected to be below $0 during the projection period. Local Plan assets are assumed to be pooled with LOPFI assets. LOPFI would load the shortage until the financing period is completed and LOPFI has been paid back. Note: The actual future contributions for this group are affected by investment return, number of active members and life expectancy. This projection does not show the effect on future employer contributions of differences between actual and assumed future experience. These differences can have a significant effect on these results. 4Gw5/10/2023 12 Arkansas Local Police and Fire Retirement System Fayetteville Firemen's Pension and Relief Fund Actuarial Valuation of Proposals Under Consideration as of December 31, 2022 3% COLA, 15-Year Amortization of UAL Projected Cash Flow - Volunteer Members Year Ended December 31 Benefits Contributions' Investment Earnings Assets (MV)Z 2022 $ 2,389 2023 $ 2,613 $ 1,507 $ 134 1,417 2024 2,578 1,499 64 403 2025 2,519 1,533 (6) (589) 2026 2,437 1,568 (74) (1,532) 2027 2,329 1,603 (137) (2,395) 2028 2,195 1,639 (193) (3,145) 2029 2,040 1,676 (241) (3,750) 2030 1,867 1,713 (277) (4,181) 2031 1,681 1,752 (301) (4,410) 2032 1,487 1,791 (309) (4,415) 2033 1,292 1,832 (301) (4,176) 2034 1,102 1,873 (275) (3,680) 2035 921 1,915 (231) (2,917) 2036 754 1,958 (169) (1,882) 2037 604 2,002 (87) (570) 2038 472 2,047 15 1,020 2039 360 - 61 721 2040 267 43 497 2041 193 29 333 2042 135 19 218 2043 92 13 138 2044 61 8 85 2045 39 5 51 2046 24 3 30 2047 14 2 17 2048 9 1 9 2049 5 5 2050 3 2 2051 1 1 2052 1 2053 1 The Local Plan contributions only; $122 monthly in 2023 in addition to the LOPFI rate (assumed to increase yearly by 2.25% price inflation thereafter). The first -year contribution assumes that the City will be under LOPFI administration for the last seven (7) months of 2023. The last year contribution, based on a 15-year amortization schedule, would be applied to calendar year 2038. 2 Reported market value of assets. Assets are projected at the assumed rate of return of 7.25% per year. Assets are projected to be below $0 during the projection period. Local Plan assets are assumed to be pooled with LOPFI assets. LOPFI would load the shortage until the financing period is completed and LOPFI has been paid back. Note: The actual future contributions for this group are affected by investment return, number of active members and life expectancy. This projection does not show the effect on future employer contributions of differences between actual and assumed future experience. These differences can have a significant effect on these results. 4 GW 5/10/2023 13 LOCAL PENSION FUND REPORT 2022 In keeping with statutory requirements, I am presenting this report for 2022 on the local Police and Fire Retirement and Relief Funds for the City of Fayetteville. Both of these plans were closed, by law, in 1983 and there are no longer any active working members remaining. There are currently 3 8 Police and 39 fire retirees and beneficiaries in the system. At December 2022 projected expenses from the fire pension fund were approximately $1.3 million as compared to fund revenues of $1.1 million. Projected police pension fund expenses were approximately $1.5 million as compared to fund revenues in excess of $1.1 million. This is before adjusting investments to current market value. Actuarial evaluations are the responsibility of the State of Arkansas Fire and Police Pension Review Board. The last evaluations completed were as of May 2022 for the year ending December 31, 2021. Based on those evaluations the total pension liability of the Police and Fire Funds were $15.3 million and $13.8 million respectively. The net pension liabilities for these funds were approximately $8.7 million for police and $11.9 million for fire. In the annual reports issued by the Arkansas Pension Review Board neither the fire nor police pension fund were found to be actuarially sound pursuant to established financial tests. The Fire Pension Fund has been classified as "projected insolvent "since 2009. The Fire Pension Board has been discussing the unstable condition of the fund and possible alternatives since that time. No specific request was made by the Fire Pension Board to the City Council in 2020. The Police Pension Fund is also considered actuarially unsound but not in immediate danger of becoming insolvent. The Police Pension Board is also aware of the Police Pension Fund status and has been considering options that would guarantee long term solvency. I will continue to monitor these pension funds in the future and keep you apprised of any new developments if necessary. LOPFI LOCAL POLICE & FIRE RETIREMENT SYSTEM August 30, 2023 Kara Paxton, City Clerk Treasurer Fayetteville Fire Pension Fund 113 W. Mountain Fayetteville, AR 72701 Via: UPS Overnight Service Dear Ms. Paxton: 620 W. 3rd, Suite 200 Little Rock, Arkansas 72201-2223 Telephone: 501.682.1745 email: info@lopfi-prb.com website: www.lopfi-prb.com Enclosed is your copy of the LOPFI Board -approved Administrative Services Agreement. To complete the consolidation process the following items are needed: In order to verify data, please have each participant complete the data form that was provided during our July 10, 2023 visit with the Local Plan board of trustees. Keep in mind: • The form includes areas for state and federal* tax withholding from the monthly benefit. Even if a person does not want taxes withheld, these areas must be completed instructing LOPFI of that decision. This form also provides an area for direct deposit information, which will be used to pay the monthly benefit to the participant. *A Form W-4P was provided during the July 101h visit and is used to ensure the benefit recipients elect the correct federal withholding. • Please include clear and readable copies of each participant's driver's license and social security card. These are used to verify identity. • If the participant is married, a copy of the marriage license needs to be included. • Ensure all above items are completed, in entirety, before they are sent to us. 2. All Local Plan assets must promptly transfer to LOPFI. This must occur before LOPFI will process benefit payments. Please contact us to complete this step. 3. Copies are needed of all FY 2023 bank/financial statements related to the Local Plan. The information should cover all the months your location held Local Plan assets and/or made benefit payments. This includes copies of statements that reveal all pension fund accounts are closed with a zero balance. Fayetteville Fire Pension Fund August 30, 2023 Page 2 of 2 And simply to provide additional confirmation, we will NOT implement a three percent (3%) compound Cost of Living Adjustment (COLA) for the Local Plan members. The City indicated it would evaluate the fiscal condition of the Local Plan at some point after the consolidation is completed to determine if a COLA could be added to the benefit structure. We warmly welcome you to LOPFI administration and are confident you will be pleased with our service. The staff members who will assist in this process are Jeri Sines and Lesley Weaver. Please feel free to contact them with any questions you may have. Respectfully, David B. Clark Executive Director Encl: