HomeMy WebLinkAbout2004-08-26 - Agendas - Final • Firemen's Pension and Relief Fund
Meeting Agenda
August 26, 2004
A meeting of the Fayetteville Firemen's Pension and Relief Fund will be held at 11 :00 a.m.
on August 26, 2004 in Room 326 of the City Administration Building.
1. Approval of the Minutes:
• July 29, 2004
2. Approval of the Pension List:
• September 2004 Pension List
3. Longer Investments:
• Report
4. New Business:
• • Benefit Increase Proposal
• 2004 Future Supplement Fund Distribution
• 2003 Actuarial Valuation
• Skelton College Enrollment
• Spector, Roseman & Kodroff Legal Representatives
• Budget Report for 06/30/04
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Fim Pension Minutes
_ July 29, 2004
Page 1 of 6
• Firemen's Pension and Relief Fund
Meeting Agenda
July 29, 2004
A meeting of the Fayetteville Firemen's Pension and Relief Fund Board of Trustees was
held at 11 :00 a.m. on July 29, 2004 in Room 326 of the City Administration Building.
Present: Pete Reagan, Robert Johnson, Marion Doss, Ronnie Wood, Mayor Coody, City
Clerk Sondra Smith, City Attorney Kit Williams, Denise Grizzle, and Kim Cooper of
Longer Investments.
The meeting was called to order by Mayor Coody.
Approval of the June 24, 2004 Minutes:
Pete Reagan moved to approve the minutes. Marion Doss seconded the motion. The
motion passed 6-0. Danny Farrar was absent.
Approval of the August Pension List:
• Pete Reagan:. There are not any changes are there Sondra?
Sondra Smith: I don't think so.
Marion Doss moved to approve the August 2004 Pension List. Pete Reagan seconded the
motion. The motion passed 6-0. Danny Farrar was absent.
Longer Investments:
Kim Cooper, Longer Investments: Elaine is out of town today she was disappointed that
she was not going to be able to be here since we only see you every three months.
Page 1 of your report shows your portfolio appraisals as of June 3oth. Your equity percent
listed at the bottom of. the page was 50.7%, that's right at the top end of your investment
policy of 25 to 50 percent stocks. We use 40 as a base for equities and then we will go plus
or minus 10% around that base of 40.
Page 2 lists some of your fixed income investments; I wanted to point out the equity funds
under Japan Webs, that is an Asian Fund based in Japan. We sold that during July, we
took a profit on it just because there has been a profit slow down in China and that slow
down can affect Japan also, the whole Asian Region. We went ahead and took the profits
on that and sold that position. Under the fixed funds you will see the III shares for the
• Lehman 20+ Year. T-Bond Fund, that is a closed end fund that holds maturities of 20 or
more years in US Treasury. We put about 3% of your portfolio into that to give you away
to extend your maturities as we saw interest rates creeping up a little bit. What we're
looking for in that is a profit on the bond trade. As we see_ interest rates go back down, we
Fin: Pension Minutes
Juty 29, 2M
Page 2 of 6
have a target of about 4 1 /8a' when we see the ten year up 4 1/8t° we will probably sell out •
of that fund for you. For right now you are earning 5.3 % on it and you've already got
1 '/2% capital appreciation so you are making money on it and you are earning income on it.
This also lists your corporate bonds, your government bonds and government agencies.
Page 5 shows the bottom line, your total account value is $ 10,067,570. Your annual income
is $319,386. That is annual income, dividends and interest on your bonds. The 3.4% is the
income yield on the portfolio, that 3 .4% compares to a five year treasury, so you are
earning in your portfolio 50% stock and 50% growth, the same income that you could earn
on a five year treasury. Along with the interest income you also have a component for
growth.
Pete Reagan This whole time the DOW has done what?
Kim Cooper: The DOW through the end of the second quarter was flat. The S&P was up
about 2 %.
r
Pete Reagan: So while everything in that market is flat we are making 3 .4 %.
Kim Cooper: That' s just your income yield, if stocks go down or bonds go down, then you
have fluctuation in market price, but you have that protection of a yield of 3.4%.
The next page is just a summary of realized gains and income through June 30th Your •
realized gains were $234,716 that is because earlier in the year we took profits on some
stock positions that we had considered expended so you have some substantial gains in
there for the first part of the year. Your net income which is your interest and dividends is
$1973131 . M
The next report that ' s titled Fixed Income Holdings, we have that in there basically to show
you what the credit ratings on your bonds are, especially on your corporate bonds. If you
will look in the columns that are titled S&P and Moody's, those are the credit ratings on
those bonds. You can see that your corporate bonds are all very high quality. We
constantly monitor those credit ratings to make sure that they are accurate and that they
continue to stay within your investment policy guidelines. That just continues on and lists
the rest of your fixed income holdings.
Page 10 has a lot of information on it, if you will look over in the right hand column where
it says Weighted Averages, your average yield to maturity on just the bonds in your
account is 4.9%. Your average maturity is 7.2 years. Right now on just your bonds only
you are earning 4.9%, that's higher than you could be earning in that 10 year treasury, it's
much higher than a five year treasury. Again, you have a very high quality fixed income
portfolio.
The bottom half of the page in that chart where it says Distribution by Maturity the first
two lines in there are the one to three years and the three to five years, of your total bonds •
holdings, 55 % are held in those two categories, so 55 % of your bonds will mature in less
than five years. We consider that as liquidity, almost like cash if we see a chance to extend
your maturities we can sell those shorter term maturities and extend maturities, lock in
Fisc Pension Minutes
July 29, 2004
Page 3 of 6
some higher yields for you. You also want to think about that treasury fund that I talked
about before that's about 7 % of your bond holdings and that will be the over the 20 year
portion of the bond portfolio. That' s not listed in there because it is considered a fund.
The next page shows the largest holdings in your portofilo as of June 301 '. It's kind of a
moving target, as of June 30'h your largest holdings were Johnson & Johnson, Walgreen,
Pfizer, Coca-Cola and Cephalon which is a drug company. Since June 301" we have sold
out of Cephalon so you don't own that one any more.
The next report is the Model Portfolio report and Elaine had lots of good things she wanted
me to point out to you on this report. What the report does it shows you where in the
different sectors of the S&P 500 your account is in relation to where that 55 hundred is.
Page 13 under the consumer non-cyclical segment, those are the consumer type products
like, Coke, Estee Lauder and the retail companies, Walmart, Walgreens. Right now we are
under weight in comparison to the S&P 500, we are at about 10%, and the S&P is 18.5 %.
The reason we are and have been underweighted is because we see things that the
consumer is going to be spending money on that will make the spending probably slow
down from what we have seen in the past. The higher gas price, the refinancing, that has
put a lot of money in people's pockets, has virtually stopped. The third quarter is the
anniversary of when the tax cut went into effect last year which gave people that rebate
check and more income in their pay checks so there' s tougher comparisons from last year
to this year. People are not going to have that extra boost in cash so we think the consumer
• side is where we need to back off and be a little underweight on the market.
On the next page Cyclical Industries we are overweight in those right now, those are the
capital goods, the chemicals, mining, forestry and industries. Right now we are at about
16% versus the S&P which is 5 %. The reason we are over weight in there is because we
think that capital spending by corporations is going to be strong at this point in the
economic recovery. Earnings have been very positive for these kinds of companies so we
are staying overweight there. In energy we are overweigh there as well, the energy stocks
have very good yield, they are inflation protection, we use them as a portfolio stabilizer, if
something happens over seas, something goes boom, then energy prices go up. It is a good
way to offer you some protection to some of the things that are going on in the world by
owning those energy stocks. You will see under financial services, right below that, as of
June 30'h you had owned Morgan Stanley, your purchase prices had been 51 .86, I just want
to use this as an example of how we work around what we consider non core positions.
Elaine bought it, when we purchased it, it was at a really good point, it had very strong
technical support in the market and we had a very low downside risk. We thought we
could buy it at that 51 .86 but if it went below 50, we didn't want to own it any more. It had
sold off of its highs and we just felt it was a real good entry point so we bought the stock
knowing that we would sell it if it hit 50, unfortunately it did hit 50, we sold out of it right
away, its just our sell discipline in order to protect your down side. We will do that in those
non core positions, we just feel we need to protect your positions and respect any stops. If
we are buying something and see a level that we don't want to hold it below even if we have
only held it for a few weeks, we will sell it. On the other side of that-we will do that on the
upside too, we had bought Phelps Dodge for you and within a week it had appreciated 11 %
and we went ahead and sold it, the stock came back down to the price that we bought it at
Fire Pension Minutes
July 29, 2004
Page 4 of 6
but we took those profits. Your account doesn't have to pay taxes so your might as well •
take the profits when we see that kind of a jump in such a short period of time.
The next page is medical supplies and pharmaceuticals, if you will look at health care in
general we are overweigh 18 % versus 12 % on S&P but in the medical supplies we' re much
more overweight than we are in the pharmaceuticals. The medical supplies are the parts
and pieces, as Elaine refers to it; it's the things like knee replacements and heart valves, all
the replacement parts that your body needs as we get older. We feel that is where the
growth is and the opportunity is in pharmaceuticals. With the sale of Cephalon you are
actually only at about 3 .8 % in pharmaceuticals so you are about half of what the S&P is in
that side. We think that we what to be equal weighted or underweight to the S&P at this
point just because if Kerry were elected we don't know what would happen to
pharmaceutical companies. There is just some uncertainly out there.
The last page the only other thing that I wanted to point out on this report is the technology
side, we are underweight in technology and we have been since the beginning if the year.
The NASDAQ which is comprised of alot of technology companies is down 8 % year to date
or was down 8 % through June. We just feel that being defensive has helped you and kept
us from getting the brunt of that 8 % even though you do have some technology companies' ,
being underweight has helped soften that.
I went over a lot of things do you have any questions about any of the holdings or any of
the sectors that you own? •
On page 17 is your contributions and withdraws, this has been since inception of the
account, your withdraws have been $1 ,635,000. The next report is your performance
summary this kind of hits on what you had asked about before, Pete. Last year in 2003
your stocks were up 29 '/2%, your total account was up 13.3 %. Through June 30, right
now your equities in your account, that's just your stocks through June 30 they were up
4.4% and that compares to the S&P which was up 2 % and the DOW that was flat. Your
equity mutual funds were up 5.9% that's the Asian fund that I had mentioned that we have
now sold out of. Your total account is up 1 .9% year to date. That shows a cumulative
return then of 27.2 % on equity since your account opened and 14. 1 % total. The
annualized numbers are 13.7% on your stocks that compares to the returns of the
inductees of about 11 % on the S&P 500 cash basis, about 11 .7 % on the DOW, your total
return, the annualized return since inception has been 7.3 % and that compares to the 6 %
actuarial assumption that you have so we are still well above that 6% number that we
strive for. The table at the bottom shows your reconciliation since your account opened,
your beginning value, if you will look at your deposits and withdraws, they net out to about
1 . 138 million and your total investment return since that time has been 1 .3 million so the
income and appreciation on your account has kept up with the distribution level.
Pete Reagan: Could you explain the difference between your cumulative return and your
annualized return.
Kim Cooper: The cumulative return is the total return, that is the return for all three of •
those time periods up above, the annualized return is like an average annual return, so that
would be an average one year return, taking into account those three periods.
Fire Pension Minutes
July29, 2004
Page 5 of 6
• , Just to let kind of let you know what is going on since we cut these reports off as of June
30'", we are right now in the middle of earnings season, second quarter earnings are corning
out. We had said in our newsletter that we expected strong earnings and we basically have
seen earnings that are in line with expectations but there have been a lot of real high profile
companies that have missed their earning expectations. They have either reported in line
with their earnings and said we are going to have the second half a little bit slower than we
expected or they have reported slightly below what expectations were. Those were big
companies like Pfizer, Coke, IBM, very highly diversified companies, even though they
have been down, earnings overall have been as expected. Still stocks are down quite a bit
for the month of July. The S&P is now down 4% this month the Russell 200 which is a
small cap index is down 8 %2% and the NASDAQ is down 9.3 % so all of the stock markets
are down in July. We just had a real defensive posture. This month we have bought three
exchange traded funds as an asset allocation tool without having to go in and buy
individual stocks; we can go in and buy those for you. We bought those in July when the
market was down about 8 % on the NASDAQ thinking that was a good technical point to
go in, we were right at the 200 day moving average which is a good technical support and
again we thought that it was a good entry point. We bought those indices, had about a 1 %
stop below that and again we were stopped out. We felt that the chance for potential
upside overrided that 1 % risk, we did have a sell on those and bad about a 1 % loss but it
came against those substantial gains that you have already this year. We wanted to point
that out so you would know how we can go into the market very quickly without having to
• say I want to buy this stock and that stock and have the individual stock risk. We can go in
very quickly by using those exchange traded funds.
Ra
ht now with those sales that we have done, your portfolio is about 5 % cash, as of June
30 you were at real low levels of cash. Does anyone have any questions?
Pete Reagan: You did a very good job. This is the middle of an election year I would like
to hear your forecast on what you think the market will do.
Kim Cooper: Well Elaine's pat answer on that is the market doesn't like uncertainty and it
doesn't like change. What we have seen from past elections is that when an incumbent is
not reelected then the market doesn't do as well as it does if an incumbent is reelected.
That's just what we have seen in the past.
Pete Reagan: You are looking at flat or negative gains then in the market through the end
of the year?
Kim Cooper: What we are thinking is that the return on the market will probably track
earnings growth, we are not going to see the returns that we saw through last year but
earnings growth and price evaluation should stay about the same.
Pete Reagan: Thank you very much we appreciate your good work.
• Kim Cooper. Thank you. We appreciate all of you.
Fire Pension Minutes
July 29, 2004
Page 6 of 6
Other: •
Kit Williams: I still have not heard anything from Ashland; they don' t want our money
evidently.
Meeting Adjourned at 11 :30 AM.
•
•
FIREMEN'S RELIEF AND PENSION
September 2004
THE,,6QLLOWING ARE THE OBLIGATIONS OF THE FIREMEN'S RELIEF FUND FOR THE
M F SEPTEMBER. YOU ARE HEREBY INSTRUCTED TO ISSUE CHECKS TO THE
PAIW, IN THE AMOUNTS SHOWN, AND FOR THE PURPOSE SO STATED.
. DATE OF REGULAR Year To Date Future
EMP# RETIREMENT NAME MO BENEFIT REG BENEFIT Suppl FED. TAX ST. TAX NET
79 11/99 ARMSTRONG (DILL), PAMELA 1 ,708.68 13,669.44 312.00 300.00 100.00 1 ,308.68
177 4/04 BACHMAN, EDDIE 2,468.23 9,872.92 312.00 47927 119.82 1 ,869.14
74 3/86 BAIRD, JULIA 1 ,698.63 13,589.04 312.00 350.00 145.00 1 ,203.63
2 3/75 BLACKARD, PAUL 103.00 824.00 62.40 103.00
63 5172 BOLAIN, ANN 56.65 592.25 62.40 56.65
68 7/99 BONADUCE, MICHAEL 2,817.19 22,537.52 312.00 475.38 2,341 .81
44 9/86 BOUDREY, BETTY MRS. 2,335.20 18,681 .60 312.00 300.00 50.00 1,985.20
45 9/86 BOUDREY, HOWARD 1 ,969.35 15,754.80 312.00 1,969.35
49 7/88 BOUDREY, JACK - 1 ,553.05 12;424.40 312.00 . 287.68 . 50.00 1 ,215.37
4 6/67 CARL, FLOYD JR 103.00 824.00 62.40 103.00
5 5172 CASELMAN, ARTHUR 123.60 988.80 62.40 123.60
57 5/90 .CATS, ROY 1 ,686.21 13,489.68 312.00 1,686.21
'6 4/68 CHRISTIE, ARNOLD 103.00 824.00 62.40 103.00
8 10!76 COUNTS, WAYNE 103.00 824.00 62.40 103.00
77 11/99 DILL,GARY JOHN 1,708.69 13,669.52 312.00 100.00 - 1 ,608.69
11 2776 FARRAR,ALONZO 941 .52 7,532.16 312.00 941 .52
38 5/84 FRALEY, JOSEPH G. - 1 ,666.62 13,332.96 312.00 200.00 15.00 1 ,451.62
170 5/03 FREEDLE, LARRY 3,597.65 28,781 .20 312.00 500.00 100.00 2,997.65
92 03/02 GAGEJOMMY 2,447.63 19,581 .04 312.00 226.00 50.00 2,171 .63
34 6f79 HARRIS, JAMES E. 103.00 824.00 62.40 103.00
70 11/99 HARRIS, MARY RUTH 56.65 592.25 62.40 56.65
93 06/02 JENKINS, JOHN - 3,372.15 26,977.20 312.00 700.00 200.00 2,472.15
86 07/01 JOHNSON,ROBERT 2,897.04 23,176.32 312.00 500.00 100.00 21297.04
4195 JORDAN, CHARLIE 2,144.36 17,154.88 312.00 2,144.36.
6 5/88 JUDY, JAN 1 ,553.05 12,424.40 312.00 200.00 50.00 1 ,303.05
37 3/84 KING, ARNOLD D. 1 ,434.98 11 ,479.84 312.00 265.00 35.00 1 ,134.98
54 5/89 KING, ARVIL 1 ,612.98 12,903.84 312.00 130.00 50.00 1 ,432.98
12 3/60 LANE, HOPE MRS 56.65 59225 62.40 56.65
13 10/67 LAYER, MERLIN 430.03 3,440.24 312.00 430.03 .
173 12103 LEDBETTER, DENNIS 3,559.06 28,472.48 312.00 575.00 173.00 2,811 .06
14 7174 LEE, HAROLD 103.00 824.00 62.40 103.00
51 10/88 LEWIS, CHARLES 1 ,553.05 12,424.40 . 312.00 75.00 25.00 1,453.05
40 9/85 LOGUE, PAUL D. 2,703.63 21 ,629.04 312.00 325.00 75.00 2,303.63
50 9/88 MASON, LARRY 1 ,537.61 12,300.88 312.00 137.61 25.00 1,375.00
39 4/85 MC ARTHUR, RONALD A. - 1 ,653.07 13,224.56 312.00 150.00 50.00 11453.07
35 2182 MC CHRISTIAN, DWAYNE 103.00 824.00 62.40 103.00
15 4/77 MC WHORTER, CHARLES 1 ,257.90 10,063.20 312.00 150.00 1 ,107.90
29 8/81 MILLER, DONALD - 1 ,229.21 9,833.68 312.00 125.00 25.00 1 ,079.21
73 2/00 MILLER,KENNETH 2,997.48 23,979.84 312.00 325.00 75.00 2,597.48
' 42 12/86 MOORE, JAMES H: 103.00 824.00 62.40 103.00
176 4/04 MORRIS, DIXIE E. 72.10 360.50 62.40 72.10
16 4164 MORRIS, WILLIAM H. (DECEASED) 355.35 0.00
62 10/68 MORRISON, ELIENE 82.40 798.25 62.40 82.40
48 7188 MULLENS, DENNIS W. 2,065.51 16,524.08 312.00 2,065.51
46 5/88 OSBURN, TROY 1 ,790.61 14,324.88 312.00 200.00 38.00 1 ,552.61
81 02/01 PHILLIPS,LARRY 2,600.36 20,850.88 312.00 2,606.36
53 2189 POAGE, LARRY 2,211.99 17,695.92 312.00 300.00 100.00 1 ,811.99
22 4/73 REED, JOE 103.00 824.00 62.40 103.00
. 30 3/81 SCHADER, EARVEL (DECEASED) 0.00
172 12103 SCHADER, MADGE 1 ,306.45 10,451 .60 1 ,306.45
41 9/85SCHADER, TROY 1 ,437.45 11 ,499.60 312.00 57.00 1 ,380.45
83 03101 SKELTON, KIMBERLY 1 ,147.60 91180.80 156.00 125.00 25.00 997.60
66 8198 SKELTON, PAULINE 401.70 3,213.60 312.00 125.00 25.00 251 .70
82 03/01 SKELTON,KELLY 1 ,147.60 91180.80 156.00 1 ,147.60
5176 SPRINGSTON, CARL 759.91 6,079.28 312.00 70.00 17.00 672.91
03/02 STOUT, IMOGENE W. 723.73 5,789.84 312.00 723.73
165 12/02 TATE, RALPH 3,457.53 27,660.24 - 312.00 300.00 100.00 3,057.53
66 3/66 TUNE, BILLIE SUE 82.40 798.25 62.40 82.40
27 3/71 TUNE, MILDRED MRS. 82.40 798.25 62.40 82.40
71 1100 WARFORD,THOMAS 2,359.06 18,872.48 312.00 300.00 2,059.06
DATE OF REGULAR Year To Data Future
EM%! RETIREMENT NAME MO BENEFIT REG BENEFIT Suppl FED. TAX ST. TAX NET .
28 7/68 WATTS, DONALD 412.00 3,296.00 312.00 412.00-
88 01/02 WOOD,RONNIE D 2,900.50 23,204.00 312.00 800.00 200.00 1 ,9000
52 9188 WRIGHT, RANDALL 1 ,594.25 12,754.00 312.00 200.00 25.00 1 ,369.
84396.35 666,271.23 14164.80 9,352.94 2,042.82 87,165.39
DROP DATE DROP EMPLOYEES NEW BENEFITS
04/01/00 NAPIER,LONNIE 3,316.32 312.00
07/01/00 REAGAN,PETE 3,332.75 312.00
01/01/01 DOSS,MARION 5,068.25 312.00
03/01/03 MAHAN, MARSHALL 3,843.23 312.00
03/01/03 PIERCE, JOEY 3,437.82 312.00
03101/03 SHACKLEFORD, GLEN 3,437.62 312.00
04/01/03 O'NEAL, TEDDY 3,884.43 312.00
05/01/04 FARRAR, DANNY 3,916.83
WE, THE UNDERSIGNED, DO SOLEMNLY SWEAR THAT THE ABOVE OBLIGATIONS ARE
JUST AND CORRECT; THAT NO PART THEREOF HAS BEEN PREVIOUSLY PAID; THAT
THE PENSION PAYMENTS SO CHARGED ARE IN ACCORDANCE WITH THE ACTIONS OF
THE BOARD OF TRUSTEES OF THE FIREMEN'S RELIEF AND PENSION FUND; THAT
THE SERVICES OR SUPPLIES FURNISHED, AS THE CASE MAY BE, WERE ACTUALLY
RENDERED OR FURNISHED; AND THAT THE CHARGES MADE THEREFORE DO NOT
EXCEED THE AMOUNT ALLOWED BY LAW OR THE CUSTOMARY CHARGE FOR SIMILAR
SERVICES OR SUPPLIES
SECRETARY CHAIRMAN AND PRESIDENT
ACKNOWLEDGEMENT
STATE OF ARKANSAS ) •
COUNTY OF WASHINGTON)
SWORN TO AND SUBSCRIBED BEFORE ME THIS DAY OF 2003.
NOTARY PUBLIC
MY COMMISSION EXPIRES :
YTD
6810-9810-5335-00 666.271.23
6810-98105335-06 14,164.80
YTD Column 666,271 .23
Dffl m 0.00
•
• PREI ARKANSAS FIRE & POLICE PENSION REVIEW BOARD
P.O. DRAWER 34164
LITTLE Roca, ARKANw 72203
TELEPHONE: (501) 682 - 1745
Fax: (501) 68.2 - 1751
To: Local FIRE Pension Board of Trustees emall., info@Iopfi-prb.com
website: wwwfopfi-prb.com
From: Arkansas Fire and Police Pension Review Board
Re: 2004 Future Supplement Fund Distribution
Date: July 30, 2004
Recently you received the Future Supplement Fund distribution for your FSE pension I
fiord from the Department of Finance and Administration. The distribution amount is in i
accordance with Act 1373 of 2003. The amounts listed below are to be distributed
equally to each rebree, beneficiary, and DROP participant as of December 31, 2003. The
effective date of the distribution is July 1, 2004.
It is important to realize theamount available for distribution in future years may vary. It
may increase or decrease; therefore, for ease of administering this supplement we are
recommending a single one-time payment be made to each eligible participant
• The total amount to be distributed to each paW fire retiree is: $ 312.00
The total amount to be distributed to each volunteer retiree is: $ 62.40
In the event one or more of your eligible participants has deceased, place that person(s)
distribution amount into the pension fiord. This method will ensure each eligible person
receives the correct amount i
Should you have questions please contact Robert Barthohney or Denise Reed at 1-800-
482-5850 extension 21745 or in the Little Rock area 682-1745.
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IPRRARKANSAS FIRE & POLICE PENSION REVIEW BOARD
P.O. DRAWER 34164
LITTLE ROCK, ARKANSAS 72203
TELEPHONE: (501 ) 682 - 1745
FAx: (501 ) 682 - 1751
email. info®lopfi-prb.com
To: Board of Trustees website: www.lopfi-prb.com
FAYETTEVILLE Fire Pension and Relief Fund
From: David B. Clark 331-4jOS,HH3l3A1l3
Interim Executive Director 3l1IA3113Abdd0AL13
Re: 2003 Actuarial Valuation
40a to My
Date: June 10, 2004 ChM13038
In accordance with State law the actuary under contract to this office periodically tests all
local fire and police pension funds for actuarial soundness. The 2003 actuarial study for
your fund is enclosed. The financial tests for the fund are designed to answer the
following questions:
• YES NO
1 . Is there enough income to the pension /
fund to fully fund it (see page 4)? ✓
2. Are current assets sufficient to cover 97%
of all accrued actuarial liabilities '(seepage 10);
OR are there enough assets to cover all active
member contributions, all payments to current
beneficiaries and 100% of future payments /
earned by active members (see page 11)?
3. Is the pension fund considered actuarial /
sound under State law? !�
•
•
FAYETTEVILLE FIREFIGHTERS PENSION FUND
ACTUARIAL VALUATION
AS OF DECEMBER 31 , 2003
•
•
Osborn , Carreiro & Associates , Inc. One Union National Plau,Suite1690
124 West Capitol Avenue
• ACTUARIES CONSULTANTS • ANALYSTS Little Rode, Arkansas 72201
(501 )376-8043
June 4, 2004
Board of Trustees
Fayetteville Firefighters Pension Fund
Gentlemen:
This report presents the results of our actuarial valuation of the assets and liabilities of the Fayetteville
Firefighters Pension Fund as of December 31 , 2003.
• This valuation is required by Arkansas Code Annotated 24- 11 -205. The purpose of this report is to ( 1 )
evaluate the actuarial status of the Fund, (2) determine the level contribution requirement needed, (3)
review the development of the Fund over the past several years, and (4) present certain actuarial items
on page 9 for disclosure under Governmental Accounting Standards. This report is not intended for
any other purpose.
I
The member and financial information used in this report was supplied by the Arkansas Fire & Police
Pension Review Board. We did not audit this information, although we did review it for
reasonableness and consistency:
I certify that this report has been prepared in accordance with generally accepted actuarial principles
and practices. In my opinion, the actuarial methods used are appropriate and the actuarial
assumptions produce results which, in the aggregate, are reasonable.
Sincerely,
Steve Osborn, F.S.A., M.A.A.A.
Actuary
•
Osborn , Carreiro & Associates , Inc . One Union National Plaia.Suite 1690
124 West Capitol Avenue
Little Rock. Arkansas 72201
ACTUARIES ' • CONSULTANTS ANALYSTS (501 )376-8o43 •
June 4 , 2004
Board of Trustees
Fayetteville Firefighters Pension Fund
Gentlemen :
This report presents the results of our actuarial valuation of the assets and liabilities of the Fayetteville
Firefighters Pension Fund as of December 31 , 2003 .
This valuation is required by Arkansas Code Annotated 24- 11 -205. The purpose of this report is to ( 1 )
evaluate the actuarial status of the Fund, (2) determine the level contribution requirement needed, (3 ) •
review the development of the Fund over the past several years, and (4) present certain actuarial items
on page 9 for disclosure under Governmental Accounting Standards. This report is not intended for
any other purpose.
1
The member and financial information used in this report was supplied by the Arkansas Fire & Police
Pension Review Board. We did not audit this information, although we did review it for
reasonableness and consistency.
I certify that this report has been prepared in accordance with generally accepted actuarial principles
and practices. In my opinion, the actuarial methods used are appropriate and the actuarial
assumptions produce results which, in the aggregate, are reasonable.
Sincerely,
J45
Steve Osborn, F.S.A., M .A, A.A.
Actuary
•
M
•
TABLE OF CONTENTS
EXHIBIT I CONTRIBUTIONS
EXHIBIT 2 COST AND LIABILITIES
EXHIBIT 3 SUMMARY OF FINANCIAL INFORMATION
EXHIBIT 4 COMPARISON WITH PRIOR YEARS
EXHIBIT 5 SHORT CONDITION TEST
• EXHIBIT 6 EMPLOYEE AND RETIREE PROFILES
EXHIBIT 7 PRINCIPLE PROVISIONS OF THE PLAN
EXHIBIT 8 ACTUARIAL METHODS AND ASSUMPTIONS
•
EXHIBIT 1 •
CONTRIBUTIONS
The following contribution level reflects the payment of the current year Normal Cost for benefits attributable
to said year (see Exhibit 2) plus an amount sufficient to pay off the Unfunded Actuarial Liability over a 5-year
period (5-year period for any unfunded retiree liability). These costs DO NOT include the contributions due to
the Local Police and Firefighters Retirement System ("LOPFI") for persons hired after 1982.
Full Volunteer or
Paid Part-Paid Total
2004 Necessary, Annual Contribution to pay:
I Normal Cost, plus $ 28.377 $ 0 $ 28,377
2 Pay off the Unfunded Actuarial
Accrued Liability 1 ,675,649 14,807 136903456
3 Total necessary $ 1 ,704,026 $ 14,807 $ 11718,833
Less •
4 Expected Employee Contribution 35121 0 0 _ 3, 121
(6.00% of salary. $ 12 per active volunteer)
Necessary Employer Contribution $ 1 ,700905 $ ] 4,807 $ 1,715,712
(This is the amount needed in
addition to investment income)
Covered Payroll $ 52,016 N/A $ 52,016
Necessary Employer Rate 3269.99% $ N/A 3298.46%
These contributions assume that the dollar contribution grows at a rate of 4% per year. The contributions are
assumed to be made continuously throughout the year.
I
The actual 2003 contribution was $751 ,843 from the employer.
4 •
EXHIBIT 2
COSTS AND LIABILITIES
December 31 , 2003
A Normal Cost Dollar Percent
(Cost to fund current active members) Amount of pay
1 Regular Retirement Benefits $ 26,955 51 .82%
2 .Voluntary Termination Benefits 114 0.22%
3 Survivors' Benefits 495 0.95%
4 Disability Benefits 813 1 .56%
TOTAL $ 28,377 54.55%
B Actuarial Accrued Liabilitv
I Active Lives
Regular Retirement Benefits $ 605,302
Voluntary Termination Benefits 0
• Survivors' Benefits 0
Disability Benefits 0
TOTAL ACTIVE LIVES $ 6055302
2 Deferred Retirement Option
DROP Accounts $ 1 ,003,908
Future DROP Payments & Pensions 5;981 ,236
TOTAL DROP $ 6,9853144
3 Inactive Lives
Retirees $ 10,3862424
Disability Retirees 529,888
Widows & Children 1 ,327,090
TOTAL INACTIVE LIVES $ 12,2432401
4 Total Liabilitv $ 19,833,848
C Assets $ 11 ,936,657
D Unfunded Actuarial Accrued Liability $ 73897, 191
• 5
EXHIBIT 3
SUMMARY OF FINANCIAL INFORMATION •
(Items D-E, and G determined by Osbom, Carreiro and Associates, Inc.)
Year Ended Year Ended Year Ended
A. INCOME 12/31/2001 12/31 /2002 _12/31 /2003
I EmpweeContributions $ 40, 179 $ 343130 $ 323150
2 Employer Contributions
Employer/Court Fines/Other 80,358 685260 64,299
Insurance Tax 93,475 87,878 412,688
Local Millage 227,374 261 .386 274,856
3 Other Income
Guarantee Fund 0 0 0
LOPFI Subsidy 0 0 0
Police Supplement (Act 1452 of 1999) 0 0 0
Future Supplement (Act 1373 of 2003) 0 0 11 ,488
Other Income/Donations 479 0 600
Adjustment to prior year 0 0 0
asset value
4 Net Investment Income -351 ,799 -1 ,0695440 362,273 •
TOTAL INCOME $ 909066 $ -617,786 $ 1 ,158,354
B. EXPENSES
1 Administrative $ 51 ,786 $ 229768 $ 45700
2 Benefits Paid
Monthly Benefits 783,202 878,775 922,413
Police Supplements 0 0 0
Future Supplements 0 0 102789
DROP Payouts 154,744 358,345 222,794
3 Refunds 0 0 0
TOTAL EXPENSES $ 9893732 $ 11259,888 $ 1 , 160,696
6 •
• EXHIBIT 3 (Continued)
C ASSETS (at book value) 12/31 /2001 12/31 /2002 12/31/2003
1 Cash & Checking Accounts $ 0 $ 0 $ 0
2 Bank Deposits 11 ,291 85452 54,188
3 Savings and Loan Deposits 0 0 0
4 Other Cash Equivalents 11186,185 677,964 624,821
5 US Govt. Securities 7499125 21789,145 2,298,986
6 Non-US Govt Securities 0 0 0
7 Mortgages 0 0 0
8 Corporate Bonds 237412841 110733492 9443659
9 Common Stocks 618467654 5,112,232 5,7545311
10 Other 6704 63,301 45, 199
• 11 Payables 0 -80 0
TOTAL ASSETS $ 11 ,602, 180 $ 9,724,506 $ 9,722, 164
D. RATIO OF ASSETS TO
ANNUAL EXPENSES: 11 .7 7.7 8.4
E. NET INVESTMENT RETURN: -2.9% -9.6% 3.8%
(Book Value Basis)
• 7
Exhibit 3 (Continued) •
12/31 /1999 32/31/2000 12/33 /2001 12/31/2002 12/31/2003
F. TOTAL MARKET VALUE
1 . Market Value, end of year 12,8803300 12,612,911 11,403,332 9,7355746 1036253689
(Used for GASB calculations, page 9)
2. Market Value, beginning of year 11 ,854, 130 12;880,300 121612,911 11 ,403,332 937355746
G. DEVELOPMENT OF ACTUARIAL VALUE OF ASSETS
1 . Actuarial Value of Assets, beginning of year 11 ,375,162 12,352,474 12,933,635 12,920,018 123167,731
2. Non Investment Net Cash Flow 38,357 -268,407 -5475867 -8089234 -3643615
3. Development of Investment Income
(a) Total Market Investment Income (FI -F2-G2) 987,813 1 ,018 -661 ,712 -859,352 1 ,254,558
(b) Amount for Immediate Recognition (6% G1 ) 682,510 741 J48 776,018 775,201 730,064
(c) Amount for Phased In Recognition (a-b) 3055303 -740,130 -174379730 -1 ,6349553 5243494
(d) Phased In Recognition
Current year : 20% of 3(c) 61 ,061 -148,026 -287,546 -3269913 1043899
First Prior Year -17,832 61 ,061 - 148,026 -287,546 -326,911
Second Prior Year 150,575 -172832 61 ,061 -148,026 -2872546 •
Third Prior Year 62,642 150,575 -17,832 61 ,061 -1482026
Fourth Prior Year 62,642 150,575 -173832 613061
Total Phased In Recognition 2562446 108,420 -241 ,768 -719,254 -5963523
(e) Actuarial Value Investment Income 9383955 8497568 534,250 55,947 133,541
( 3(b) + 3(d) )
4. Actuarial Value of Assets, End of year
( I + 2 + 3(e) ) 129352,474 12,933,635 12,9202018 12, 167,731 11,936,657
5. Net Investment Return on the 8.2% 7.0% 4.2% 0.4% l . l %
Actuarial Value of Assets
Note: The Pension Review Board's Board Rule 411 first applies this methodology to determine the Actuarial Value
of Assets for the 32/31/99 actuarial valuation report. Different methods were used to determine the Actuarial
Value of Assets for the 12131 /98 and earlier reports.
8 •
• EXHIBIT 3 (Continued)
ACCOUNTING INFORMATION
This page is included to provide the information required by the Governmental Accounting Standards Board
Statement No. 25 and 27. The values below are based on the assumptions contained in Exhibit 8.
The Annual Pension Cost disclosed in this exhibit will almost always differ from the actual cash contribution to
the fund. We must emphasize that these disclosures are shown in the city's financial statements; Sound
actuarial projections should be used to determine the actual cash contribution requirements.
RECONCILIATION OF NET PENSION OBLIGATION (NPO)
I
2002 2003 2004
1 . Actuarially Required Contribution 1 ,279,840 1 ,279,840 1 ,996,348
2. Interest on NPO -130,976 -63,527 -243228
3 . Adjustment to ( 1) -3925806 -190,523 -86,381
4. Annual Pension Cost (1 )+(2)-(3) . 1 ,541 ,670 1 ,4061836 27058,501
5 . Actual Contribution Made 417,524 7515843
6. Increase in NPO (4)-(5) 1 , 1245146 654,993
7. NPO Beginning of Year . -2, 182,934 - 1 ,058,788 -403,795
8. NPO End of Year . - 17058,788 -403,795
REQUIRED SUPPLEMENTARY INFORMATION
(a) (b) (c) (d) (e) (f) (g)
Unfunded
Entry Age Accrued UAL as a %
Actuarial Market Actuarial Liability Funded Annual of Covered
Valuation Value of Accrued . (UAL) Ratio Covered Payroll
Date Plan Assets* Liability (c)-(b) (b)/(c) Payroll (d)/(f)
12/31 /1995 8,8975591 97045,983 1483392 98.4% 676,847 21 .9%
12/31 /1997 11,225,602 1220933450 867,848 92.8% 608,602 142.6%
12/31 /1999 12,8805300 12,9403843 605543 99.5% 367, 188 16.5%
12/31 /2001 1174035332 17,2393942 5,836,610 66. 1 % 234,765 2486. 1 %
12/31 /2003 101625,689 19,8335848 9,208, 159 53 .6% 52,016 17702.7%
* Note: 12/31/1995 are at amortized cost value.
** Note: For volunteer/part paid members, Annual Covered Payroll is $200 for such
active members
• 9
EXHIBIT 4 •
COMPARISON WITH PRIOR YEARS
This exhibit compares current valuation results with those of prior years.
Full Paid Actuarial Computed
Active Members Employer Contribution Total Plan
Unfunded Normal
Valuation Annual Percent Dollar Actuarial Cost Funded
Date No. Payroll of Pay Amount Assets Liability Percent Percent
12/31 /1982 50 810,926 22. 1 % 1797271 2,202,969 811 , 186 18.5% 73. 1 %
12/31 / 1984 45 807,438 27.7% 223,455 32078,619 1 ,193,660 22. 1 % 72. 1 %
12/31/1986 37 723,894 29.6% 213,935 4,006,484 13379,340 21 .8% 74.4%
12/31/1987 * 38 788,348 31 .3% 246,479 43460;948 1 ,455, 161 23.4% 75 .4%
12/31/1989 27 639,962 36.0% 230,328 51189,846 1 ,976,463 26.6% 72.4%
12/31/1991 23 585,898 33 .3% 1957273 5,999,964 1 ,427,422 25.5% 80.8%
12/31 /1993 22 620,116 25 .2% 156,484 7,271 ,255 544,779 25.4% 93.0%
12/31 /1995 * 21 676,847 25.6% 173 ,401 8,8973591 148,392 29.8% 98.4%
12/31 /1997 * 17 608,602 55 .9% 339,974 102797,686 11295,764 38.0% 89.3%
12/31 /1999 10 3673188 53.7% 197,315 12,3527474 588,369 37.7% 95.5%
12, 31 /2001 6 234,765 405 .5% 952,076 12,920,017 4,3191925 55.4% 74.9%
12/31 /2003 1 521016 3270.0% 19700,905 115936,657 7,8971191 54.6% 60.2 % •
*Benefits or assumptions changed
Note: Normal cost prior to 12/31 /89 is net of 6% employee contributions.
Part-Paid/ Actuarial
Volunteer Computed
Valuation Active Employer
Date Members Contribution
12/31 /1982 1 227
12/31/1984 1 274
12/31 /1986 0 0
12/31 /1987 * 0 0
12/31 /1989 0 0
12/31/1991 0 0
12/31/1993 0 0
12/31/1995 * 0 0
12/31 /1997 * 0 0
12/31/1999 0 0
12/31 /2001 * 0 3, 123
12/31 /2003 0 14,807
10 •
EXHIBIT 5
SHORT CONDITION TEST
The Arkansas General Assembly has stated that the funding objective for these plans is to pay for benefits
with contributions that remain level as a percentage of employee payroll. Thus, the long-term condition
test is met when the actual contributions are fairly level and are paid when due. .
A short condition test can be used to measure a plan's progress. Under the short condition test, the fund's
assets are compared with:
I ) Active member contributions;
2) The liabilities for future benefits to the present retirees and inactive members;
3) The liabilities for service already rendered by active members.
If the plan has.been following level cost funding, liability ( 1 ) and liability (2) above will almost always be
fully covered by the rest of the present assets. In addition, liability (3) above will at least partially funded.
The larger the funded portion of liability (3), the stronger the condition of the fund.For a closed fund i.e.,
one like yours, where no new members are admitted), the funded portion of liability (3) should be steadily
increasing.
• The following table illustrates the history of the short condition test for this plan:
Computed Actuarial Liabilities Portion of Liabilities
covered by Assets
(1) (2) (3)
Active Retirees, Actives-
Valuation Members Inactives, Employer Valuation
Date Contributions and DROPS Financed Assets ( 1 ) (2) (3)
12/31 /1982 160,669 898,272 11955,214 2,202,969 100% 100% 59%
12/31/1984 236,541 1 ,464,696 2,571 ,042 35078,619 100% 100% 54%
12/31/1986 263,129 2,753,772 2,3683923 41006,484 100% 100% 42%
12/31/1987 308,829 2,754,276 29853,004 41460;948 100% 100% 49%
12/31 /1989 2741405 43560,672 2,3311232 5, 18%846 . 100% 100% 15%
12/31 /1991. 292,477 5,0723169 2,0621740 5,999,964 100% 100% 31 %
12/31 /1993 353,891 5,005, 131 2,4572012 7,271 ,255 100% 100% 78%
12/31 /1995 4183412 59101 ,995 3,5251576 8,8971591 100% 100% 96%
12/31 /1997 401 ,937 7,315,705 4,375,808 10,797,686 100% 100% 70%
12/31 /1999 267,239 103017,182 2,656,422 12,352,474 100% 100% 78%
12/31 /2001 171 , 157 14,565,274 2,503,511 12,920,017 100% 88% 0%
12/31 /2003 33,201 . 19,228,546 5722101 11 ,936,657 100% 62% 0%
• 11
Exhibit 6
Employee Profile
Employee data needed for the valuation was obtained from the records furnished by
the Arkansas Fire and Police Pension Review Board. The following table shows a
detailed breakdown of the present participants by the number of participants and
total salary.
Actives
Years of Service
30 and
Age 0-5 5- 10 10-15 15-20 20-25 25-30 Over Total
. ,.
Under Count 0 0 0 0 0 0 0
_ _ ___
25 Salary 0 0 0 0 0 0 0
25-29 Count 0 0 0 0 0 0
Salary 0 _0 0 0 0 0 0_
30-34 Count 0 0 0 0 0 0
Salary 0 0 0 0 0 0 0
35-39 Count 0 0 0 0 0 0 0
i
Salary 0 0 0 0 0 0 0 0,
40-44 Count 0 0 0 0 0 0 0 • 1` •
Salary 0 0 0 0 0 0 0 Oy{
45-49 Count 0 0 0 1 0 0 0 l
Salary 0 0 0 52,016 0 0 0 2< 6
50-54 Count 0 0 0 0 0 0
Salary 0 0 0 0 0 _ 0 _ 0 ;
55-59 Count 0 0 0 0 0 0 0 p
Salary 0 0 0 0 0 0 0
60-64 Count 0 0 0 0 0 0 0 fi
Salary 0 0 0 0 0 0 0 0
65 & Count 0 0 0 0 0 0 0 '
Over Salary 0 0 0 0 0 0 0 Q
Unknown Count 0 0 0 0
Age Salary 0 0 0 0 0 0 0 ti
--Total Count �m � ,y "0 •`b • :� �Q -, x QF . a ,,
-
rY
12 is
Exhibit 6
•
Employee Profile
Employee data needed for the valuation was obtained from the records furnished by the
Arkansas Fire and Police Pension Review Board. The following table shows a detailed
breakdown of the present participants by the number of participants.
Volunteers/Part-Paid Actives
Years of Service
30 and
qge 0-5 5-10 10- 15 15-20 20-25 25-30 Over Total
Under Count 0 0 0 0 0 0 0 gp:v
t
25 x
25-29 Count 0 0 0 0 0 0 00
.. �
30-34 Count 0 0 0
0 . 0 0 OF U
35-39 Count . 0 0 0 0 0 0
0 0 0 0
• 40-44 Count 0 0 0
45-49 Count 0 0 0 0 0 0 0 -
50-54 Count 0 0 0 0 0 0 0 =A'.
55-59 Count 0 0 0 0 0 0 0
FUnknown
Count 0 0 0 0 0 0 0
Count 0 0 0 0 0 0 of
00
Count 0 0 0 0 0 0
p
Total Count � � �� :
• f
• 13
i
Exhibit 6 •
Inactive Profile
Employee data needed for the valuation was obtained from the records furnished by the
Arkansas Fire and Police Pension Review Board. The following table shows a detailed
breakdown of the present payees by the number of payees and total annual benefit.
Retirees and Survivors
Years Since Retirement
- - — 10 and
Age 0-1 1_2 2-3 34 4-5 5- 10 Over Total
Under Count 0 0 0 0 0 0 2 ; 'r xFM
40 Benefit 0 0 0 0 0 0 26,740 '
40-44 Count 0 0 0 0 0 0 0
Benefit 0 0 0 0 0 0 0 xe:0
45-49 Count 0 0 1 1 0 1 0
Benefit 0 0 39,287 30,365 0 32, 822 0
50-54 Count 0 0 3 0 3 0 0 ; T . �
Benefit 0 0 96,060 0 675298 0 0
55-59 Count 0 2 0 0 0 1 8
Benefit 0 825196 0 0 0 24,983 1625538 !
60-64 Count 0 0 0 0 0 0 7 :, ` •
Benefit 0 0 0 0 0 0 125,253
65-69 Count 0 0 0 0 1 0 4
Benefit 0 0 0 0 34,922 0 46.030
70-74 Count 0 0 0 0 0 0 6 6
Benefit 0 0 0 0 0 0 781066
75-79 Count 0 0 0 0 0 0 7
Benefit 0 0 0 0 0 0 29,413
80-84 Count 0 0 0 0 0 0 3
Benefit 0 0 0 0 0 0 20,655
85 & Count 0 0 0 0 0 0 9 F
Over Benefit 0 0 0 0 0 0 17,490
_s
Unknown Count 0 0 0 0 0 0 0
Age Benefit 0 0 0 0 0 0 0
Total Count Ic
Benefit
This includes 44 retirees with annual benefit of $767,070 .
This includes 2 disableds with annual benefit of $36,706 .
This includes 13 survivors with annual benefit of $ 110,342 .
14 •
• Exhibit 6 .
Deferred Retirement Option Plan Profile'
Employee data needed for the valuation was obtained from the records furnished by the Arkansas Fire
and Police Pension Review Board. The following table shows a detailed breakdown of the current
participants on DROP by the number of participants and total annual DROP benefit.
DROP Participants
Years Since Electing DROP
Age 0- 1 1 -2 2-3 3-4 4-5 5- 10 Total
Under Count 0 0 0 0 0 0 Rilr
40 Benefit 0 0 0 0 0 0 . .
40-44 Count I 0 0 0 0 0SF
Benefit 45,255 0 0 0 0 0A155`
4549 Count 2 0 0 2 1 0X 5
r
• Benefit 803104 0 0 77,465 283756 0 1$6 325
50-54 Count 1 0 0 0 1 0 R�aM
r� �i
Benefit 44,775 0 0 0 41 ,465 0 ^-h 6 24,T
55-59 Count 0. 0 0 0 0 0 -s IMI,
Benefit 0 0 0 0 0 00
60-64 Count 0 0 1 0 0 0 4
Benefit 0 0 - 59,048 0 0 0
65-69 Count 0 0 0 0 0 O N
Benefit 0 0 0 0 0 0
pnknom
Count 0 . 0 0 0 0 0 , b
Benefit 0 0 0 0 0 0
Count 0 0 0 0 0 0 - 4
Benefit 0 0 0 0 0 0 '
Count 0 0 0 0 0 0 Benefit 0 0 0 0 0 0 Countj NEW
yBenefit
• 15
EXHIBIT 7 •
PRINCIPLE PROVISIONS OF THE PLAN
EMPLOYEE Member of Fire Department
EMPLOYER Fayetteville Fire Department
MEMBERSHIP Condition of Employment. Firefighters hired after 1982 must join the
statewide Local Police and Firefighters Retirement System
CREDITABLE SERVICE Determined on basis of service since employment
CONTRIBUTIONS
Employee 6.00% of salary. Volunteers contribute $12/year. Refundable if member
terminates before retirement eligibility.
Employer 1 . Matching contribution equal to employee contribution
2. State Insurance Premium Tax turnback
3. Local Millage
FINAL SALARY Salary attached to the rank of the member at time of retirement, based on •
regularly scheduled work-week.
DEFERRED RETIREMENT This plan has elected to participate in the Deferred Retirement Option Plan
OPTION PLAN <. effective January 25, 1996. Members who elect to participate have a
DROP account that is increased by the monthly amount of their retirement
as if they had retired as of the date DROP was elected. Has not elected
coverage under Act 1457 of 1999 .
RETIREMENT BENEFITS
Eligibility 20 Years of Service regardless of age.
Benefit 90% of Final Salary, but not less than $4,200. ($660/year for volunteer/part-
paid). If service exceeds 20 years, the annual benefit is increased by $240
for each year over 20, up to $ 1 ,200/year extra. ($ 120 for each year over 20
up to $600/year for volunteer/part-paid) .
If service is more than 25 years, member receives an extra 1 .25% (for each
year over 25) of Final Salary, payable once the retiree reaches age 60. The
benefit cannot exceed 100% of Final Salary.
16 •
EXHIBIT 7 (Continued
DEATH BENEFITS
Eli ibi i Death before 20 Years of Service not occurring while performing work in
gainful employment outside the fire department, or death after 20 years.
Benefit 1 . Widow receives same amount as member is receiving or eligible
for.
2. Each child under age 19 receives $ 1 ,500/year. ($300/year for
volunteer/part-paid). If no surviving spouse, child receives
spouse's benefit to age 19.
DISABILITY BENEFITS
Eli ibili Permanent physical or mental disability not acquired while performing
work in gainful employment outside the fire department.
Benefit Full Paid Non-duty disability
Retirement benefit but not less than $4,200/year.
Full Paid Duty related disability
• Retirement benefit but not less than 65% of Final Salary and not
less than $4,200/year.
Volunteer/Part-Paid:
Computed as voluntary retirement benefit
COST OF LIVING For each of the years 2004 to 2006, a 3% COLA will be given to all
ADJUSTMENT retirees and members on DROP.
• 17